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2016-12-12 City Council Agenda Packet
City Council 1 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. December 12, 2016 Special Meeting Council Chambers 5:00 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 Study Session 5:00-6:00 PM 1.Discussion of the Challenges and Accomplishments of the City Council Special Orders of the Day 6:00-6:10 PM 2.This item has been removed and will not be heard 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. REVISED 2 December 12, 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. Minutes Approval 6:35-6:40 PM 3. Approval of Action Minutes for the November 21 and 28, 2016 Council Meetings Consent Calendar 6:40-6:45 PM Items will be voted on in one motion unless removed from the calendar by three Council Members. 4. Adoption of a Resolution Declaring the Results of the Consolidated Municipal Election Held on November 8, 2016 5. Approval of Site Finalization of Lot D, Located at Hamilton Avenue and Waverley Street, for the new Downtown Parking Garage, and Approval of a Contract With Watry Design, Inc. in the Amount of $1,899,591 to Provide Design and Environmental Assessment Services for the new Downtown Parking Garage, Capital Improvement Program Project, PE-15007 6. Approval of a Contract With RossDrulisCusenbery Architecture, Inc. in the Amount of $7,007,992 to Provide Design and Environmental Assessment Services for the new Public Safety Building, Capital Improvement Program Project, PE-15001 and new California Avenue Area Parking Garage Capital Improvement Program Project, PE-18000 7. Adoption of a Resolution Amending Utilities Rule and Regulation 27, Generating Facility Interconnections 8. 450 Bryant Street [16PLN-92]: Consideration of an Appeal and Adoption of Findings of Approval by the Director of Planning and Community Environment for Architectural Review of an Expansion to a Category 2 Historic Resource (Avenidas) and Associated Approval of a Mitigated Negative Declaration and Mitigation, Monitoring and Reporting Plan 9. Adoption of a Resolution Approving the Standard Form Edison Electric Institute Master Power Purchase and Sale Agreement, With Special Terms and Conditions ("Standard Form Electric Master Agreement"), and the Standard Form Master Renewable Energy Certificate Purchase and Sale Agreement ("Standard Form Master REC Agreement") 10. Review and Approve the Process to Solicit Applications for a Stakeholder Committee to Advise the Council Regarding a Potential Tax and Other Funding Options for Transportation Programs and Projects 3 December 12, 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. 11.Approval of a Contract With Pierce Manufacturing Inc. in the Amount of $399,915 for the Purchase of a Type III Wildland Fire Engine; and Approval of Budget Appropriation Amendments in the General Fund and the Vehicle Replacement and Maintenance Fund 12.Approval of a Contract With Pierce Manufacturing Inc. in the Amount of $680,666 for the Purchase of a Triple Combination 1500 GPM Fire Pumper 13.Adoption of the Annual Amendments to the Employment Agreements Between the City of Palo Alto and Council Appointed Officers (City Manager, City Attorney, City Auditor and City Clerk) 14.Approval of Amendment Number Nine to the Agreement With the County of Santa Clara for Abatement of Weeds to Change the Method for Setting Abatement Fees and Costs 15.Approve and Authorize the City Manager to Execute Contract Amendment Number One to Contract Number C14150749 in the Amount of $138,719 for Project Consultant MIG for Additional Services; and Approve a Budget Amendment in the Capital Improvement Fund (Project PE-13003) 16.Approval of Contract Number C17166591 With Artist Susan Zoccola, LLC in the Not-to-Exceed Amount of $90,000 for the Design Development, Fabrication and Installation of Artwork Associated With the Charleston-Arastradero Corridor Project 17.SECOND READING: Adoption of an Ordinance Approving Revisions tothe Architectural Review Findings in Palo Alto Municipal Code Chapter 18.76 and Approval of an Exemption Under Sections 15061 and 15305 of the California Environmental Quality Act (CEQA) Guidelines (FIRST READING: November 14, 2016 PASSED: 7-2 Berman, Kniss absent) 18.Approval of a Contract With Anderson Pacific Engineering Construction, Inc. in the Amount of $5,992,000 for the Matadero Storm Water Pump Station Upgrade Project, Capital Improvement Program Project SD-13003, and Adoption of a Categorical Exemption Under Sections 15302 and 15303 of the California Environmental Quality Act Guidelines (CEQA) 19.Approval of Amendment Number Four to the Palo Alto-Stanford Fire Protection Agreement With the Board of Trustees of the LelandStanford Junior University Extending the Term to June 30, 2017 for an Additional Fee of $4,841,415, and Approval of a Related Budget MEMO 4 December 12, 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. Amendment Reducing the General Fund Budget Stabilization Reserve to Offset a Reduction in FY 2016 Fire Department Revenues 20.Approval of: 1) a Professional Services Agreement With RMC Water and Environment for Development of a Recycled Water Strategic Plan in a Total Amount Not-to-Exceed $2,000,000; and 2) a Cost Sharing Agreement With the Santa Clara Valley Water District Under Which the District Will Fund 90 Percent of Strategic Plan Consultant Costs; and 3) an Amendment to the Fiscal Year 2017 Budget Appropriation for the Wastewater Treatment Fund Action Items Include: Reports of Committees/Commissions, Ordinances and Resolutions, Public Hearings, Reports of Officials, Unfinished Business and Council Matters. 6:45-8:15 PM 21.PUBLIC HEARING: Adoption of two Ordinances to Update the City's Below Market Rate (BMR) Housing Program as Recommended by the Finance Committee: (1) Repealing Municipal Code Section 16.47 (Non- residential Projects) and 18.14 (Residential Projects) and Adding a new Section 16.65 (Citywide Affordable Housing Requirements) and; (2) Establishing Housing Impact Fees and Housing In-Lieu Fees for Residential, Nonresidential, and Mixed Use Developments. The Proposed Ordinances are Exempt From the California Environmental Quality Act (CEQA) per Sections 15378(b)(4), 15305 and 15601(b)(3) of the State CEQA Guidelines. The BMR Ordinance and Fees Were Recommended for Adoption by the Planning and Transportation Commission on November 30, 2016 8:15-9:00 PM 22.PUBLIC HEARING: Adoption of an Ordinance Amending the FY 2017 Municipal Fee Schedule to Reflect Development Services Cost of Services Study and FY 2017 Annual Adjustment 9:00-9:30 PM 23.Colleagues’ Memo Reaffirming Palo Alto’s Commitment to a Diverse, Supportive, Inclusive, and Protective Community 9:30-10:00 PM 24.Colleagues’ Memo Regarding Support Funding for the Barron Park Donkey Project MEMO 5 December 12, 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. Inter-Governmental Legislative Affairs Council Member Questions, Comments and Announcements Members of the public may not speak to the item(s) CLOSED SESSION 25.CONFERENCE WITH CITY ATTORNEY- EXISTING LITIGATION Subject: City of Palo Alto v. Public Employee Relations Board (PERB) (International Association of Fire Fighters, Local 1319, Real Party), Cal Court of Appeal No. H041407, on Appeal From PERB Case No. SF-CE-869-M Authority: Government Code Section 54956.9(d)(1) CONFERENCE WITH LABOR NEGOTIATORS City Designated Representatives: City Manager and his designees Pursuant to Merit System Rules and Regulations (James Keene, Molly Stump, Rumi Portillo, Eric Nickel, Dennis Burns) Employee Organizations: Palo Alto Fire Chiefs’ Association; International Association of Fire Fighters, Local 1319; Palo Alto Police Officers’ Association; Palo Alto Police Managers’ AssociationGovernment Code Section 54957.6(a) 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. 6 December 12, 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 Sp. Policy and Services Committee Meeting December 14, 2016 Sp. City School Committee Meeting December 15, 2016 Schedule of Meetings Schedule of Meetings Tentative Agenda Tentative Agenda Informational Reports Boards and Commissions Term End Dates for 2017 (Maddy Act) Informational Update Regarding Fiber-to-the-Premises and Wireless Initiatives Transmittal of the CalPERS City of Palo Alto Pension Plan Annual Valuation Reports as of June 30, 2015 Annual Report Development Impact Fees - Early Memo Annual Review of the City’s Renewable Procurement Plan, Renewable Portfolio Standard Compliance, and Carbon Neutral Electric Supplies City of Palo Alto Utilities Update for the First Quarter of Fiscal Year 2017 Property Leases Entered Into by the City Manager Under Palo Alto Municipal Code Section 2.30.310(h), and Reported per Code Section 2.30.710 Fiscal Year 2016 Public Letters to Council Set 1 Set 2 CITY OF PALO ALTO OFFICE OF THE CITY CLERK December 12, 2016 The Honorable City Council Attention: Finance Committee Palo Alto, California Approval of Action Minutes for the November 21 and 28, 2016 Council Meetings Staff is requesting Council review and approve the attached Action Minutes. ATTACHMENTS: Attachment A: 11-21-16 DRAFT Action Minutes (DOCX) Attachment B: 11-28-16 DRAFT Action Minutes (DOCX) Department Head: Beth Minor, City Clerk Page 2 CITY OF PALO ALTO CITY COUNCIL DRAFT ACTION MINUTES Page 1 of 3 Regular Meeting November 21, 2016 The City Council of the City of Palo Alto met on this date in the Council Chambers at 6:04 P.M. Present: Burt, DuBois, Filseth, Holman, Kniss, Schmid, Wolbach Absent: Berman, Scharff Study Session 1. Study Session to Discuss the Planned Rebuilding Project of the Junior Museum & Zoo. 2. Study Session to Present the Findings of the Citywide Engineering and Traffic Speed Surveys and Discuss Alternatives to the Establishment of Speed Limits and Requirements for Enforcement. Agenda Changes, Additions and Deletions None. Minutes Approval 3. Approval of Action Minutes for the November 7, 2016 Council Meeting. MOTION: Council Member DuBois moved, seconded by Council Member Wolbach to approve the Action Minutes for the November 7, 2016 Council Meeting. MOTION PASSED: 7-0 Berman, Scharff absent Action Items 4. PUBLIC HEARING: 2016 Water Utility Public Health Goals Report. Public Hearing opened and closed without public comment at 9:27 P.M. MOTION: Council Member Kniss moved, seconded by Council Member DuBois to accept the City of Palo Alto 2016 Water Utility Public Health Goals Report. DRAFT ACTION MINUTES Page 2 of 3 City Council Meeting Draft Action Minutes: 11/21/16 INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion, “and request Staff to evaluate the alternative of submitting a Request for Proposals (RFP) to a private or non-profit entity to be a provider of lead testing for residents on a cost-effective basis, and that the program be established and supported by the City.” MOTION AS AMENDED RESTATED: Council Member Kniss moved, seconded by Council Member DuBois to accept the City of Palo Alto 2016 Water Utility Public Health Goals Report and request Staff to evaluate the alternative of submitting a Request for Proposals (RFP) to a private or non- profit entity to be a provider of lead testing for residents on a cost-effective basis, and that the program be established and supported by the City. MOTION AS AMENDED PASSED: 7-0 Berman, Scharff absent Inter-Governmental Legislative Affairs None. Council Member Questions, Comments and Announcements Council Member Holman said there was a memorial held in honor of Miner Forty Niner, the Palo Alto donkey who passed away in late September. She noted there were between 100-120 people in attendance at the memorial and she is pleased so many people showed up. She added the other donkey, Perry, has returned to Palo Alto and he has a new partner, Jenny. She said they are doing well together. Mayor Burt said he was asked to speak on Palo Alto’s Smart City initiatives last week at the Global Internet Conference in Wuzhen, China. He spoke about his time at the conference and noted, regarding climate change initiatives, the United States may be returning to where it was prior to the Paris Accords. He said the initiatives of local, regional and state governments are crucial when it comes to what we will be able to do in terms of climate change. He spoke about the importance of understanding the Smart City movement and how it relates to sustainability and climate change. He said it is important to share those issues with the community, what it means, and why it should matter. He also mentioned that one of the priorities Council laid out this year was housing. He said one of the areas regarding housing that was touched on at the Retreat, but not yet explored, is the displacement and severe impact on renters in the community. He said the surrounding communities are taking initiatives to try to provide renter protection. He noted the Council will not have an opportunity to take that issue up this year, but suggested Council Members should add this as a DRAFT ACTION MINUTES Page 3 of 3 City Council Meeting Draft Action Minutes: 11/21/16 significant item at their upcoming retreat. He said it is an issue of critical importance to the community. Adjournment: The meeting was adjourned at 9:35 P.M. CITY OF PALO ALTO CITY COUNCIL DRAFT ACTION MINUTES Page 1 of 6 Special Meeting November 28, 2016 The City Council of the City of Palo Alto met on this date in the Council Chambers at 5:04 P.M. Present: Berman, Burt, DuBois, Filseth, Holman, Kniss, Scharff, Schmid arrived at 5:07 P.M., Wolbach Absent: Agenda Changes, Additions and Deletions None. Minutes Approval 1. Approval of Action Minutes for the November 14, 2016 Council Meeting. MOTION: Council Member Berman moved, seconded by Council Member Kniss to approve the Action Minutes for the November 14, 2016 Council Meeting. MOTION PASSED: 9-0 Consent Calendar MOTION: Council Member Schmid moved, seconded by Council Member Holman, third by Council Member DuBois to pull Agenda Item Number 3- Approval of Amendment Number 6 to Contract Number C08025506 With Placeworks | DCE… to become Agenda Item Number 8a. MOTION: Vice Mayor Scharff moved, seconded by Council Member Filseth to approve Agenda Item Numbers 2, 4-8. 2. Approval of two Blanket Purchase Orders for Hauling and Disposal of Construction Material Debris From the Municipal Service Center to an Off-Site Facility for the Utilities and Public Works Departments With a Total Not-to-Exceed Amount of $3,507,233 From November 1, 2016 to June 30, 2019 With (a) Dillard Trucking Inc. ($1,494,085); and DRAFT ACTION MINUTES Page 2 of 6 City Council Meeting Draft Action Minutes: 11/28/16 (b) With TMT Enterprises, Inc. ($2,013,148); and Finding of CEQA Exemption Pursuant to Guideline 15301(b)-(c) Maintenance of Existing Facilities. 3. Approval of Amendment Number 6 to Contract Number C08025506 With Placeworks | DCE to add $410,902 for a Total Not-to-Exceed Amount of $3,212,059 for the Comprehensive Plan Update; and Amendment Number 1 to Contract Number S16163548 With Management Partners to add $120,000 for a Total Not-to-Exceed Amount of $205,000 for Related Project Management Services; and Approval of a Budget Amendment in the General Fund. 4. Request for Authorization to Increase Existing Legal Services Agreement With the Law Firm of Jarvis, Fay, Doporto & Gibson by an Additional $325,000 for a Total Not-to-Exceed Amount of $375,000 for Litigation Defense Services and Approve a Budget Amendment in the General Fund. 5. Approval to Schedule a Discussion Regarding Appointments for Unscheduled Vacant Term on the Planning and Transportation Commission Ending December 15, 2018; and Appointment of Three Candidates to the Historic Resources Board and Four Candidates to the Parks and Recreation Commission for Terms Ending December 15, 2019 in January 2017. 6. Ordinance 5400 Entitled, “Ordinance of the Council of the City of Palo Alto Amending Palo Alto Municipal Code (PAMC) Title 16 (Building Regulations), Chapters 16.45 (Transportation Impact Fee for New Nonresidential Development in the Stanford Research Park/El Camino Real CS Zone), 16.46 (Approval of Projects with Impacts on Traffic in the San Antonio/West Bayshore Area), 16.47 (Approval of Projects with Impacts on Housing), 16.57 (In-Lieu Parking Fee For New Nonresidential Development in the Commercial Downtown (CD) Zoning District), 16.58 (Development Impact Fees), 16.59 (Citywide Transportation Impact Fee), 16.60 (Charleston Arastradero Corridor Pedestrian and Bicyclist Safety Impact Fee), 16.61 (Public Art for Private Developments); and Title 21 (Subdivisions and Other Divisions of Land), Chapter 21.50 (Parkland Dedication or Fees In-Lieu Thereof) and; Adding 16.64 (Development Fee and In-Lieu Payment Administration) (FIRST READING: November 7, 2016 PASSED: 8-1 Schmid no).” DRAFT ACTION MINUTES Page 3 of 6 City Council Meeting Draft Action Minutes: 11/28/16 7. Ordinance 5401 Entitled, “Ordinance of the Council of the City of Palo Alto Amending Resolution 9579 to Update the Fiscal Year 2017 Municipal Fee Schedule to Adjust the Planning and Community Environment Fees by Fiscal Year 2017 Adjustments to Salaries and Benefits (FIRST READING: November 14, 2016 PASSED: 7-0 Berman, Kniss absent).” 8. Ordinance 5402 Entitled, “Ordinance of the Council of the City of Palo Alto Amending Section 4.39.080 (False Alarm Service Charges) and Section 4.39.090 (Revocation of Alarm Registration) of Chapter 4.39 (Private Intrusion Alarms) of the Palo Alto Municipal Code to Update the False Alarm Program (FIRST READING: November 14, 2016 PASSED: 7-0 Berman, Kniss absent).” MOTION FOR AGENDA ITEM NUMBERS 2, 4-8 PASSED: 9-0 Action Items 8a. (Former Agenda Item Number 3) Approval of Amendment Number 6 to Contract Number C08025506 With Placeworks | DCE to add $410,902 for a Total Not-to-Exceed Amount of $3,212,059 for the Comprehensive Plan Update; and Amendment Number 1 to Contract Number S16163548 With Management Partners to add $120,000 for a Total Not-to-Exceed Amount of $205,000 for Related Project Management Services; and Approval of a Budget Amendment in the General Fund. MOTION: Council Member Schmid moved, seconded by Council Member Holman to maintain tradition going back to the 1988 Citywide Transportation/Land Use Study to treat new development with 4 new parking spaces per 1,000 square feet. AMENDMENT: Council Member Holman moved, seconded by Council Member XX to add to the Motion, “retain the current ratio of employees per thousand square feet for commercial development in Comprehensive Plan Scenario 5 and apply that to the reduced floor area ratio maximum.” AMENDMENT FAILED DUE TO THE LACK OF A SECOND MOTION WITHDRAWN BY THE MAKER DRAFT ACTION MINUTES Page 4 of 6 City Council Meeting Draft Action Minutes: 11/28/16 MOTION: Vice Mayor Scharff moved, seconded by Mayor Burt to authorize City Manager or his designee to execute: A. Amendment Number Six to contract C08025506 with Placeworks | DCE, increasing the amount by $410,902 for a total of $3,212,059 for work on the Comprehensive Plan Update; and B. Amendment Number One to contract S16163548 with Management Partners increasing the amount by $120,000 for a total of $205,000 for related Project Management Assistance; and C. Amend the Fiscal Year 2017 Budget Appropriation Ordinance for the General Fund by: i. Increasing the Planning and Community Environment Department contract services by $530,902; and ii. Decreasing the General Fund Budget Stabilization Reserve by $530,902. MOTION PASSED: 9-0 9. Discuss and Approve Sustainability and Climate Action Plan (S/CAP) Framework, Principles & Guidelines. MOTION: Vice Mayor Scharff moved, seconded by Mayor Burt to: A. Adopt the Sustainability/Climate Action Plan (S/CAP) Framework, including its Guiding Principles, Decision Criteria and Design Principles as the road map for development of subsequent S/CAP Implementation Plans (SIPs); and B. Direct Staff to return to Council with S/CAP Implementation Plans; and C. Direct Staff to make its best effort to incorporate Council Member comments. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion Part A, “draft” after “adopt the.” MOTION AS AMENDED RESTATED: Vice Mayor Scharff moved, seconded by Mayor Burt to: A. Adopt the draft Sustainability/Climate Action Plan (S/CAP) Framework, including its Guiding Principles, Decision Criteria and Design Principles as the road map for development of subsequent S/CAP Implementation Plans (SIPs); and DRAFT ACTION MINUTES Page 5 of 6 City Council Meeting Draft Action Minutes: 11/28/16 B. Direct Staff to return to Council with S/CAP Implementation Plans; and C. Direct Staff to make its best effort to incorporate Council Member comments. MOTION AS AMENDED PASSED: 9-0 10. Review of the Draft Land Use & Community Design Element of the Comprehensive Plan Update Recommended by the Citizens Advisory Committee. Council Member DuBois advised that he will not participate in this Agenda Item as it relates to citywide land use decisions that could impact Stanford University due to a source of income from Stanford University. He left the meeting at 7:56 P.M. Council Member DuBois returned to the meeting at 9:27 P.M. Mayor Burt left the meeting at 9:39 P.M. MOTION: Council Member DuBois moved, seconded by Council Member Schmid to: A. Immediately clarify with Placeworks | DCE that Council’s intention in Scenario 5 was a low jobs scenario; and B. Reduce the jobs forecast an amount corresponding to the reduction in office space square footage, and attempt to accommodate that work within the existing budget. MOTION FAILED: 4-4 DuBois, Filseth, Holman, Schmid yes, Burt absent Inter-Governmental Legislative Affairs None. Council Member Questions, Comments and Announcements Council Member Kniss reported she and Vice Mayor Scharff attended a meeting in San Jose where the City received the Santa Clara County Department of Public Health 2016 Healthy Cities Campaign Award for Best in Active & Safe Communities. The Award recognizes Palo Alto’s healthy food and beverage environment, efforts towards becoming a tobacco free community, and various crosscutting strategies. The City also received Exemplary City Award recognizing the City’s Safe Routes to School Program. DRAFT ACTION MINUTES Page 6 of 6 City Council Meeting Draft Action Minutes: 11/28/16 Council Member Scharff announced that at the same meeting, he was recognized with the Healthy Cities Champion Award. He reported his gratitude to Council Member Holman for her efforts championing the City’s Health City, Healthy Community efforts. Council Member Holman reported her regrets for not being able to attend the meeting. Council Member Kniss shared her appreciation for the City’s recognition by the Health Department. Vice Mayor Scharff reported the Champion Award recognizes his efforts with the Cities Association of Santa Clara County in developing a matrix regarding healthy cities. Council Member Holman shared her appreciation to the City Manager’s Office and the Community Services Department in supporting the City’s Healthy City, Healthy Community efforts and support of the Healthy City, Healthy Community Committee. Council Member Berman advised that he will be submitting his resignation as a Council Member later this week as he takes on his new role as State Assemblymember this coming Monday. Council Member Kniss shared her congratulations to and best wishes for Council Member Berman. She noted that serving as an Assemblymember has been a long time goal for him. Council Member Holman commented that community members have expressed support for the creation of an arts district, which could be included in the Comprehensive Plan Update. Vice Mayor Scharff announced that he was selected to be the Vice President of the Association of Bay Area Governments (ABAG) Personnel and Finance Committee and to serve on the committee to oversee ABAG’s merger with the Metropolitan Transit Commission. James Keene, City Manager expressed his and City Staff’s appreciation for Council Member Berman’s service and their best wishes on his new role. Adjournment: The meeting was adjourned at 11:36 P.M. CITY OF PALO ALTO OFFICE OF THE CITY CLERK December 12, 2016 The Honorable City Council Palo Alto, California Adoption of a Resolution Declaring the Results of the Consolidated Municipal Election Held on November 8, 2016 Attached is the Resolution canvassing the results of the November 8, 2016, Consolidated Election. RECOMMENDATION Staff recommends that the City Council adopt the attached Resolution and Direct the Clerk to Submit the Adopted Measures to the Secretary of State. ATTACHMENTS: Attachment A: Draft Election Resolution (DOCX) Attachment B: Certified Election Results (Exhibit A) (PDF) Department Head: Beth Minor, City Clerk Page 2 NOT YET APPROVED 1 121211 sh 8262029 Resolution No. Resolution of the Council of the City of Palo Alto Declaring the Results of the Consolidated General Municipal Elections Held on Tuesday, November 8, 2016 R E C I T A L S A. On November 8, 2016, a general municipal election was duly held in the City of Palo Alto pursuant to the provisions of Article III, Section 4 of the Charter of the City of Palo Alto for the purpose of electing four members to the City Council, each for a full term of four years expiring December 31, 2020; B. Due and legal notice of the general municipal election was given as required by law; C. On the 8th day of November 2016 at 7:00 a.m., the polls were duly and regularly opened for the general municipal election and the polls were continuously kept open until 8:00 p.m.; D. There were 40,123 registered voters eligible to vote, and 35,174 ballots including absentee ballots were cast, for a total of 87.7 percent of eligible voters casting ballots in the election; E. The Registrar of Voters of Santa Clara County has conducted a complete and official canvass of the returns of the election; F. Article III, Section 4 of the Charter of the City of Palo Alto requires the Council to act as the canvassing board to canvass the results of such elections; and G. On December 12, 2016, the Council of the City of Palo Alto met at its usual place of meeting, canvassed the returns of the general and special municipal elections and declared the results thereof. NOW, THEREFORE, the Council of the City of Palo Alto does RESOLVE as follows: SECTION 1. The Council finds and declares that: (a) A general municipal election was duly and regularly held on November 8, 2016, according to the Charter of the City of Palo Alto, Resolution Number 9254, and the election laws of the State of California; (b) The total number of registered voters in the City was 40,123; the total number of ballots including absentee ballots cast was and 35,174; and the total number of votes cast in the City at the municipal election for the purpose of electing four council members for full terms was 93,695; (c) The total number of votes given and cast at the municipal election, including votes cast upon absentee ballots, was as follows for the candidates for City Council for full terms: GREER STONE 7,376 STEWART CARL 4,766 DANIELLE MARTELL 2,708 JOHN KARL FREDRICH 2,414 LEONARD W. ELY III 2,312 TOTAL 93,695 (d) Liz Kniss, Greg Tanaka, Adrian Fine and Lydia Kou being the four candidates receiving the highest number of votes for the office of Council Member for a full four-year term, were duly and regularly elected for terms of four years commencing January 1, 2017, to serve as Council Members of the City of Palo Alto. SECTION 2. Attached hereto as Exhibit "A" and incorporated herein by this reference is the statement of the results as required by Section 10264 of the California Elections Code. INTRODUCED AND PASSED: AYES: LIZ KNISS 16,844 GREG TANAKA 13,445 ADRIAN FINE 12,855 LYDIA KOU 12,458 ARTHUR KELLER 10,936 DON MCDOUGALL 7,581 NOES: ABSTENTIONS: ABSENT: ATTEST: APPROVED: City Clerk Mayor APPROVED AS TO FORM: City Attorney County of Santa Clara Registrar of Voters I 555 Berger Drive, Bldg. 2 San Jose, CA 95112 Mailing Address: P.O. Box 61 1360, San Jose, CA 9516 I -1360 (408) 299-VOTE (8683) 866-430-VOTE (8683) FAX: (408) 998-7314 www sccvote.org December 8, 2016 Ms. Beth Minor City Clerk City of Palo Alto 250 Hamilton Avenue Palo Alto, CA 94301 RE: Certification of Election Results-November 8, 2016 Presidentia'l General Election Dear Ms. Minor: Enclosed are the Certificate of Election Results, Official Results and Statement of Votes for the contest in your jurisdiction. Pursuant to Elections Code Section 15400, the Governing Board should accept the Statement of Votes and Certificate of Election Results, and declare the totals to be the final results of the election. Please contact Shui Ling Chu at 408-282-3041 if you have any questions. Sincerely, Shannon Bushey Registrar of Voters Enclosures Board of Supcrviso•·s: Mike Wasserman, Cindy Chavez, Dave Cortese, Ken Yeager, S Joseph Simitian County Executive: Jeffrey V. Smith EXHIBIT A CERTIFICATE OF ELECTION RESULTS STATE OF CALIFORNIA ) ) ss. COUNTY OF SANTA CLARA ) I, Shannon Bushey, Registrar of Voters of the County of Santa Clara, State of California, hereby declare: 1. A Presidential General Election was held in the County of Santa Clara, for the City of Palo Alto, on November 8, 2016 for the purpose of electing Four (4) Council Members to the Governing Board. 2. The official canvass of the returns of this election was conducted by the Office of the Registrar of Voters in accordance with the appropriate provisions of the Elections Code of the State of California. 3. The Statement of Votes Cast, now on file in my office, shows the number of votes for each candidate for the Governing Board of the City of Palo Alto and in each of the precincts and that the total shown for each candidate are true and correct. WITNESS my hand and Official Seal this 8th day of December, 2016. Shannon Bushey, Registrar of V ers Santa Clara County Member, Palo Alto City Council Number to Vote For: 4 Completed Precincts: 44 of 44 LIZ KNISS 16,844 GREG TANAKA 13,445 ADRIAN FINE 12,855 LYDIA KOU 12,458 ARTHUR KELLER 10,936 DON MCDOUGALL 7,581 GREER STONE 7,376 STEWART CARL 4,766 DANIELLE MARTELL 2,708 JOHN KARL FREDRICH 2,414 LEONARD W. ELY, Ill 2,312 Member, San Jose City Council, District 2 Completed Precincts: 57 of 57 SERGIO JIMENEZ 17,629 STEVE BROWN 14.441 Member. San Jose City Council, District 6 Completed Precincts: 70 of 70 DEVORA "DEV" JOAN DAVIS 20,360 HELEN K. CHAPMAN 17 450 Member, San Jose City Council, District 8 Completed Precincts: 54 of 54 SYLVIA ARENAS 17,258 JIMMY NGUYEN 17 161 Run Date!Time: 12/6/16 3:00:54 PM 17.98% 14.35% 13.72% 13.30% 11.67% 8.09% 7.87% 5.09% 2.89% 2.58% 2.47% 54.97% 45.03% 53.85% 46.15% 50.14% 49.86% OFFICIAL FINAL RESULTS Cumulative Totals Member, Santa Clara City Council, Seat 3 Completed Precincts: 49 of 49 DEBI DAVIS 21,948 JOHN MCLEMORE 12.217 Member, Santa Clara City Council, Seat 4 Completed Precincts: 49 of 49 PATRICIA MAHAN 11,384 TINO SILVA 10,059 RAJ CHAHAL 9,365 MARKUS A. BRACAMONTE 3 925 Member, Santa Clara City Council, Seat 6 Completed Precincts: 49 of 49 KATHY WATANABE 16,526 MOHAMMED NADEEM 6,895 SUDS JAIN 5,319 ANTHONY J. BECKER 2,966 MARIO BOUZA 2 762 Member, Santa Clara City Council, Seat 7 Completed Precincts: 49 of 49 TERESA O'NEILL 19,634 KEVIN PARK 10,635 AHMAD RAFAH 4 100 City Clerk, City of Santa Clara Completed Precincts: 64.24% ROD DIRIDON, JR. 35.76% DEBORAH BRESS Chief Of Police, City of Santa Clara Completed Precincts: 32.78% MICHAEL J. SELLERS 28.96% PAT NIKOLAI 26.96% 11 .30% Member, Saratoga City Council Number to Vote For: 2 Completed Precincts: MANNY CAPPELLO HOWARD MILLER 47.95% DEDE SMULLEN 20.00% 15.43% Member, Sunnyvale City Council, Seat 4 8.61% 8.01% Completed Precincts: LARRY KLEIN JOHN CORDES MIKE MCCARTHY 57.13% Member, Sunnyvale City Council, Seat 5 30.94% 11.93% Completed Precincts: RUSS MELTON SCC_20161108_E November 8, 2016 49 of 49 22,424 67.00% 11,044 33.00% 49 of 49 17,618 50.15% 17 513 49.85% 23 of 23 8,748 39.28% 7,449 33.45% 6075 27.28% 61 of 61 18,972 46.63% 13,984 34.37% 7 733 19.01% 61 of 61 24,281 60.60% PaQe 6 of 10 November 8, 2016 Presidential General Election 67 I Cily of Palo Alto Member, Palo Alto CHy Council GRD. Totals. Page 63 g 8l :r (,) ~" -i< ..J .... " . ..J ..J z ~ 0 ~ 0 Ill o£ "' ..J ::! ;;! < ~ ""e w w w "' ~ I= ..J < "' () ~ ~ ..J z ~ <( u.. w ::l ~ ~ .... w 0 (,) ..J z <( " 0 ::> :~g "' "' .... 0 .... "' u: z w .... "' ~ :! 0 0 0 .:.~ !!l "' "' ~ ~ ::l (,) Ill ..J z ~~~ z ::l "' <( w " (; j:: w z ~ z "' ..J ~ "' w 0 :r ii! w z z w :i ~ ~~~ ~ I ~ ffi w 0 ~ lffi <( g a: .... "' 0 Coooly of Santa Clara 40123 35174 87.7% 12456 16844 10936 7376 2312 4766 2414 12855 13445 2708 7~81 U.S, ReprosentaUve, District 18 40123 35174 87.7% 12458 16844 10g36 7376 2312 4766 2414 12855 13445 2708 1581 Slate Senate, District 13 40123 35174 87.7"!. 12458 1684-4 10936 7376 2312 4766 2414 12855 13<•5 2708 1581 Slate Assembly Otstrlct 24 40123 3517 4 87.7'-' 12458 16844 10936 7376 2312 4766 2414 12855 13445 2708 7581 Stale Board ot Equal. Oislrict 2 40123 35174 87.7% 12458 16844 10936 1m 2312 4766 2414 12655 13445 2708 7581 Supervisorial District 5 40123 35174 87.7% 12458 16844 10936 7376 2312 4766 2414 12855 13445 2108 7581 City of Palo Alto 40123 35174 87~7% 12458 16844 10936 7376 2312 4766 2414 12855 13445 2708 7581 12fll2016 10:57:10 AM GRD. Totals· Page 63 Page 1 of5 November B, 2016 Presidential General Election 67 I City or Palo Alto Member, Palo Alto City Council VBM Tolals-Page 6J ] 8! r 0 .~ $ -li?: ..J 1-..J ..J z ~;; "' ~-c ~ "' .J w ..J 0 ..: ~ " e w w w "' "' ~ c( ~ ..J c( "' t) ~ ~ ..J z :;:: c( LL w ::J ~ ~ 1-w 0 0 ..J z c( ::;; 0 :::> .fg5 "' >< t-c t-~ u:: z w c 1-0 0 "' "' "' "' "' z ;! :l u .: ... ll: "' -' z .82c:c z ::J "' c( c( !! w ::;; a -' D: >< :X: w z ~ z "' ~ EJ!a t-w 0 r "' w z w ..: I ~ ·~ ~ >-.!>! ~ I~ w Q !i ~ 18 D: Ill -' c County of Santa Clara 40123 27158 67,7% 9844 13384 8691 5715 1844 3842 1896 10054 10471 2107 6063 U.S Representative, District 18 40123 27158 67,7o/. 9844 13384 8691 5715 1844 3842 1896 10054 10471 2107 ~) Slate Senate, Dislrlc113 40123 27158 07.70/o 9844 13384 8691 571"5 1844 3842 1896 10054 10471 2107 ~) Stale Assembly District 24 40123 27158 67.7% 9844 13384 6691 5715 1844 3842 1896 10054 10471 2107 6063 Stale Board of Equal. District 2 40123 27158 67 7% 9844 13384 8691 5715 1844 3842 1896 10054 10471 2107 5063 Supervisorial Dlstrlct 5 40123 27158 67.7o/. 9844 13384 8691 5715 1844 3842 1896 10054 10471 2107 6063 City of Palo Alto 40123 27158 67.7% 9844 13384 8691 5715 1844 3842 1896 10054 10471 2107 6063 121712016 10 57;10 AM VBM Tot•ls ·Page 63 Page2 ofS PCT Totals-Page 63 z 0 i= g rn 5 w a: Coumy of San1a Cfara U.S Representative, Dis!fict 18 Slate Senate, Dlstrlct 13 State Assembly District 24 Slate Board or Equal. Disbict 2 Supervisorial District 5 City of Palo AJlo 121712016 10:57:10 AM November 8, 2016 Presidential General Election 1-rn < u rn 1-0 -' -' < a! 40123 8018 40123 8016 40123 6016 40123 8016 40123 8016 40123 8016 40123 8016 Cily of Palo Alto Member, Palo Alto City Council = u c , -0 , ~~ " . Jlf; c <! !l ~ 1-::> :_o:J 0 cO z H~ a: !j_~ ::> 20.0% 2614 20.0% 2614 200% 2614 20.0".4 2614 20.0% 2614 20.011/io 2614 20.0% 2614 VJ VJ z " !::l -' .. w -' -' w " .. ::> i= ~ 346Q 3460 3460 3460 3460 3460 3460 :I: u g -"' ~ c -' -' w -' w w "' "' ~ ~ < " z ~ < u. w ::> 0 u -' z .... :51 :;; "' u: z w 0 c "' ~ z ;! .... u .. < < -' ::. w z ~ z ~ " w w 0 :I: I~ I~ ~ z I~ w .... tfl g Ill 0 2245 1661 468 924 518 2801 297 601 1518 2245 1661 468 924 518 2801 2974 601 f518 2245 1661 468 92~ 511 2801 2974 601 1511! 2245 1661 468 924 518 2801 2974 601 1518 2245 1661 468 924 518 2801 2974 601 1518 2245 1661 468 924 518 2801 2974 601 1518 2245 1661 468 924 518 2801 2974 601 1518 PCT Totals-Page 63 Page3 of5 November 8, 2016 Presidential General Election 1¢3 I City or Palo Allo I Member, Palo Alto City Council !~ 0 , ::t: ~~ " ...J -12 ...J z f-0 • ~ 0 ~ ...J 0 (/) .;; cr: ...J w ...J ~ ~ " ~ w w w cr: i1: ;2 cr: <t f:: ...J " (.) " 0 ...J z ;:: <t w <t :::> C2 (/) f-.S! E w 0 " ...J ~ "' :=;; 0 :::> :gg "' .... 0 .... cr: z w >-f-"' cr: "' cr: cr: ;2 u. <t ...J 0 "' 0 0 ...-... ll: !!l :::> cr: <t "' z .... ...J " 5 ..J z .8.:!< z ::t: w z ;:: z ~ " w :=;; ..J cr: "' z w ~ e .!! a .... w 0 w ::t: w z IF ~~~ !::< '~ cr: w .... ~ ~ ffi lel 0 ~ Ill " "' 0 PCT MAIL 2001 PCT Reporting ~ 0 o,oo;. 0 0 0 0 0 0 0 0 0 0 0 VBM Reporting 5 5 fOO,O% 1 2 3 1 0 0 0 1 2 0 2 PCT 2002 PCTReporting 1423 311 21,9(o/t 79 136 67 ~3 22 29 20 116 121 24 76 VBM Reporting 1423 908 63,8% 262 479 262 1B3 55 99 54 373 3BJ 64 275 PCT2003 PCT Reponmg 895 168 18,8o/. 57 67 52 34 9 24 11 60 56 6 32 VBMReportll'lg 895 636 71 !g/. 266 295 231 169 34 132 31 245 213 32 128 PCT 2004 PCT Reporting f472 303 206% 52 96 " 38 19 18 17 94 95 29 52 VBM Reporting 1<12 980 666% 193 446 225 108 147 59 66 334 308 89 192 PCT2005 PCT Reporting 1191 358 30 1°/• 94 155 104 73 21 46 12 168 166 1B 88 VBMRepolting 1191 708 59 SD!. 193 349 1B4 150 25 120 27 332 364 46 178 PCT MAIL 2006 PCT Reporting 329 0 0.0°/. 0 0 0 0 0 0 0 0 0 0 0 VBM Reporting 329 284 56,3% 101 101 92 Sll 20 55 22 94 110 28 49 PCT2009 PCTReporting 1401 296 2f,O% 9B 142 19 51 33 27 18 100 124 24 55 VBMReporting 1407 940 66.8"1. 342 462 299 183 90 132 51 325 332 75 205 PCT2010 PCTReporting no 218 28.3% 7~ 91 49 40 12 32 19 68 13 16 35 VBMReporting 770 440 57.1% 135 200 131 82 20 64 38 170 165 51 100 PCT2013 PCTReporting 1301 267 20,5% 80 135 75 50 10 30 27 107 93 21 47 VBM Reporting 1301 916 70..4% 343 511 342 164 46 114 69 367 331 62 211 PCT2014 PCT Report1ng 799 162 20._3% 48 55 30 19 4 18 13 49 53 19 22 PCT2014 VBMReporting 799 491 61.5% 169 211 123 69 33 53 41 171 177 36 107 PCT2015 PCT Reporting 1081 178 16,5% 58 57 48 29 5 21 fl 38 " 14 20 VBM Reportrng 1081 723 66,9% 285 293 223 144 46 115 69 231 235 79 120 fCT MAIL 2018 PCT Reporting 143 0 0,0% 0 0 0 0 0 0 0 0 0 0 0 VBM Reporting 143 109 76,2% 32 47 27 16 8 16 10 31 35 22 26 PCT2019 PCT Reporting 860 lBO 20.9% 67 93 59 32 6 12 10 64 72 22 36 VBM Reporting 860 561 65,2% 214 245 167 91 36 69 55 200 195 59 108 PCT MAIL2022 PCT Reporting 1 0 0,0% 0 0 0 0 0 0 0 0 0 0 0 VBM Reporting 1 I 100,0% 0 0 0 0 0 0 0 0 0 0 0 PCT2025 PCT ReportWlg 1392 248 17.8% 79 119 76 51 17 36 18 95 104 21 40 VBM Reporting 1392 980 70.4% 351 506 301 190 56 106 76 385 375 B! 224 PCT2026 PCT Reporting 773 178 22,8% 67 82 59 41 7 22 13 51 65 14 37 VBM Reporting 773 505 65,3% 192 211 135 98 28 59 46 179 205 44 110 PCT2034 PCT ReporMg 929 195 21.0% 57 BO 54 45 16 26 17 10 14 ·~ 36 VBMReporting 929 614 66.1% 219 315 In 120 32 BS 46 233 284 41 139 PCT203S PCT Reporting 779 170 21,8% 59 85 51 33 8 22 6 67 66 13 24 VBM Reporting 779 522 67.0% 201 265 114 1f3 27 86 30 201 2f7 36 101 PCT2046 PCT Reporting 1257 245 19,5% 71 128 51 53 23 16 13 92 101 18 58 VBM Reporting 1257 871 69,3% 245 485 249 152 86 98 54 372 336 54 231 PCT 2048 PCT Reporting 1"332 259 19,4% 84 116 87 15 26 30 10 71 91 14 58 VBM Reporting 1332 952 71,5% 337 472 314 239 124 142 61 338 382 45 248 PCT2056 PCT Repolfug no 175 22.7% 57 66 37 25 13 9 12 60 60 17 40 PCT 2056 VBM Reporting 770 512 66,5% !Sf 2U 144 88 31 59 33 199 213 39 1l1 PCT 2057 PCT Reporting 1355 246 182% 65 112 60 38 15 26 19 81 95 18 46 VBM Reporting 1355 922 68.0% 300 464 258 172 14 124 67 366 350 99 232 PCT2061 PCTReporting 1338 354 2a.s% 117 151 94 61 23 35 17 151 135 33 89 VBMReporting 1338 829 62,0% 233 396 257 158 34 110 57 333 305 64 211 PCT206B PCTReporting 1322 224 16.9% 60 fOB 67 41 12 23 12 74 ill! 7 48 VBM Reporting 1322 958 72.5% 342 531 339 202 9B 1B3 54 381 316 62 221 PCT2075 per Reporting 1256 216 17..2% 81 90 67 43 19 33 8 T4 82 to 36 \IBM Reporting 1256 904 72.0% 318 513 289 228 72 120 55 35'1 394 56 215 PCT207B per Reporting 1335 196 148% 68 89 65 54 16 25 10 55 72 9 35 VBM Reporting 1335 982 73.6% 402 528 35'4 275 63 172 63 340 383 64 215 PCT20B1 PCT Reporting 730 B1 1U% 36 41 26 19 f 19 1 21 24 10 9 VBM Reporting 730 513 78 So/. 266 298 240 139 28 105 30 204 233 37 126 PCJ ~ PC T Reponing 862 186 21 6°1. 85 95 10 56 11 24 4 70 59 11 ll t2nf2016 10 57:10 AM PAGE63 Page 4 ors November 8, 2016 Presidential General Election r I City of Palo Alto Member, Palo Alto City Council ~ ._ 0 • I 0 0 , ... 0 -' f--< -ii2 -' z 0 • ::; 0 ~ -' 0 "' 0 = "' -' w -' <( ~ " . w w w "' "' <( "' <( 1= ~ ~ -' " u -' z ;:: <( u. w "' <( ~ f-w g " -' <( "' :0 "' z 0 f-:::;) :g ~ Ill "' 0 .... 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IQ ;j! ffi l;!i 0:: Ill f-"' V:OMJtt~ing 86~ 577 669% 232 301 181 167 43 84 33 193 218 43 111 PCJ2096 PCTRopot'llnD 846 126 14,9% 0 58 41 30 17 11 8 ·~ 42 B 18 YOM R~tporlng 846 ~·· 695% 227 3!8 2f1 152 81 101 39 212 253 25 149 PCTml PCTF<ei>OI1inq 748 144 19.3'1.. 64 82 44 29 5 21 10 54 67 15 33 VlW Reporting 748 521 69.7% 211 246 169 116 21 73 33 183 200 45 86 PCT2t01 PO'fRIII~ 1509 316 20,9% 90 145 67 74 15 16 22 114 115 26 74 VBMRtpofft!Q 1509 949 62.9% 324 496 218 230 41 roa 68 396 394 94 218 PCT 210l PC'fR•porfr1g 686 129 188% 56 57 39 30 5 26 10 35 50 9 24 PCTi:lDl VllMR•-686 471 68,7% 250 219 175 98 15 79 34 166 174 27 96 PC12t07 f'(;Tftoprito 835 194 232% 60 89 53 59 10 21 10 65 75 15 39 \l'fl.MR~ang 835 558 66.B% 212 260 156 128 31 78 40 179 228 41 112 PCf2110 PCTRt~~ 864 193 22.3% 78 n 66 47 3 26 10 66 79 15 27 w .. RtporbtiQ 864 566 65,5% 212 285 188 127 33 72 29 242 252 32 151 rcr:ln2 PCTN•-989 177 17,9% 47 56 47 28 10 21 15 47 57 14 26 WMR..., ... 989 690 6'9,B% 252 357 219 114 35 60 44 243 251 70 149 PCTZ113 PCT Rtpo<1>!o 12BJ 272 21.2% 100 112 73 61 7 30 25 102 99 18 47 VEJM R.eportSMg 1283 830 647% 355 374 294 156 44 124 92 284 285 64 161 PCT,11S PQTR~:~ 679 130 19 2o/. 56 44 39 33 6 28 12 51 41 13 19 VllMRo-579 479 70.5% 241 211 196 145 23 102 37 165 163 29 93 F'CT1'U'1 PClRCI~ 626 176 21.3% 62 71 63 55 4 24 11 63 61 6 30 V!lMR.,....., 826 575 69.6% 199 280 181 137 26 80 '33 238 263 41 142 POt 2115 PCTRICI~ 954 175 18,3% 64 65 75 38 B 30 13 56 se 17 33 vtJMRop~~ 954 656 68,8'/, 302 293 318 138 39 103 55 197 248 50 107 POT ;11'20 PCTR•potlilo 959 185 19.3% 71 n 56 25 13 25 14 67 65 17 25 VBM RtPIHtfng 959 642 66,9°/, 213 292 182 103 30 86 55 219 229 5~ 1<7 PCT7t'22 PCTR•-866 216 24.9o/. 85 66 70 53 7 32 22 62 69 13 29 VBMRopof'fleiO 666 546 63.1o/. 2rrl 201 247 181 21 122 38 131 169 45 71 pcfMII.lt2124 POTRoportlrlg 196 0 0,0% 0 0 0 0 0 0 0 0 0 0 0 VBMR.ofH"tnrl 196 176 89.8% 63 83 50 26 18 24 14 58 63 n 36 PCTMM..2120 PCTRt'~ 59 0 0.0% 0 0 0 0 0 0 0 0 0 0 0 PCTMAA..2121J VDMRo~ 59 50 84.8% f3 30 11 3 6 4 7 17 18 7 17 PCt21~ PCT llopottffoo n1 169 23.6% 47 70 38 39 10 12 10 66 59 15 37 Vlllo&Ro-717 458 63,9°/. 146 202 133 104 24 63 34 175 162 42 97 GRAND TOTALS I 40,f23 35,174 87.7% 12,458 16,844 f0,936 7,376 2,312 4,766 2,414 12,855 13.445 2,708 7,581 12ni201610:57:10AM PAGE63 PageS ors 0::: w _J w _J z w -~ u. 0::: z :J <C :I: 0:: 1-0 0::: <C <C Precinct VBM PCT VBM PCT 2003 0 1 0 0 2005 0 .o 0 1 2010 0 0 0 0 2013 o · 3 0 0 2014 0 0 1 0 2015 0 0 2 0 2028 0 0 0 0 2048 1 0 0 0 TOTAL 1 4 3 1 G-Total 5 4 Write-In Statement of Votes SANTA CLARA COUNTY November 8, 2016 Presidential General Election Member, Palo Alto City Council _J _J w _J 1-_J 0::: <C w <C (!) <C z ~ 2 :J 0 <C w 0 1-z 0 en <C _J (.) _J 0::: 1-w 2 w (!) -z z w w <C 0 0::: 0::: 0 0 (!) 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VBM PCT VBM PCT VBM PCT VBM 0 0 0 0 0 0 0 0 1 0 0 0 1 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 1 0 2 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 2 1 1 1 1 2 2 2 2 8 Page 101 of 122 :I: (.) -0:: -- 0 >-"' w _J 0::: w u. ~ _J 0::: 0 <C 0::: ~ <C z z :I: 0 0 w ..., _J PCT VBM PCT VBM PCT 0 0 0 0 0 1 0 0 0 0 1 0 0 0 0 3 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 1 0 6 0 0 1 0 0 1 en ~ z ~ N :J Precinct VBM PCT VBM 2003 0 1 0 2005 0 0 0 2010 0 0 0 2013 0 3 0 2014 1 0 0 2015 2 0 0 2028 0 0 0 2048 1 0 1 TOTAL 4 4 1 G-Total 8 ::J 0 ~ ~ c >-...J PCT 1 0 0 0 0 0 0 0 1 2 Write-In Statement of Votes SANTA CLARA COUNTY November 8, 2016 Presidential General Election Member, Palo Alto City Council ...J 0::: <( u 1-0::: <( ~ w 1-en VBM PCT 0 1 0 0 0 0 0 0 0 0 2 0 0 1 0 0 2 2 4 Page 102 of 122 City of Palo Alto (ID # 7418) City Council Staff Report Report Type: Consent Calendar Meeting Date: 12/12/2016 City of Palo Alto Page 1 Summary Title: Downtown Parking Garage Site and Design Contract Approval Title: Approval of Site Finalization of Lot D, Located at Hamilton Avenue and Waverley Street, for the New Downtown Parking Garage, and Approval of a Contract with Watry Design, Inc. in the Amount of $1,899,591 to Provide Design and Environmental Assessment Services for the new Downtown Parking Garage, Capital Improvement Program Project, PE-15007 From: City Manager Lead Department: Public Works Recommendation Staff recommends that Council: 1) Approve the site Lot D, located at Hamilton Avenue and Waverley Street, for the planning and design of a new downtown parking garage; and 2) Approve and authorize the City Manager or his designee to execute Contract No. C17166279 (Attachment A) with Watry Design, Inc. in a not- to-exceed amount of $1,899,591 for design services including $1,726,901 for basic services and $172,690 for additional services for the New Downtown Parking Garage Capital Improvement Program project (PE- 15007). Background In 2014 the City Council authorized staff to proceed with several parking strategies aimed at improving parking supply for the University Avenue (Downtown) and California Avenue Business Districts (Staff Report ID #4374). Since then, the City has taken steps to maximize use of existing off-street parking facilities, address spill-over impacts into adjacent residential neighborhoods, and reduce overall parking demand via establishment of a Transportation Management Association (TMA) and other means. The City has also initiated a study of paid parking downtown, and continues to monitor a parking deficiency City of Palo Alto Page 2 that was originally described in the 1986 study of downtown. All of these actions have failed to fully address parking demand downtown, and the total supply of public parking (on and off-street) remains at or near capacity during the busiest times of the day/week. Council identified parking facilities in downtown and the California Avenue area as being among the City’s priority projects and incorporated $13.0 million for a Downtown garage and $9.6 million for a California Avenue garage into the 2014 Council Infrastructure Plan. Council approved the plan in June 2014 (Staff Report ID #4889), including the use of the estimated $4.0 million FY 2014 yearend balance in the Downtown In-Lieu Parking fund, revenue collected for construction of garages in downtown. In October 2014, Council directed staff to return with a draft Request for Proposal (RFP) and evaluation criteria for hiring a qualified professional design firm for design, environmental review and preparation of construction cost estimate of a publicly-financed parking garage on parking Lot D at the corner of Hamilton Avenue and Waverley Street (Staff Report ID #5173). A feasibility analysis indicated a new garage could be constructed on Lot D to provide an additional 214 spaces to the existing 86 spaces (300 total). The initial project budget of $13.0 million was derived by multiplying the number of additional spaces by the downtown parking in-lieu fee in effect during FY 2014. As instructed, staff brought a draft RFP to Council in December 2015 however; the item was pulled from the consent calendar and not rescheduled (Staff Report ID #5818). In September, staff prioritized the New Downtown Parking Garage project again and released an RFP to solicit design proposals. Discussion Watry Design, Inc. Scope of Services The contract with Watry Design, Inc. includes preparation of environmental documents, schematic designs, design development packages, and construction documents for a new Downtown Parking Garage at existing surface parking Lot D. Watry Design, Inc. will develop conceptual options in preliminary design that include mechanical parking, retail, and sub-surface parking levels. Staff will return to Council with conceptual options for approval prior to moving forward with schematic design and environmental review. Watry Design, Inc. will present City of Palo Alto Page 3 designs for the new garage to the Architectural Review Board (ARB), Planning and Transportation Commission (PTC) and Council as appropriate at schematic design and design development levels. Watry Design, Inc. will also provide construction cost estimates upon completion of schematic design, design development, and construction document phases of the project. The Watry contract is configured into three phases. Phase 1 includes California Environmental Quality Act (CEQA) assessment, preliminary design, schematic design and design development. Phase 2 includes construction documents, permitting, project bidding and award. Phase 3 includes construction administration services and project closeout documents. The design contract includes the scope of services and compensation for all three phases. However, commencement of work for each phase will require written authorization by the City. Phase 2 will not be authorized until CEQA review and Council approval of the project are completed. Request for Proposal (RFP) Process In June 2016, Council authorized a contract with Nova Partners, Inc. (NOVA) to provide program management services for the 2014 Council Infrastructure Plan projects. Nova helped develop the project delivery plan, preliminary schedule and scope of work for procuring design and environmental review services for the downtown parking structure, and assisted with the selection process. Summary of Solicitation Process Proposed Length of Project 38 months Number of Consultants Contacted 615 Number of Builder Exchanges 6 Number of websites 1 (PlanetBids) Number of days to response 26 days Number of Proposal received 5 Company Name Address International Parking Design Oakland, CA Brooks + Scarpa Los Angeles, CA Watry Design San Jose, CA Choate Parking Consultants, Inc. Concord, CA City of Palo Alto Page 4 Watry Buehler Collaborative San Francisco, CA Proposed Basic Services Fee Range: $1,075,879 to $2,017,325 On September 29, 2016, the City released a Request for Proposal (RFP No. 166279) for Professional Services and five proposals were submitted. An evaluation committee comprised of Public Works, Planning and Community Environment, and Nova staff reviewed each firm’s submittal in response to the criteria identified in the RFP. On November 9, 2016, the three top-scoring firms made presentations to the evaluation committee. Watry Design, Inc. was unanimously selected as the top candidate. Staff recommends awarding the contract to Watry Design, Inc. based on their experience designing parking structures and working in the Palo Alto community, understanding of the project scope, and construction administration experience. In addition, the Watry team includes architectural services from The Hayes Group, having extensive experience navigating the Palo Alto ARB and approval process. The RFP requested pricing for both traditional design/bid/build and design/build project delivery methods for the parking garage. The Watry contract includes the design/bid/build delivery method. The design/build project delivery method is often considered advantageous for parking garage construction due to its tendency to shift risk to the design/build contractor and reduce costs by allowing the design/build contractor to find the most cost-effective strategies for complying with project specifications. In this instance, the need to secure ARB and Council approval of the project and CEQA document prior to the design/build RFP, would likely limit the innovations of the design/build contractor and potentially introduce delays. Timeline/Next Steps Staff anticipates the environmental assessment, preliminary and schematic design will take approximately one year to complete. Staff will return to Council in early 2017 to present options for conceptual approval prior to proceeding with schematic design and environmental review. Resource Impact City of Palo Alto Page 5 As approved in the Fiscal Year 2017 Adopted Capital Budget, funding for Phase 1 services (environmental assessment and design services through design development), Reimbursables and Additional Services is available in Capital Improvement Program project PE-15007. Additional funding needed to support Phases 2 and 3 will be appropriated in future fiscal years to coincide with the design and construction schedule. Phase 1: $883,729 Phase 2: $453,864 Phase 3: $339,308 Reimbursables: $50,000 Additional Services $172,690 Total: $1,899,591 Funding for the entire project was approved at approximately $13.7 million, which includes staff time. Updated construction cost estimates and corresponding total project budgets will be developed during the preliminary design phase and presented to Council with conceptual options for mechanical parking, retail, and sub-surface parking levels. The FY2017-2021 capital budget and 5-year plan includes a contingency fund of $30 million for the 2014 Council Infrastructure Plan projects that can be used to provide additional funding for the Infrastructure Plan projects as needed. Additionally, the Downtown In-Lieu Parking Fund balance as of June 30, 2016 is sufficient to provide a total contribution of approximately $4.8 million to the project, an increase of $0.8 million from the $4.0 million included in the 2014 Council Infrastructure Plan. Policy Implications The following policy statements in the Palo Alto Comprehensive Plan support the construction of new parking supply in addition to Council direction to staff on October 20, 2014: Policy T-45 Provide sufficient parking in the University Avenue/Downtown and California Avenue business districts to address long range needs. Policy T-47 Protect resident areas from the parking impacts of nearby business districts. City of Palo Alto Page 6 The policy implications involve discussion of the potential for increasing traffic in the immediate vicinity of a new garage and balancing this against the benefits (e.g. a reduction in the over-flow parking in nearby residential neighborhoods and convenient parking for area employees and visitors). Environmental Review Watry Design, Inc. will complete an environmental assessment as outlined in the scope of work. It is anticipated that the initial study will conclude that an Environmental Impact Report or Mitigated Negative Declaration will be required for the project. Attachments: Attachment A: Contract Watry Design Inc-C17166279-Final (PDF) CITY OF PALO ALTO CONTRACT NO. C17166279 AGREEMENT BETWEEN THE CITY OF PALO ALTO AND WATRY DESIGN INC. FOR PROFESSIONAL SERVICES This Agreement is entered into on this 12th day of December, 2016, (“Agreement”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“City”), and WATRY DESIGN, INC., a California corporation, located at 2099 Gateway Place, Suite 550, San Jose, CA 95110 (“Consultant”). RECITALS The following recitals are a substantive portion of this Agreement. A. City intends to construct a new parking structure in the Downtown University Avenue business district (“Project”) and desires to engage a consultant to provide professional design and environmental consulting 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. In reliance on these representations, City desires to engage Consultant to provide professional services as more fully described in the Scope of Services set forth in Exhibit “A,” (“Basic Services”) and any authorized additional services (collectively, the “Services”), and in accordance with Schedule of Performance (“Schedule”) set forth in Exhibit “B.” NOW, THEREFORE, in consideration of the recitals, covenants, terms, and conditions, in this Agreement, the parties agree: AGREEMENT SECTION 1. SCOPE OF SERVICES. Consultant will perform the Services described in Exhibit “A” in accordance with the terms and conditions contained in this Agreement, to the reasonable satisfaction of City. Optional Incorporation of Proposal [This provision only applies if checked to incorporate consultant’s proposal into this Agreement.] Consultant’s proposal, dated _______(“Proposal”) is incorporated into and made part of this Agreement, subject to the limitations of subsection 27.8, and excepting any and all provisions in the Proposal which conflict with or are inconsistent with the provisions of this Agreement, as determined by the City Manager. 1 Professional Services Rev. September 21, 2016 2 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, by a Task Order assigned and approved by City’s designated Project Manager. Each Task Order will be in substantially the same form the Professional Services Task Order form attached as Exhibit A-1. Each Task Order will designate a City Project Manager and contain a specific scope of Services, a specific schedule of performance and a specific compensation amount. The total price of all Task Orders issued under this Agreement may not exceed the amount of compensation set forth in Section 4, below. Consultant will only be compensated for Services performed under an authorized Task Order. City may elect, but is not required, to authorize Services up to the maximum compensation amount set forth in Section 4. City is not obligated to issue any Task Orders under this Agreement. SECTION 2. TERM. [Option A - applies when the term ends on a specified, pre-determined date.] The term of this Agreement (“Term”) begins on the date of its full execution and expires on unless terminated earlier pursuant to Section 19 of this Agreement. OR [Option B - applies when the term ends upon completion of Services, the exact date of which is not yet certain.] The term of this Agreement (“Term”) begins on the date of its full execution and expires upon satisfactory completion of the Services in accordance with the Schedule, but in no event later than June 30, 2020 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 must complete the Services within the Term and in accordance with the Schedule. Any Services for which times for performance are not specified in this Agreement may be commenced and completed by Consultant in a reasonably prompt and timely manner based upon the circumstances and City’s direction to the Consultant. City’s agreement to extend or modify the Term or the Schedule will not preclude recovery of damages for delay if the extension or modification is required due to delay caused by the Consultant. SECTION 4. COMPENSATION. 4.1 Basic Services. The compensation to be paid by City to Consultant for performance of the Basic Services and reimbursable expenses may not exceed One Million Seven Hundred Twenty Six Thousand Nine Hundred One Dollars ($1,726,901). Consultant agrees to complete all Basic Services, including reimbursable expenses, within this amount. Professional Services Rev. September 21, 2016 3 4.2 Additional Services. Services in addition to the Basic Services (“Additional Services”), if any, must be authorized in accordance with and subject to the provisions of Exhibit “C,” entitled “Compensation.” In the event Additional Services are authorized, the total compensation for Basic Services, Additional Services and reimbursable expenses may not exceed One Million eight hundred ninety nine thousand five hundred ninety one Dollars ($1,899,591). Consultant will not be entitled to any compensation for Additional Services performed without the prior written authorization of City. Additional Services includes any Services that are determined by City to be necessary for the proper completion of the Project, but which are not already encompassed within the Basic Services described in Exhibit “A.” 4.3 Rate Schedule. The applicable rates and schedule of payment are set forth in Exhibit “C-1”, entitled “Schedule of Rates” (“Rate Schedule”). Consultant is not entitled to compensation for any Services performed or reimbursement for expenses incurred to the extent that payment would result in a total exceeding the maximum amount of compensation set forth herein. Optional [for multi-year contracts] 4.4 Unexpended monies. At the sole discretion of the City, the not-to-exceed compensation authorized in a contract year may include compensation authorized and not expended in prior contract years. SECTION 5. INVOICES. To request payment from City for Services performed, Consultant must submit monthly invoices to the City describing the Services performed and the applicable charges based on the Rate Schedule (including, for each day Services were provided, the name and title of the individuals or subconsultants who performed the Services, the hours worked, the hourly rates, and reimbursable expenses). The invoice must clearly distinguish between Basic Services and Additional Services, and must itemize all reimbursable expenses. The invoice must also describe the percentage of completion of the Services or each Task Order, as applicable. The information in Consultant’s invoices will be subject to verification by City. Consultant must submit all invoices to the City’s Project manager (“Project Manager”) at the address specified in Section 13, below. The City will process and pay all undisputed amounts within thirty (30) days of receipt of an invoice submitted in compliance with this Section 5. SECTION 6. RESPONSIBILITY AND STANDARD OF CARE. 6.1 Responsibility. All of the Services must be performed by Consultant or under Consultant’s supervision. Consultant represents that it possesses the professional and technical personnel necessary to timely perform the Services required by this Agreement and that Consultant’s personnel have sufficient skill and experience to perform the Services assigned to them. Consultant represents that it, its employees and any subconsultants assigned to the Project, have and will maintain during the Term of this Agreement all applicable licenses, permits, qualifications, insurance and approvals of whatever nature that are legally required to perform the Services. Professional Services Rev. September 21, 2016 4 6.2 Standard of Care. All of the Services to be furnished by Consultant under this Agreement must meet or exceed the professional standards applicable to professionals in the same discipline and with similar knowledge and skill, who are engaged in related Services in the San Francisco Bay Area under the same or similar circumstances. SECTION 7. COMPLIANCE WITH LAWS. Consultant must keep itself informed of and comply with all federal, state and local laws, ordinances, regulations, and orders applicable to the Project, performance of the Services, or to any personnel or subconsultants assigned to perform Services under this Agreement. Consultant must 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 AND OMISSIONS. Consultant is solely responsible for all costs and damages, including, but not limited to, increases in the cost of Services, increased Project costs, delay damages, or change order markup costs arising from or caused by Consultant’s errors and omissions. Consultant is solely responsible for the costs to correct such errors and omissions, and for any costs or damages caused by Consultant’s unreasonable delay in correcting its errors and omissions. SECTION 9. COST ESTIMATES. If this Agreement pertains to the design of a public works project, Consultant must submit updated estimates of probable construction costs at each phase of design submittal. If the total estimated construction cost at any submittal phase exceeds ten percent (10%) of City’s stated construction budget, Consultant must 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, Consultant, and any person employed by or contracted with Consultant to provide Services under this Agreement, will provide such Services as an independent contractor and not as an employee of City. SECTION 11. ASSIGNMENT. Consultant’s expertise and experience is a material inducement for City to enter into this Agreement. Consultant may 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 may not subcontract any portion of the Services to a subconsultant without the prior written authorization of the City Manager or his or her designee. Professional Services Rev. September 21, 2016 5 OR Option B: Subcontracts Authorized: Notwithstanding Section 11 above, City agrees that subconsultants may be used to complete the Services. This authorization does not operate to create a contractual relationship between the City and any subconsultant. The subconsultants authorized by City to provide Services for the Project are: Hayes Group Architects Merrill Morris BKF Donnelly Design Engineering Enterprise List Engineering Cornerstone Engineering WSP/Parsons Brinkerhoff Mack 5 Consultant must require its subconsultants to comply with all applicable provisions of this Agreement, which must be attached to each subcontract. Consultant is solely responsible for directing all subconsultants providing Services, and for any compensation due to subconsultants. Consultant is fully responsible to City for all acts and omissions of a subconsultant. Consultant may not change or add subconsultants without the prior written approval of the City Manager or his or her designee. SECTION 13. PROJECT MANAGEMENT. 13.1 Consultant will assign Michelle Wendler as the Principal to have supervisory responsibility for the performance, progress, and execution of the Services and Gordon Knowles as the Project Manager to represent Consultant during the day-to-day Services for the Project. If circumstances require the substitution of the Project director or coordinator, or any other key personnel for any reason, the appointment of a substitute Project director or coordinator and the assignment of any new or replacement key personnel will be subject to the prior written approval of the City’s Project Manager. At City’s request, Consultant must promptly remove any personnel who City determines do not perform the Services in an acceptable manner, are uncooperative, or who present a threat to the adequate or timely completion of the Project or to the safety of persons or property. 13.2 City’s Project Manager is Holly Boyd, Public Works Department, Engineering Division, 250 Hamilton Avenue, Palo Alto, CA 94301, Telephone: 650.329.2612. 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 or substitute Project Manager without prior notification to Consultant. Professional Services Rev. September 21, 2016 6 SECTION 14. OWNERSHIP OF MATERIALS. All work product, including without limitation, all writings, drawings, plans, reports, specifications, calculations, documents, other materials and copyright interests developed under this Agreement are deemed the exclusive property of City without restriction or limitation upon their use. Consultant agrees that all copyrights which arise from creation of work product pursuant to this Agreement will 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 employees or subconsultants, if any, may provide such work product 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 Services. SECTION 15. AUDITS. Consultant agrees to maintain and retain such records for at least four (4) years after the expiration or earlier termination of this Agreement. Consultant will permit City to audit, at any reasonable time during the term of this Agreement and for four (4) years after expiration or termination of the Term, Consultant’s records in any form or format pertaining to matters covered by this Agreement. SECTION 16. INDEMNITY. [Option A applies to the following design professionals subject to Civil Code Section 2782.8: architects, landscape architects, registered professional engineers, and licensed 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 attorney 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 subconsultants under this Agreement, regardless of whether or not such liability for such Claims may have been caused in part by an Indemnified Party. OR [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, pertaining or in any manner related to performance or nonperformance by Consultant, its officers, employees, agents or Professional Services Rev. September 21, 2016 7 subconsultants under this Agreement, regardless of whether or not such liability for such Claims may have been 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 liability for Claims arising from the active negligence, sole negligence or willful misconduct of an Indemnified Party. 16.3. City’s acceptance of Consultant’s Services and duties will not operate as a waiver of Consultant’s indemnity and defense obligations. The provisions of this Section 16 survive the expiration or early termination of this Agreement. SECTION 17. WAIVERS. 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 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, must obtain and maintain, in full force and effect during the Term of this Agreement, the insurance coverage described in Exhibit “D,” entitled “Insurance Requirements,” attached hereto and incorporated herein. Consultant and its subconsultants, if any, must obtain and maintain 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 subconsultants 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 City as an additional insured under such policies as required above. 18.3. Certificates evidencing such insurance shall be filed with City concurrent- ly 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 City’s 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. Professional Services Rev. September 21, 2016 8 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 to Consultant. Upon receipt of such notice, Consultant will must discontinue its performance of the Services, as specified in the notice of suspension or termination. 19.2. Upon receipt of notice of suspension or termination, Consultant must immediately deliver to the City Manager any and all work product and materials including, but not limited to, all copies of studies, sketches, drawings, computations, and other data, in any form or format, whether or not completed, which have been prepared by Consultant or its subconsultants, or given to Consultant or its subconsultants, in connection with this Agreement. Such work product and materials are deemed the property of City. 19.4. Upon such suspension or termination by City, Consultant will be paid for the Services satisfactorily rendered or materials delivered to City in accordance with the scope of Services on or before the stated effective date of the suspension or termination; provided, however, if this Agreement is suspended or terminated for cause, which may include unsatisfactory performance or default by Consultant, City will compensate Consultant only for that portion of Consultant’s services which have been satisfactorily provided and which are of direct and immediate benefit to City as determined by the City Manager acting in his or her sole discretion. The following Sections will survive any expiration or termination of this Agreement: 8, 14, 15, 16, 19.4, 20, 25 and 27. 19.5. No payment, partial payment, acceptance, or partial acceptance for Services by City will operate as a waiver by City of any of its rights under this Agreement. SECTION 20. NOTICES. All notices under this Agreement 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 Professional Services Rev. September 21, 2016 9 To Consultant: Michelle Wendler Watry Design, Inc. 2099 Gateway Place Suite 550 San Jose, CA 95110 SECTION 21. CONFLICT OF INTEREST. 21.1. By entering into 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, subcontractors 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 will 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. Pursuant to Palo Alto Municipal Code section 2.30.510, Consultant certifies that in the performance of this Agreement, it will 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 or any other protected classification. 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, 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 must comply with the City’s Environmentally Preferred Purchasing policies which are available at City’s Purchasing Department, incorporated by reference and may be amended from time to time. Consultant must 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; and second, reusing waste and third, recycling or composting waste. In particular, Consultant must comply with the following zero waste requirements: 23.1. All printed materials provided by Consultant to City generated from a personal computer and printer including but not limited to, proposals, quotes, invoices, reports, Professional Services Rev. September 21, 2016 10 and public education materials, must 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. 23.2. Goods of any type or nature purchased by Consultant on behalf of City must 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 Department’s office. SECTION 24. COMPLIANCE WITH PALO ALTO MINIMUM WAGE ORDINANCE. Consultant must 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 must 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. In addition, Consultant must post notices regarding the Citywide 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 City’s Charter and its Municipal Code. Notwithstanding any other provision in this Agreement, 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. SECTION 26. PREVAILING WAGES AND DIR REGISTRATION FOR PUBLIC WORKS CONTRACTS 26.1 This Project is not subject to prevailing wages. This Agreement is not subject to prevailing wage requirements in the performance and implementation of the Project if this Agreement is not a public works contract as defined under Labor Code section 1720, et seq. and regulations promulgated thereunder, or if, pursuant to Labor Code section 1782, the Agreement does not include a public works construction project of more than $25,000, or a public works alteration, demolition, repair, or maintenance of more than $15,000. OR 26.1 This Project is subject to prevailing wage requirements, including all applicable requirements of Chapter 1 of Part 7 of Division 2 of the Labor Code, including requirements pertaining to wages, working hours and workers’ compensation insurance. The general prevailing wage requirements applicable to the City’s location for each craft, Professional Services Rev. September 21, 2016 11 classification, or type of worker needed to provide the Services, including employer payments for health and welfare, pension, vacation, apprenticeship and similar purposes, are on file at the City’s Purchasing Department’s office and available online at http://www.dir.ca.gov/DLSR. Consultant must provide a copy of prevailing wage rates to any staff or subconsultant, and must require compliance with the prevailing wage requirements. Consultant must comply with all applicable sections of the Labor Code pertaining to prevailing wages, including, but not limited to, Sections 1771.1, 1725.5, 1775, 1776, 1777.5, 1782, 1810, and 1813. 26.2 Consultant must comply with the requirements of Exhibit “E” for any contract for public works construction, alteration, demolition, repair or maintenance. 26.3 Pursuant to Labor Code section 1725.5, Consultant and its subconsultants or subcontractors must be registered with the California Department of Industrial Relations (“DIR”) to perform public work. The Services provided pursuant to this Agreement are subject to compliance monitoring and enforcement by the DIR pursuant to Labor Code section 1771.4. 26.4 Pursuant to Labor Code section 1861, by entering into this Agreement, Consultant certifies as follows: “I am aware of the provisions of Labor Code section 3700 which require every employer to be insured against liability for workers’ compensation or to undertake self-insurance in accordance with the provisions of that code, and I will comply with such provisions before commencing the performance of public works services under this Agreement.” SECTION 27. MISCELLANEOUS PROVISIONS. 27.1. This Agreement will be governed by the laws of the State of California. 27.2. The state courts of California in the County of Santa Clara, State of California are the exclusive venue for any legal action arising from or related to this Agreement. 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 is entitled to recover an amount equal to the fair market value of legal services provided by its attorneys as well as any attorneys’ fees paid to third parties. 27.4. This Agreement, including the exhibits hereto, represents the entire and integrated agreement between the parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This Agreement may only be amended by a written instrument signed by both 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. Professional Services Rev. September 21, 2016 12 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. 27.7. All exhibits or attachments referred to in this Agreement and any duly authorized Task Orders are incorporated into and made part of this Agreement. 27.8 In the event of any conflict or inconsistency between the terms of this Agreement and the terms of any exhibits hereto or Consultant’s proposal (if any), the Agreement shall control. In the case of any conflict or inconsistency between the terms of the exhibits hereto and the terms of Consultant’s Proposal, the terms in the exhibits shall control. 27.9 If, pursuant to this Agreement, City discloses to Consultant or provides access to personal information as defined in California Civil Code section 1798.81.5(d) about any California resident (“Personal Information”), Consultant must maintain reasonable and appropriate security procedures to protect the Personal Information, and must inform City immediately upon learning that there has been a breach in the security of the Personal Information or the system in which the Personal Information is maintained. Consultant may 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 the party that each represents. 27.12 This Agreement may be signed in multiple counterparts, which shall, when executed by all the parties, constitute a single binding agreement. Professional Services Rev. September 21, 2016 13 CONTRACT No. C17166279 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) WATRY DESIGN, INC 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”: SCHEDULE OF RATES EXHIBIT “D”: INSURANCE REQUIREMENTS 14 City of Palo Alto – Contract No. C17166279 Exhibit A |Scope of Services EXHIBIT A SCOPE OF SERVICES DOWNTOWN PARKING STRUCTURE I. GENERAL INFORMATION A. Project Summary 1.Project Description and Purpose. The City of Palo Alto (“City”) intends to construct a new parking structure (“Project”) in the Downtown University Avenue business district to provide a minimum of 300 parking spaces, public restrooms, bicycle lockers, electric vehicle charges and potentially 2,000 to 6,000 square feet of retail, stacked parking systems and solar canopy or other uses as determined by the City. 2.Project Location. The Parking Structure will be located at Parking Lot D (at Hamilton Avenue and Waverley Street). B. Summary of Services. 1.Design Consultant Services. The design consultant services for the Project (“Consultant Services”) include preparation of Preliminary Design, Schematic Design, Design Development Documents, Construction Documents, assistance with Bidding and Award, Construction Administration and Project Closeout Services. 2.Environmental Consulting Services. For the Project, preparation of environmental review and environmental document. City’s Role. During the term of the Consultant’s professional services under this Agreement, the following items will be the responsibility of the City: 1.The City’s Project Manager or authorized designee shall manage the Consultant’s performance under the Agreement. Consultant shall receive final direction only from the Project Manager or his or her authorized designee. The Project Manager shall resolve any conflicting direction from other groups, departments or agencies. 2.The City shall provide evaluation, mitigation design and administration of work for hazardous materials at the Project site. 3.The City shall provide reviews and comment on what may be necessary to complete design milestones, and/or approve completion of design milestones and cost estimates. At 15 City of Palo Alto – Contract No. C17166279 Exhibit A |Scope of Services the completion of each phase, the City shall, acting in its sole discretion, provide written authorization to the Consultant to proceed to the next phase, contingent upon satisfactory completion of the previous phase and any required approvals, including, but not limited to, budget authorizations. Said written authorization shall require the signature(s) of the City’s Project Manager or his/her authorized designee. 4.City shall provide record drawings of existing Project facilities (when available). 5.City shall provide Division 0 and 1 specifications (front-end), in Microsoft Word format to Consultant for review and comment. 6.City shall print and provide construction contractors with copies of bid documents (including the front end documents and the final plans and specifications for the Project). 7.City shall advertise and award construction contracts. 8.The City shall oversee and manage the artist selection process, City and artists agreements, artwork approvals, budgets and schedule, and artwork installation. 9.The City may prequalify general contractors and key subcontractors and limit bidding to only those firms that have been deemed by the City to be qualified. City shall actively market the Project to general contractors and major traders to increase likelihood of receiving competitive bids. II.GENERAL REQUIREMENTS The following general requirements apply to both the Consultant Services and the Environmental Services (collectively, the “Services”). Requirements specific to Consultant Services are provided in Part III, below. Requirements specific to the Environmental Services are provided in Part IV, below. A. Project Manager. The City’s Project Manager or authorized delegee(s) (“Project Manager”) will be the primary point of contact for the Consultant. The Project Manager will monitor the Consultant’s performance. B. Communications. The Consultants must maintain communications for all aspects of delivery of the Services. Each Consultant must be in daily contact with the Project Manager and must provide same day responses to the City’s email and telephone requests. Each 16 City of Palo Alto – Contract No. C17166279 Exhibit A |Scope of Services Consultant must be equally responsive to the other Consultant to ensure prompt and efficient delivery of coordinated Services. C. Integrated Services. Time is of the essence for design and delivery of this Project. The Consultants must at all times coordinate delivery of their respective Services to avoid delaying progress on the Project. Consultant must ensure that it does not delay the Services provided by the sub-consultants, and must coordinate schedules to avoid delay. III. DESIGN PROFESSIONAL SERVICES A. General Provisions. This Part III of the Scope of Services includes the requirements for delivery of the Consultant Services for the Project. In general, this includes design and code-compliant Project drawings and specifications and construction administration up to and including Project close-out. The Consultant Services include the general provisions included in this subpart III.A, as well as the phase-specific requirements set forth in subparts III.B-G. 1.Design and Construction Administration. Consultant’s responsibilities include, but are not limited to the following: 1.1 Preparation of conceptual design documents, schematic design documents, design development documents, construction documents, project manual specifications and permit package, estimates of probable construction cost; 1.2 Management of the entire design process, including all design professionals; 1.3 Providing construction administration services from bidding through close- out, including coordination of systems’ commissioning 1.4 Providing assistance with obtaining construction permits and bidding process; and 1.5 Coordination of public art (per City’s municipal code requirements). These design and construction administration services are to be provided by qualified, licensed professionals, including, but not limited to the following professions: civil engineer, geotechnical engineer, structural engineer, mechanical engineer, electrical engineer/lighting design, landscape architect, architect, cost consultant, energy analysis 17 City of Palo Alto – Contract No. C17166279 Exhibit A |Scope of Services engineer, commissioning agent, signage designer, surveyor, arborist, stacked parking specialists and other specialty consultants as needed. 2.Budget and Cost Estimates. The Project must be designed and constructed for a total cost not to exceed $13 million dollars, including all exterior and interior improvements and associated site work improvements. The Consultant must work closely with the Project Manager to assure that the total Project cost does not exceed the Project budget. The Consultant must provide cost estimates at each phase of design in a format acceptable to the Project Manager. If an estimate indicates that the Project costs may exceed the budget, the Consultant will not be authorized to proceed to the next design phase until the estimate is reconciled with the budget, the design is modified to meet the budget, or the City agrees to adjust the budget accordingly. 3.Project Schedule. Within ten business days after the City and Consultant have fully executed the agreement for the Consultant Services, the Consultant must provide a Project schedule, in a format acceptable to the Project Manager. The schedule must show all Project development phases, including environmental review, design, construction and close-out. The Project schedule must be sufficiently detailed to allow the Project Manager to monitor progress on the Project design and construction. During the design phase, Consultant must submit an updated Project schedule as part of its deliverables for each phase. During the construction administration phase, Consultant must submit an updated schedule on a monthly basis, concurrent with submission of its payment applications. 4.Investigation and Review. The Consultant is responsible for thorough and appropriate field investigation of the Project site and for identifying existing conditions. The Consultant must review available documentation regarding site conditions. 5.Code Compliance. All design and construction must comply with the most recent requirements (i.e. current at the time of submitting an application for building permit) of all local, state, and federal codes and regulations, including but not limited to, the California Building Code 2016 (Part 2 of Title 24), the regulations promulgated under Titles II and III of the Americans with Disabilities Act (28 CFR Parts 35 and 36), the Americans with Disabilities Act Design Standards (Appendix A of 28 CFR 36), and the Palo Alto Municipal Code. 6.Green Building Requirements. The City intends that the Parking Structure are designed and built in conformance with the City’s Green Building Policy, which currently requires LEED Silver or higher. The City’s Green Building Policy is under current review and the Project will be required to comply with the applicable Green Building requirements in 18 City of Palo Alto – Contract No. C17166279 Exhibit A |Scope of Services effect during design development. Consultant is responsible for designing the Project to comply with the application Green Building Policy Requirements (“Green Building Requirements”), including but not limited, providing qualified project management and submission of all required documentation. Information regarding the City’s Green Building Policy may be accessed via the City’s website at: http://www.cityofpaloalto.org/gov/depts/ds/green_building/green_building_in_palo_a lto.asp 7.Architectural Review Board. Consultant is required to participate in and comply with the City’s Architectural Review Board (“ARB”) process for final approval of the design of the Project. 7.1 The ARB is charged with design review of all new construction, consistent with its objectives, which include: Promote orderly and harmonious development of the City; Enhance the desirability of residence or investment in the City; Encourage the attainment of the most desirable use of land and improvements; Enhance the desirability of living conditions upon the immediate site or in adjacent areas; and Promote visual environments which are of high aesthetic quality and variety and which, at the same time, are considerate of each other 7.2 Consultant must become familiar with the ARB process and be prepared to provide all materials for both the informal and formal submissions. The required entitlements needed from the Planning and Community Environment Department are conditions of approval and ARB design review for the Parking Structure. As part of this process, the Consultant will be required to attend multiple ARB meetings including study sessions and formal presentations to the Board as required to complete the ARB process. The Design Development phase of the Project (addressed below is subpart D) will not be considered complete until formal ARB approvals are obtained. 8.Meetings and Presentations. Consultant will be responsible for leading communications at design meetings, various public meetings, and meetings with outside stakeholders, including community meetings. The design meetings will include a minimum of 4 community meetings and informational presentations to City 19 City of Palo Alto – Contract No. C17166279 Exhibit A |Scope of Services departments, community groups, and neighbors. 8.1 In addition to meeting with or presentations to the ARB, presentation to the Palo Alto City Council will also be required. Participation for the Project will include presentations to and meeting with other City boards and commissions to solicit feedback and comments on the progress of the design. Other meetings may also include City Fire Department and Building Department, technical-planning meetings, technical-building meetings, traffic meetings, reviewing agencies meetings, Design Review Committee, and other meetings reasonably required. 8.2 Consultant must attend meetings with the Project Manager and key City staff people at each stage of design. 8.3 Most meetings will be held at Palo Alto City Hall, 250 Hamilton Avenue, Palo Alto, CA 94301. Community meetings may include interactive design workshops for some aspects of the Project, particularly site design. 8.4 Consultant’s duties will include arrangement for meeting logistics, invitations to meetings, meeting materials, meeting minutes, and follow up on action items. Project meetings with the Project Manager and key City staff people will be held, at a minimum on a weekly basis throughout the Project design and construction. The Environmental Consultant will be required to attend such meetings as needed. Consultant shall schedule coordination meetings, including the Environmental Consultant or key sub-consultants on a consistent basis throughout the Project, but particularly early in the design phase to ensure an integrated and informed design. 9.Plans and Specifications. For design-bid-build project delivery, the Consultant must provide full construction plans and specifications for the Project, including, but not limited to: Site and boundary survey Architectural design; Traffic circulation Structural, civil, mechanical, electrical and plumbing engineering; Fire protection system design to 90% construction document level; All building low-voltage systems; Security system design; Solar canopy; 20 City of Palo Alto – Contract No. C17166279 Exhibit A |Scope of Services Parking Guidance systems; Stacked parking systems; Electrical Vehicle chargers; Coordination of building specialty systems; Landscape Architecture Demolition plan develop; and Building signage, including code, interior and exterior wayfinding, monument sign and exterior signage 10.Coordination. Consultant will be required to work with and coordinate design efforts with other consultants that are under separate contract and to coordinate with the City and other parties as needed to minimize adverse impacts during construction, including vehicular, bicycle and pedestrian traffic and access, and impacts to normal residential and commercial uses in the surrounding areas. The City reserves the right to enter into separate contracts with separate contracts with consultants or contractors supplying specialized services, use qualified City staff to provide services, or direct the integration of qualified additional consultants into the Services. B. Preliminary Design Phase Scope of Work 1.Scope Verification. Consultant shall meet with the City to verify the scope, schedule and budget. 2.Project Kick-off Meeting. The Project will begin with a Project kick-off meeting where all Project stakeholders and user group representatives are introduced and scope, schedule, budget and approvals will be discussed and agreed to. 3.Data Gathering, Review and Evaluation. Consultant must review all existing requirements, approvals and conditions relevant to the Project, including evaluation of existing site conditions. Consultant shall prepare Geotechnical Report including subsurface exploration and laboratory testing to evaluate the condition of the soils for the parking structure. Consultant shall prepare site survey for the Project including aerial survey, field survey and record boundary. Consultant shall prepare arborist report for the Project, including a tree survey, detailing the species, size, health and other pertinent information of existing trees at the site. 4.City Project Meetings. Consultant shall meet with the Project Manager, Department of Public Works (DPW), the Building Department, Utilities Department, Planning and 21 City of Palo Alto – Contract No. C17166279 Exhibit A |Scope of Services Community Environment Department, Transportation and Parking Divisions to discuss the status of the Project and Project objectives. 5.Green Building Design Workshop. Consultant shall lead an “all hands” Green Building Design Workshop identifying strategies to achieve Parksmart Silver or higher certification and meet the City’s Green Building Policies and energy conservation initiatives. 6.Parking Structure Conceptual Design. Consultant shall develop a Parking Structure program based on the 2014 feasibility study. Consultant shall provide at least three additional Parking Structure design concepts for review by City staff, ARB and City Council prior to proceeding with schematic design phase. At a minimum these additional concepts shall include an option that includes retail and mechanical lifts, option that maximizes parking, utilizing sub-surface parking and mechanical lift systems for additional parking beyond 300 parking stalls. Consultant shall develop a concept design for the Project including: Review of circulation patterns on site; Vehicular Circulation; Pedestrian Circulation, including public and disabled persons access; Access to existing alleys and businesses; Parking layout for parking levels; Ramping solution; Entrance and exit design; and Temporary Facilities and construction logistics Consultant shall prepare concept drawings for each of the three options to describe the general program including: Floor plans; Elevations; Building sections; 3D Massing Model; Code exceptions needed; Cost Estimate; and Project Schedule The concept drawings will be used in preliminary presentation meetings including those with all Project stakeholders, initial community outreach meetings and Downtown Business District meetings. The preliminary design concept drawings will also be used as the basis of the CEQA review process. 22 City of Palo Alto – Contract No. C17166279 Exhibit A |Scope of Services 7.Planning and Transportation Commission (PTC) and ARB Study Sessions. The Consultant shall attend study session with PTC and ARB to discuss preliminary design concepts and receive input. Design modifications if requested will be made per the direction of the PTC and ARB. 8.Public Arts Commission. The Consultant shall meet with the Palo Alto Public Art Commission to discuss the Project and coordinate public art concepts. 9.City Council Meeting. The Consultant shall attend the City Council meeting and present the preliminary design concept for the parking structure. Design modifications if requested will be made per direction of the City Council. C. Schematic Design Phase. This phase involves the Consultant working with the City to refine the selected conceptual design and space plan developed and approved with the Preliminary Design Phase and obtain ARB approval. 1.Schematic Design Documents. Upon receipt of Letter of Authorization by the City, the Consultant shall proceed with the Schematic Design Phase. The Consultant will develop schematic design drawings and documents based on Project concepts developed during the Preliminary Design Phase. The schematic design documents developed during this phase should include preliminary drawings showing the Project’s basic components, scale and location. The schematic design documents must include, to the extent applicable: conceptual plans of the site and improvements; preliminary sections and elevations; approximate areas and volumes and dimensions; and preliminary sections of materials and systems. The Schematic Design Package must be completed at the end of the Schematic Design Phase and will be used for City sign offs and general cost estimating purposes. 2.Specific Elements. The schematic designs for the Project shall include the following specific elements: 2.1 The Consultant shall establish the structural design criteria which may include, but is not limited to, deflection criteria, lateral movement criteria, live load criteria and other special criteria furnished by the City. The Consultant shall prepare structure calculations to confirm structural system components as necessary. 23 City of Palo Alto – Contract No. C17166279 Exhibit A |Scope of Services 2.2 Based on the selected architectural option, selected structural system and parking program, schedule and construction budget requirements, the Consultant shall prepare for approval by the City, Schematic Design Documents consisting of drawings and other documents illustrating the scale and relationship of the Project components. The following drawings will be included: Cover Sheet; Green Building Application NR1; Code Analysis/Compliance Sheet and Building Area diagrams; Site Survey; Site Plan with grades and streetscape; Parking Level Plans; Exterior Elevations; Building Cross Sections; Typical Wall Sections or other details as needed to demonstrate material transitions; 3D Model of the building depicting the architectural design solution; Landscaping Plan (up to three alternatives); Exterior lighting photometrics; Structural Calculations as needed; Basis of Design Documents for all disciplines for cost estimate; Updated Project Schedule; and Updated Cost Estimate 2.3 If the conceptual design option selected by City Council for preliminary design includes subsurface parking, additional design fees will be negotiated for the relevant additional design costs. D. Design Development Phase. This phase involves further refinement of the Schematic Design Package developed in the preceding phase. 1. Design Development Documents. When directed by the City following approval of the Schematic Design Package, Design Professional will begin the Design Development phase, which includes developing design documents that further define the Project, including the drawings and outline specifications fixing and describing the size, character and site relationships for major Project components. Consultant must coordinate with sub- consultants as needed to develop designs for all building systems, including civil, structural, mechanical, plumbing, electrical, lights, fire protection, security, emergency communications and all site improvements and landscaping. Site improvements and landscaping must anticipate full compliance with C.3 storm water treatment regulations. 24 City of Palo Alto – Contract No. C17166279 Exhibit A |Scope of Services 2.Coordination. Consultant must coordinate and meet with Project Manager and key City staff people, as needed, for preparation of the Design Development Documents, including Public Works Engineering, Transportation, and Public Works Public Services. 3.Green Building Design. Consultant shall verify and develop Green Building Design strategies from the Green Building Design Workshop. Consultant shall complete the “Basis of Design” (BOD) report in the Design Development phase to achieve LEED Silver or higher certification and meet the City’s Green Building Policies and energy conservation initiatives. 4.Deliverables. Consultant’s submissions during Design Development must include the following: 4.1 Preliminary Design Development Package (50%), including a drawing package provide with architectural plans and other drawings as updated from Schematic Design and, plans for the civil, landscape, structural, mechanical/plumbing/fire protection and electrical designs. This package will be used for an over the shoulder review to determine that the direction from Schematic Design is proceeding in the right direction. 4.2 Completed Design Development Package (100%), incorporating the City’s comments and directions following review of the 50% documents must be submitted for final review. The completed Design Development package must include: Cover Sheet; Green Building Application NR1; Code Compliance Sheet and Building Area diagrams; Site Survey; Civil Site Plans and appropriate details; Utility Plans; Site Plan; Parking Level Plans; Structural Foundation Plans; Structural Framing Plans; Parking Level Drainage Plan; Exterior Elevations; Building Cross Sections; Typical Wall Sections as needed; 25 City of Palo Alto – Contract No. C17166279 Exhibit A |Scope of Services Architectural Details as needed to depict materials; Structural Details as needed; Mechanical Plans and equipment schedules based on using a VRF system solution for any retail spaces; Electrical Plans and equipment schedules; Plumbing Plans and equipment schedules; Fire Protection performance plans; Landscape Plans and plant palette; Signage Plans and schedules; Parking structure guidance system and wayfinding; Quantities of reinforcing adequate for pricing; Structural Calculations as needed; Draft Specifications for all disciplines; Updated Project Schedule at 100%; and Updated Cost Estimate at 100%, including value engineering if necessary E. Permit Set and Construction Documents. This design phase requires refining the City- approved Design Development package into final Project plans and specifications for permit issuance, and for bidding. 1.Final Design Documents. Consultant must provide completed Project drawings and technical specifications to staff for review and approval at the final design completion stage and for final review and sign off at the bid set design stage. The final plans and specifications must be suitable for construction, including the structural, M/E/P systems, site improvements, landscaping, storm drains, and finishes. Final drawings shall be suitable for review by the Building Inspection Division and for sign off by the City. The Construction Documents Package must include drawings and technical specifications from all disciplines, executed to a level of detail for open public bidding. They shall include overlays of equipment systems. 2.Development and Review Stages. The final permit and construction documents will be developed and reviewed in three stages, as follows. At each stage Consultant must incorporate directions from the City provided at the conclusion of the preceding stage, and must update the estimated cost of construction. 2.1 Consultant must prepare and submit a 60% complete Construction Documents Package to the City based on comments received from the City’s review of the 26 City of Palo Alto – Contract No. C17166279 Exhibit A |Scope of Services 100% Design Development submittal. 2.2 Consultant must prepare and submit a 95% complete Construction Documents Package to the City based on comments received from the City’s review of the 60% Construction Documents submittal. The Building Department plan check set shall be considered the 95% Construction Documents and shall be provided to the City for review and comment during the permitting process. 2.3 Final 100% complete Construction Documents shall be prepared based on feedback provided at the 95% review and the permit review. These 100% documents will be used as the Construction Documents to be issued for bid to procure the construction contract. All exhibits, drawings, reports, data, renderings, elevations and other materials required to support applications for regulatory entitlements, permits and approvals shall be completed and submitted. 3.Permit Process. Consultant must assist the Project Manager to obtain a building permit by furnishing all the necessary drawings and calculations and working with the Planning and Community Environment Department, Development Services Department, and Fire Marshall, as required. Consultant shall respond to all Building Official’s comments and questions. Consultant will be responsible for all services, exhibits and applications to obtain all necessary permits or approvals known at the time the services are rendered. Consultant will be responsible for obtaining all necessary design stage permits and approvals. City will pay permit and application fees. Anticipated permits include, but are not limited to the City Building Department, California Regional Water Quality Control Board, Santa Clara Valley Water District, City Utilities and City Fire Department. 4.Deliverables. Consultant must submit three (3) sets of plan check drawings and specifications during Construction Documents Phase. Upon completion of the final design the Design Professional will submit two (2) hard copies of the specifications and calculations and, one (1) copy of the electronic version (using Microsoft Word format) of the specifications on a compact disk or flash drive, three (3) sets of drawings for stakeholders use, complete set of drawings on compact disk or flash drive in AutoCAD and PDF formats, and three (3) wet stamped drawings to the City Building Department. Specifications will include Division Zero and Division 1 provided by the City. Only applicable information shall be included in the Specifications. 4.1 Updated documents for the City Green Building Requirements must be included. 27 City of Palo Alto – Contract No. C17166279 Exhibit A |Scope of Services F. Project Bidding and Award. Consultant will participate in the general contractor procurement process which will be a design-bid-build delivery model with a pre-qualification component. Consultant shall assist the City during the prequalification and bid solicitation process. Consultant shall provide bid phase services, as requested by the City, through award of construction contract. Services include assistance in response to bidders’ inquiries, preparation of addenda, and attendance at pre-qualification and pre-bid meetings. G. Construction Administration and Project Closeout. Design Professional must provide construction administration phase services commencing from the award of the construction contract. Construction administration services include, but are not limited to, the following: 1. Identify and list the submittals to be made by the general contractor and its subcontractors and provide review and assistance to the general contractor as needed. 2.Review and approve all submittals including submittal from subcontractors within ten (10) calendar days. 3.Promptly respond to request for information (“RFIs”) within five (5) calendar days, clarify plans and specifications, and maintain an RFI log. 4.Issue Architectural Supplemental Information (ASI) within five (5) calendar days if ASIs are needed. 5.Review and respond to change order requests or proposals within five (5) days of receipt. 6.Architect or structural engineer to attend weekly Project meetings including being available on site for a minimum of three days per week for a maximum of 2 hours perday. 7. Issue monthly field observation reports documenting the progress of work. 8. Punch list inspection and re-inspection, as needed. 9. Provide post occupancy inspection, warranty support, and correction of defects administration. 10. Attend all pre-construction meetings and weekly construction meetings 11.Record Drawings. Upon completion of the Project, and after acceptance by the City, the Design Professional shall submit to the City one (1) complete set of record drawings 28 City of Palo Alto – Contract No. C17166279 Exhibit A |Scope of Services reflecting as-built conditions as provided by the general contractor. A complete set of record drawings shall also be submitted to the Project Manager in AutoCAD and PDF electronic formats IV. ENVIRONMENTAL CONSULTING SERVICES A. General Provisions. This Part IV of the Scope of Services includes the requirements for delivery of Environmental Services for the Project. In general this includes conducting and coordinating complete environmental review of the Project in compliance with CEQA, preparation of the required environmental review documents – most likely an Environmental Impact Report (“EIR”) – and participating in meetings and public hearings. This scope of services assumes that an EIR will be required for the Project. If it is later determined that an EIR is not required, this scope of services will be modified accordingly, e.g., to include preparation of a mitigated negative declaration. The Environmental Services for this RFP includes all components required to initiate and complete full environmental review and preparation of an EIR for the Project including the Notice of Preparation (“NOP”), scoping meeting, staff meetings, performing all the necessary impact analysis for the EIR, including a climate change analysis, providing draft and final documents, responses to comments, mitigation monitoring report, attending public hearings including ARB approval. Formal approval by the ARB will be required prior to the final Certification of the EIR. Based on a preliminary review, the anticipated significant impacts for this Project are related to parking, traffic, and aesthetics. Critical analysis of parking and circulation is needed in addition to other environmental impact studies. The Project site is located in a commercial setting within the Downtown Palo Alto community. The aesthetic quality of the proposed structures and exterior improvements is a critical component of the Project. 1.Agency Coordination. The Consultant must meet and confer with all other appropriate local, regional, state and federal agencies as necessary to identify and address concerns and comments. This includes all coordination with the California State Office of Planning and Research regarding all notices and information related to the CEQA EIR process. 2.Coordination. The Consultant will be required to work with and coordinate CEQA efforts with other consultants that are under separate contracts with the City, and to coordinate with the City and other parties as needed to minimize adverse impacts during construction, including vehicular, bicycle and pedestrian traffic and access, and impacts to normal residential and commercial uses in the surrounding areas. The 29 City of Palo Alto – Contract No. C17166279 Exhibit A |Scope of Services City reserves the right to enter into separate contracts with consultants or contractors supplying specialized services, use qualified City staff to provide services, or direct the integration of qualified additional consultants into the Services. 3.Outreach & Meetings. The Consultant must prepare materials as necessary, facilitate as necessary and attend community workshops, meetings and public hearings. This includes preparation of notices and displays, and responding to comments. The Consultant shall plan and budget for sufficient meetings with City staff to accomplish all tasks with full consultation and review, including a minimum of eight (8) meetings with staff. In addition to the public scoping session, the Consultant should budget for four (4) presentations at public meetings (two for the Planning and Transportation Commission and two for the City Council). The Consultant should closely coordinate with the sub-consultants as needed for these meetings. B. Initial Study. Consultant must conduct preliminary analysis of the proposed Project and Project site and conduct an initial study in compliance with the CEQA Guidelines (14 CCR §15000, et seq.). Consultant will prepare a draft initial study and City staff will determine the need for any revisions to the draft initial study. Development of the initial study must include the following. 1. A summary of the Project and a discussion of alternatives. Appropriate alternatives will be discussed and agreed upon with City staff. Analysis of the proposed intensity of potential land use compared against the carrying capacity of the land. 2. Discussion of the Project and consistency with other plans (e.g., the Comprehensive Plan). 3. Identification of known areas of concern or controversy regarding the type or nature of potential environmental impacts, measurement of those impacts and/or the significance of those impacts. Specific environmental categories include: aesthetics, air quality, biological resources, cultural resources, hazardous materials, geology and soils, hydrology and water quality, land use, noise, population and housing, public services, utilities and service systems, traffic, transportation and parking. 4. Identification of potential significant environmental impacts including, but not limited to, cumulative, growth inducing, induced travel demand and/or socioeconomic factors. 5. Recommendation of feasible mitigation measures, mitigation monitoring efforts, and 30 City of Palo Alto – Contract No. C17166279 Exhibit A |Scope of Services implementation measures that would reduce significant impacts to less than significant levels, or if this is not possible, produce a substantial lessening of such impacts. 6. Identification of unavoidable significant impacts, if any, with all implemented mitigation measures and mitigation-monitoring program. C. Detailed CEQA Scope of Services. City staff has identified the following tasks, as a minimum and not limited, for environmental review, analysis and preparation of CEQA-related documents and preparation of the EIR. These tasks are suggestive and intended as a general guideline. The Consultant is encouraged to recommend alternative tasks, scopes and services that may be appropriate. 1.Task 1: Kick-off Meeting/Site Tour. An initial meeting will be held with City staff to discuss and refine the EIR approach, work scope, data needs (including for the Initial Study/EIR project description), cumulative analysis approach, and project alternatives approach. The team will discuss any preferences the City may have regarding EIR format, organization, and presentation. The Consultant will visit the Project site and its surrounds to verify relevant environmental conditions. 2.Task 2: Schedule for the Preparation of the EIR. Based on the kick-off meeting and the draft timeline provided with the RFP, the Consultant will prepare a refined EIR schedule coordinated with the Project design schedule. The EIR schedule, including any subsequent changes will require approval from the City. Deliverable: Annotated EIR project schedule graphic. 3.Task 3: Data Collection and Review of Existing Information. To avoid duplications and reduce costs, Consultant shall rely on existing data whenever possible. Relevant documents, including reports commissioned by the City will be provided when available. Consultant will review documents related to the proposed Project and existing conditions on the Project site and the surrounding area. Deliverable: Memo with follow-up questions and a list of additional information and/or studies needed to complete the CEQA review. Based on the availability of the additional information needed to complete the CEQA review, Consultant may need to fill in the gaps with additional research and studies. 4.Task 4: Notice of Preparation. Working with City staff, Consultant will review the overall approach and process for the project and all key environmental issues and 31 City of Palo Alto – Contract No. C17166279 Exhibit A |Scope of Services prepare the NOP. The approach to the EIR will be discussed and Environmental Consultant and staff will identify any additional analytical tasks not included in the RFP or in Environmental Consultant’s proposed scope of services. The Environmental Consultant will be responsible for preparing the NOP and contacting the State Office of Planning and Research (OPR), and other responsible local and/or federal agencies required to be officially noticed when the Project is initiated. At a minimum, the following topics shall be included in the EIR: aesthetics, air quality, alternatives, biological resources, CEQA process, emergency power, general, geology and seismicity, hazards and hazardous materials, land use, security and safety, noise, police services, and transportation. Deliverable: NOP document working with City team. 5.Task 5: Public Scoping Meeting. Consultant will participate in a public scoping meeting to solicit feedback on the project, its potential impacts, and possible mitigation measures. At the scoping meeting, CEQA lead will provide an overview (e.g. PowerPoint) of the CEQA process, the purpose of the EIR and its general content, the Initial Study, and opportunities for public input. CEQA lead will be available to answer questions regarding these issues, without speculating on the future findings of the EIR analysis. Consultants shall assume the City will schedule the meeting and provide the venue. Key sub-consultants (e.g. traffic or noise consultants) may also need to attend the meetings. Deliverable: PowerPoint presentation; notes from the public scoping meeting summarizing the comments and their relevance to the EIR analysis. 6.Task 6: Mitigation Measures. Based on the overall Project impact, a series of mitigation measures will be developed by Consultant working closely with staff. Both physical improvements and policy considerations will be included as mitigation measures. This task shall also include evaluation of the goals and objectives of the Comprehensive Plan to determine consistency with mitigation measures. Deliverables: All necessary reports required to complete and support the EIR process. 7.Task 7: Prepare Description of Project Alternatives. The specific development details have been preliminary determined at this time: The City has prepared the basic programming needs for the proposed structure as indicated in Part I, above. The Consultant will develop Project alternatives based on the programming needs. In 32 City of Palo Alto – Contract No. C17166279 Exhibit A |Scope of Services consultation with the City, Consultant will develop a set of assumptions to be used as a basis for a project description for each of the alternatives, when will be used in the EIR. The project description will be prepared in accordance with CEQA Guidelines and will include a description of the project’s technical and environmental characteristics. The Consultant will consult with City staff regarding the discretionary approvals that will be needed for the Project. As part of this process the Consultant, coordinating with the design team as needed, will be required to investigate these concepts above and present to Council for action. Once action is given, the Consultant can then move forward with the finalization of the concept plan and the draft EIR. Deliverable: Project descriptions for each alternative in accordance with CEQA Guidelines. 8.Task 8: Prepare Administrative Draft EIR. Prepare an Administrative Draft EIR (“ADEIR”) for City staff review. The ADEIR will focus on those environmental factors for which potentially significant impacts may result. Mitigation measures will be recommended for each identified significant impact. The EIR for the proposed Project will be prepared and processed in accordance with CEQA and the CEQA Guidelines. The EIR will include the following: 8.1 A summary of the proposed actions and its consequences. The summary shall identify the following: each significant effect with proposed mitigation measures and alternatives that would reduce or avoid that effect; areas of controversy including issues raised by agencies and the public; issues to be resolved including the choice among alternatives and whether or how to mitigate the significant effects; 8.2 Project description including a detailed map of the locations, a statement of objectives sought by the proposed project, a general description of the Project’s technical, economic, and environmental characteristics and a statement describing the intended uses of the EIR; 8.3 Description of existing environmental setting, potential environmental impacts, and mitigation measures; 8.4 Consideration and discussion of alternatives to the proposed Project; 8.5 Environmental consequences of the Project and the proposed alternatives, including (a) any significant environmental impacts which cannot be avoided if the Project is implemented; (b) the growth inducing impacts of the proposed 33 City of Palo Alto – Contract No. C17166279 Exhibit A |Scope of Services Project; and (c) cumulative impacts; and 8.6 A Mitigation Monitoring and Reporting Plan (“MMRP”), pursuant to AB 3180, that defines how, when and by whom mitigation measures are to be implemented. The EIR will evaluate the following environmental issues in detail: Aesthetics Air Quality Biological Resources Cultural Resources Energy Conservation Geology and Soils Green House Gas Emissions Hazards and Hazardous Materials Hydrology and Water Quality Land Use and Planning Mineral Resources Noise Population and Housing Public Services Recreation Transportation, Traffic and Parking Utilities and Service Systems Deliverable: Fifteen (15) copies of the ADEIR and 1 compact disk or flash drive with Microsoft Word and 1 compact disk or flash drive with Adobe (pdf) version. Meetings: Weekly meetings throughout the duration of the process will required with the project team at a minimum, to discuss data collection, methodological approaches, potential impacts and mitigation measures. The Consultant shall be prepared to attend these meetings and bring appropriate subconsultants as necessary. 9.Task 9: Prepare Screencheck Draft EIR. Based on staff comments on the Administrative Draft EIR, Consultant will prepare a version of the DRAFT EIR for City staff approval prior to publication of the Draft EIR for public release. Deliverable: One (1) electronic version in Word and one (1) electronic version in Adobe PDF of the ScreenCheck Draft EIR. 10.Task 10: Prepare Published Draft EIR (“DEIR”). Consultant shall prepare a DRAFT 34 City of Palo Alto – Contract No. C17166279 Exhibit A |Scope of Services EIR, incorporating any revisions and refinements to the ScreenCheck Draft EIR in response to City staff comments. Consultant shall also prepare the Notice of Completion/Availability (NOC/NOA) in Microsoft Word for use by the City. Consultant will overnight the NOC/NOA to the State Clearinghouse (State Office of Planning and Research), beginning the 45-day Draft EIR response period. Consultant will follow-up with OPR to ensure that the NOC/NOA was received, released and posted on the State Clearinghouse website. Deliverable: Sixty-five (65) printed and bound copies – 50 to the City for public distribution and 15 for Consultant to overnight to the State Clearinghouse; two unbound copies and two electronic versions (Adobe PDF and Microsoft Word formats). One (1) electronic version of the NOC/NOA in Word. City Responsibility: Noticing. 11. Task 11: Public Review and Hearings. The City will provide a 45-day noticing period during which the public will have an opportunity to review and comment on the DEIR. The Consultant will attend one Planning and Transportation Commission hearing to answer questions on the Draft EIR from the public and the Commission. CEQA lead, will provide an overview (e.g., PowerPoint) of the Draft EIR process and findings. Key sub- consultants may also need to attend the meetings. Meetings: Attend a Planning and Transportation Commission hearing on the draft EIR. City Responsibility: Noticing and conducting hearings, attending neighborhood meetings. 12.Task 12: Prepare Administrative Final EIR (Responses to Comments and MMRP). Consultant shall prepare responses to the comments received on the Draft EIR and incorporate these responses into an Administrative Final EIR for City Review. The Administrative Final EIR shall include a list of persons and agencies that commented on the Draft EIR; a summary of comments received on the Draft EIR; a collection of verbatim comments received on the Draft EIR (letters, memos, emails, minutes, etc.); written responses to each substantive environmental comment; and any revisions to the Draft EIR text or graphics necessary to adequately respond to the comments received. Consultant shall produce a draft Mitigation Monitoring and Reporting Plan (MMRP) that defines how, when and by whom mitigation measures are to be implemented. Staff will coordinate closely with the Consultant to prepare and respond to the report 35 City of Palo Alto – Contract No. C17166279 Exhibit A |Scope of Services documents. Deliverable: Twenty-five (25) printed and bound copies of the Administrative Final EIR and draft MMRP, two (2) unbound copies and two (2) electronic versions (Adobe PDF and Microsoft Word formats) of the Administrative Final EIR and MMRP. Meeting/City Involvement: Collect and forward comments to consultant, meet to discuss appropriate level of response to comments and format for preparing the Final EIR. 13.Task 13: Prepare Final EIR and MMRP. Consultant shall prepare a Final EIR incorporating revisions and refinements based upon City staff responses to the Administrative Final EIR. Consultant will also produce the final MMRP. The revised documents will be submitted to the City for certification by the City Council. Response to comments, resulting changes to DEIR, MMRP, Statement of Overriding Consideration, if necessary. Findings of Fact and prepare Final EIR (FEIR) and Notice of Determination. The FEIR shall include the reprinted DEIR with text changes. Consultant shall prepare the Notice of Determination (NOD) and will forward it to the State Clearinghouse and post the NOD with the County Clerk within five (5) days of project approval. Deliverable: Fifty (50) printed and bound copies of the Final EIR and MMRP, two (2) unbound copies and two electronic versions (Adobe PDF and Microsoft Word formats) of the Final EIR and MMRP. For the NOD, one (1) electronic version in word. 14.Task 14: Attend Certification Hearings. Attend and be available to answer questions from multiple Planning and Transportation Commission hearings and one meeting before the City Council for certification of the EIR. Key sub-consultants may also need to attend the meetings. Meetings: Multiple Planning and Transportation Commission hearings and one City Council meeting. Professional Services Rev. September 21, 2016 36 EXHIBIT “B” SCHEDULE OF PERFORMANCE Consultant must perform the Services so as to complete each milestone within the number of days/weeks specified below, measured from the date of City’s issuance of the Notice to Proceed (NTP) with the Services. The time to complete each milestone may be increased or decreased by mutual written agreement of Consultant and City so long as all Services are completed within the Term of the Agreement. Consultant must provide a detailed schedule of Services consistent with the schedule below within 2 weeks of receipt of the notice to proceed. Milestones Completion (No. of Weeks From NTP) 1.Preliminary Design 12 weeks 2.Schematic Design 40 weeks 3.Environmental Assessment 52 weeks 4.Design Development 64 weeks 5.Construction Documents 76 weeks 6.Permitting 88 weeks 7.Project Bidding and Award 96 weeks 8.Construction Administration 148 weeks 9.Project Closeout 152 weeks Professional Services Rev. September 21, 2016 37 EXHIBIT “C” COMPENSATION The City agrees to compensate the Consultant for the Services performed in accordance with the terms and conditions of this Agreement, and as set forth in the budget schedule below, and as further specified in each Task Order issued by the City. Compensation will 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 must perform the tasks and categories of Services 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. City will authorize Phase 2 and 3, at its discretion, contingent upon approval of environmental review and of the budget for construction of the Project, and upon satisfactory completion of the Phase 1 Services. BUDGET SCHEDULE NOT TO EXCEED AMOUNT Phase 1 Environmental Assessment $274,228 Preliminary Design $126,559 Schematic Design $228,554 Design Development $254,388 Phase 2 Construction Documents $347,971 Permitting $75,819 Project Bidding and Award $30,074 Phase 3 Construction Administration $297,589 Project Closeout $41,719 Subtotal Basic Services $1,676,901 Reimbursable Expenses $50,000 Total Basic Services and Reimbursable Expenses $1,726,901 Additional Services (Not to Exceed) $172,690 Maximum Total Compensation $1,899,591 Professional Services Rev. September 21, 2016 38 REIMBURSABLE EXPENSES The administrative, overhead, secretarial time or 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 will reimburse Consultant for the following expenses at cost, provided that the expenses were reasonably and necessarily incurred solely for providing the Services: A. Travel outside the San Francisco Bay Area, including transportation and meals, will be reimbursed at actual cost subject to limits of the City’s policy for reimbursement of travel and meal expenses for City employees. B. Long distance telephone service charges, cellular phone service charges, overnight delivery, facsimile transmission and postage charges are reimbursable at actual cost. All requests for payment of expenses must be accompanied by appropriate documentation of the claimed expenditure, such as written receipts. Any expense anticipated to be more than $5,000 must be approved in writing in advance by the City’s Project Manager. ADDITIONAL SERVICES Consultant will provide Additional Services related to a duly authorized Task Order only pursuant to advanced, written authorization from the City as specified in Section 4 of the Agreement. At the City’s Project Manager’s request, Consultant must submit a detailed written proposal including a description of the scope of Additional Services, schedule, level of effort, and Consultant’s proposed maximum compensation, including reimbursable expenses, for such Additional Services based on the rates set forth in Exhibit C-1. The Additional Services, including scope, schedule and maximum compensation will be negotiated and memorialized in writing by the City’s Project Manager and Consultant prior to commencement of the Additional Services. Such written agreements for Additional Services are deemed to be incorporated into the Task Order payment. [Optional] Work required because the following conditions are not satisfied or are exceeded are considered Additional Services: EXHIBIT “C‐1” SCHEDULE OF RATES Irvine, CA • San Jose, CA • Dallas, TX watrydesign.com 2016 Hourly Rates Title Rate Principal $ 265 Associate Principal $ 215 Senior Project Manager $ 195 Project Manager $ 185 Assistant Project Manager $ 175 Senior Project Engineer $ 185 Project Engineer $ 175 Senior Project Architect $ 185 Project Architect $ 175 Senior Job Captain $ 175 Job Captain $ 165 Senior Designer $ 155 Staff Designer $ 145 Project Administrator $ 125 Administrator $ 115 Condition Assessment $ 290 Legal Expert $ 400 Deposition $ 500 Litigation $ 600 39 EXHIBIT “C‐1” SCHEDULE OF RATES 2016 Hourly Rates Managing Principal $280 Principal $185 Sr Associate $155 Architect/Project Manager 150 Staff I $137.50 Staff II $130 Staff III $125 Staff IV $115 Staff V $105 Staff VI $95 40 EXHIBIT “C‐1” SCHEDULE OF RATES Effective 01/01/2017 Schedule of Hourly Service Charges Hourly personnel rates (fully loaded) are as follows: Principal Landscape Architect ............................................................................................. $196.00 Senior Landscape Architect I ............................................................................................... $163.00 Senior Landscape Architect II / Urban Designer ................................................................... $156.00 Landscape Architect I .......................................................................................................... $147.00 Landscape Architect II ......................................................................................................... $135.00 Landscape Architect II ...............................................................................................................$.00 Landscape Architect III ........................................................................................................ $128.00 Landscape Designer I .......................................................................................................... $122.00 Landscape Designer II ......................................................................................................... $100.00 CAD Specialist I .........................................................................................................................$.00 Graphic Designer/Studio Support ..............................................................................................$.00 41 EXHIBIT “C‐1” SCHEDULE OF RATES PROFESSIONAL PERSONNEL SERVICE FEES JANUARY 1, 2016 - DECEMBER 31, 2016 PERSONNEL HOURLY RATES ENGINEERING Senior Associate $200.00 Associate $194.00 Project Manager $184.00 - $190.00 Engineer IV $171.00 Engineer I, II, III $120.00 - $138.00 - $157.00 PLANNING Planner I, II, III $120.00 - $138.00 - $157.00 SURVEYING Senior Associate $200.00 Associate $194.00 Project Manager $184.00-$190.00 Surveyor I, II, III, IV $120.00 - $138.00 - $157.00 - $171.00 Survey Party Chief $159.00 Survey Chainman $103.00 Apprentice I, II, III, IV $63.00 - $84.00 - $93.00 - $99.00 Instrumentman $137.00 DESIGN AND DRAFTING Technician I, II, III $116.00 - $123.00 - $135.00 Drafter I, II, III, IV $90.00 - $100.00 - $108.00 - $119.00 Student Engineer/Surveyor $63.00 CONSTRUCTION ADMINISTRATION/QSP-QSD Senior Construction Administrator $180.00 Resident Engineer $133.00 Field Engineer I, II, III $120.00 - $138.00 - $157.00 SERVICES AND EXPENSES Project Assistant $75.00 Clerical/Administrative Assistant $63.00 Principals’ time on projects is chargeable at $223.00- $245.00 per hour. 42 EXHIBIT “C‐1” SCHEDULE OF RATES Palo Alto Parking Structure Project Billing Rates Principal $215/hr. Project Manager $160/hr. Design Lead $160/hr. Staff Designer $125/hr. 43 EXHIBIT “C‐1” SCHEDULE OF RATES The Engineering Enterprise www.engent.com TEE BILLING RATES OCTOBER 1, 2016 - SEPTEMBER 30, 2017 Job Classification Hourly Rate Principal $230.00 Associate $210.00 Senior Engineer/Project Manager $190.00 Engineer/Designer $170.00 Revit/CAD Technician $140.00 Administrative Staff $110.00 44 EXHIBIT “C‐1” SCHEDULE OF RATES List Engineering 2016 Hourly Labor Rates Principal Engineer $205 Senior Engineer $185 Administration $100 Senior Drafter $135 Drafter $75 45 EXHIBIT “C‐1” SCHEDULE OF RATES Hourly Fee Rates and Equipment Charges Through December 31, 2016 Senior Principal Engineer or Geologist $245 Principal Engineer or Geologist $225 Senior Risk Assessor $200 Senior Project Engineer or Geologist $200 Principal Construction Services $180 Project Engineer or Geologist $170 Senior Staff Engineer or Geologist $145 Senior Supervisory Technician $145 Staff Engineer or Geologist $135 Supervisory Technician $120 Technical Illustrator/CAD Operator $115 Dispatch $105 Engineering Technician II $100 Engineering Technician I $95 Administrative Assistant $85 46 EXHIBIT “C‐1” SCHEDULE OF RATES 2016 – 2017 Schedule of Fees Hourly Rates Principal/Managing Principal $185.00 - $215.00 Senior Cost and Project Managers $165.00 - $185.00 Cost and Project Managers $135.00 - $165.00 Project and Cost Engineers $110.00 - $135.00 Administrative Support $ 72.00 - $75.00 47 Professional Services Rev. September 21, 2016 48 EXHIBIT “D” INSURANCE REQUIREMENTS CONSULTANTS 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: CONSULTANT, 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 CONSULTANT 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 Professional Services Rev. September 21, 2016 49 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 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 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 INSR ADDLSUBRLTRINSR WVD DATE (MM/DD/YYYY) PRODUCER CONTACTNAME: FAXPHONE(A/C, No):(A/C, No, Ext): E-MAILADDRESS: INSURER A : INSURED INSURER B : INSURER C : INSURER D : INSURER E : INSURER F : POLICY NUMBER POLICY EFF POLICY EXPTYPE OF INSURANCE LIMITS(MM/DD/YYYY) (MM/DD/YYYY) COMMERCIAL GENERAL LIABILITY AUTOMOBILE LIABILITY UMBRELLA LIAB EXCESS LIAB WORKERS COMPENSATION AND EMPLOYERS' LIABILITY DESCRIPTION OF OPERATIONS / LOCATIONS / VEHICLES (ACORD 101, Additional Remarks Schedule, may be attached if more space is required) AUTHORIZED REPRESENTATIVE INSURER(S) AFFORDING COVERAGE NAIC # Y / N N / A (Mandatory in NH) ANY PROPRIETOR/PARTNER/EXECUTIVEOFFICER/MEMBER EXCLUDED? EACH OCCURRENCE $ DAMAGE TO RENTED $PREMISES (Ea occurrence)CLAIMS-MADE OCCUR MED EXP (Any one person) $ PERSONAL & ADV INJURY $ GENERAL AGGREGATE $GEN'L AGGREGATE LIMIT APPLIES PER: PRODUCTS - COMP/OP AGG $ $ PRO- OTHER: LOCJECT COMBINED SINGLE LIMIT $(Ea accident) BODILY INJURY (Per person) $ANY AUTO ALL OWNED SCHEDULED BODILY INJURY (Per accident) $AUTOS AUTOS HIRED AUTOS NON-OWNED PROPERTY DAMAGE $AUTOS (Per accident) $ OCCUR EACH OCCURRENCE $ CLAIMS-MADE AGGREGATE $ DED RETENTION $$ PER OTH- STATUTE ER E.L. EACH ACCIDENT $ E.L. DISEASE - EA EMPLOYEE $ If yes, describe under E.L. DISEASE - POLICY LIMIT $DESCRIPTION OF OPERATIONS below POLICY SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, NOTICE WILL BE DELIVERED IN ACCORDANCE WITH THE POLICY PROVISIONS. THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AFFIRMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUING INSURER(S), AUTHORIZED REPRESENTATIVE OR PRODUCER, AND THE CERTIFICATE HOLDER. IMPORTANT: If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must be endorsed. If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endorsement. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). COVERAGES CERTIFICATE NUMBER:REVISION NUMBER: CERTIFICATE HOLDER CANCELLATION © 1988-2014 ACORD CORPORATION. All rights reserved. The ACORD name and logo are registered marks of ACORDACORD 25 (2014/01) ACORDTM CERTIFICATE OF LIABILITY INSURANCE 11/15/2016 Dealey, Renton & Associates P. O. Box 12675 Oakland, CA 94604-2675 510 465-3090 - David C. Eckman Doris A. Chambers 510 465-3090 510 452-2193 dchambers@dealeyrenton.com Watry Design, Inc. 2099 Gateway Place, Suite 550 San Jose, CA 95110 SAGITTA 25.3 (2014/01) DESCRIPTIONS (Continued from Page 1) 30 Day/10 Day for Non-Payment of Premium. 2 of 2 #S1872207/M1830564 6802901L841 07/30/2016 Office of the City Clerk Palo Alto, CA 94303 City of Palo Alto Post Office Box 10250 Re: Project #RFP166279, Downtown Parking Structure(CIP PE-15007) NAME OF PERSON(S) OR ORGANIZATION(S), CONT.: City of Palo Alto, its Council members, Officers, Agents and Employees POLICY NUMBER:COMMERCIAL AUTO CA 20 48 02 99 THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY. DESIGNATED INSURED This endorsement modifies insurance provided under the following: BUSINESS AUTO COVERAGE FORM GARAGE COVERAGE FORM MOTOR CARRIER COVERAGE FORM TRUCKERS COVERAGE FORM With respect to coverage provided by this endorsement, the provisions of the Coverage Form apply unless modified by this endorsement. This endorsement identifies person(s) or organization(s) who are “insureds” under the Who Is An Insured Provision of the Coverage Form. This endorsement does not alter coverage provided in the Coverage Form. This endorsement changes the policy effective on the inception date of the policy unless another date is indicated below. Endorsement effective Named Insured Countersigned by (Authorized Representative) SCHEDULE Name of Person(s) or Organization(s): (If no entry appears above, information required to complete this endorsement will be shown in the Declarations as applicable to the endorsement.) Each person or organization shown in the Schedule is an “insured” for Liability Coverage, but only to the extent that person or organization qualifies as an “insured” under the Who Is An Insured Provision contained in Section II of the Coverage Form. CA 20 48 02 99 Copyright, Insurance Services Office, Inc., 1998 Page 1 of 1 BA4A571692 07/30/2016 Watry Design, Inc. Re: Project #RFP166279, Downtown Parking Structure(CIP PE-15007) NAME OF PERSON(S) OR ORGANIZATION(S), CONT.: City of Palo Alto, its Council members, Officers, Agents and Employees City of Palo Alto City Council Staff Report (ID # 7417) Report Type: Consent Calendar Meeting Date: 12/12/2016 Summary Title: Public Safety Building and Cal Ave Garage Design Contract Approval Title: Approval of a Contract with RossDrulisCusenbery Architecture, Inc. in the Amount of $7,007,992 to Provide Design and Environmental Assessment Services for the new Public Safety Building, Capital Improvement Program Project, PE-15001 and new California Avenue Area Parking Garage Capital Improvement Program Project, PE-18000 From: City Manager Lead Department: Public Works Recommendation Staff recommends that Council approve and authorize the City Manager or his designee to execute Contract No. C17165953 (Attachment A) with RossDrulisCusenbery Architecture, Inc. (RDC) in a not-to-exceed amount of $7,007,992 for design and environmental review services, including $6,370,902 for basic services and $637,090 for additional services for the new Public Safety Building Capital Improvement Program project (PE-15001) and the new California Avenue Parking Garage Capital Improvement Program project (PE-18000). Background In December 2015, Council directed staff to begin design for a 3-story Public Safety Building (PSB) on Parking Lot C-6 in the California Avenue business district (CMR 6069) and in advance of the PSB, design a new parking garage with a retail element along Birch Street on Parking Lot C-7. The new parking garage is intended to replace the existing surface parking on Lots C-6 and C-7 while adding a minimum of 160 net new parking stalls (460 total stalls). The new Public Safety Building and new California Avenue area parking garage projects are part of the 2014 Council Infrastructure Plan. The direction from Council included a request for analysis of costs and other impacts for possible options to add more than the City of Palo Alto Page 1 minimum 460 parking stalls. In preparation for and in advance of procuring full design services, staff: 1. 2. Prepared title reports for Lots C-6 and C-7; Procured a geotechnical engineer and completed a soils report in May 2016; Procured an arborist and prepared a tree survey for Lots C-6 and C-7; Surveyed boundaries and site topography for Lots C-6 and C-7; Prepared Phase I Environmental Site Assessment (due diligence) for Lots C-6 and C-7; and Initiated Transportation Impact Analysis (TIA) and completed existing traffic count survey. 3. 4. 5. 6. In June 2016, Council authorized a contract with Nova Partners, Inc. (Nova) to provide program management services for the 2014 Council Infrastructure Plan projects. Nova assisted with developing the project delivery plan, preliminary schedule and scope of work for procuring design, and environmental review services for the PSB and garage. Nova also assisted with the selection process. As stated in the Fiscal Year 2017 Adopted Capital Budget, the total budgets for these two projects are: 1. 2. Public Safety Building (PE-15001), $57.8 million and California Avenue Garage (PE-18000), $10.3 million The project budgets shown above are based on original estimates from the 2014 Council Infrastructure Plan, and include staff salaries and benefits. Construction costs may be higher due to market escalation and anticipated scope modifications such as the added retail element for the California Avenue parking garage. The FY 2017-2021 capital budget and 5-year plan includes a contingency fund of $30 million for the 2014 Council Infrastructure Plan projects that can be used to provide additional funding for the Infrastructure Plan projects as needed. Discussion RDC Contract Scope of Services The RDC contract scope of services includes the following for both the Public City of Palo Alto Page 2 Safety Building and the Parking Garage: Phase 1: 1. 2. 3. 4. California Environmental Quality Act (CEQA) Assessment Preliminary Design Schematic Design Design Development Phase 2: 1. Permit Set and Construction Documents 2. Project Bidding and Award Phase 3: 1. Construction Administration 2. Project Closeout and Commissioning The design contract includes the scope of services and compensation for all three phases. However, commencement of work for each phase will require written authorization by the City. Phase 2 work will not be authorized until CEQA review and Council approval of the projects are completed. The contract with RDC includes preparation of environmental documents, schematic designs, design development packages, and construction documents for a new PSB and parking garage at existing surface parking Lots C-6 and C-7. RDC will develop conceptual options for the parking garage in preliminary design that include retail, additional above-ground levels, and additional sub-surface parking levels. Staff expects to return to Council in March 2017 with the conceptual options for the parking garage for approval prior to moving forward with schematic design. RDC will present the designs for the new PSB and parking garage to the Architectural Review Board (ARB), Planning and Transportation Commission (PTC) and Council as appropriate at schematic design and design development levels. RDC will also provide construction cost estimates upon completion of schematic design, design development, and construction document phases of the project. At a minimum, the PSB will be designed to meet LEED Silver certification standards per the current City policy. Consideration of LEED Gold or Platinum certification will be evaluated during design, especially in light of the recently adopted Sustainability and Climate Action Plan (S/CAP) draft framework. The City of Palo Alto Page 3 design process will include evaluation of electrification potential for PSB mechanical systems, photovoltaics on the parking garage and PSB, and other green building concepts. LEED certification is not applicable to the parking garage, however it will be designed to the locally adopted Building Code. Green Building requirements of the Request for Proposals (RFP) Process Table 1: Summary of Solicitation Process On September 13, 2016, the City released a Request for Proposal (RFP No. 165953) for Professional Services. Seven proposals were submitted. Public Works, Nova Partners, and Public Safety staff reviewed each firm’s submittal in response to the criteria identified in the RFP. On October 31, 2016, the four top‐scoring firms made presentations to the evaluation committee. RDC was selected as the top candidate. Staff recommends awarding the contract to RDC based on their experience designing public safety facilities and working community, the overall strength of their project team in the Palo Alto including multiple City of Palo Alto Page 4 Proposal Description/ Number Public Safety Building and California Avenue Parking Garage / RFP 165953 Proposed Length of Project 36 months Number of websites 1 (PlanetBids) Number of days to response 28 Number of Proposal received 7 Company Name Location Selected for Interview? Advanced Design Consultants, Inc. San Jose, CA No Heller Manus Architects San Francisco, CA No KMD Architects San Francisco, CA Yes Mark Cavagnero Associates San Francisco, CA No AECOM Technical Services, Inc. San Francisco, CA Yes RossDrulisCusenbery Architecture, Inc. Sonoma, CA Yes Ten Over Studio San Luis Obispo, CA Yes Submitted Fee Range: $4,956,951 to $6,806,221 subconsultants, their understanding of the project scope and their construction administration experience. The RFP requested pricing for both traditional design/bid/build and design/build project delivery methods for the California Avenue Parking Garage. The RDC contract includes the design/bid/build delivery method. The design/build project delivery method is often considered advantageous for parking garage construction due to its tendency to shift risk to the design/build contractor and reduce costs by allowing the design/build contractor to find the most cost- effective strategies for complying with the project specifications. In this instance, the funding of the project through certificates of participation would require a low bid-based design/build RFP process that would be less advantageous for the City. Additionally, the need to complete construction of the parking garage prior to initiating construction of the public safety building, and to secure ARB and Council approval of the project and the CEQA document prior to the design/build RFP, would likely limit the innovations of the design/build contractor and potentially introduce delays. The not-to-exceed contract amount for RDC includes a number of optional services that were identified and negotiated after completion of the selection process. The total also includes an additional services budget of 10% beyond the amount for basic services and reimbursables. For comparison to the Table 1 Submitted Fee Range of all proposals, RDC’s fee exclusive of the optional services is approximately $5.9 million. Timeline Staff anticipates returning to Council in March 2017 for direction on the Parking Garage size. Following that action, design and environmental review is expected to continue through to December 2017. Completion of the Parking Garage is targeted for late summer 2018, and completion of the PSB is expected in late spring of 2021. Preparation of a detailed schedule from RDC is one of first tasks of the contract. Resource Impact As approved in the Fiscal Year 2017 Adopted Capital Budget, funding for Phase 1 services (environmental assessment and design services through design development), reimbursables and additional services is available in Capital City of Palo Alto Page 5 Improvement Program projects PE‐15001 and PE‐18000. Further funding needed to support Phases 2 and 3 will be appropriated in future fiscal years to coincide with the design and construction schedule. Table 2: Capital Improvement Program Project Allocation Total funding in the 2014 Council Infrastructure Plan for both projects was established at $66.6 million, excluding staff salaries and benefits. Updated construction cost estimates and corresponding total project budgets will be developed during the preliminary design phase and will be presented to Council as part of the consideration of providing more than 460 parking spaces in the parking garage. The two CIP projects that would be advanced under the proposed contract are important City priorities. As such, they are expected to require significant staff time that would be covered by the same CIP projects, as well as support by Nova Partners. The staff involved would include the project manager in Public Works, staff in Planning and Community Environment to support the environmental review and ARB review tasks, as well as supporting staff throughout the City organization. Policy Implications Authorization of this project does not represent a change in existing policies. A new Public Safety Building was designated the top priority of the nine projects established by the 2014 Council Infrastructure Plan. In addition, the following policy statements in the Palo Alto Comprehensive Plan support the construction of a new structure: Policy C-22 Design and construct new community facilities to have flexible functions to ensure adaptability to the changing needs of the City of Palo Alto Page 6 PSB (PE-15001) Garage (PE-18000) Total Phase 1: $1,701,404 $454,097 $2,155,501 Phase 2: $2,292,955 $418,314 $2,711,269 Phase 3: $1,176,297 $199,650 $1,375,947 Reimbursables: $74,125 $54,060 $128,185 Add. Services: $524,649 $112,441 $637,090 Total: $5,771,139 $1,236,854 $7,007,992 community. Policy C-29 Strategically locate public facilities and parks to serve all neighborhoods in the City. The following policy statements in the Palo Alto Comprehensive Plan support the construction of new parking supply in addition to Council direction to staff on December 14, 2015: Policy T‐45 Provide sufficient parking in the University Avenue/Downtown and California Avenue business districts to address long range needs. Policy T‐47 Protect resident areas from the parking impacts of nearby business districts. The policy implications involve discussion of the potential for increasing traffic in the immediate vicinity of a new garage and balancing this against the benefits (e.g. a reduction in the over‐flow parking in nearby residential neighborhoods and convenient parking for area employees and visitors). This discussion is expected when the Parking Garage options return to Council in March 2017 for further direction to staff. Environmental Review RDC will complete an environmental assessment as outlined in the scope of work. It is anticipated that the initial study will conclude that an Environmental Impact Report or Mitigated Negative Declaration will be required for the project. Attachments: Attachment A: RDC-C17165953 Final Signed (PDF) City of Palo Alto Page 7 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 CITY OF PALO ALTO CONTRACT NO. C17165953 AGREEMENT BETWEEN THE CITY OF PALO ALTO AND ROSSDRULISCUSENBERYARCHITECTURE, INC. FOR PROFESSIONAL SERVICES 12th This Agreement is entered into on this day of December, 2016, (“Agreement”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“City”), and ROSSDRULISCUSENBERY ARCHITECTURE, INC., a California corporation, located at 18294 Sonoma Highway, Sonoma, CA 95476 (“Consultant”). RECITALS The following recitals are a substantive portion of this Agreement. A. City intends to construct a new Public Safety Building and a new Parking Garage (“Project”) and desires to engage a consultant to provide professional design and environmental 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.In reliance on these representations, City desires to engage Consultant to provide professional services as more fully described in the Scope of Services set forth in Exhibit “A,” (“Basic Services”) and any authorized additional services (collectively, the “Services”), and in accordance with Schedule of Performance (“Schedule”) set forth in Exhibit “B.” NOW, THEREFORE, in consideration of the recitals, covenants, terms, and conditions, in this Agreement, the parties agree: AGREEMENT SECTION 1. SCOPE OF SERVICES. Consultant will perform the Services described in Exhibit “A” in accordance with the terms and conditions contained in this Agreement, to the reasonable satisfaction of City. Optional Incorporation of Proposal [This provision only applies if checked to incorporate consultant’s proposal into this Agreement.] Consultant’s proposal, dated (“Proposal”) is incorporated into and made part of 1 Attachment A DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 this Agreement, subject to the limitations of subsection 27.8, and excepting any and all provisions in the Proposal which conflict with or are inconsistent with the provisions of this Agreement, as determined by the City Manager. 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, by a Task Order assigned and approved by City’s designated Project Manager. Each Task Order will be in substantially the same form the Professional Services Task Order form attached as Exhibit A-1. Each Task Order will designate a City Project Manager and contain a specific scope of Services, a specific schedule of performance and a specific compensation amount. The total price of all Task Orders issued under this Agreement may not exceed the amount of compensation set forth in Section 4, below. Consultant will only be compensated for Services performed under an authorized Task Order. City may elect, but is not required, to authorize Services up to the maximum compensation amount set forth in Section 4. City is not obligated to issue any Task Orders under this Agreement. SECTION 2. TERM. [Option A - applies when the term ends on a specified, pre-determined date.] The term of this Agreement (“Term”) begins on the date of its full execution and expires on unless terminated earlier pursuant to Section 19 of this Agreement. OR [Option B - applies when the term ends upon completion of Services, the exact date of which is not yet certain.] The term of this Agreement (“Term”) begins on the date of its full execution and expires upon satisfactory completion of the Services in accordance with the Schedule, but in no event later than December 31, 2021 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 must complete the Services within the Term and in accordance with the Schedule. Any Services for which times for performance are not specified in this Agreement may be commenced and completed by Consultant in a reasonably prompt and timely manner based upon the circumstances and City’s direction to the Consultant. City’s agreement to extend or modify the Term or the Schedule will not preclude recovery of damages for delay if the extension or modification is required due to delay caused by the Consultant. SECTION 4. COMPENSATION. 4.1 Basic Services. The compensation to be paid by City to Consultant for performance of the Basic Services and reimbursable expenses may not exceed Six Professional Services Rev. September 21, 2016 2 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 Million Three hundred Seventy Thousand Nine hundred two Dollars ($6,370,902). Consultant agrees to complete all Basic Services, including reimbursable expenses, within this amount. 4.2 Additional Services. Services in addition to the Basic Services (“Additional Services”), if any, must be authorized in accordance with and subject to the provisions of Exhibit “C,” entitled “Compensation.” In the event Additional Services are authorized, the total compensation for Basic Services, Additional Services and reimbursable expenses may not exceed Seven Million Seven Thousand Nine Hundred Ninety Two Dollars ($7,007,992). Consultant will not be entitled to any compensation for Additional Services performed without the prior written authorization of City. Additional Services includes any Services that are determined by City to be necessary for the proper completion of the Project, but which are not already encompassed within the Basic Services described in Exhibit “A.” 4.3 Rate Schedule. The applicable rates and schedule of payment are set forth in Exhibit “C-1”, entitled “Schedule of Rates” (“Rate Schedule”). Consultant is not entitled to compensation for any Services performed or reimbursement for expenses incurred to the extent that payment would result in a total exceeding the maximum amount of compensation set forth herein. Optional [for multi-year contracts] 4.4 Unexpended monies. At the sole discretion of the City, the not-to- exceed compensation authorized in a contract year may include compensation authorized and not expended in prior contract years. SECTION 5. INVOICES. To request payment from City for Services performed, Consultant must submit monthly invoices to the City describing the Services performed and the applicable charges based on the Rate Schedule (including, for each day Services were provided, the name and title of the individuals or subconsultants who performed the Services, the hours worked, the hourly rates, and reimbursable expenses). The invoice must clearly distinguish between Basic Services and Additional Services, and must itemize all reimbursable expenses. The invoice must also describe the percentage of completion of the Services or each Task Order, as applicable. The information in Consultant’s invoices will be subject to verification by City. Consultant must submit all invoices to the City’s Project manager (“Project Manager”) at the address specified in Section 13, below. The City will process and pay all undisputed amounts within thirty (30) days of receipt of an invoice submitted in compliance with this Section 5. SECTION 6. RESPONSIBILITY AND STANDARD OF CARE. 6.1 Responsibility. All of the Services must be performed by Consultant or under Consultant’s supervision. Consultant represents that it possesses the professional and technical personnel necessary to timely perform the Services required by this Agreement and that Consultant’s personnel have sufficient skill and experience Professional Services Rev. September 21, 2016 3 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 to perform the Services assigned to them. Consultant represents that it, its employees and any subconsultants assigned to the Project, have and will maintain during the Term of this Agreement all applicable licenses, permits, qualifications, insurance and approvals of whatever nature that are legally required to perform the Services. 6.2 Standard of Care. All of the Services to be furnished by Consultant under this Agreement must meet the professional standards applicable to professionals in the same discipline and with similar knowledge and skill, who are engaged in related Services in the San Francisco Bay Area under the same or similar circumstances. SECTION 7. COMPLIANCE WITH LAWS. Consultant must keep itself informed of and comply with all federal, state and local laws, ordinances, regulations, and orders applicable to the Project, performance of the Services, or to any personnel or subconsultants assigned to perform Services under this Agreement. Consultant must 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 AND OMISSIONS. Consultant is solely responsible for all costs and damages, including, but not limited to, increases in the cost of Services, increased Project costs, delay damages, or change order markup costs arising from or caused by Consultant’s errors and omissions. Consultant is solely responsible for the costs to correct such errors and omissions, and for any costs or damages caused by Consultant’s unreasonable delay in correcting its errors and omissions. SECTION 9. COST ESTIMATES. If this Agreement pertains to the design of a public works project, Consultant must submit updated estimates of probable construction costs at each phase of design submittal. If the total estimated construction cost at any submittal phase exceeds ten percent (10%) of City’s stated construction budget, Consultant must 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, Consultant, and any person employed by or contracted with Consultant to provide Services under this Agreement, will provide such Services as an independent contractor and not as an employee of City. SECTION 11. ASSIGNMENT. Consultant’s expertise and experience is a material inducement for City to enter into this Agreement. Consultant may 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. Professional Services Rev. September 21, 2016 4 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 Option A: No Subcontractor: Consultant may not subcontract any portion of the Services to a subconsultant without the prior written authorization of the City Manager or his or her designee. OR Option B: Subcontracts Authorized: Notwithstanding Section 11 above, City agrees that subconsultants may be used to complete the Services. This authorization does not operate to create a contractual relationship between the City and any subconsultant. The subconsultants authorized by City to provide Services for the Project are: WATRY DESIGN, INC. - Parking Consultants MIG - Environmental Planners WALTER P MOORE - Structural Engineers WSP | Parsons Brinckerhoff - MEP/ IT / AV / Accoustics WINBOURNE - Emergency Communications Consultant CUMMING - Cost Consultants GUIDEPOST SOLUTIONS - Low Voltage & Security Electronic Systems SANDIS - Civil Engineers INTERSTICE - Landscape Architects HINMAN ENGINEERS - Threat assessment Consultant must require its subconsultants to comply with all applicable provisions of this Agreement, which must be attached to each subcontract. Consultant is solely responsible for directing all subconsultants providing Services, and for any compensation due to subconsultants. Consultant is fully responsible to City for all acts and omissions of a subconsultant. Consultant may not change or add subconsultants without the prior written approval of the City Manager or his or her designee. SECTION 13. PROJECT MANAGEMENT. 13.1 Consultant will assign Michael B. Ross, AIA as the Design Principal in Charge to have supervisory responsibility for the performance, progress, and execution of the Services and Thomas R. Larson, AIA, LEED as the Project Manager to represent Consultant during the day-to-day Services for the Project. If circumstances require the substitution of the Project director or coordinator, or any other key personnel for any reason, the appointment of a substitute Project director or coordinator and the assignment of any new or replacement key personnel will be subject to the prior written approval of the City’s Project Manager. At City’s request, Consultant must promptly remove any personnel who City determines do not perform the Services in an acceptable manner, are uncooperative, or who present a threat to the adequate or timely completion of the Project or to the safety of persons or property. 13.2 City’s Project Manager is Matt Raschke, Public Works Department, Engineering Division, 250 Hamilton Ave, Palo Alto, CA 94301, Telephone: 650-496- 5937. The Project Manager will be Consultant’s point of contact with respect to Professional Services Rev. September 21, 2016 5 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 performance, progress and execution of the Services. City may designate an alternate or substitute Project Manager without prior notification to Consultant. SECTION 14. OWNERSHIP OF MATERIALS. All work product, including without limitation, all writings, drawings, plans, reports, specifications, calculations, documents, other materials and copyright interests developed under this Agreement are deemed the exclusive property of City without restriction or limitation upon their use. Consultant agrees that all copyrights which arise from creation of work product pursuant to this Agreement will be vested in City, and Consultant waives and relinquishes all claims to copyright or other intellectual property rights in favor of the City excepting for use of project photos and diagrams for normal marketing and design award purposes on the part of the Consultant, Consultant shall obtain prior written approval from the City for any such use so that the City can ensure that no sensitive information is used for marketing purposes. Neither Consultant nor its employees or subconsultants, if any, may provide such work product 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 Services. “The City shall to greatest extent permitted by law indemnify, defend and hold the Consultant harmless from and against any and all claims, damages, liabilities, losses, costs and fees (including reasonable attorney fees) arising from the use on unrelated other projects or from unauthorized modifications made to the work product developed by the Consultant under this Agreement.” SECTION 15. AUDITS. Consultant agrees to maintain and retain such records for at least four (4) years after the expiration or earlier termination of this Agreement. Consultant will permit City to audit, at any reasonable time during the term of this Agreement and for four (4) years after expiration or termination of the Term, Consultant’s records in any form or format pertaining to matters covered by this Agreement. SECTION 16. INDEMNITY. [Option A applies to the following design professionals subject to Civil Code Section 2782.8: architects, landscape architects, registered professional engineers, and licensed 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 attorney 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 subconsultants under this Agreement, regardless of whether or not such liability for such Claims may have been caused in part by an Indemnified Party. Professional Services Rev. September 21, 2016 6 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 OR [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, pertaining or in any manner related to performance or nonperformance by Consultant, its officers, employees, agents or subconsultants under this Agreement, regardless of whether or not such liability for such Claims may have been 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 liability for Claims arising from the active negligence, sole negligence or willful misconduct of an Indemnified Party 16.3. City’s acceptance of Consultant’s Services and duties will not operate as a waiver of Consultant’s indemnity and defense obligations. The provisions of this Section 16 survive the expiration or early termination of this Agreement. SECTION 17. WAIVERS. 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 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, must obtain and maintain, in full force and effect during the Term of this Agreement, the insurance coverage described in Exhibit “D,” entitled “Insurance Requirements,” attached hereto and incorporated herein. Consultant and its subconsultants, if any, must obtain and maintain 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 subconsultants 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 City as an additional insured under such policies as required above. Professional Services Rev. September 21, 2016 7 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 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 City’s 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 to Consultant. Upon receipt of such notice, Consultant will must discontinue its performance of the Services, as specified in the notice of suspension or termination. 19.2. Upon receipt of notice of suspension or termination, Consultant must immediately deliver to the City Manager any and all work product and materials including, but not limited to, all copies of studies, sketches, drawings, computations, and other data, in any form or format, whether or not completed, which have been prepared by Consultant or its subconsultants, or given to Consultant or its subconsultants, in connection with this Agreement. Such work product and materials are deemed the property of City. 19.4. Upon such suspension or termination by City, Consultant will be paid for the Services satisfactorily rendered or materials delivered to City in accordance with the scope of Services on or before the stated effective date of the suspension or termination; provided, however, if this Agreement is suspended or terminated for cause, which may include unsatisfactory performance or default by Consultant, City will compensate Consultant only for that portion of Consultant’s services which have been satisfactorily provided and which are of direct and immediate benefit to City as determined by the City Manager acting in his or her sole discretion. The following Professional Services Rev. September 21, 2016 8 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 Sections will survive any expiration or termination of this Agreement: 8, 14, 15, 16, 19.4, 20, 25 and 27. 19.5. No payment, partial payment, acceptance, or partial acceptance for Services by City will operate as a waiver by City of any of its rights under this Agreement. SECTION 20. NOTICES. All notices under this Agreement 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 or Coordinator at the address of Consultant SECTION 21. CONFLICT OF INTEREST. 21.1. By entering into 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, subcontractors 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 will 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. Pursuant to Palo Alto Municipal Code section 2.30.510, Consultant certifies that in the performance of this Agreement, it will 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 or any other protected classification. 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, and agrees to meet all requirements of Professional Services Rev. September 21, 2016 9 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 Section 2.30.510 pertaining to nondiscrimination in employment. SECTION 23. ENVIRONMENTALLY PREFERRED PURCHASING AND ZERO WASTE REQUIREMENTS. Consultant must comply with the City’s Environmentally Preferred Purchasing policies which are available at City’s Purchasing Department, incorporated by reference and may be amended from time to time. Consultant must 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; and second, reusing waste and third, recycling or composting waste. In particular, Consultant must comply with the following zero waste requirements: 23.1. All printed materials provided by Consultant to City generated from a personal computer and printer including but not limited to, proposals, quotes, invoices, reports, and public education materials, must 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. 23.2. Goods of any type or nature purchased by Consultant on behalf of City must 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 Department’s office. SECTION 24. COMPLIANCE WITH PALO ALTO MINIMUM WAGE ORDINANCE. Consultant must 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 must 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. In addition, Consultant must post notices regarding the Citywide 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 City’s Charter and its Municipal Code. Notwithstanding any other provision in this Agreement, 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. SECTION 26. PREVAILING WAGES AND DIR REGISTRATION FOR PUBLIC WORKS CONTRACTS Professional Services Rev. September 21, 2016 10 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 26.1 This Project is not subject to prevailing wages. This Agreement is not subject to prevailing wage requirements in the performance and implementation of the Project if this Agreement is not a public works contract as defined under Labor Code section 1720, et seq. and regulations promulgated thereunder, or if, pursuant to Labor Code section 1782, the Agreement does not include a public works construction project of more than $25,000, or a public works alteration, demolition, repair, or maintenance of more than $15,000. OR 26.1 This Project is subject to prevailing wage requirements, including all applicable requirements of Chapter 1 of Part 7 of Division 2 of the Labor Code, including requirements pertaining to wages, working hours and workers’ compensation insurance. The general prevailing wage requirements applicable to the City’s location for each craft, classification, or type of worker needed to provide the Services, including employer payments for health and welfare, pension, vacation, apprenticeship and similar purposes, are on file at the City’s Purchasing Department’s office and available online at http://www.dir.ca.gov/DLSR. Consultant must provide a copy of prevailing wage rates to any staff or subconsultant, and must require compliance with the prevailing wage requirements. Consultant must comply with all applicable sections of the Labor Code pertaining to prevailing wages, including, but not limited to, Sections 1771.1, 1725.5, 1775, 1776, 1777.5, 1782, 1810, and 1813. 26.2 Consultant must comply with the requirements of Exhibit “E” for any contract for public works construction, alteration, demolition, repair or maintenance. 26.3 Pursuant to Labor Code section 1725.5, Consultant and its subconsultants or subcontractors must be registered with the California Department of Industrial Relations (“DIR”) to perform public work. The Services provided pursuant to this Agreement are subject to compliance monitoring and enforcement by the DIR pursuant to Labor Code section 1771.4. 26.4 Pursuant to Labor Code section 1861, by entering into this Agreement, Consultant certifies as follows: “I am aware of the provisions of Labor Code section 3700 which require every employer to be insured against liability for workers’ compensation or to undertake self-insurance in accordance with the provisions of that code, and I will comply with such provisions before commencing the performance of public works services under this Agreement.” SECTION 27. MISCELLANEOUS PROVISIONS. 27.1. This Agreement will be governed by the laws of the State of California. 27.2. The state courts of California in the County of Santa Clara, State of Professional Services Rev. September 21, 2016 11 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 California are the exclusive venue for any legal action arising from or related to this Agreement. 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 is entitled to recover an amount equal to the fair market value of legal services provided by its attorneys as well as any attorneys’ fees paid to third parties. 27.4. This Agreement, including the exhibits hereto, represents the entire and integrated agreement between the parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This Agreement may only be amended by a written instrument signed by both 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. 27.7. All exhibits or attachments referred to in this Agreement and any duly authorized Task Orders are incorporated into and made part of this Agreement. 27.8 In the event of any conflict or inconsistency between the terms of this Agreement and the terms of any exhibits hereto or Consultant’s proposal (if any), the Agreement shall control. In the case of any conflict or inconsistency between the terms of the exhibits hereto and the terms of Consultant’s Proposal, the terms in the exhibits shall control. 27.9 If, pursuant to this Agreement, City discloses to Consultant or provides access to personal information as defined in California Civil Code section 1798.81.5(d) about any California resident (“Personal Information”), Consultant must maintain reasonable and appropriate security procedures to protect the Personal Information, and must inform City immediately upon learning that there has been a breach in the security of the Personal Information or the system in which the Personal Information is maintained. Consultant may 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 the party that each represents. Professional Services Rev. September 21, 2016 12 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 27.12 This Agreement may be signed in multiple counterparts, shall, when executed by all the parties, constitute a single binding agreement. which Professional Services Rev. September 21, 2016 13 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 CONTRACT No. C17165953 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 ROSSDRULISCUSENBERY ARCHITECTURE, INC. City Manager (Contract over $85k) Purchasing Manager (Contract over $25k) Contracts Administrator (Contract under $25k) Officer 1 By: Name: Michael Ross Title: CEO APPROVED AS TO FORM: Officer 2 (Required for Corp. or LLC) By: Name: Mallory Cusenbery Title: Principal City Attorney or designee (Contract over $25k) Contracts Administrator (Checklist Approval) Attachments: EXHIBIT “A”: EXHIBIT “B”: EXHIBIT “C”: EXHIBIT “C-1”: EXHIBIT “D”: SCOPE OF SERVICES SCHEDULE OF PERFORMANCE COMPENSATION SCHEDULE OF RATES INSURANCE REQUIREMENTS Professional Services Rev. September 21, 2016 14 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 EXHIBIT A SCOPE OF SERVICES PUBLIC SAFETY BUILDING AND CALIFORNIA AVENUE PARKING GARAGE PROJECT I. GENERAL INFORMATION A. Project Summary. 1. Project Description and Purpose. The City of Palo Alto (“City”) intends to construct a new approximately 45,500 SF, Public Safety Building (“PSB”) combined with two levels of basement parking, to house the City’s Police Department, 911 Emergency Dispatch Center, Emergency Operations Center, Office of Emergency Services, Fire Department Administration, and other related services. The new Public Safety Building and basement parking will be designed to meet essential facility code requirements under the California Essential Services Buildings Seismic Safety Act. In conjunction with the PSB Project, the City intends to construct a new parking structure (“Parking Structure”) to provide a minimum of 460 parking spaces and 4,700 square feet of commercial “warm shell” retail space (interior commercial tenant improvements are excluded) in the City’s California Avenue business district. This project, which includes two separate structures—the Public Safety Building and the Parking Structure (collectively, the “Project”)—is intended to address the City’s needs for housing public safety operations and the need for public parking for the California Avenue business district. The Parking Structure is a non- essential facility. To minimize public parking impacts, the Parking Structure must be fully constructed before construction may begin on the Public Safety Building. 2. Project Location. Both structures will be sited on Sherman Avenue on sites that are currently in use as City-owned parking lots. The Public Safety Building is to be constructed on City parking lot C-6 on Sherman Avenue between Park Blvd and Birch Street (“Site A”). The Parking Structure is to be constructed on City parking lot C-7 on Sherman Avenue between Birch Street and Ash Street (“Site B”). B. Summary of Basic Services. 1. Design Consultant Services. The design consultant services for the Project (“Consultant Services”) include preparation of Preliminary Design, Schematic Design, Design Development Documents, Construction Documents, assistance with Bidding and Award, Construction Administration and Project Closeout Services. 2. Environmental Consulting Services. For the Project, preparation of environmental review and environmental document. C. City’s Role. During the term of the Professional Services Agreement with Consultant (“Agreement”), the following items will be the responsibilities of the City: Professional Services Rev. September 21, 2016 15 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 1. The City’s Project Manager (as defined below, under II.A) or authorized designee shall manage the Consultant’s performance under the Agreement. Consultant shall receive final direction only from the Project Manager or his or her authorized designee. The Project Manager shall resolve any conflicting direction from other groups, departments or agencies. 2. City shall be responsible for scheduling all meetings between the Consultant and other City departments including but not limited to: Utilities, Department of Public Works, Fire Marshal, Arts Commission, City Building Official, Planning Department, Traffic and Parking, ARB, Planning Commission and City Council. 3. The City shall provide evaluation, mitigation design and administration of work for hazardous materials at each site and in the existing building. Removal of hazardous materials will be bid and conducted as separate projects from the Project. This hazardous material abatement work is not included in this Agreement. 4. The City shall provide reviews and comment on what may be necessary to complete design milestones, and/or approve completion of design milestones and cost estimates. At the completion of each phase, the City shall, acting in its sole discretion, provide written authorization to the Consultant to proceed to the next phase, contingent upon satisfactory completion of the previous phase and any required approvals, including, but not limited to, budget authorizations. Said written authorization shall require the signature(s) of the City's Project Manager or his/her authorized designee. 5. City shall provide record drawings of existing project facilities (when available). 6. City shall provide its standard front end template, in Microsoft Word format to Consultant for review and comment. 7. City shall print and provide construction contractors with copies of bid documents (including the front end documents and the final plans and specifications for the Project). 8. City shall advertise and award construction contracts. 9. The City shall oversee and manage the artist selection process, City and artist agreements, artwork approvals, budgets and schedule, and artwork installation. Consultant’s Design Principal shall be included in the committee for identification of the public art sites, coordination of the public art with the design of the Project and selection of the public artists (s). 10. The City may prequalify general contractors and key subcontractors and limit bidding to only those firms that have been deemed by the City to be qualified. Professional Services Rev. September 21, 2016 16 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 City shall actively market the Project to general contractors and major trades to increase likelihood of receiving competitive bids. The Project will consist of developing two separate bid packages one each for the PSB and Parking Structure. The Project delivery will be design/bid/build. 11. City shall identify, select and procure all equipment such as copy machines, vending machines, computers, printers, and other miscellaneous office equipment, etc., that is not included in the Project. 12. City shall provide the following basis of design studies, services, reports and documents for the Consultant’s use; topographic survey, existing utility surveys, geotechnical study and ongoing services through the construction phase, transportation and parking study, arborist report, hazardous materials study and abatement plan, cultural resource study and biological resources study. 13. The City shall identify stakeholders for the public outreach process, and coordinate public meetings to be part of the Project implementation. II. GENERAL REQUIREMENTS The following general requirements apply to both the Consultant Services and the Environmental Services (collectively, the “Services”). Requirements specific to Consultant Services are provided in Part III, below. Requirements specific to the Environmental Services are provided in Part IV, below. A. Project Manager. The City’s Project Manager or authorized delegate (“Project Manager”) will be the primary point of contact for the Consultant. The Project Manager will monitor the Consultant’s performance. B. Communications. The Consultant must maintain communications for all aspects of delivery of the Services. Consultant must be in regular contact with the Project Manager and must provide where reasonably possible same day responses to the City’s email and telephonic requests. Consultant must be equally responsive to the sub-consultants to ensure prompt and efficient delivery of coordinated Services. C. Integrated Services. Time is of the essence for design and delivery of this Project. The Consultant must at all times coordinate delivery of its Services to avoid delaying progress on the Project. Consultant must ensure that it does not delay the Services provided by the sub-consultants, and must coordinate schedules to avoid delay. III. DESIGN PROFESSIONAL SERVICES A. General Provisions. This Part III of the Scope of Services includes the requirements for delivery of the Consultant Services for the Project. In general, this includes design and preparation of code-compliant Project drawings and specifications and construction administration up to and including Project close out. The Consultant Services include the general provisions included in this subpart III.A, as well as the Professional Services Rev. September 21, 2016 17 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 phase-specific requirements set forth in subparts III.B-G, which follow. 1. Design and Construction Administration. Consultant’s responsibilities include, but are not limited to the following: 1.1 Preparation of conceptual design documents, schematic design documents, design development documents, construction documents, project manual specifications and permit package, estimates of probable construction cost; 1.2 Management of the entire design process, including all design professionals; 1.3 Providing construction administration services, from bidding through close out, including coordination of systems’ commissioning; 1.4 Providing assistance with obtaining construction permits and bidding process; and 1.5 Coordination of public art (per City’s municipal code requirements). These design and construction administration services are to be provided by qualified, licensed professionals, including, but not limited to the following professions: civil engineer, structural engineer, mechanical engineer, electrical engineer/lighting designer, landscape architect, architect, cost estimator, audio- visual engineer, acoustic engineer, energy analysis engineer, commissioning agent(s), signage designer, and other specialty sub-consultants as needed. 2. Budget and Cost Estimates. The Project must be designed and constructed for a total cost not to exceed $67 million dollars, including all exterior and interior improvements and associated site work improvements. The Consultant must work closely with the Project Manager to assure that the total Project cost does not exceed the Project budget. The Consultant must provide cost estimates at each phase of design in a CSI format acceptable to the Project Manager. City shall provide a third party independent cost estimate at each cost estimate milestone for comparison with the Consultant’s cost estimate. Both estimates shall utilize the same approved CSI format. Consultant must provide a single Statement of Probable Cost at the following milestones: Preliminary Design, Schematic Design, 100% Design Development, 60% Construction Documents, 95% Construction Documents and Final/100% Construction Documents. If an estimate indicates that the Project costs may exceed the budget, the Consultant will not be authorized to proceed to the next design phase until the estimate is reconciled with the budget, the design is modified to meet the budget, or the City agrees to adjust the budget accordingly. 3. Project Schedule. Within ten business days after the City and the Consultant have fully executed the Agreement, Consultant must provide a Project schedule, in a format acceptable to the Project Manager. The schedule must show all Project development phases, including environmental review, Professional Services Rev. September 21, 2016 18 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 design, construction and closeout for each building. The Project Schedule must show that construction of the Parking Structure is completed before construction begins on the Public Safety Building. The schedule should be prepared in consultation with the sub-consultants to ensure integrated delivery of Services. The schedule may provide for final development of the design documents for the Public Safety Building to be completed during construction of the Parking Structure. The Project schedule must be sufficiently detailed to allow the Project Manager to monitor progress on Project design and construction. During the design phase, Consultant must submit an updated Project schedule as part of its deliverables for each design phase. During the construction administration phase, the Consultant will provide monthly schedule updates comparing the progress of the overall Project schedule with the construction schedules independently prepared by the two contractors. Consultant must submit an updated schedule on a monthly basis, concurrent with submission of its payment applications. 4. Investigation and Review. The Consultant is responsible for thorough and appropriate field investigation of the Project sites and for identifying existing conditions that may affect design or construction of the Project. The Consultant must review available documentation regarding site conditions. 5. Code Compliance. All design and construction must comply with the most recent requirements (i.e., current at the time of submitting an application for a building permit) of all applicable local, state, and federal codes and regulations, including, but not limited to, the California Building Code 2016 (Part 2 of Title 24), the regulations promulgated under Titles II and III of the Americans with Disabilities Act (28 CFR Parts 35 and 36), the Americans with Disabilities Act Design Standards (Appendix A of 28 CFR 36), and the Palo Alto Municipal Code. The design for the Public Safety Building must meet all current requirements required under the California Essential Services Buildings Seismic Safety Act, including, but not limited to Title 24, Part 1 of the California Building Standards Administrative Code, Chapter 4, Articles 1 through 3. 6. Green Building Requirements. The City intends that the Public Safety Building and Parking Structure are designed and built in conformance with the City’s Green Building Policy, which currently requires LEED Silver or higher. At 50% Schematic Design the City shall determine if the Project will be registered with the United States Green Building Council as a LEED Silver project. As part of the process, City wishes to evaluate what would be required to bring the Project to LEED Gold or Platinum. The City’s Green Building Policy is currently under review and the Project will be required to comply with the applicable Green Building requirements in effect during design development. Consultant is responsible for designing the Project to comply with the applicable Green Building Policy Requirements (“Green Building Requirements”), including, but not limited to, providing qualified project management and submission of all required documentation. Information regarding the City’s Green Building Policy may be accessed via the City’s website at: http://www.cityofpaloalto.org/gov/depts/ds/green_building/green_building_in_palo Professional Services Rev. September 21, 2016 19 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 _alto.asp 7. Architectural Review Board. Consultant is required to participate in and comply with the City’s Architectural Review Board (“ARB”) process for final approval of the design of the Project. Notwithstanding the separate construction time frames for the Parking Structure and the Public Safety Building, the preliminary plans for each building must be submitted together for simultaneous review and approval by the ARB. 7.1 The ARB is charged with design review of all new construction, consistent with its objectives, which include: Promote orderly and harmonious development of the City; Enhance the desirability of residence or investment in the City; Encourage the attainment of the most desirable use of land and improvements; Enhance the desirability of living conditions upon the immediate site or in adjacent areas; and Promote visual environments which are of high aesthetic quality and variety and which, at the same time, are considerate of each other. 7.2 Consultant must become familiar with the ARB process and be prepared to provide all materials for both the informal and formal submissions. The required entitlements needed from the Planning and Community Environment Department are conditions of approval and ARB design review for the new Public Safety Building and Parking Structure. The Consultant will be required to attend multiple ARB study sessions and will also be required to make formal presentations to the Board as required to complete the ARB process. The Design Development phase of the Project (addressed below, in subpart D) will not be considered completed until formal ARB approvals are obtained. 8. Meetings and Presentations. Consultant will be responsible for leading communications at design meetings, various public meetings, and meetings with outside stakeholders, including community meetings. The design meetings will include a minimum of 4 to 5 public meetings and information presentations to City departments, community groups, and neighbors. 8.1 In addition to meetings with or presentations to the ARB, presentations to the Palo Alto City Council will also be required. Participation for the Project will include presentations to and meetings with other City boards and commissions to solicit feedback and comments on the progress of the design(s). Other meetings may also include City Fire Department and Building Department, technical-planning meetings, technical-building meetings, technical-Police meetings, technical-Fire meetings, technical-Emergency Operations meetings, technical- technology meetings, traffic meetings, reviewing agencies meetings, Professional Services Rev. September 21, 2016 20 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 Design Review Committee, and other meetings reasonably required. 8.2 Consultant must attend meetings with the Project Manager and key City staff people at each stage of design. 8.3 Most meetings will be held at Palo Alto City Hall, 250 Hamilton Ave, Palo Alto, CA 94301. Community meetings may include interactive design workshops for some aspects of the Project, particularly site design. 8.4 Consultant’s duties will include coordinating meeting logistics, preparing invitations to meetings and meeting minutes, and follow up on action items. Project meetings with the Project Manager and key City staff people will be held, regularly throughout the Project design and construction process. Meetings may be in person or through teleconference depending on meeting topics. The sub-consultants will be required to attend such meetings as needed. Consultant shall schedule coordination meetings, including the key sub-consultants on a consistent basis throughout the Project, but particularly early in the design phase to ensure an integrated and informed design. 9. Plans and Specifications. For design-bid-build project delivery, the Consultant must provide full construction plans and specifications for the Project, including, but not limited to: Architecture and interior design, including, applicable, acoustical design services, special equipment design and installation, and finishes, furniture and equipment (“FF&E”) design, selection and management; Structural, civil, mechanical, electrical and plumbing engineering; Fire protection system design to 90% CD level; Complete telecommunication system distributions; Waterproofing All building low-voltage systems; Security system design; Coordination of building specialty systems Landscape architecture; Demolition plan development; and Building signage, including code, interior and exterior wayfinding, monument sign and exterior signage. Parking guidance system Photovoltaic systems Acoustic engineering Threat assessment Blast resistant design (optional additional service) Technical systems programming Commissioning Professional Services Rev. September 21, 2016 21 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 10. Communication Networks (optional additional service). The Public Safety Building will include a wide range of telecommunications infrastructure, including land mobile radio, landline fiber optic, data network cabling, wireless cellular telephony, wireless data, microwave, and satellite connectivity. Lines-of-sight geometries need to be considered in the placement of certain antennas and transceivers. Additionally, some public safety communications infrastructure will continue to exist at remote sites, including regional systems that are shared among other government agencies. Thus, robust and resilient site and intra- system connectivity will also be required, as will other protective measures, such as back-up power. The City operates a number of public safety applications and systems in partnership with the neighboring communities of Mountain View and Los Altos and a shared trunked radio system with Santa Clara County municipalities and agencies. Connectivity over both primary and redundant networks is a critical consideration in the design of the Public Safety Building. The City will inform the Consultant during Preliminary Design if design of these systems will be authorized through an additional service authorization or amendment to the Agreement. If design of these systems is authorized, the City will inform Consultant whether all or part of these systems will be included in the Agreement or if the procurement of these systems will be under separate contract administered by the City. 11. Coordination. Consultant will be required to work with and coordinate design efforts with other firms that are under separate contracts with the City, including, but not limited to, hazardous materials, the transportation impact, surveyor, geotechnical, and arborist, and to coordinate with the City and other parties as needed to minimize adverse impacts during construction, including vehicular, bicycle and pedestrian traffic and access, and impacts to normal residential and commercial uses in the surrounding areas. For the purpose of this Agreement the services provided by the City’s Hazardous Materials Consultant during the design phase shall include: Investigation, borings, analysis, testing, assessment report, preparation of abatement specifications, including as required; material removal and disposal, dewatering and disposal, encapsulation, barrier and venting requirements, testing and monitoring protocols, cost estimation, provision of response to bid questions, and assessment of bid proposals. Hazardous Materials Consultant construction phase services shall include: on site observation, material sampling and testing, monitoring equipment, material and air sampling, post construction monitoring and certification process. The City reserves the right to enter into separate contracts with other firms or contractors supplying specialized services, use qualified City staff to provide services, or direct the integration of qualified additional sub-consultants into the Services. B. Preliminary Design Phase Scope of Work Professional Services Rev. September 21, 2016 22 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 1. Scope Verification. Consultant shall meet with the City to verify the scope, schedule and budget. 2. Project Kick off Meeting. The Project will begin with a Project kick off meeting where all Project stakeholders and user group representatives are introduced and scope, schedule, budget and approvals discussed and agreed to. User group program verification meetings (Item 4.) will be scheduled. 3. Data Gathering, Review & Evaluation. Consultant will review all previously prepared Project documents, studies, design drawings and existing site plans. 4. Program and Design Verification Meetings. Consultant will participate in and conduct meetings with all Project stakeholders to verify the program with each user group and ensure all previously established and required building services are incorporated into the final PSB design. Consultant shall review all existing requirements, approvals and conditions relevant to Project, including evaluation of existing site conditions. Consultant shall provide final programming documents for the Public Safety Building and Parking Structure. 5. City Project Meetings. Consultant shall meet with the Project Manager, Department of Public Works (“DPW”), the Building Department, Utilities Department, Planning Department and Traffic and Parking Divisions to discuss the status of the Project and Project objectives. 6. Communication Network, 911 Communications and Radio Systems Program Meetings. Consultant and its communications consultant shall meet with representatives of the City and the Palo Alto PD to establish the scope and technology requirements of the 911 Dispatch Center and radio communication systems. 7. Risk Assessment. Consultant shall prepare a risk assessment for the PSB which identifies potential threats and risks, balances those risks with the budget and makes recommendations for the architectural, site, physical and electronic security measures or strategies to address potential vulnerabilities. 8. Structural Systems and Base Isolation Systems Study for PSB. Consultant shall provide design options and estimated budget for structural systems and base isolation systems for the PSB. The City’s decision regarding base isolation or relative structural hardening of the building will be finalized at 100% Preliminary Design. 9. Green Building Design Workshop. Consultant shall lead an “all hands” Green Building design workshop identifying strategies to achieve LEED Silver or higher Professional Services Rev. September 21, 2016 23 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 certification and meet the City’s Green Building Policies and energy conservation initiatives. 10. Public Safety Building Conceptual Design. Consultant shall prepare design concept and space plan drawings refining and depicting the PSB. These drawings will be used as the basis of the CEQA review process. The preliminary PSB design concept drawings will also be used in preliminary presentation meetings including those with all Project stakeholders, initial community outreach meetings and California Avenue Merchant Association meetings. 11. Public Safety Building Conceptual Design ROM Cost Estimate. Consultant shall prepare rough order of magnitude (“ROM”) construction cost estimate for the Project prior to proceeding with the Schematic Design phase. This will allow the City early on to update or adjust the scope if needed to better align with the budget. 12. Parking Structure Conceptual Design. Consultant shall prepare design concept and space plan drawings refining and depicting the Parking Structure. Two additional parking structure concepts will also be prepared for review by city staff, ARB and the City Council prior to proceeding to Schematic Design Phase for the Parking Structure. At a minimum, these additional Parking Structure concepts must indicate how additional parking beyond 460 stalls might be achieved and demonstrate the building massing impacts and proposed floor plan layouts, code exceptions needed, and other elements to assist in the final Council approval of the Parking Structure design concept. The preliminary garage design concept drawings shall include a minimum of 460 parking spaces and integrate commercial spaces along Birch Street. The concept drawings will be used in preliminary presentation meetings including those with all Project stakeholders, initial community outreach meetings and California Avenue Merchant Association meetings. The preliminary design concept drawings will also be used as the basis of the CEQA review process. 13. Parking Structure Conceptual Design ROM Cost Estimate. Consultant shall provide a ROM construction cost estimate for the Parking Structure prior to proceeding with the Schematic Design phase. 14. Planning Commission & ARB Study Sessions. The design of the PSB and the Parking Structure will be coordinated and related. The Consultant shall attend study sessions with the Planning Commission and ARB to discuss the preliminary design concepts and receive input. Design modifications if requested will be made per direction of the Planning Commission and ARB. 15. Public Arts Commission. Consultant will meet with the Palo Alto Public Art Commission to discuss the Project and coordinate public art concepts. Professional Services Rev. September 21, 2016 24 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 16. City Council Meeting. Consultant will attend the City Council meeting and present the preliminary design concept for the PSB and Parking Structure. Design modifications if requested will be made per direction of the City Council. C. Schematic Design Phase. This phase involves the Consultant working with the City to refine the conceptual design and space plans developed and approved during the Preliminary Design Phase. 1. Schematic Design Documents. Upon receipt of a Letter of Authorization issued by the City, the Consultant shall proceed with the Schematic Design Phase. The Consultant will develop schematic design drawings and documents based on Project concepts developed during the Preliminary Design Phase. The schematic design documents developed during this phase should include preliminary drawings showing the Project’s basic components, scale and location. The schematic design documents must include, to the extent applicable: conceptual plans of the sites and improvements; preliminary sections and elevations; approximate areas, volumes, and dimensions; and preliminary selections of materials and systems. The Schematic Design Package must be completed at the end of the Schematic Design Phase and will be used for City sign offs and general cost estimating purposes. 2. Specific Elements. The schematic designs for the Project shall include the following specific elements: 2.1 Emergency service routes, including possible tunnel connecting the Public Safety Building basement with the basement level of the parking structure or the addition of a second exit ramp on the Public Safety Building site to provide the required secondary exit from the Public Safety Building basement; 2.2 Employee and visitor parking; 2.3 Public and disabled persons access; 2.4 Temporary facilities and construction logistics; and 2.5 Address building separation concerns. 3. Deliverables. Consultant shall prepare for City’s approval a Schematic Design Package that includes: 3.1 Plans in partial 3-D modeled format, suitable for serving as base drawings for design development; 3.2 Site plans and floor plans; Professional Services Rev. September 21, 2016 25 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 3.3 Exterior elevations as applicable; 3.4 Schematic building and site sections; 3.5 Outline specifications; 3.6 Code Analysis 3.7 Updated compliance with Green Building Requirements, consistent with the outline specifications; 3.8 Updated cost estimates; and 3.9 Updated Project schedule 3.10 LEED Registration of Project D. Design Development Phase. This phase involves further refinement of the Schematic Design Package developed in the preceding phase. Design Development Services shall be documented in 3D Building Information Model (“BIM”) Revit format serving as base drawings for Construction Documents. 1. Design Development Documents. When directed by the City following approval of the Schematic Design Package, Consultant shall begin the Design Development phase, which includes developing design documents that further define the Project, including drawings and outline specifications fixing and describing the size, character and site relationships of major Project components. Consultant must coordinate with sub-consultants as needed to develop designs for all building systems, including civil, structural, mechanical, plumbing (including sanitary sewer connections), electrical, lighting, fire protection, security, emergency communications, telecom, audio visual, acoustics, and all site improvements and landscaping. Structural analysis completed in the schematic design phase shall be further developed, including base isolation as an option for seismic survivability of this essential services building. Site improvements and landscaping must anticipate full compliance with C.3 storm water treatment regulations. 2. Coordination. Consultant shall coordinate and meet with the Project Manager and key City staff people, as needed, for preparation of the Design Development Documents, including Public Works Engineering, Fire, Office of Emergency Services, Police, and Information Technology. 3. Phased Review. Consultant shall submit the Design Development documents for preliminary City review at 50% completion. Consultant must then refine the Design Development documents based on City’s comments and further direction. Professional Services Rev. September 21, 2016 26 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 4. Green Building Design. Consultant shall verify and develop Green Building Design strategies from the Green Building Design Workshop. Consultant shall complete the “Basis of Design” (BOD) report in the Design Development phase to achieve LEED Silver or higher certification and meet the City’s Green Building Policies and energy conservation initiatives. 5. Deliverables. Consultant’s submissions during Design Development include the following: 5.1 Preliminary Design Development Package (50%), including a top level drawing package provided with plans and written systems descriptions to outline the final drawing package. The outline specifications should be complete and include a comprehensive description, both in written and plan drawing form, for the structural, mechanical and electrical designs. 5.2 Completed Design Development Package (100%), incorporating the City’s comments and directions following review of the 50% documents must be submitted for final review. The completed Design Development package shall include but not limited to: a. Plans in Revit modeled format; b. Site plans and floor plans for all major disciplines, including site demolition plans; c. Interior and exterior elevations; Including showing preliminary control locations; d. Exterior wall sections; e. Equipment schedules for all major disciplines; Including single-line diagrams; f. Preliminary furniture layout; g. Proposed finishes; h. Specifications; i. Preliminary signage design and layout; j. Updated documentation for Green Building Requirements; k. Documentation showing the status of electronic submittals to United States Green Building Council (“USGBC”), if applicable under the Green Building Requirements, including Basis of Design report; l. Updated cost estimates, including value engineering, if necessary; Professional Services Rev. September 21, 2016 27 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 m. Updated Project schedule; n. Design of specialty systems; o. Design of security systems; p. Acoustical analysis report; and q. Parking structure guidance system and wayfinding. E. Permit Set and Construction Documents. This design phase will refine the City- approved Design Development package into final Project plans and specifications for permit issuance, and for bidding. 1. Final Design Documents. Consultant shall provide completed Project drawings and technical specifications to staff for review and approval at the final design completion stage and for final review and sign off at the bid set design stage. The final plans and specifications must be suitable for construction, including structural, M/E/P systems (including new sanitary sewer), electrical, site improvements, landscaping, storm drains, and finishes. Final drawings shall be suitable for review by the Building Inspection Division and for sign off by the City. The Construction Documents Package must include drawings and technical specifications from all disciplines, executed to a level of detail for open public bidding. They shall include overlays of equipment systems, including specialty systems and furniture layout. 2. Development and Review Stages. The final permit and construction documents will be developed and reviewed in three stages, as follows. At each stage Consultant must incorporate directions from the City provided at the conclusion of the preceding stage, and must update the estimated cost of construction. 2.1 Consultant shall prepare and submit a 60% complete Construction Documents Package to the City based on comments received from the City’s review of the 100% Design Development submittal. 2.2 Consultant shall prepare and submit a 95% complete Construction Documents Package to the City based on comments received from the City’s review of the 60% Construction Documents submittal. The Building Department plan check set shall be considered the 95% Construction Documents and shall be provided to the City for review and comment during the permitting process. 2.3 Final 100% complete Construction Documents shall be prepared based on feedback provided at the 95% review and the permit review. These 100% documents will be used as the Construction Documents to be issued for bid Professional Services Rev. September 21, 2016 28 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 to procure the construction contract(s). All exhibits, drawings, reports, data, renderings, elevations, and other materials required to support applications for regulatory entitlements, permits, and approvals should be completed and submitted. 3. Permit Process. Consultant shall assist Project Manager to obtain a building permit by furnishing all the necessary drawings and calculations and working with the Planning Department, Building Inspection Division, and Fire Marshal as required. Consultant will be responsible for all services, exhibits and applications required to obtain all necessary permits or approvals known at the time the services are rendered. Consultant will be responsible for obtaining all necessary design stage permits and approvals. City will pay permit and application fees. Anticipated permits include, but are not limited to the City Building Department, California Regional Water Quality Control Board, Santa Clara Valley Water District, City Utilities, and City Fire Department. 4. Deliverables. Consultant shall submit three (3) sets of plan check drawings and specifications during Construction Documents Phase. Upon completion of the final design the Consultant will submit two (2) hard copies of specifications and calculations, one (1) copy of the electronic version (using Microsoft Word format) of the specifications on a compact disk or flash drive, three (3) sets of drawings for stakeholders use, complete set of drawing on compact disk or flash drive in PDF and AutoCAD formats, and three (3) wet stamped drawings to the City Building Department. Specifications will include the front end template provided by the City. Only applicable information shall be included in the Specifications. 4.1 Updated documents for the Green Building Requirements must be included. 4.2 Documentation showing the status of electronic submittals to USGBC, if applicable. 4.3 FF&E bid documents which will be issued as a separate procurement(s). 4.4 Separate signage bid documents package F. Project Bidding and Award. Consultant will participate in the general contractor procurement process which, for the Public Safety Building and potentially for the Parking Structure as well, will be a design-bid-build delivery model with a pre- qualification component. Consultant shall assist the City during the bid solicitation process. Consultant shall provide bid phase services, as requested by the City, through award of the construction contract(s). Services include assistance in response to bidders’ inquiries, preparation of addenda, and attendance at pre-qualification and pre- bid meeting. G. Construction Administration and Project Closeout. Consultant must provide construction administration phase services commencing from the award of the Professional Services Rev. September 21, 2016 29 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 construction contract for each structure. Construction administration services include, but are not limited to, the following. 1. Identify and list the submittals to be made by the general contractor and its subcontractors and provide review and assistance to the general contractor as needed. 2. Review and approve all submittals including submittal from subcontractors within (12) calendar days. 3. Promptly respond to requests for information (“RFIs”) within (7) calendar days, clarify plans and specifications, and maintain an RFI log. 4. Issue ASIs within (7) calendar days if ASIs are needed. 5. Review/respond to change orders within (7) calendar days of receipt. 6. Attend weekly Project meetings and be available on site for a minimum of two days per week for the PSB and one day per week for the Parking Structure. 7. Maintain updated LEED documentation for Green Building Requirements and monitor the status of electronic submittals to USGBC. 8. Issue monthly field observation reports documenting the progress of work. 9. Punch list inspection and re-inspection, as needed 10. Provide post occupancy inspections, warranty support, and correction of defects administration. 11. Attend all pre-construction meetings and weekly construction meetings. 12. Record Drawings. Upon completion of the Project, and after acceptance by the City, the Consultant shall submit to the City one (1) complete set of record drawings reflecting all as-built conditions as prepared and provided by the general contractor. A complete set of record drawings shall also be submitted to the Project Manager in AutoCAD and PDF electronic formats. IV. ENVIRONMENTAL CONSULTING SERVICES A. General Provisions. This Part IV of the Scope of Services includes the requirements for delivery of Environmental Services for the Project. In general, this includes conducting and coordinating complete environmental review the Project in compliance with CEQA, preparation of the required environmental review documents – most likely an Environmental Impact Report (“EIR”) – and participating in meetings and public hearings. This scope of services assumes that an EIR will be required for the Project. If it is later determined that an EIR is not required, this scope of services will be modified accordingly, e.g., to include preparation of a mitigated negative declaration. Professional Services Rev. September 21, 2016 30 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 The Environmental Services includes all components required to initiate and complete full environmental review and preparation of an EIR for the Project including the Notice of Preparation (“NOP”), scoping meeting, staff meetings, performing all the necessary impact analysis for the EIR, including a climate change analysis, providing draft and final documents, responses to comments, mitigation monitoring report, attending public hearings including ARB approval. Formal approval by the ARB will be required prior to the final Certification of the EIR. Based on a preliminary review, the anticipated significant impacts for this Project are related to parking, traffic, and aesthetics. Critical analysis of parking and circulation is needed in additional to other environmental impact studies. The Project site is located in a commercial setting with newly constructed housing nearby which requires a sensitive design approach for compatibility. The aesthetic quality of the proposed structures and exterior improvements is a critical component of the Project. The EIR shall be comprehensive yet easily understood. It will clearly explain CEQA findings to the general public, City staff, agencies, and decision makers. The EIR will make the direct and subtle connections between planning, design, and environmental effects, regulations, and mitigations. 1. Agency Coordination. The Consultant must meet and confer with all other appropriate local, regional, state and federal agencies as necessary to identify and address concerns and comments. This includes all coordination with the California State Office of Planning and Research regarding all notices and information related to the CEQA EIR process. 2. Coordination. The Consultant will be required to work with and coordinate CEQA efforts with other firms that are under separate contracts with the City, including, but not limited to, the transportation impact (including parking), hazardous materials, surveyor, geotechnical, and arborist consultants and to coordinate with the City and other parties as needed to minimize adverse impacts during construction, including vehicular, bicycle and pedestrian traffic and access, and impacts to normal residential and commercial uses in the surrounding areas. The City reserves the right to enter into separate contracts with other firms or contractors supplying specialized services, use qualified City staff to provide services, or direct the integration of qualified additional sub- consultants into the Services. 3. Outreach & Meetings. The Consultant must prepare materials as necessary, facilitate as necessary and attend community workshops, meetings and public hearings. This includes preparation of notices and displays, and responding to comments. The Consultant shall plan and budget for sufficient meetings with City staff to accomplish all tasks with full consultation and review, including a minimum of (7) meetings with staff. In addition to the public scoping session, the Consultant should budget for (4) presentations at public meetings (two for the Planning and Transportation Commission and two for the City Council). The Consultant should closely coordinate with the sub-consultants as needed for these meetings. B. Initial Study. Consultant must conduct preliminary analysis of the proposed Project and Project site and conduct an initial study in compliance with the CEQA Guidelines Professional Services Rev. September 21, 2016 31 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 (14 CCR §15000, et seq.). Consultant will prepare a draft initial study and City staff will determine the need for any revisions to the draft initial study. Development of the initial study scope of work is described in the following Section D. Detailed CEQA Scope of Services, Task 4. C. Environmental Topics. The following environmental topics will be evaluated, each in its own EIR chapter. Consistent with the explanation above, the environmental evaluation will describe (1) impacts that can be avoided or reduced to a less-than- significant level through implementation of uniformly applicable development policies, standards, or regulations (“standard regulations”); and (2) impacts that require project- specific mitigation. 1. Aesthetics (project-specific mitigation based on Architectural Review Board conclusions). Consultant will evaluate the proposed Project for conformance with City of Palo Alto adopted design standards and guidelines. The conclusions of the ARB, and any subsequent design refinements, will be described. Consultant will evaluate the Project plans, including before-and-after visual simulations, to determine whether the Project would obstruct views of scenic resources, degrade the visual environment, or create a new source of light and glare. 2. Air Quality (project-specific mitigation based on BAAQMD CEQA Guidelines). The air quality analysis will evaluate whether Project construction and operation would have the potential to result in significant air quality impacts. The analysis will evaluate the Project’s consistency with the Bay Area Air Quality Management District’s (BAAQMD’s) 2010 Clean Air Plan and the significance of the amount of pollutants that would be generated by Project construction and operation. The proposed PSB’s gross building square footage is below the BAAQMD construction screening size criteria for a government civic center land use (277,000 square feet). However, if the Project involves extensive material transport (more than 10,000 cubic yards) associated with building demolition and potential grading, a detailed construction emissions assessment will be required. In addition, Project construction emissions may generate pollutant concentrations at residential receptors located in close proximity (within 500 feet) of the Project work areas. The construction emissions assessment would use methodologies recommended by or consistent with the most recent guidelines available from the BAAQMD (2011), and would include: a) Use of the California Emissions Estimator Model (CalEEMod) to quantify the mass amount of pollutants, including fugitive dust, produced by Project construction. Depending on the amount of pollutants that could be emitted by the Project, the California Air Resources Board’s (CARB’s) latest EMFAC and OFFROAD models may be used to refine CalEEMod emissions estimates. These CARB models contain more detailed information on the type, operating modes, and emissions associated with on-road and off-road vehicles and equipment. b) Use of the American Meteorological Society’s / U.S. EPA’s Regulatory Model (AERMOD) to quantify pollutant dispersion and resulting pollutant concentrations Professional Services Rev. September 21, 2016 32 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 at sensitive receptor locations. Modeled pollutant concentrations will be used to calculate carcinogenic and non-carcinogenic health risks from Project emissions. 3. Biological Resources (standard regulations based on City tree preservation regulations). The findings of the Tree Survey Report (David L. Babby, March 17, 2016) will be summarized and applicable tree preservation/replacement regulations explained. 4. Cultural Resources (mitigation based on CEQA Guidelines section 15064.5). Potential cultural resource (archaeological and paleontological) impacts and mitigations will be described, based on CEQA Guidelines section 15064.5 (Determining the Significance of Impacts to Archaeological and Historical Resources). 5. Energy Conservation (standard regulations). This EIR chapter will be prepared pursuant to the 2014 court decision in California Clean Energy Committee v. City of Woodland. The analysis will describe existing energy supplies, regional patterns of energy use, and Project energy requirements. In accordance with CEQA section 21100(b)(3) and Guidelines Appendix F (Energy Conservation), the analysis will discuss the potential energy impacts of the proposed Project, with emphasis on avoiding or reducing inefficient, wasteful, and unnecessary consumption of energy. 6. Geology and Soils (project-specific mitigation based on geotechnical report). Consultant will base analysis of geology and soils on the geotechnical report prepared by Romig Engineers, Inc. (May 2016). Based on this report, the primary geotechnical concerns for the proposed Project are: (1) the need for temporary shoring of the basement excavations; (2) the likelihood that ground water will be present above the depth of the basement excavations, requiring dewatering; (3) the need to design and waterproof the floors and walls of the basement and access tunnel; and (4) the likelihood of severe ground shaking during a major earthquake. The Romig report’s site-specific mitigation recommendations will be described. 7. Greenhouse Gas Emissions (standard regulations based on BAAQMD CEQA Guidelines and City Policy). The climate change analysis will describe the existing regional and local greenhouse gas conditions; documented, potential climate- induced changes in the Project vicinity; and the GHG regulations applicable to the Project, including the Palo Alto General Plan, Sustainability and Climate Action Plan, and other City policies intended to reduce the Project’s GHG emissions and impacts related to climate change, including sea level rise. 8. Greenhouse Gas Assessment. The proposed PSB’s gross building square footage is above BAAQMD operational screening size criteria for a government civic center (27,000 square feet) and therefore requires a detailed GHG assessment. This assessment will quantify the net increase in GHG emissions that would result from the Project (i.e., the incremental increase in emissions above that generated without the Project). Existing and Project GHG emissions will be estimated using CalEEMod and utility usage data provided by the City. The Project’s GHG emissions will be Professional Services Rev. September 21, 2016 33 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 evaluated for consistency with the goals of the City’s Sustainability and Climate Action Plan, and other regulations adopted for the purposes of reducing GHGs. 9. Hazards and Hazardous Materials (project-specific mitigation based on Phase I ESA and subsequent investigations). Consultant will base its initial analysis of hazardous materials on the Phase I Environmental Site Assessment (ESA) prepared by Northgate Environmental Management, Inc. (April 22, 2016). Based on the report, groundwater contamination associated with a Superfund plume, and also potentially with a nearby former gas station, may have migrated beneath the Project site. Although the plume and the gas station site are being remediated, volatile organic compounds (VOCs) present in the groundwater could potentially impact future construction of the underground parking structures, and could potentially impact indoor air quality in the buildings. The ESA recommends on-site investigations related to groundwater quality and vapor intrusion, and subsequent preparation of Site Management Plans. This EIR scope assumes that the necessary work to complete the hazardous materials investigations will be completed by a firm under separate contract to the City; Consultant will integrate this subsequent work into the EIR. 10. Hydrology and Water Quality (standard regulations). The EIR will describe the standard City and agency regulations for ensuring that: (1) the Project is protected from flooding and (2) the Project does not result in water quality impacts during construction and operation (including NPDES and C3 requirements). According to the FEMA Flood Insurance Rate Map (Effective Date May 18, 2009), the Project site is located in Other Flood Areas/ Zone X, which means there is a 1% annual probability of a flood creating an average water depth of 1 foot. Also, Project development could adversely affect water quality by increasing both soil erosion and the overall discharge of urban pollutants into local surface waters. Water quality will be examined for both construction and operation, emphasizing the erosion and sedimentation control regulations of the National Pollution Discharge Elimination System (NPDES), as administered by the Regional Water Quality Control Board and implemented by the City of Palo Alto under its Phase II NPDES Storm Water Management Plan. 11. Land Use and Planning (project-specific mitigation). The proposed Project will be evaluated for its conformance with City of Palo Alto zoning regulations and General Plan policies. For example, the proposed PSB design will not require variances from zoning regulations, but variances will be required for the parking structure options (Site Evaluation Study, December 14, 2015). 12. Noise (project-specific mitigation). This assessment will describe the existing noise and vibration environment in the Project vicinity and applicable City of Palo Alto noise regulations, including General Plan policies related to noise. Consultant will conduct short- (hourly) and long-term (24-hour) noise monitoring at up to two noise monitoring locations to adequately describe the existing noise environment in the Project vicinity and evaluate Project compatibility with existing noise levels. Given the proposed construction activities and the land uses surrounding the Project Professional Services Rev. September 21, 2016 34 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 site, it is expected that demolition and building construction activities could result in a temporary and periodic increase in noise levels above ambient conditions (noise generation). The EIR will identify typical construction equipment sound levels, quantify peak and typical construction activity noise levels, and, if necessary, identify best management practices or mitigation measures consistent with those contained in City plans, policies, and regulations (e.g., restricted work hours) which would reduce the magnitude of potential construction noise impacts to a less-than- significant level. 13. Noise Generation. The Project does not involve the construction of a new, noise- sensitive land use (noise exposure) and is not expected to result in significant operational noise generation impacts. 14. Public Services (standard regulations). The Project will improve the operations of the City of Palo Alto Police Department, 911 Emergency Dispatch Center, Emergency Operations Center, Office of Emergency Services, Fire Department Administration, and other related services. The EIR will describe how standard design, safety, and building requirements of the police and fire departments are incorporated into the Project design. Also, construction impacts will be described, along with standard City regulations that minimize those impacts (e.g., construction traffic plan) and mitigations already included in other EIR chapters (e.g., construction air quality and noise). 15. Transportation, Traffic, and Parking (project-specific mitigation). Under separate contract with the City, Fehr & Peers will prepare a transportation impact (TIA, including parking) for the Project, based on the City of Palo Alto’s and Santa Clara Valley Transportation Authority’s (VTA’s) requirements, as well as Fehr & Peers’ knowledge of the study area (Fehr & Peers, August 23, 2016). Consultant will incorporate the TIA, including its impact analysis and mitigation measures, into the EIR to meet CEQA requirements. 16. Utilities and Service Systems (standard regulations). In consultation with City staff, Consultant will evaluate potential impacts on water supply, wastewater generation, storm water drainage, solid waste/recycling, and associated infrastructure. Potential impacts are expected to be less than significant, based on standard City requirements for maintaining adequate utility service and infrastructure. The following CEQA topics likely will have less-than-significant impacts when Consultant prepares the Initial Study, and will not be further evaluated in the EIR unless otherwise required: i. Agricultural and Forest Resources. There is no Prime Farmland, Unique Farmland or Farmland of Statewide Importance, lands under Williamson Act contracts, or lands zoned for agriculture or forest land within the vicinity of the Project site. Professional Services Rev. September 21, 2016 35 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 ii. Minerals. There are no mineral deposits or gravel mining areas on the Project site. iii. Population and Housing. The Project site consists of two City-owned public parking lots. There is no housing on the site; the Project would not displace any existing housing or people. D. Detailed CEQA Scope of Services. The specific tasks needed to complete the EIR for the proposed Public Safety Building and Parking Structure are described below. 1. TASK 1: KICK-OFF MEETING/SITE TOUR An initial meeting will be held with City staff to discuss and refine the EIR approach, work scope, data needs (including for the Initial Study/EIR Project description), cumulative analysis approach, and Project alternatives approach. The team will discuss any preferences the City may have regarding EIR format, organization, and presentation. The Consultant will visit the Project site and its surroundings to verify relevant environmental conditions. 2. TASK 2: SCHEDULE FOR THE PREPARATION OF THE EIR Based on the kick-off meeting and the RFP Draft Estimated Project Timeline, Consultant will prepare a refined EIR schedule coordinated with the Project design schedule. The EIR schedule, including any subsequent changes, will require approval from the City. Deliverable: Annotated EIR Project schedule graphic. 3. TASK 3: DATA COLLECTION AND REVIEW OF EXISTING INFORMATION The EIR analysis will rely on existing data whenever possible. Available relevant data will be assembled based on (1) technical studies prepared by firms under separate contracts with the City, (2) the City’s latest planning and regulatory documents, (3) information on any other pending development applications and “pipeline” projects in the vicinity, and (4) any applicable, recent CEQA documents. Consultant will review all technical studies for CEQA adequacy, and will notify the City if there are gaps or deficiencies. Should this occur, the City’s other consultants will make the appropriate revisions or conduct additional studies. For one example, the ESA prepared for the project (Northgate Environmental Management, Inc., April 22, 2016) recommends on-site investigations related to groundwater quality and vapor intrusion, and subsequent preparation of Site Management Plans. Deliverable: Memo with follow-up questions and an annotated list of additional data needs to complete the EIR. 4. TASK 4: INITIAL STUDY AND NOTICE OF PREPARATION To verify which topics are to be included in the EIR (see discussion of “Environmental Topics Covered in the EIR,” above), Consultant will complete an Initial Study (IS) checklist and narrative, as recommended by CEQA Guidelines Professional Services Rev. September 21, 2016 36 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 section 15082, to solicit public and interested agency input on the proper scope of the EIR. The IS checklist format will follow the latest version of CEQA Guidelines Appendix G (Environmental Checklist Form). Consultant assumes the City will submit a single set of consolidated comments on the draft IS. Consultant will prepare a draft Notice of Preparation (NOP) for City staff review and will edit the NOP based on City comments to create a final public release NOP/IS. The IS will be attached to the NOP for public and agency distribution. Consultant will collaborate with the City on preparing its mailing list for the NOP/IS; Consultant will review the City’s standard CEQA mailing list and, if necessary, suggest additional recipients (e.g., State and responsible agencies). It is assumed that the City will distribute the NOP/IS to those on the mailing list. Consultant will overnight the NOP/IS to the State Clearinghouse (State Office of Planning and Research), beginning the 30-day NOP/IS response period. Consultant will follow- up with OPR to ensure that the NOP/IS was received, released, and posted on the State Clearinghouse website. Deliverable: Electronic Word and PDF versions of draft and final NOP/IS. Also, Consultant will print (15) copies and overnight them to the State Clearinghouse. 5. TASK 5: PUBLIC SCOPING MEETINGS Consultant will participate in a public scoping meetings to solicit feedback on the Project, its potential impacts, and possible mitigation measures. At the scoping meeting, CEQA lead will provide an overview (e.g., PowerPoint) of the CEQA process, the purpose of the EIR and its general content, the Initial Study, and opportunities for public input. CEQA lead will be available to answer questions regarding these issues, without speculating on the future findings of the EIR analysis. Consultant shall assume the City will schedule the meeting and provide the venue. Deliverable: PowerPoint presentation; notes from the public scoping meeting summarizing the comments and their relevance to the EIR analysis. Note: Under each appropriate task, this EIR scope describes the number of meetings that, in Consultant’s CEQA experience, accomplishes the task. Should more meetings be required or requested by the City, please see Task 14 (Additional Meetings) below. This Task 5 includes one scoping meeting, and additional meetings can be budgeted from Task 15. 6. TASK 6: MITIGATION MEASURES. Based on the overall Project impact, a series of mitigation measures will be developed by Consultant working closely with staff. Both physical improvements and policy considerations will be included as mitigation measures. This task shall also include evaluation of the goals and objectives of the Comprehensive Plan to determine consistency with mitigation measures. Deliverable: All necessary reports required to complete and support the EIR Professional Services Rev. September 21, 2016 37 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 process. 7. TASK 7: PREPARE DESCRIPTION OF PROJECT ALTERNATIVES In collaboration with City staff and the design team, Consultant will prepare the EIR project description plus descriptions of the EIR project alternatives. It is vital to note that CEQA Guidelines section 15126.6 (Consideration and Discussion of Alternatives to the Proposed Project) defines “project alternatives” as those “which would feasibly attain most of the basic objectives of the project, but would avoid or substantially lessen any of the significant effects of the project.” Therefore, any EIR program and design alternatives must avoid or reduce im- pacts compared to the proposed (“preferred”) project evaluated in the EIR. For this reason, the preferred project should be the “worst-case” option relevant to environmental impacts. If desired, the City then can approve one of the project alternatives without requiring additional CEQA analysis. However, if during the EIR process, an alternative with potentially greater impacts is chosen as the preferred project, the EIR analysis will need to be re-examined and the schedule adjusted accordingly. Consultant will consult with City staff regarding the discretionary approvals that will be needed for the Project. Council has requested that the staff investigate the alternative of a larger garage with additional spaces. As part of this process Consultant, coordinating with the sub-consultants as needed, will be required to investigate this concept and present to Council for action. Once action is given, Consultant can then move forward with the finalization of the concept plan and the draft EIR. Deliverable: Project descriptions for the proposed (“preferred”) project and for each EIR alternative, in accordance with CEQA Guidelines section 15126.6, required to complete and support the EIR process. 8. TASK 8: PREPARE ADMINISTRATIVE DRAFT EIR Consultant will prepare all required EIR sections, including: • Introduction • Summary • Project Description • Environmental Topical Sections (see discussion of “Environmental Covered in the EIR,” above) • Project Consistency with Local and Regional Plans • Cumulative Impacts • Growth-Inducing Effects • Significant Unavoidable Impacts • Irreversible Environmental Changes • Effects Found Not to be Significant • Alternatives to the Proposed Project • Mitigation Monitoring • Agencies, Organizations, and Persons Contacted Topics Professional Services Rev. September 21, 2016 38 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 Consultant will prepare a project description in accordance with CEQA Guidelines section 15124. The project description will consist of text and explanatory graphics and maps, which describe the Project in sufficient detail to allow for meaningful and useful analysis of impacts and mitigation measures. Consultant will prepare a Mitigation Monitoring and Reporting Plan (“MMRP”), pursuant to AB 3180, that defines how, when and by whom mitigation measures are to be implemented. For each topical section, Consultant will describe the existing environmental and regulatory settings in written and graphic form. Project impacts and mitigation measures warranted to avoid or reduce significant impacts will be identified. As described above in “Environmental Topics Covered in the EIR,” the EIR will evaluate the following environmental issues in detail: • Aesthetics • Air Quality • Biological Resources • Cultural Resources • Energy Conservation • Geology and Soils • Greenhouse Gas Emissions • Hazards and Hazardous Materials • Hydrology and Water Quality • Land Use and Planning • Noise • Public Services • Transportation, Traffic, and Parking • Utilities and Service Systems Based on our review of available information and technical reports, Consultant believes that the Project would result in less-than-significant impacts, with no standard regulations or project-specific mitigation required, for the other environmental issues included in CEQA Guidelines Appendix G (agriculture and forestry resources, mineral resources, population and housing, airport land use safety, parks and recreation, scenic highways, and wetlands). These envi- ronmental issues will not be discussed in detail in the EIR, but will be listed in EIR section “Effects Found Not to be Significant,” with reference to the Initial Study in the EIR appendix. OTHER REQUIRED CEQA DISCLOSURES Consultant will summarize the EIR findings in terms of the assessment categories required by CEQA Guidelines section 15126.2, which include project- related “consistency with local and regional plans,” “cumulative impacts,” “growth-inducing effects,” “significant unavoidable impacts,” “irreversible environmental changes,” and “effects found not to be significant.” For the first two categories (plans, cumulative), the EIR will have separate chapters. For the Professional Services Rev. September 21, 2016 39 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 remaining four categories, almost all of the information will already be included in other EIR chapters; to show a direct connection to the CEQA terms, one EIR chapter will summarize the findings according to these categories. Meetings: Minimum three (3) in-person meetings are included in this task, which Consultant considers more than adequate to coordinate the Administrative Draft EIR process with City staff and the design team. In order to maintain the City’s proposed schedule, team discussions concerning EIR data needs, methodology, and potential impacts and mitigation measures must be accomplished efficiently and effectively up front, during Tasks 1 through 4, so that Consultant can concentrate on the work at hand. In addition, conference calls throughout the EIR process are already expected as part of the work scope. Should more meetings be required or requested by the City, please see Task 15 (Additional Meetings) below. Deliverable: Fifteen (15) copies of the ADEIR and one (1) CD with Microsoft Word and 1 CD with Adobe (pdf) version. 9. TASK 9: PREPARE SCREENCHECK DRAFT EIR Consultant assumes the City will provide one consolidated, internally consistent set of staff comments on the Administrative Draft EIR. Consultant will prepare a “Screencheck” version of the Draft EIR for City staff approval prior to publication of the Draft EIR for public release. Deliverable: One (1) electronic version in Word and one (1) electronic version in Adobe PDF of the Screencheck Draft EIR. 10. TASK 10: PREPARE PUBLISHED DRAFT EIR Consultant will prepare a Draft EIR, incorporating any revisions and refinements to the Screencheck Draft EIR in response to City staff comments. Consultant will also prepare the Notice of Completion/Availability (NOC/NOA) in Word for use by the City. Consultant will overnight the NOC/NOA to the State Clearinghouse (State Office of Planning and Research), beginning the 45-day Draft EIR response period. Consultant will follow-up with OPR to ensure that the NOC/NOA was received, released, and posted on the State Clearinghouse website. Deliverable: Sixty-five (65) printed and bound copies of the Draft EIR (including appendices, unless the City would prefer the appendices on separate CD disks) - 50 to the City for public distribution and 15 for Consultant to overnight to the State Clearinghouse; two (2) unbound copies; one (1) electronic version in Word; and one (1) electronic PDF version for City posting on its website. One (1) electronic version of the NOC/NOA in Word. City responsibility: Noticing. 11. TASK 11: PUBLIC REVIEW AND HEARING The City will provide for a 45-day noticing period during which the public will have Professional Services Rev. September 21, 2016 40 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 an opportunity to review and comment on the DEIR. Consultant will attend one Planning and Transportation Commission hearing to answer questions on the Draft EIR from the public and the Commission. CEQA lead, will provide an overview (e.g., PowerPoint) of the Draft EIR process and findings. Should more meetings be required or requested by the City, please see Task 14 (Attend Certification Hearings) and Task 15 (Additional Meetings), below. Key sub- consultants may also need to attend the meetings. Deliverable: PowerPoint presentation. Meetings: Attend a Planning and Transportation Commission hearing on the draft EIR. City responsibility: Noticing and conducting hearings, attending neighborhood meetings 12. TASK 12: PREPARE ADMINISTRATIVE FINAL EIR (RESPONSES TO COMMENTS AND DRAFT MMRP) Following public review of the Draft EIR, Consultant will respond to substantive comments on the Draft EIR and prepare an Administrative Final EIR. Consultant, in collaboration with City staff, will prepare responses to substantive comments received from the public, responsible or other agencies, and other interested parties during the review period for the Draft EIR. The Administrative Final EIR will be prepared as an attachment to the Draft EIR. It will include a list of persons and agencies that commented on the Draft EIR; a summary of comments received on the Draft EIR; a collection of verbatim comments received on the Draft EIR (letters, memos, e-mails, minutes, etc.); written responses to each substantive environmental comment; and any revisions to the Draft EIR text or graphics necessary to adequately respond to the comments received. Consultant will produce a draft Mitigation Monitoring and Reporting Plan (MMRP) consistent with CEQA section 21081.6 and will submit it to the City for review and approval. Consultant will work with City staff and legal counsel to prepare draft versions of the Findings of Fact and, if necessary, the Statement of Overriding Considerations. This task includes one meeting with City staff to discuss the appropriate level of response to comments and the format for the Final EIR. Consultant will prepare a Screencheck version of the Final EIR for City staff approval before reproduction of the Final EIR for public release. Deliverable: Twenty-five (25) printed and bound copies of the Administrative Final EIR and draft MMRP, two (2) unbound copies, one (1) electronic version in Word, and one (1) electronic version in Adobe PDF. For the Screencheck Final EIR, one (1) electronic version in Word and one (1) electronic version in Adobe PDF. Professional Services Rev. September 21, 2016 41 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 Meeting/City Involvement: Collect and forward comments to Consultant, meet to discuss appropriate level of response to comments and format for preparing the Final EIR. 13. TASK 13: PREPARE PUBLISHED FINAL EIR AND MMRP Consultant will prepare a Final EIR incorporating revisions and refinements based upon City staff responses to the Administrative Final EIR. Consultant’s fee assumes that no more than 60 hours of environmental sub-consultant professional planning staff time will be required for responses to comments and preparation of the Final EIR. Consultant will also produce the final Mitigation Monitoring and Reporting Plan (MMRP). The revised documents will be submitted to the City for certification by the City Council. Response to comments, resulting changes to DEIR, MMRP, Statement of Overriding Consideration, if necessary, Findings of Fact and prepare Final EIR (FEIR) and Notice of Determination. The FEIR shall include the reprinted DEIR with text changes. Consultant will prepare the Notice of Determination (NOD) and will forward it to the State Clearinghouse. Concurrently, City staff will post the NOD with the County Clerk within five days of Project approval. Deliverable: Fifty (50) printed and bound copies of the Final EIR and MMRP, two (2) unbound copies, one (1) electronic version in Word, and one (1) electronic version in Adobe PDF. For the NOD, one (1) electronic version in Word. Note: For more resourceful and less costly production, the deliverables include printing the Final EIR as a separate attachment to the Draft EIR. Any revised pages to the Draft EIR will show track changes and will be coordinated and printed with the responses to comments, in a separate Final EIR document. The deliverables do not assume reprinting the entire Draft EIR. 14. TASK 14: ATTEND CERTIFICATION HEARINGS In addition to the seven (7) meetings included in previous tasks (Tasks 1, 5, 6, 7, 10, and 11), Consultant will attend four (4) certification hearings with the Planning and Transportation Commission and/ or City Council to assist City staff in presenting the Final EIR and responding to questions. Consultant CEQA lead, will provide an overview (e.g., PowerPoint) of the Final EIR process and findings. Should more meetings be required or requested by the City, please see Task 15 (Additional Meetings) below. Deliverable: PowerPoint presentation. 15. Task 15: Additional Meetings (each) Should the City request additional meetings beyond those listed in this Environmental Consulting Services scope of work, those meetings shall be Professional Services Rev. September 21, 2016 42 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 invoiced hourly per the hourly rates in Exhibit C -1. Assume each additional meeting to be based on six-hour total meeting time – including preparation, on- site meeting, travel time beyond the employee’s regular commute, mileage, and tolls. -END- Professional Services Rev. September 21, 2016 43 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 EXHIBIT “B” SCHEDULE OF PERFORMANCE Consultant must perform the Services so as to complete each milestone within the date specified below, measured from the date of City's issuance of the Notice to Proceed (NTP) with the Services. The time to complete each milestone may be increased or decreased by mutual written agreement of Consultant and City so long as all Services are completed within the Term of the Agreement. Consultant must provide a detailed schedule of Services consistent with the schedule below within 2 weeks of receipt of the notice to proceed. Milestones Target Completion Professional Services Rev. September 21, 2016 44 Task A.1: PSB Preliminary Design - CEQA / EIR December 2017 Task B.1: PSB Schematic Design March 2018 Task B.2: PSB Design Development August 2018 Task B.3: PSB Permit Set / Construction Documents February 2019 Task B.4: PSB Project Bidding and Award May 2019 Task B.5: PSB Construction Administration and Closeout May 2021 Task C.1: Parking Structure Preliminary Design – CEQA / EIR December 2017 Task C.2: Parking Structure Schematic Design February 2018 Task C.3: Parking Structure Design Development March 2018 Task C.4: Parking Structure Permit Set / Construction Documents May 2018 Task C.5: Parking Structure Project Bidding and Award July 2018 Task C.6: Parking Structure Construction Administration and Closeout August 2019 Task E.2: PSB Threat Assessment (Predesign) January 2018 Task E.4: PSB Programming Services for Technical Systems January 2018 Task E.6: PSB Fixtures, Furniture and Equipment Design and Procurement Documents February 2019 Task E.7: PSB Commissioning (Cx) May 2021 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 EXHIBIT “C” COMPENSATION The City agrees to compensate the Consultant for the Services performed in accordance with the terms and conditions of this Agreement, and as set forth in the budget schedule below, and as further specified in each Task Order issued by the City. Compensation will 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 must perform the tasks and categories of Services as outlined and budgeted below. The City’s amounts between compensation for Project Manager may approve in writing the transfer of budget any of the tasks or categories listed below provided the total 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. Each phase requires a separate written Notice-to-Proceed (NTP). Phases 2 and 3 will be authorized at CITY’s discretion, and upon environmental review and budget for the Project. approval of BUDGET SCHEDULE NOT TO EXCEED AMOUNT Professional Services Rev. September 21, 2016 45 BASIC SERVICES Phase 1 Phase 2 Phase 3 Task A.1: PSB Preliminary Design - CEQA / EIR $242,696 Task B.1: PSB Schematic Design $495,700 Task B.2: PSB Design Development $856,210 Task B.3: PSB Permit Set / Construction Documents $1,915,206 Task B.4: PSB Project Bidding and Award $90,127 Task B.5: PSB Construction Administration and Closeout $1,149,124 Task C.1: Parking Structure Preliminary Design – CEQA / EIR $121,347 Task C.2: Parking Structure Schematic Design $142,607 Task C.3: Parking Structure Design Development $190,143 Task C.4: Parking Structure Permit Set / Construction Documents $399,300 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 REIMBURSABLE EXPENSES The administrative, overhead, secretarial time or 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 will reimburse Consultant for the following expenses at cost, provided that the expenses were reasonably and necessarily incurred solely for providing the Services: A. Travel outside the San Francisco Bay Area, including transportation and meals, will be reimbursed at actual cost subject to limits of the City’s policy for reimbursement of travel and meal expenses for City employees. B. Long distance telephone service charges, cellular phone service charges, overnight delivery, facsimile transmission and postage charges are reimbursable at actual cost. All requests for payment of expenses must be accompanied by appropriate documentation of the claimed expenditure, such as written receipts. Any expense Professional Services Rev. September 21, 2016 46 Task C.5: Parking Structure Project Bidding and Award $19,014 ROW TOTALS Task C.6: Parking Structure Construction Administration and Closeout $199,650 Task E.2: PSB Threat Assessment (Predesign) $47,634 Task E.4: PSB Programming Services for Technical Systems $34,164 Task E.6: PSB Fixtures, Furniture and Equipment (FF&E) Design and Procurement Documents $287,622 Task E.7: PSB Commissioning (Cx) $27,173 Additional Excess Insurance Coverage $25,000 TOTAL BASIC SERVICES $2,155,501 $2,711,269 $1,375,947 $6,242,717 REIMBURSABLES $128,185 SUBTOTAL (BASIC SERVICES & REIMBURSABLES) $2,283,686 $2,711,269 $1,375,947 $6,370,902 ADDITIONAL SERVICES – 10% OF SUBTOTAL $637,090 TOTAL NOT-TO-EXCEED AMOUNT $2,920,776 $2,711,269 $1,375,947 $7,007,992 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 anticipated to be more than $500 must be approved in writing in advance by the City’s Project Manager. ADDITIONAL SERVICES Consultant will provide Additional Services related to a duly authorized Task Order only pursuant to advanced, written authorization from the City as specified in Section 4 of the Agreement. At the City’s Project Manager’s request, Consultant must submit a detailed written proposal including a description of the scope of Additional Services, schedule, level of effort, and Consultant’s proposed maximum compensation, including reimbursable expenses, for such Additional Services based on the rates set forth in Exhibit C-1. The Additional Services, including scope, schedule and maximum compensation will be negotiated and memorialized in writing by the City’s Project Manager and Consultant prior to commencement of the Additional Services. Such written agreements for Additional Services are deemed to be incorporated into the Task Order payment. [Optional] Work required because the following conditions are not satisfied or are exceeded are considered Additional Services: Professional Services Rev. September 21, 2016 47 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 EXHIBIT C-1 SCHEDULE OF RATES HOURLY RATE SCHEDULE 48 Firm / Title Rate RossDrulisCusenbery Architecture, Inc Principal-in-Charge $229 Design Principal $229 Project Manager $182 Senior Architect $166 Architect $156 Designer $130 Programmer $104 Drafter $104 Administrative Support $83 W.P. Moore (Structural Engineer) Principal-in-Charge $250 Director of Seismic Design $250 Senior Project Manager $180 Engineer $130 WSP (MEP) Senior Vice President $300 Vice President $225 Senior Associate $180 Mech. CAD $95 Electrical Engineer $130 Electrical CAD $95 Plumbing Engineer $130 Administrative $85 Sandis (Civil Engineers) Senior Project Manager $185 Project Manager $165 Project Engineer $140 Design Engineer $115 Engineer Technician $105 Interstice (Landscape Architects) Principal $240 Project Manager $180 Project Landscape Architect $160 Designer/Draftsperson $140 Administrative $90 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 49 Firm / Title Rate Cumming (Cost Estimator) Director $195 Associate Director $185 Senior Cost Manager $175 Watry (Parking Structure Consultant) Principal $265 Associate Principal $215 Project Manager $185 Project Engineer $175 Project Architect $175 Job Captain $165 Staff Designer $145 Winbourne (PSB Technology Systems Consultant) Project Manager $180 Senior SME $155 Senior Engineer $155 WSP (Building Data Systems Designer) Associate $160 Senior Engineer $155 MIG (Environmental Consultant) CEQA Project Manager $180 Senior Project Associate $135 Senior Environmental Planner $170 Project Associate $95 DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 EXHIBIT “D” INSURANCE REQUIREMENTS CONSULTANTS 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: 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. Professional Services Rev. September 21, 2016 50 REQUIRE D TYPE OF COVERAGE REQUIREMENT MINIMUM LIMITS EACH OCCURRENCE AGGREGATE YES WORKER’S COMPENSATION YES 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. $2,000,000 $2,000,000 $2,000,000 $5,000,000 $5,000,000 $5,000,000 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 $2,000,000 YES THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: CONSULTANT, 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 CONSULTANT 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. DocuSign Envelope ID: A63DC2C9-56AB-4BCA-9D0E-69800F9213B6 B. CROSS LIABILITY 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 CANCELLATION. OF VENDORS ARE REQUIRED TO FILE 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 Professional Services Rev. September 21, 2016 51 City of Palo Alto (ID # 7435) City Council Staff Report Meeting Date: 12/12/2016 City of Palo Alto Page 1 Title: Adoption of a Resolution Amending Utilities Rule and Regulation 27, Generating Facility Interconnections From: City Manager Lead Department: Utilities Recommendation Staff recommends that Council adopt a resolution amending City of Palo Alto Utilities (“Utilities”) Rule and Regulation 27 Generating Facility Interconnections (Attachment B). Executive Summary Utilities’ Rules and Regulations govern utility services in the city and the fees charged for those services. They are updated as needed to ensure Utilities’ procedures meet industry practices, standards, and requirements. The recommended amendment adds practices and procedures to Rule and Regulation 27 for the definition, installation, and interconnection of generating facilities that are connected to Utilities’ electric distribution system. Background There are twenty-nine Utilities Rules and Regulations (Rules) which set forth the conditions under which the City provides utility services from both the Utilities Department (electric, natural gas, water, wastewater, fiber optic) and the Public Works Department (refuse, storm drain). Rule and Regulation 27, Generating Facility Interconnections, describes the Interconnection, operating and metering requirements for Generating Facilities connected to the electric distribution system. It was last updated and issued by Council in April 2012. Discussion The proposed changes to Rule and Regulation 27 include: • Addition of a “Table of Contents” • Restructuring of Section C, Application and Interconnection Process, to clarify the interconnection review process and the time line requirements for the interconnection of a generating facility • Addition of Section D.3, Technology Specific Requirements, to explain the requirements for different generating technologies. City of Palo Alto Page 2 • Addition of Section D.5, Smart Inverter Generating Facility Design and Operating Requirements, to keep pace with changing inverter technology • General modifications to several sections to ensure the Rule conforms to current technology, helps staff meet customer expectations, and is clear and easy to understand. Resource Impact Approval of changes to Utilities Rule and Regulation 27 will not result in a significant change in net operating revenues or expenses. Policy Implications This recommendation does not represent a change to current City policies. Environmental Review The adoption of a resolution amending Utility Rule and Regulation 27 does not constitute a project requiring review under the California Environmental Quality Act (CEQA) 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. Attachments: • Attachment A: Resolution Amending Rule and Reg 27 • Attachment B: Amended Rule 27 effective December 12, 2016 • Attachment C: Rule 27 Redlines Attachment A NOT YET APPROVED 161108 jb 6053873 1 Resolution No. Resolution of the Council of the City of Palo Alto Amending Utilities Rule and Regulation 27 (Generating Facility Interconnections) R E C I T A L S A. 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 hereby RESOLVES as follows: SECTION 1. Pursuant to Section 12.20.010 of the Palo Alto Municipal Code, Utilities Rule and Regulation 27 (Generating Facility Interconnections) is hereby amended as attached and incorporated. Utility Rule and Regulation 27, as amended, shall become effective December 12, 2016. SECTION 2. The adoption of this resolution amending Utilities Rule and Regulation 27 (Generating Facility Interconnections) is not a project requiring California Environmental Quality Act (CEQA) review, under California Public Resources Code Sec. 21065, 21080(b)(8), 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 Utilities Director of Administrative Services GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 1 TABLE OF CONTENTS: A. APPLICABILITY ......................................................................................................................................................... 2 B. GENERAL RULES, RIGHTS AND OBLIGATIONS ................................................................................................. 2 C. APPLICATION AND INTERCONNECTION PROCESS ........................................................................................... 5 1. APPLICATION PROCESS ............................................................................................................................ 5 2. OVERVIEW OF THE INTERCONNECTION REVIEW PROCESS............................................................ 5 3. COMMISSIONING TESTING AND PARALLEL OPERATION............................................................... 10 4. WITHDRAWAL / CANCELLATION ......................................................................................................... 11 D. GENERATING FACILITY DESIGN AND OPERATING REQUIREMENTS ........................................................ 11 1. GENERAL INTERCONNECTION AND PROTECTION FUNCTION REQUIREMENTS ...................... 12 2. PREVENTION OF INTERFERENCE ......................................................................................................... 14 3. TECHNOLOGY SPECIFIC REQUIREMENTS .......................................................................................... 19 4. SUPPLEMENTAL GENERATING FACILITY REQUIREMENTS ........................................................... 20 5. SMART INVERTER GENERATING FACILITY DESIGN AND OPERATING REQUIREMENTS ....... 21 E. INTERCONNECTION FACILITIES AND DISTRIBUTION SYSTEM MODIFICATIONS OWNERSHIP AND COST ALLOCATION ................................................................................................................................................ 31 1. SCOPE AND OWNERSHIP OF INTERCONNECTION FACILITIES AND DISTRIBUTION SYSTEM MODIFICATIONS ....................................................................................................................................... 31 2. RESPONSIBILITY OF COSTS OF INTERCONNECTING A GENERATING FACILITY...................... 32 3. INSTALLATION AND FINANCING OF INTERCONNECTION FACILITIES AND DISTRIBUTION SYSTEM MODIFICATIONS ....................................................................................................................... 32 F. METERING, MONITORING AND TELEMETRY ................................................................................................... 33 1. GENERAL REQUIREMENTS..................................................................................................................... 33 2. METERING BY CPAU ................................................................................................................................ 33 3. NET GENERATION METERING ............................................................................................................... 34 4. POINT OF COMMON COUPLING METERING ....................................................................................... 34 5. TELEMETERING ........................................................................................................................................ 34 6. LOCATION .................................................................................................................................................. 35 7. COSTS OF METERING ............................................................................................................................... 35 ATTACHMENT B GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 2 A. APPLICABILITY This Rule describes the Interconnection, Metering and operating requirements for Generating Facilities to be connected to the City of Palo Alto Utilities (CPAU) Electric Distribution System. In order to provide for uniformity and to encourage the Interconnection of renewable energy generation, this Rule is intended to be generally consistent with the technical requirements of California Public Utilities Commission Rule 21 and IEEE 1547, as amended. Language from IEEE 1547 that has been adopted directly (as opposed to paraphrased) is followed by a citation that lists the clause from which the language derived. For example, IEEE 1547-4.1.1 is a reference to Clause 4.1.1. In the event of any conflict between this Rule and any of the CPUC Rule 21 and IEEE 1547 standards listed herein, the requirements of this Rule shall take precedence. B. GENERAL RULES, RIGHTS AND OBLIGATIONS 1. Prior Authorization Required to Interconnect and Operate. An executed Interconnection Agreement or Net Energy Metering and Interconnection Agreement, as applicable, is required in addition to receiving CPAU’s express written permission before Parallel Operation of a Generating Facility with CPAU’s Distribution System. CPAU shall apply this Rule in a non-discriminatory manner and shall not unreasonably withhold its permission for Parallel Operation of Generating Facilities with CPAU’s Distribution System. 2. Separate Agreements Required for Other Services. Separate Agreements are required for the provision of other Electric Services from CPAU including, but not limited to, Distribution Service provided by CPAU during periods of Curtailment or interruption of a Generating Facility, in accordance with CPAU’s Rules & Regulations. 3. Service Not Provided With Interconnection. Interconnection with CPAU's Distribution System under this Rule provides no rights to utilize CPAU's Distribution System for the transmission, distribution, or wheeling of electric power. 4. Compliance with Laws, Rules & Regulations and Utility Rates. Applicants shall ascertain and comply with applicable CPAU Rules & Regulations and Utility Rates; applicable Federal Energy Regulatory Commission (FERC) approved rules, tariffs and regulations; and any local, state or federal Law, statute or regulation which applies to the design, siting, GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 3 construction, installation, operation, or any other aspect of the Applicant’s Generating Facility and Interconnection Facilities. 5. Design Reviews and Inspections. CPAU has the right to review the design of an Applicant’s Generating Facility and Interconnection Facilities and to inspect the Generating Facility and/or Interconnection Facilities prior to the commencement of Parallel Operation with CPAU’s Distribution System. CPAU may require Applicants to make modifications as necessary to comply with the requirements of CPAU Rules and Regulations or other reasonable requirements. CPAU’s review and authorization for Parallel Operation shall not be construed as confirming or endorsing the Applicant’s design or as warranting the Generating Facility and/or Interconnection Facilities’ safety, durability or reliability. CPAU is not responsible for the adequacy or capacity of such Facilities. 6. Right to Access. Customer Generating and Interconnection Facilities shall be accessible to CPAU personnel whenever necessary for CPAU to perform its duties and exercise its rights under its Rules and Regulations and any Interconnection Agreement, including the Net Energy Metering and Interconnection Agreement. 7. Prudent Operation and Maintenance Required. The Customer shall operate and maintain its Generating Facility and Interconnection Facilities in accordance with Prudent Electrical Practices and shall maintain compliance with CPAU Rules and Regulations. 8. Curtailment and Disconnection. CPAU may limit the operation, disconnect or require the disconnection of a Customer’s Generating Facility from CPAU’s Distribution System at any time, with or without notice, in the event of an Emergency, or to correct Unsafe Operating Conditions. CPAU may also limit the operation, disconnect or require the disconnection of a Customer’s Generating Facility from CPAU’s Distribution System with reasonable written notice: (1) to allow for routine maintenance, repairs or modifications to CPAU’s Distribution System; (2) upon CPAU’s determination that a Customer’s Generating Facility is not in compliance with any CPAU Rules and Regulations; or (3) upon termination of the applicable Interconnection Agreement or Net Energy Metering and Interconnection Agreement. Within a reasonable period after the Customer’s written request, CPAU will provide a written explanation of the reason for such Curtailment or disconnection. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 4 9. Coordination with Affected Systems. CPAU will notify the Affected System Operators that are potentially affected by an Applicant’s Interconnection Request(s). CPAU will coordinate the conduct of any studies required to determine the impact of the Interconnection Request on Affected Systems with Affected System Operators and, if possible, include those results in its Interconnection Study. CPAU will invite such Affected System Operators to all meetings held with Applicant as required by this Rule. Applicants and transmission providers which may be an Affected System shall cooperate with CPAU in all matters related to the conduct of relevant studies and the determination of modifications to Affected Systems. Applicant shall enter into an agreement with the owner of the Affected System, as applicable and upon request by CPAU. The agreement will specify the terms governing payments to be made by Applicant to the owner of the Affected System as well as the repayment, if applicable, by the owner of the Affected System. 10. Transferability of Interconnection Request. An Applicant may transfer its Interconnection Request to another entity only if such entity acquires the proposed Generating Facility identified in the Interconnection Request and the Point of Interconnection and operating parameters do not change. CPAU at its discretion may deny such requests if CPAU determines applicable requirements will not be met as a result of the transfer. 11. Special Provisions Applicable to Net Energy Metering Applicants (NEM). Notwithstanding any other provision in this Rule: a. For Generating Facilities qualifying for service under PUC Sections 2827, 2827.8 and 2827.10, as amended, the Applicant is not responsible for payment of study costs. b. For Generating Facilities qualifying for service under PUC Sections 2827 and 2827.8, as amended, CPAU’s approval for Interconnection will normally be processed not later than thirty (30) Business Days following CPAU’s receipt of: i. a completed Net Energy Metering Interconnection Request including all supporting documents and required payments; ii. a completed signed Net Energy Metering Generator Interconnection Agreement; and iii. evidence of Applicant’s final electric inspection clearance from the Palo Alto Building Department. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 5 If the 30-day period cannot be met, CPAU will notify Applicant of the reason for the inability to process the Interconnection Request and the expected completion date. Applicants with PUC Section 2827 Generating Facilities that include non-inverter based Generators and/or Generators with non-Certified Equipment should submit a completed Net Energy Metering Interconnection Request, including all supporting documents sufficient for CPAU to start the review process, without waiting for the final inspection clearance. Applicants with such Generating Facilities are advised to submit their Interconnection Request at least six (6) months in advance of their planned Commercial Operation Date. Depending on the size and location of these Generating Facilities, additional time for review and study may be required. C. APPLICATION AND INTERCONNECTION PROCESS 1. APPLICATION PROCESS a. Utility Service Application (Application). All Applicants must complete and submit the Application and three (3) sets of plan drawings at the Development Center located at 285 Hamilton Avenue. 2. OVERVIEW OF THE INTERCONNECTION REVIEW PROCESS a. Valid Interconnection Request. After an Application is received and deemed complete and valid, CPAU will start the interconnection review process. See Section B.11 for special provisions related to the timeframe and costs applicable to NEM Applicants. b. Initial Review. Upon receipt of a complete and valid Application and plans, CPAU shall perform an Initial Review. The Initial Review determines if (i) the Generating Facility qualifies for a Simplified Interconnection, or (ii) the Generating Facility requires a Supplemental Review. Absent extraordinary circumstances, CPAU shall notify Applicant in writing of the results of Initial Review within ten (10) Business Days following validation of an Interconnection Request. i. Passage of Initial Review. For Interconnection Requests that pass the Initial GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 6 Review and do not require Interconnection Facilities or Distribution Upgrades, CPAU will provide the Applicant with a Generator Interconnection Agreement or Generator Interconnection Agreement and Net Energy Metering Agreement, if applicable, within fifteen (15) Business Days of providing notice of Initial Review results. For Interconnection Requests that pass the Initial Review but also require Interconnection Facilities or Distribution upgrades, CPAU will provide Applicant with a non-binding cost estimate of the Interconnection Facilities or Distribution upgrades within thirty (30) Business Days of providing notice of Initial Review results. These facilities may be treated as Special Facilities (depending on circumstance) for the purpose of determining Applicant costs. The applicant can then proceed with executing an Interconnection Agreement in accordance with Section C.1.e below. ii. Failure of Initial Review. For Interconnection Requests that fail Initial Review, CPAU will provide the technical reason, data and analysis supporting the Initial Review results in writing and provide Applicant the option to proceed directly to a Supplemental Review. The Applicant shall notify CPAU within ten (10) Business Days following such notification whether to (i) proceed to a Supplemental Review, or (ii) withdraw the Interconnection Request. Applicants that elect to proceed to a Supplemental Review shall provide a nonrefundable Advance Engineering Fee set forth in Rate Schedule E-15 with their response. CPAU will proceed with the Supplemental Review once payment of the required Advance Engineering Fee has been received. If Applicant fails to notify CPAU within ten (10) Business Days of such notification, the Interconnection Request will be deemed withdrawn. iii. Additional Initial Review Information. No changes may be made to the planned Point of Interconnection or Generating Facility size included in the Interconnection Request during the review process, unless such changes are agreed to by CPAU. Where agreement has not been reached, Applicants choosing to change the Point of Interconnection or Generating Facility size must reapply and submit a new Interconnection Request. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 7 c. Supplemental Review. If Applicant requests a Supplemental Review and submits an Advance Engineering Fee as described in Rate Schedule E-15, if required, CPAU will perform the Supplemental Review using the review process in Section H.2., and complete the Supplemental Review within twenty (20) Business Days, absent extraordinary circumstances, following authorization and receipt of the fee. The Supplemental Review will determine if (i) the Generating Facility qualifies for interconnection, or interconnection with additional requirements, or (ii) the Generating Facility requires a Detailed Study. The Applicant must provide the following data to CPAU when requesting a Supplemental Review: Generator: 1. MVA Rating 2. kV Rating 3. Base MVA 4. Base kV 5. Xd" (direct axis subtransient reactance) 6. Xd' (direct axis transient reactance) 7. Xd (Synchronous reactance) 8. X2 (Negative Sequence reactance) 9. X0 (Zero Sequence reactance) Generating Facility Transformer Data: 1. Winding configuration (delta-Wye gnd or Wye gnd-Delta) 2. MVA Rating 3. KV Rating 4. Base MVA 5. Base KV 6. Z1 HV-LV 7. Z0 HV-LV GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 8 Line Data: 1. Impedance data for line from Transformer to POI (if applicable) 2. Z1 3. Z0 4. Point of Interconnection (POI) Location i. Passage of Supplemental Review. For Interconnection Requests that pass a Supplemental Review and do not require Interconnection Facilities or Distribution Upgrades, CPAU will provide Applicant with a Generator Interconnection Agreement within fifteen (15) Business Days of providing notice of the Supplemental Review results. For Interconnection Requests that pass a Supplemental Review but also require Interconnection Facilities or Distribution upgrades, CPAU will provide Applicant with a non-binding cost estimate of the Interconnection Facilities or Distribution upgrades within thirty (30) Business Days of providing notice of the Supplemental Review results. These facilities may be treated as Special Facilities (depending on circumstance) for the purpose of determining Applicant costs. The Applicant can then proceed with executing an Interconnection Agreement in accordance with Section C.1.e below. ii. Failure of Supplemental Review. For Interconnection Requests that fail a Supplemental Review, CPAU will provide the technical reason, data and analysis supporting the Supplemental Review results in writing and provide Applicant the option to proceed directly to a cost estimate and schedule for a Detailed Study. The Applicant shall notify CPAU within fifteen (15) Business Days following such notification whether to (i) proceed to a cost estimate and schedule for a Detailed Study, or (ii) withdraw the Interconnection Request. If the Applicant elects to proceed with the cost estimate and schedule for a Detailed Study, CPAU shall provide Applicant with a non-binding cost estimate and schedule within thirty (30) Business Days of the Applicant providing notice to proceed. If Applicant fails to notify CPAU within fifteen (15) Business Days of such notification, the Interconnection Request shall be deemed withdrawn. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 9 d. Detailed Study. If the Applicant requests to proceed with the cost estimate and schedule for a Detailed Study as provided by CPAU in Section C.1.c.ii above, CPAU and the Applicant may enter into a Detailed Study agreement that provides for CPAU to perform additional studies, facility design and engineering, and to provide an estimate for the actual cost of CPAU provided Interconnection Facilities or Distribution Upgrades as required to allow for the interconnection of the generating facility at the Applicant’s expense. The Detailed Study agreement shall set forth CPAU’s estimated time schedule and charges for completing such work. Note: the Detailed Study fee shall be waived for NEM applicants meeting the requirements of Section B.11. Following payment of the cost estimate by the Applicant, CPAU will proceed with the Detail Study in accordance with the agreed upon time schedule, and upon completion of the Detailed Study, CPAU will provide the results in writing to the Applicant along with the final cost estimate of any required Interconnection or Distribution Facilities. These facilities may be treated as Special Facilities (depending on circumstance) for the purpose of determining Applicant costs. The applicant can then proceed with executing an Interconnection Agreement in accordance with Section C.1.e below. e. Execution of the Generator Interconnection Agreement. i. Following the receipt of a cost estimate for any Distribution Upgrades and/or Interconnection Facilities that have been identified (Applicants that did not require a cost estimate may proceed to Section C.1.e.ii below), Applicant shall notify CPAU within fifteen (15) Business Days whether Applicant: (i) requests a Generator Interconnection Agreement, or (ii) withdraws its Interconnection Request. If Applicant fails to notify CPAU within fifteen (15) Business Days, the Interconnection Request shall be deemed withdrawn. If Applicant elects to proceed to a Generator Interconnection Agreement, CPAU will provide Applicant with a Generator Interconnection Agreement for Applicant’s signature within fifteen (15) Business Days of Applicant’s request. ii. Upon receipt of a draft Generator Interconnection Agreement, Applicant has ninety (90) Calendar Days to sign and return the Generator GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 10 Interconnection Agreement. Applicant shall provide to CPAU written comments, or notification of a lack of any comments, on the draft Generator Interconnection Agreement and appendices within thirty (30) Calendar Days. At the request of Applicant, CPAU shall begin negotiations with Applicant at any time after CPAU provides Applicant with the draft Generator Interconnection Agreement, which contains in its appendices the cost estimate for any Distribution Upgrades and/or Interconnection Facilities that have been identified by CPAU. If Applicant fails to execute the Generator Interconnection Agreement within the ninety (90) Calendar Days described in this section, the Interconnection Request shall be deemed withdrawn. iii. After Applicant has executed the Generator Interconnection Agreement and paid the final invoice for estimated cost of Distribution Upgrades and/or Interconnection Facilities, CPAU will commence with the design, procurement, construction and installation of required facilities identified in the Generator Interconnection Agreement. (Note: once the Applicant executes the agreement, the Applicant is thereafter referred to as a Producer) CPAU and Producer will use good faith efforts to meet schedules and estimated costs in accordance with the requirements of the Generator Interconnection Agreement. Producer is responsible for all costs associated with Parallel Operation to support the safe and reliable operation of the Distribution System and Transmission System. 3. COMMISSIONING TESTING AND PARALLEL OPERATION a. Commissioning Testing. Producer is responsible for commissioning and testing new Generating Facilities and associated Interconnection Facilities to ensure compliance with the safety and reliability provisions of this Rule prior to being operated in parallel with CPAU’s Distribution or Transmission System. For non- Certified Equipment, Producer shall develop a written testing plan to be submitted to CPAU for its review and acceptance. Where applicable, the testing plan shall include the installation test procedures published by the manufacturer of the Generating Facility or Interconnection Facilities. Facility testing shall be conducted at a mutually agreeable time, and CPAU shall be given the opportunity to witness the tests. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 11 b. Parallel Operation or Momentary Parallel Operation. Producer shall not commence Parallel Operation of its Generating Facility with CPAU’s system unless it has received CPAU’s express written permission to do so. CPAU will authorize Producer’s Generating Facility for Parallel Operation or momentary Parallel Operation with CPAU’s Distribution or Transmission System, in writing, within five (5) Calendar Days of satisfactory compliance with the terms of all applicable agreements. 4. WITHDRAWAL / CANCELLATION Applicant may withdraw its Interconnection Request at any time by written notice of such withdrawal to CPAU. In addition, after receipt of the Interconnection Request, if Applicant fails to adhere to the requirements and timelines of this rule, CPAU shall deem the Interconnection Request to be withdrawn and shall provide written notice to Applicant of the deemed withdrawal within five (5) Business Days and an explanation of the reasons for such deemed withdrawal. Upon receipt of such written notice, Applicant shall have five (5) Business Days in which to either respond with information or action that either cures the deficiency or supports its position that the deemed withdrawal was erroneous. Applications that are over one year old (from the date of CPAU’s receipt) without resulting in a signed Interconnection Agreement or Net Energy Metering and Interconnection Agreement, or approval for Parallel Operation of a Generating Facility within one year of completion of all applicable review and/or studies, are subject to cancellation by CPAU. D. GENERATING FACILITY DESIGN AND OPERATING REQUIREMENTS This section D. has been revised to be consistent with the requirements of ANSI/IEEE 1547-2003 Standard for Interconnecting Distributed Resources with Electric Power Systems (IEEE 1547). Exceptions are taken to IEEE 1547 Clauses 4.1.4.2 Distribution Secondary Spot Networks and Clauses 4.1.8.1 or 5.1.3.1, which address Protection from Electromagnetic Interference. Note that this Rule and Regulation 27 does not adopt the Generating Facility power limitation of 10 MW incorporated in IEEE 1547. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 12 1. GENERAL INTERCONNECTION AND PROTECTION FUNCTION REQUIREMENTS The Protective Functions and requirements of this Rule are designed to protect CPAU’s Distribution System and not the Generating Facility. Customer shall be solely responsible for providing adequate protection for its Generating Facility and Interconnection Facilities. The Customer’s Protective Functions shall not impact the operation of other Protective Functions utilized on CPAU’s Distribution System in a manner that would affect CPAU’s capability of providing reliable service to its Customers. a. Protective Functions Required. A Generating Facility operating in parallel with CPAU’s Distribution System shall be equipped with the following Protective Functions to sense abnormal conditions on CPAU’s Distribution System and cause the Generating Facility to be automatically disconnected from CPAU’s Distribution System or to prevent the Generating Facility from being connected to CPAU’s Distribution System inappropriately: i. Over and under voltage trip functions and over and under frequency trip functions; ii. A voltage and frequency sensing and time-delay Function to prevent the Generating Facility from energizing a de-energized Distribution System circuit and to prevent the Generating Facility from reconnecting with CPAU’s Distribution System unless CPAU’s Distribution System service voltage and frequency is within the ANSI C84.1-1995 Table 1 Range B Voltage Range of 106V to 127V on a 120V basis, inclusive, and a frequency range of 59.3 Hz to 60.5 Hz, inclusive, and are stable for at least 60 seconds, and; iii. A Function to prevent the Generating Facility from contributing to the formation of an Unintended Island, and cease to energize the CPAU system within two seconds of the formation of an Unintended Island. The Generating Facility shall cease to energize CPAU’s Distribution System for faults on CPAU’s Distribution System circuit to which it is connected (IEEE1547-4.2.1). The Generating Facility shall cease to energize CPAU’s Distribution circuit prior to re-closure by CPAU’s Distribution System GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 13 equipment (IEEE1547-4.2.2). b. Momentary Paralleling Generating Facilities. With CPAU’s approval, the transfer switch or scheme used to transfer the Producer’s Loads from CPAU’s Distribution System to Producer’s Generating Facility may be used in lieu of the Protective Functions required for Parallel Operation. c. Suitable Equipment Required. Circuit breakers or other interrupting devices located at the Point of Common Coupling must be Certified or "Listed" (as defined in Article 100, the Definitions Section of the National Electrical Code) as suitable for their intended application. This includes being capable of interrupting the maximum available fault current expected at their location. Producer’s Generating Facility and Interconnection Facilities shall be designed so that the failure of any one device shall not potentially compromise the safety and reliability of CPAU’s Distribution System. The Generating Facility’s paralleling-device shall be capable of withstanding 220% of the Interconnection Facilities’ rated voltage (IEEE 1547-4.1.8.3). The Interconnection Facilities shall have the capability to withstand voltage and current surges in accordance with the environments defined in IEEE Std C62.41.2-2002 or IEEE Std C37.90.1-2002 as applicable and as described in IEEE 1547-4.1.8.2. d. Visible Disconnect Required: The Producer shall furnish and install a ganged, manually-operated isolating switch (or a comparable device mutually agreed upon by CPAU and the Producer) near the Point of Interconnection to isolate the Generating Facility from CPAU’s Distribution System. The device does not have to provide overcurrent protection. The device must: i. Allow visible verification that separation has been accomplished. (This requirement may be met by opening the enclosure to observe contact separation.) Molded case circuit breakers do not meet the visible contact requirement and are not acceptable as a Visible Disconnect device. ii. Include markings or signage that clearly indicates open and closed positions. iii. Be capable of being reached quickly and conveniently 24 hours a day by GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 14 CPAU personnel for construction, maintenance, inspection, testing or reading, without obstacles or requiring those seeking access to obtain keys, special permission, or security clearances. iv. Be capable of being locked in the open position. v. Be clearly marked on the submitted Single Line Diagram and its type and location approved by CPAU prior to installation. If the device is not adjacent to the Point of Common Coupling (PCC), permanent signage must be installed at a CPAU-approved location providing a clear description of the location of the device. Generating Facilities with Non-Islanding inverters totaling one (1) kilovolt-ampere (kVA) or less are exempt from this requirement. e. Drawings Required. Prior to Parallel Operation or Momentary Parallel Operation of the Generating Facility, CPAU shall approve the Producer's Protective Function and control diagrams. A Generating Facility equipped with a Protective Function and control scheme previously approved by CPAU for system-wide application or only Certified Equipment may satisfy this requirement by reference to previously approved drawings and diagrams. f. Generating Facility Conditions Not Identified. In the event this Rule does not address the Interconnection conditions for a particular Generating Facility, CPAU and Producer may agree upon other arrangements, to be approved by CPAU. 2. PREVENTION OF INTERFERENCE The Producer shall not operate a Generating Facility or Interconnection Facilities that superimpose a voltage or current upon CPAU’s Distribution System that interferes with CPAU operations, service to CPAU Customers, or communication facilities. If such interference occurs, the Producer must diligently pursue and take corrective action at its own expense after being given notice and reasonable time to do so by CPAU. If the Producer does not take corrective action in a timely manner, or continues to operate the facilities causing interference without restriction or limit, CPAU may, without liability, disconnect the Producer's facilities from CPAU’s Distribution System, in accordance with Section B.8 of this Rule. To eliminate undesirable interference caused by its operation, GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 15 each Generating Facility shall meet the following criteria: a. Voltage Regulation. The Generating Facility shall not actively regulate the voltage at the PCC while in parallel with CPAU’s Distribution System. The Generating Facility shall not cause the service voltage at other Customers to go outside the requirements of ANSI C84.1-1995, Range A (IEEE 1547-4.1.1). b. Operating Voltage Range. The voltage ranges in Table D.1 define protective trip limits for the Protective Function and are not intended to define or imply a voltage regulation Function. A Generating Facility shall cease to energize CPAU’s Distribution System within the prescribed trip time whenever the voltage at the PCC deviates from the allowable voltage operating range. The Protective Function shall detect and respond to voltage on all phases to which the Generating Facility is connected. i. Generating Facilities. Generating Facilities shall be capable of operating within the voltage range normally experienced on CPAU’s Distribution System from plus to minus 5% of the nominal voltage (e.g. 114 volts to 126 volts on a 120 volt base), at the service panel or PCC. The trip settings at the generator terminals shall be selected in a manner that minimizes nuisance tripping between 106 volts and 132 volts on a 120-volt base (88-110% of nominal voltage) to compensate for voltage drop between the generator terminals and the PCC. Voltage shall be detected at either the PCC or the Point of Interconnection. However, the voltage range at the PCC with the generator on-line shall stay within +/-5% of nominal. ii. Voltage Disturbances. Whenever CPAU’s Distribution System voltage at the PCC varies from and remains outside normal (nominally 120 volts) by the predetermined amounts set forth in Table D.1, the Generating Facility’s Protective Functions shall cause the Generator(s) to become isolated from CPAU’s Distribution System. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 16 TABLE D.1: Voltage Trip Settings Voltage at Point of Common Coupling Maximum Trip Time(1) Assuming 120 V Base % of Nominal Voltage # of Cycles (Assuming 60 Hz Nominal) Seconds Less than 60 Volts Less than 50% 10 Cycles 0.16 Seconds Greater than or equal to 60 Volts but less than 106 Volts Greater than or equal to 50% but less than 88% 120 Cycles 2 Seconds Greater than or equal to 106 Volts but less than or equal to 132 Volts Greater than or equal to 88% but less than or equal to 110% Normal Operation Greater than 132 Volts but less than or equal to 144 Volts Greater than 110% but less than or equal to 120% 60 Cycles 1 Second Greater than 144 Volts Greater than 120% 10 Cycles 0.16 Seconds (1) “Maximum Trip time” refers to the time between the onset of the abnormal condition and the Generating Facility ceasing to energize CPAU’s Distribution System. Protective Function sensing equipment and circuits may remain connected to CPAU’s Distribution System to allow sensing of electrical conditions for use by the “reconnect” feature. The purpose of the allowed time delay is to allow a Generating Facility to “ride through” short-term disturbances to avoid nuisance tripping. Set points shall not be user adjustable (though they may be field adjustable by qualified personnel). c. Paralleling. The Generating Facility shall parallel with CPAU’s Distribution System without causing a voltage fluctuation at the PCC greater than ±5% of the prevailing voltage level of CPAU’s Distribution System at the PCC, and meet the flicker requirements of D.2.d. d. Flicker. The Generating Facility shall not create objectionable flicker for other Customers on CPAU’s Distribution System. To minimize the adverse voltage effects experienced by other Customers (IEEE 1547-4.3.2), flicker at the PCC caused by the Generating Facility should not exceed the limits defined by the “Maximum Borderline of Irritation Curve” identified in IEEE 519-1992 (IEEE Recommended Practices and Requirements for Harmonic Control in Electric Power Systems, IEEE STD 519-1992). This requirement is necessary to minimize the adverse voltage GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 17 affects experienced by others Customers on CPAU’s Distribution System. Generators may be connected and brought up to synchronous speed (as an induction motor) provided these flicker limits are not exceeded. e. Integration with CPAU’s Distribution System Grounding. The grounding scheme of the Generating Facility shall not cause over-voltages that exceed the rating of the equipment connected to CPAU’s Distribution System and shall not disrupt the coordination of the ground fault protection on CPAU’s Distribution System (IEEE 1547-4.1.2). f. Frequency. The Generating Facility shall operate in synchronism with CPAU’s Distribution System. Whenever CPAU’s Distribution System Frequency at the PCC varies from and remains outside normal (nominally 60 Hz) by the predetermined amounts set forth in Table D.2, the Generating Facility’s Protective Functions shall cease to energize CPAU’s Distribution System within the stated maximum trip time. TABLE D.2: Frequency Trip Settings Generating Facility Rating Frequency Range (Assuming 60 Hz Nominal) Maximum Trip Time (1) (Assuming 60 Cycles per Second Less or equal to 30 kW Less than 59.3 Hz 10 Cycles Greater than 60.5 Hz 10 Cycles Greater than 30 kW Less than 57 Hz 10 Cycles Less than an adjustable value between 59.8 Hz and 57 Hz but greater than 57 Hz (2) Adjustable between 10 and 18,000 Cycles (2),(3) Greater than 60.5 Hz 10 Cycles 1) “Maximum Trip time” refers to the time between the onset of the abnormal condition and the Generating Facility ceasing to energize CPAU’s Distribution System. Protective Function sensing equipment and circuits may remain connected to CPAU’s Distribution System to allow sensing of electrical conditions for use by the “reconnect” feature. The purpose of the allowed time delay is to allow a Generating Facility to “ride through” short-term disturbances to avoid nuisance tripping. Set points shall not be user adjustable (though they may be field adjustable by qualified personnel). GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 18 (2) Unless otherwise required by CPAU, a trip frequency of 59.3 Hz and a maximum trip time of 10 cycles shall be used. (3) When a 10-cycle maximum trip time is used, a second under frequency trip setting is not required. g. Harmonics. When the Generating Facility is serving balanced linear Loads, harmonic current injection into CPAU’s Distribution System at the PCC shall not exceed the limits stated below in Table D.3. The harmonic current injections shall be exclusive of any harmonic currents due to harmonic voltage distortion present in CPAU’s Distribution System without the Generating Facility connected (IEEE 1547-4.3.3). The harmonic distortion of a Generating Facility located at a Customer’s site shall be evaluated using the same criteria as for the Host Loads. Table D.3 Maximum Harmonic Current Distortion in Percent of Current (I)(1,2) Individual Harmonic Order h, (odd harmonics) (3) h<11 11 ≤ h < 17 17 ≤ h < 23 23 ≤ h < 35 35 ≤ h Total Demand distortion (TDD) Max Distortion (%) 4.0 2.0 1.5 0.6 0.3 5.0 (1) IEEE 1547-4.3.3 (2) I = the greater of the maximum Host Load current average Demand over 15 or 30 minutes without the GF, or the GF rated current capacity (transformed to the PCC when a transformer exists between the GF and the PCC). (3) Even harmonics are limited to 25% of the odd harmonic limits above. h. Direct Current Injection. Generating Facilities should not inject direct current greater than 0.5% of rated output current into CPAU’s Distribution System. i. Power Factor. Each Generator in a Generating Facility shall be capable of operating at some point within a Power Factor range from 0.9 leading to 0.9 lagging. Operation outside this range is acceptable provided the reactive power of the Generating Facility is used to meet the reactive power needs of the Host Loads or that reactive power is otherwise provided under tariff by CPAU. The Producer shall notify CPAU if it is using the Generating Facility for Power Factor correction. Unless otherwise agreed upon by the Producer and CPAU, Generating Facilities shall automatically GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 19 regulate Power Factor, not voltage, while operating in parallel with CPAU’s Distribution System. 3. TECHNOLOGY SPECIFIC REQUIREMENTS a. Three-Phase Synchronous Generators. For three-phase Generators, the Generating Facility circuit breakers shall be three-phase devices with electronic or electromechanical control. The Producer shall be responsible for properly synchronizing its Generating Facility with CPAU’s Distribution System by means of either manual or automatic synchronizing equipment. Automatic synchronizing is required for all synchronous Generators that have a Short Circuit Contribution Ratio (SCCR) exceeding 0.05. Loss of synchronism protection is not required except as may be necessary to meet D.2.d (Flicker) (IEEE 1547-4.2.5). Unless otherwise agreed upon by the Producer and CPAU, synchronous Generators shall automatically regulate Power Factor, not voltage, while operating in parallel with CPAU’s Distribution System. A power system stabilization function is specifically not required for Generating Facilities under 10 MW Net Nameplate Rating. Ground Fault Protection is required for generators > 40 kW. Voltage Restraint Overcurrent or Voltage Controlled Overcurrent relays are required for generators or a group of generators > 400 kW. b. Induction Generators. Induction Generators (except self-excited Induction Generators) do not require a synchronizing Function. Starting or rapid Load fluctuations on induction Generators can adversely impact CPAU’s Distribution System's voltage. Corrective step-switched capacitors or other techniques may be necessary and may cause undesirable ferroresonance. When these counter measures (e.g. additional capacitors) are installed on the Producer's side of the Point of Common Coupling, CPAU must review these measures. Additional equipment may be required as determined in a Supplemental Review or a Detailed Study. Ground Fault Protection is required for generators > 40 kW. Voltage Restraint Overcurrent or Voltage Controlled Overcurrent relays are required for generators or a group of generators > 400 kW. c. Inverters. Only Certified inverters are approved for interconnection. Utility- interactive inverters do not require separate synchronizing equipment. Non-utility- interactive or “stand-alone” inverters shall not be used for Parallel Operation with GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 20 CPAU’s Distribution System. Inverters or a group of inverters > 400 kW require Ground Fault Protection. Inverter based systems not classified as “Smart Inverters” may continue to be installed per Section D.3.c until September 8, 2017, which is twelve (12) months after the date the Supplement SA of UL-1741 (with California requirements) was approved. Section D.5 may be used in all or in part, for inverter based technologies by mutual agreement of CPAU and the Applicant. The replacement of an existing inverter to an inverter that is of equal or greater ability than the original is allowed per Section D.3.c. Section D.5 may be used in all or in part, for replacement inverter based technologies by mutual agreement of CPAU and the Applicant. d. Single-Phase Generators. For single-phase Generators connected to a shared single-phase secondary system, the maximum Net Nameplate Rating of the Generating Facilities shall be 20 kVA. Generators connected to a center-tapped service neutral must be installed such that no more than 6 kVA of unbalanced power is applied to the two “legs” of the service. The current in the most heavily loaded leg must not exceed twice that of the other leg. For Dedicated Distribution Transformer Services, the maximum Net Nameplate Rating of a single-phase Generating Facility shall be the transformer nameplate rating. 4. SUPPLEMENTAL GENERATING FACILITY REQUIREMENTS a. Fault Detection. A Generating Facility with an SCCR exceeding 0.1 or one that does not cease to energize CPAU’s Distribution System within two seconds of the formation of an Unintended Island shall be equipped with Protective Functions designed to detect Distribution System faults, both line-to-line and line-to-ground, and shall cease to energize CPAU’s Distribution System within two seconds of the initiation of a fault. b. Transfer Trip. For a Generating Facility that cannot detect Distribution System faults (both line-to-line and line-to-ground) or the formation of an Unintended Island, and cease to energize CPAU’s Distribution System within two seconds, CPAU may require a Transfer Trip system or an equivalent Protective Function. For net metered GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 21 or non-net metered Generating Facilities, the Facility will be considered capable of supporting an Unintended Island if the aggregate distributed generation output is 80% or more of the Distribution System real-time load kW seen at CPAU’s source-side Distribution Protection Device. c. Reclose Blocking. Where the aggregate Generating Facility capacity exceeds 15% of the peak Load on any automatic reclosing device, CPAU may require additional Protective Functions, including, but not limited to reclose-blocking on some of the automatic reclosing devices. 5. SMART INVERTER GENERATING FACILITY DESIGN AND OPERATING REQUIREMENTS Section D.3.c shall continue to be used for interconnection of inverter based technologies until September 8, 2017, twelve (12) months after the date the Supplement SA of UL-1741 (with CA requirements) was approved by the full UL-1741 Standards Technical Panel (STP). Following such date, Section D.5 shall apply for interconnection of inverter based technologies. Until such date, Section D.5 may be used in all or in part, for inverter based technologies by mutual agreement of the CPAU and the Applicant. The inverter requirements are intended to be consistent with ANSI/IEEE 1547- 2003 and 1547a Standard for Interconnecting Distributed Resources with Electric Power Systems (IEEE 1547 including amendment 1547a). In the event of conflict between this Rule and IEEE 1547-2003, this Rule shall take precedence. Exceptions are taken to IEEE 1547 Clauses 4.1.4.2 Distribution Secondary Spot Networks and Clauses 4.1.8.1 or 5.1.3.1, which address Protection from Electromagnetic Interference. Rule 27 does not adopt the Generating Facility power limitation of 10 MW incorporated in IEEE1547. a. Protective Functions Required. Smart Inverters operating in parallel with CPAU’s Distribution System shall be equipped with the following Protective Functions to sense abnormal conditions on CPAU’s Distribution System and cause the Smart Inverter to be automatically disconnected from CPAU’s Distribution System or to prevent the Smart Inverter from being connected to CPAU’s Distribution System inappropriately: GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 22 i. Over and under voltage trip functions and over and under frequency trip functions; ii. A voltage and frequency sensing and time-delay function to prevent the Smart Inverter from energizing a de-energized Distribution System circuit and to prevent the Smart Inverter from reconnecting with CPAU’s System unless CPAU’s Distribution System service voltage and frequency is within the ANSI C84.1-1995 Table 1 Range B voltage Range of 106 volts to 127 volts (on a 120 volt basis), inclusive, and a frequency range of 59.3 Hz to 60.5 Hz, inclusive, and are stable for at least 15 seconds; and iii. A function to prevent the Smart Inverter from contributing to the formation of an Unintended Island, and cease to energize CPAU’s Distribution System within two seconds of the formation of an Unintended Island. iv. Only Certified Smart Inverters are approved for interconnection. Smart Inverters or a group of Smart Inverters > 400 kW require Ground Fault Protection. The Smart Inverter shall cease to energize CPAU’s Distribution System for faults on CPAU’s Distribution System circuit to which it is connected (IEEE 1547-4.2.1). The Smart Inverter shall cease to energize CPAU’s Distribution circuit prior to reclosing by CPAU’s Distribution System equipment (IEEE 1547-4.2.2). b. Momentary Paralleling Generating Facilities. With CPAU’s approval, the transfer switch or scheme used to transfer Producer’s loads from CPAU’s Distribution System to Producer’s Generating Facility may be used in lieu of the Protective Functions required for Parallel Operation. c. Suitable Equipment Required. Circuit breakers or other interrupting equipment located at the PCC must be Certified or “Listed” (as defined in Article 100, the Definitions Section of the National Electrical Code) as suitable for their intended application. This includes being capable of interrupting the maximum available fault current expected at their location. Producer’s Smart Inverter and Interconnection Facilities shall be designed so that the failure of any single device or component shall GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 23 not potentially compromise the safety and reliability of CPAU’s Distribution System. The Smart Inverter paralleling-device shall be capable of withstanding 220% of the Interconnection Facility rated voltage (IEEE 1547- 4.1.8.3). The Interconnection Facility shall have the capability to withstand voltage and current surges in accordance with the environments defined in IEEE Std. C62.41.2-2002 or IEEE Std. C37.90.1-2002 as applicable and as described in L.3.e (IEEE 1547- 4.1.8.2). d. Visible Disconnect Required. Producer shall furnish and install a ganged, manually- operated isolating switch (or a comparable device mutually agreed upon by CPAU and Producer) near the Point of Common Coupling to isolate the Smart Inverter from CPAU’s Distribution System. The device does not have to provide over-current protection. The device must: i. Allow visible verification that separation has been accomplished. (This requirement may be met by opening the enclosure to observe contact separation.) Molded case circuit breakers do not meet the visible contact requirement and are not acceptable as a Visible Disconnect device. ii. Include markings or signage that clearly indicates open and closed positions. iii. Be capable of being reached quickly and conveniently 24 hours a day by CPAU personnel for construction, maintenance, inspection, testing or reading, without obstacles or requiring those seeking access to obtain keys, special permission, or security clearances. iv. Be capable of being locked in the open position. v. Be clearly marked on the submitted single line diagram and its type and location approved by CPAU prior to installation. If the device is not adjacent to the PCC, permanent signage must be installed at a CPAU approved location providing a clear description of the location of the device. If the switch is not accessible outside the locked premises, signage with contact information and a CPAU approved locking device for the premises shall be installed. Generating Facilities with Non-Islanding inverters totaling one (1) GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 24 kilovolt-ampere (kVA) or less are exempt from this requirement. e. Drawings Required. Prior to Parallel Operation or Momentary Parallel Operation of the Smart Inverter, CPAU shall approve Producer’s Protective Function and control diagrams. Generating Facilities equipped with Protective Functions and a control scheme previously approved by CPAU for system-wide application or only Certified Equipment may satisfy this requirement by reference to previously approved drawings and diagrams. f. Generating Facility Conditions Not Identified. In the event this Rule does not address the Interconnection conditions for a particular Smart Inverter, CPAU and Producer may agree upon other arrangements, to be approved by CPAU. g. Prevention of Interference. Producer shall not operate Smart Inverters that superimpose a voltage or current upon CPAU’s Distribution System that interferes with CPAU operations, service to CPAU Customers or communication facilities. If such interference occurs, Producer must diligently pursue and take corrective action at its own expense after being given notice and reasonable time to do so by CPAU. If Producer does not take corrective action in a timely manner, or continues to operate the facilities causing interference without restriction or limit, CPAU may, without liability, disconnect Producer's facilities from CPAU’s Distribution System, in accordance with Section B.8 of this Rule. h. Voltage Regulation. If approved by CPAU, the Smart Inverter may actively regulate the voltage at the Point of Common Coupling (PCC) while in parallel with CPAU’s Distribution System. The Smart Inverter shall not cause the service voltage at other customers to go outside the requirements of ANSI C84.1-1995, Range A (IEEE 1547-4.1.1). i. Voltage Trip and Ride-Through Settings. The voltage ranges in Table D.4 define protective trip limits for the Protective Function and are not intended to define or imply a voltage regulation Function. Generating Facilities shall cease to energize CPAU’s Distribution System within the prescribed trip time whenever the voltage at the PCC deviates from the allowable voltage operating range. The Protection Function shall detect and respond to voltage on all phases to which the Generating Facility is connected. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 25 j. Smart Inverters. Smart Inverters shall be capable of operating within the voltage range normally experienced on CPAU’s Distribution System from plus to minus 5% of the nominal voltage (e.g. 114 volts to 126 volts, on a 120 volt base), at the service panel or PCC. The trip settings at the generator terminals may be selected in a manner that minimizes nuisance tripping in accordance with Table D.4 to compensate for voltage drop between the generator terminals and the PCC. Voltage may be detected at either the PCC or the Point of Interconnection. However, the voltage range at the PCC, with the generator on-line, shall stay within +/-5% of nominal. k. Voltage Disturbances. Whenever CPAU’s Distribution System voltage at the PCC varies from and remains outside Near Nominal voltage for the predetermined parameters set forth in Table D.4, the Smart Inverter’s Protective Functions shall cause the Smart Inverter(s) to become isolated from CPAU’s Distribution System: i. The Smart Inverter shall stay connected to CPAU’s Distribution System while the grid remains within the “Ride-Through Until” voltage-time range and must stay connected in the corresponding “Operating Mode”. ii. For voltage excursions beyond the near Nominal (NN) magnitude range and within the range of the HV1 or LV3 regions, the Smart Inverter shall momentarily cease to energize within 0.16 seconds. iii. In the HV1 region, the Smart Inverter is permitted to reduce power output as a function of voltage under mutual agreement between the Producer and CPAU. iv. If the distribution system voltage does not exit the ride-through region and recovers to normal system voltage, the Smart Inverter shall restore continuous operation within 2 seconds. v. If the CPAU’s Distribution System voltage does not exit the ride-through region and returns from the LV3 region to the LV2 or LV1 region, the Smart Inverter shall restore available current within 2 seconds. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 26 vi. Different voltage-time settings could be permitted by CPAU. Table D.4: Voltage Ride-Through Table Region Voltage at Point of Common Coupling (% Nominal Volts) Ride-Through Until Operating Mode Maximum Trip Time High Voltage 2 (HV2) V > 120 0.16 seconds High Voltage 1 (HV1) 110 < V < 120 12 seconds Momentary Cessation 13 seconds Near Nominal (NN) 88 < V < 110 Indefinite Continuous Operation Not Applicable Low Voltage 1 (LV1) 70 < V < 88 20 seconds Mandatory Operation 21 seconds Low Voltage 2 (LV2) 50 < V < 70 10 seconds Mandatory Operation 11 seconds Low Voltage 3 (LV3) V < 50 1 second Momentary Cessation 1.5 seconds l. Paralleling. The Generating Facility shall parallel with CPAU’s Distribution System without causing a voltage fluctuation at the PCC greater than plus/minus 5% of the prevailing voltage level of CPAU’s Distribution System at the PCC, and meet the flicker requirements of Section D.5.m below. m. Flicker. The Generating Facility shall not create objectionable flicker for other customers on CPAU’s Distribution System. To minimize the adverse voltage effects experienced by other customers (IEEE 1547-4.3.2), flicker at the PCC caused by the Generating Facility should not exceed the limits defined by the "Maximum Borderline of Irritation Curve" identified in IEEE 519-1992 (IEEE Recommended Practices and Requirements for Harmonic Control in Electric Power Systems, IEEE STD 519-1992). This requirement is necessary to minimize the adverse voltage affects experienced by other Customers on CPAU’s Distribution System. Generators may be connected and brought up to synchronous speed (as an induction motor) GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 27 provided these flicker limits are not exceeded. n. Integration with CPAU’s Distribution System Grounding. The grounding scheme of the Generating Facility shall not cause over-voltages that exceed the rating of the equipment connected to CPAU’s Distribution System and shall not disrupt the coordination of the ground fault protection on CPAU’s Distribution System (IEEE 1547-4.1.2). o. Frequency. CPAU controls system frequency, and the Generating Facility shall operate in synchronism with CPAU’s Distribution System. Whenever CPAU’s Distribution System frequency at the PCC varies from and remains outside normal (nominally 60 Hz) by the predetermined amounts set forth in Table D.2, the Generating Facility’s Protective Functions shall cease to energize CPAU’s Distribution System within the stated maximum trip time. p. Frequency Ride-Through Requirements. Smart Inverter based systems shall remain connected to CPAU’s Distribution System while the grid is within the frequency-time range indicated in Table D.5, and shall disconnect from the electric grid during a high or low frequency event that is outside that frequency-time range. The frequency values are shown in Table D.5. These values provide default interconnection system response to abnormal frequencies. The inverter shall disconnect by the default clearing times. In the high frequency range between 60.2 Hz and 61.5 Hz, or some other mutually agreed range, the Smart Inverter is permitted to reduce real power output until it ceases to export power by 61.5 Hz, or other frequency value mutually agreed between the generating facility operator and CPAU. Islands and microgrids may need different default frequency settings. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 28 Table D.5: Frequency Ride-Through and Trip Settings Table System Frequency Default Settings (Hz) Minimum Range of Adjustability (Hz) Ride-Through Until Ride –Through Operational Mode Maximum Trip Time f > 62 62 – 64 No Ride Through Not Applicable 0.16 seconds 60.5 < f < 62 60.1 – 62 299 seconds Mandatory Operation 300 seconds 58.5 < f < 60.5 Not Applicable Indefinite Continuous Operation Not Applicable 57.0 < f < 58.5 57 – 59.9 299 seconds Mandatory Operation 300 seconds f < 57.0 53 – 57 No Ride Through Not Applicable 0.16 seconds q. Harmonics. When the Smart Inverter is serving balanced linear loads, harmonic current injection into CPAU’s Distribution System at the PCC shall not exceed the limits stated in Table D.3. The harmonic current injections shall be exclusive of any harmonic currents due to harmonic voltage distortion present in CPAU’s Distribution System without the Smart Inverter connected (IEEE 1547- 4.3.3.). The harmonic distortion of a Smart Inverter shall be evaluated using the same criteria as for the Host Loads. r. Direct Current Injection. Smart Inverter should not inject direct current greater than 0.5% of rated output current into CPAU’s Distribution System. s. Power Factor. Producer shall provide adequate reactive power compensation on site to maintain the Smart Inverter power factor near unity at rated output or a CPAU specified power factor in accordance with the following requirements: i. Default Power Factor setting: 1.0 +/- 0.01 (0.99 Lagging to 0.99 Leading). ii. Aggregate generating facility is greater than 15 kW: 1.0 +/- 0.15 (0.85 GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 29 Lagging to 0.85 Leading) down to 20% rated power based on available reactive power. iii. Aggregate generating facility is less than or equal to 15 kW: 1.0 +/- 0.10 (0.90 Lagging to 0.90 Leading) down to 20% rated power based on available reactive power. t. Dynamic Volt/VAR Operations. The Smart Inverter shall be capable of operating dynamically within a power factor range of +/- 0.85 PF for larger (>15 kW) systems, down to 20% of rated power, and +/- 0.9 PF for smaller systems (≤15 kW), down to 20% of rated power, based on available reactive power. This dynamic Volt/VAR capability shall be able to be activated or deactivated in accordance with CPAU requirements. CPAU may permit or require the Smart Inverter systems to operate in larger power factor ranges, including in 4-quadrant operations for storage systems with the implementation of additional anti-islanding protection as determined by CPAU. The Smart Inverter shall be capable of providing dynamic reactive power compensation (dynamic Volt/VAR operation) within the following constraints: The Smart Inverter shall not cause the line voltage at the point of common coupling to go outside the requirements of the latest version of ANSI C84.1, Range A. The Smart Inverter shall be able to consume reactive power in response to an increase in line voltage, and produce reactive power in response to a decrease in line voltage. The reactive power provided shall be based on available reactive power, but the maximum reactive power provided to the system shall be as directed by CPAU. u. Ramp Rate Requirements. The Smart Inverter is required to have the following ramp controls for at least the following two conditions. These functions can be established by multiple control functions or by one general ramp rate control function. Ramp GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 30 rates are contingent upon sufficient energy available from the Smart Inverter. Normal ramp-up rate: For transitions between energy output levels over the normal course of operation. The default value is 100% of maximum current output per second with a range of adjustment between 1% to 100%, with specific settings as mutually agreed by the CPAU and the Producer. Connect/Reconnect Ramp-up rate: Upon starting to inject power into the grid, following a period of inactivity or a disconnection, the inverter shall be able to control its rate of increase of power from 1 to 100% maximum current per second, with specific settings as mutually agreed upon by CPAU and the Producer. v. Default Activation States for Phase 1 Functions. Unless otherwise provided by CPAU, the default settings will be as follows: Anti-islanding – activated Low/High Voltage Ride-Through – activated Low/High Frequency Ride-Through – activated Dynamic Volt/VAR operations – deactivated Ramp rates – activated Fixed power factor – activated Reconnect by “soft-start” methods – activated These default activation states may be modified by mutual agreement between CPAU and Producer. w. Automatic Transfer (Load Shedding or Transfer). The voltage and frequency ride- through requirements of D.5.i and D.5.m shall not apply if either: a) The real power across the Point of Common Coupling is continuously maintained at a value less than GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 31 10% of the aggregate rating of the Smart Inverters connected to the Generation Facility prior to any voltage disturbance, and the Generation Facility disconnects from CPAU’s distribution system, along with Generation Facility load, such that the net change in real power flow from or to CPAU is less than 10% of the aggregate Smart Inverter capacity; or b) Generation Facility load real power demand equal to 90% to 120% of the pre-disturbance aggregate Smart Inverter real power output is shed within 0.1 seconds of Smart Inverter disconnection. x. Fault Detection. A Smart Inverter with an SCCR exceeding 0.1 or one that does not cease to energize CPAU’s Distribution System within two seconds of the formation of an Unintended Island shall be equipped with Protective Functions designed to detect Distribution System faults, both line-to-line and line-to-ground, and cease to energize CPAU’s Distribution System within two seconds of the initiation of a fault. y. Transfer Trip. For a Generating Facility that cannot detect Distribution System faults (both line-to-line and line-to-ground) or the formation of an Unintended Island, and cease to energize CPAU’s Distribution System within two seconds, CPAU may require a Transfer Trip system or an equivalent Protective Function. z. Reclose Blocking. Where the aggregate Generating Facility capacity exceeds 15% of the peak load on any automatic reclosing device, CPAU may require additional Protective Functions, including, but not limited to reclose-blocking on some of the automatic reclosing devices. E. INTERCONNECTION FACILITIES AND DISTRIBUTION SYSTEM MODIFICATIONS OWNERSHIP AND COST ALLOCATION 1. SCOPE AND OWNERSHIP OF INTERCONNECTION FACILITIES AND DISTRIBUTION SYSTEM MODIFICATIONS a. Scope. Parallel Operation of Generating Facilities may require Interconnection Facilities or modifications to CPAU’s Distribution System (“Distribution System modifications”). The type, extent and costs of Interconnection Facilities and Distribution System modifications shall be consistent with this Rule and determined through the Supplemental Review and/or Interconnection Studies described in Section C. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 32 b. Ownership. Interconnection Facilities installed on Producer’s side of the PCC may be owned, operated and maintained by the Producer or CPAU. Interconnection Facilities installed on CPAU’s side of the PCC and Distribution System modifications shall be owned, operated and maintained only by CPAU. 2. RESPONSIBILITY OF COSTS OF INTERCONNECTING A GENERATING FACILITY a. Study and Review Costs. A Producer shall be responsible for the reasonably incurred costs of the reviews and studies conducted pursuant to Section C.1 of this Rule. b. Facility Costs. A Producer shall be responsible for all costs associated with Interconnection Facilities owned by the Producer. The Producer shall also be responsible for any costs reasonably incurred by CPAU in providing, operating, or maintaining the Interconnection Facilities and Distribution System modifications required for the Interconnection of the Producer’s Generating Facility with CPAU’s Distribution System. c. Separation of Costs. Should CPAU combine the installation of Interconnection Facilities or Distribution System modifications required for the Interconnection of a Generating Facility with modifications to CPAU’s Distribution System to serve other Customers or Producers, CPAU shall not include the costs of such separate or incremental facilities in the amounts billed to the Producer. d. Payments. The Producer must pay applicable costs prior to the scheduling of any engineering reviews and studies; construction of distribution system modifications; or interconnection of generating facilities to CPAU’s Distribution System. 3. INSTALLATION AND FINANCING OF INTERCONNECTION FACILITIES AND DISTRIBUTION SYSTEM MODIFICATIONS a. Agreement Required. The costs for Interconnection Facilities and Distribution System modifications shall be paid by the Producer pursuant to the Provisions contained in the Special Facilities Agreement. Where the type and extent of the GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 33 Interconnection Facilities or Distribution System modifications warrant additional detail, Producer and CPAU shall execute separate agreement(s) to more fully describe and allocate the parties’ responsibilities for installing, owning, operating and maintaining the Interconnection Facilities and Distribution System modifications. b. Interconnection Facilities and Distribution System Modifications. Interconnection Facilities connected to CPAU’s side of the Point of Common Coupling and Distribution System modifications shall be provided, installed, owned and maintained by CPAU at Producer’s expense. c. Reservation of Unused Facilities. When a Producer wishes to reserve CPAU-owned Interconnection Facilities or Distribution System modifications installed and operated as Special Facilities for the Producer at Producer’s expense, but idled by a change in the operation of the Producer's Generating Facility or otherwise, Producer may elect to abandon or reserve such facilities consistent with the terms of its agreement with CPAU. If Producer elects to reserve idle Interconnection Facilities or Distribution System modifications, CPAU shall be entitled to continue to Charge Producer for the costs related to the ongoing operation and maintenance of the Special Facilities. d. Refund of Salvage Value. When a Producer elects to abandon the Special Facilities for which it has either advanced the installed costs or constructed and transferred to CPAU, the Producer shall not receive a credit for the net salvage value of the Special Facilities. F. METERING, MONITORING AND TELEMETRY 1. GENERAL REQUIREMENTS All Generating Facilities shall be metered in accordance with this Section F and shall meet all applicable standards of CPAU contained in CPAU’s applicable rules and published CPAU manuals dealing with Metering specifications. For general metering requirements, see CPAU Rule and Regulation 15. For net metering requirements, see CPAU Rule and Regulation 29. 2. METERING BY CPAU The ownership, installation, operation, reading and testing of revenue Metering Equipment GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 34 for Generating Facilities shall be by CPAU only. 3. NET GENERATION METERING For purposes of monitoring Generating Facility operation to determine standby Charges and applicable non-bypassable Charges as defined in CPAU’s tariffs, and for Distribution System planning and operations, consistent with Section B.4 of this Rule, CPAU shall have the right to specify the type, and require the installation of Net Generation Metering equipment. CPAU shall only require Net Generation Metering to the extent that less intrusive and/or more cost effective options for providing the necessary Generating Facility output data are not available. In exercising its discretion to require Net Generation Metering, CPAU shall consider all relevant factors, including but not limited to: a. Data requirements in proportion to need for information; b. Producer’s election to install equipment that adequately addresses CPAU’s operational requirements; c. Accuracy and type of required Metering consistent with purposes of collecting data; d. Cost of Metering relative to the need for and accuracy of the data; e. The Generating Facility’s size relative to the cost of the Metering/monitoring; f. Other means of obtaining the data (e.g., Generating Facility logs, proxy data etc.); and g. Requirements under any Interconnection Agreement with the Producer. 4. POINT OF COMMON COUPLING METERING For purposes of assessing CPAU Charges for retail service, the Producer’s PCC Metering shall be reviewed by CPAU, and if required, replaced to ensure that it will appropriately measure Electric power according to the Provisions of the Customer’s Electric Service tariff. Where required, the Customer’s existing Meter may be replaced with a bi-directional meter so that power deliveries to and from the Producer’s site can be separately recorded. Alternately, the Producer may, at its sole option and cost, require CPAU to install Multi- Metering Equipment to separately record power deliveries to CPAU’s Distribution System and retail purchases from CPAU. Where necessary, such PCC Metering shall be designed to prevent reverse registration. 5. TELEMETERING GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 12-12-2016 Sheet No. 35 If the nameplate rating of the Generating Facility is 1 MW or greater, telemetering equipment at the Net Generator Metering location may be required at the Producer's expense. If the Generating Facility is interconnected to a portion of CPAU’s Distribution System operating at a voltage below 10 kV, then Telemetering equipment may be required on Generating Facilities 250 kW or greater. CPAU shall only require Telemetering to the extent that less intrusive and/or more cost effective options for providing the necessary data in real time are not available 6. LOCATION Where CPAU-owned Metering is located on the Producer’s Premises, Producer shall provide, at no expense to CPAU, a suitable location for all such Metering Equipment as set forth in CPAU Rule and Regulation 15. 7. COSTS OF METERING The Producer will bear all costs of the Metering required by this Rule, including the incremental costs of operating and maintaining the Metering Equipment. (END) GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 12 TABLE OF CONTENTS: A. APPLICABILITY ......................................................................................................................................................... 2 B. GENERAL RULES, RIGHTS AND OBLIGATIONS ................................................................................................. 2 C. APPLICATION AND INTERCONNECTION PROCESS......................................................................................... 65 1. APPLICATION PROCESS .......................................................................................................................... 65 2. OVERVIEW OF THE INTERCONNECTION REVIEW PROCESS.......................................................... 75 3. COMMISSIONING TESTING AND PARALLEL OPERATION .......................................................... 1510 4. WITHDRAWAL / CANCELLATION ..................................................................................................... 1711 D. GENERATING FACILITY DESIGN AND OPERATING REQUIREMENTS .................................................... 1811 1. GENERAL INTERCONNECTION AND PROTECTION FUNCTION REQUIREMENTS .............. 181112 2. PREVENTION OF INTERFERENCE ..................................................................................................... 2114 3. TECHNOLOGY SPECIFIC REQUIREMENTS ...................................................................................... 2819 4. SUPPLEMENTAL GENERATING FACILITY REQUIREMENTS ...................................................... 3020 5. SMART INVERTER GENERATING FACILITY DESIGN AND OPERATING REQUIREMENTS .. 3221 E. INTERCONNECTION FACILITIES AND DISTRIBUTION SYSTEM MODIFICATIONS OWNERSHIP AND COST ALLOCATION ............................................................................................................................................ 4231 1. SCOPE AND OWNERSHIP OF INTERCONNECTION FACILITIES AND DISTRIBUTION SYSTEM MODIFICATIONS ................................................................................................................................... 4231 2. RESPONSIBILITY OF COSTS OF INTERCONNECTING A GENERATING FACILITY ............. 423132 3. INSTALLATION AND FINANCING OF INTERCONNECTION FACILITIES AND DISTRIBUTION SYSTEM MODIFICATIONS ............................................................................................................... 443233 F. METERING, MONITORING AND TELEMETRY ............................................................................................... 4533 1. GENERAL REQUIREMENTS ................................................................................................................ 4533 2. METERING BY CPAU ........................................................................................................................ 453334 3. NET GENERATION METERING ....................................................................................................... 453334 4. POINT OF COMMON COUPLING METERING ................................................................................... 4634 5. TELEMETERING ................................................................................................................................ 463435 6. LOCATION .............................................................................................................................................. 4635 7. COSTS OF METERING ........................................................................................................................... 4735 ATTACHMENT C GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 22 A. APPLICABILITY This Rule describes the Interconnection, Operating and Metering and operating requirements for Generating Facilities to be connected to the City of Palo Alto Utilities (CPAU) Electric Distribution System. Subject to the requirements of this Rule, CPAU will allow the Interconnection of Generating Facilities with its Distribution System. In order to provide for uniformity and to encourage the Interconnection of renewable energy generation, this Rule has been writtenis intended to be generally consistent with the technical requirements of CPUCCalifornia Public Utilities Commission Rule 21 and IEEE 1547, as amended. Language from IEEE 1547 that has been adopted directly (as opposed to paraphrased language or previous language that was determined to be consistent with IEEE 1547) is followed by a citation that lists the clause from which the language derived. For example, IEEE 1547-4.1.1 is a reference to Clause 4.1.1. In the event of any conflict between this Rule and any of the CPUC Rule 21 and IEEE 1547 standards listed herein, the requirements of this Rule shall take precedence. B. GENERAL RULES, RIGHTS AND OBLIGATIONS 1. Prior Authorization Required to Interconnect and Operate. A Producer must comply with this Rule, execute anAn executed Interconnection Agreement or, if a Producer is a customer-generator, as that term is used in Rule and Regulation 29, a Net Energy Metering and Interconnection Agreement with CPAU, and receive, as applicable, is required in addition to receiving CPAU’s express written permission before Parallel Operation of itsa Generating Facility with CPAU’s Distribution System. CPAU shall apply this Rule in a non-discriminatory manner and shall not unreasonably withhold its permission for Parallel Operation of Producer’s Generating FacilityFacilities with CPAU’s Distribution System. 2. Separate Agreements Required for Other Services. A Producer requiringSeparate Agreements are required for the provision of other Electric Services from CPAU including, but not limited to, Distribution Service provided by CPAU during periods of Curtailment or interruption of the Producer’sa Generating Facility, will enter into agreements with CPAU for such Services in accordance with CPAU’s Rules & Regulations and Utility Rates. 3. Service Not Provided With Interconnection. Interconnection with CPAU's Distribution GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 32 System under this Rule does not provide a Producer anyprovides no rights to utilize CPAU's Distribution System for the transmission, distribution, or wheeling of Electricelectric power. 4. Compliance Withwith Laws, Rules & Regulations and Utility Rates. A ProducerApplicants shall ascertain and comply with applicable CPAU Rules & Regulations and Utility Rates; applicable Federal Energy Regulatory Commission (FERC) approved rules, tariffs and regulations; and any local, state or federal Law, statute or regulation which applies to the design, siting, construction, installation, operation, or any other aspect of the Producer’sApplicant’s Generating Facility and Interconnection Facilities. 5. Design Reviews and Inspections. CPAU shall havehas the right to review the design of a Producer’san Applicant’s Generating Facility and Interconnection Facilities and to inspect a Producer’sthe Generating Facility and/or Interconnection Facilities prior to the commencement of Parallel Operation with CPAU’s Distribution System. CPAU may require a ProducerApplicants to make modifications as necessary to comply with the requirements of this RuleCPAU Rules and Regulations or other reasonable requirements. CPAU’s review and authorization for Parallel Operation shall not be construed as confirming or endorsing the Producer’sApplicant’s design or as warranting the Generating Facility and/or Interconnection Facilities’ safety, durability or reliability. CPAU shallis not, by reason of such review or lack of review, be responsible for the adequacy or capacity of such equipmentFacilities. 6. Right to Access. A Producer’sCustomer Generating Facility and Interconnection Facilities shall be accessible to CPAU personnel whenever necessary for CPAU to perform its duties and exercise its rights under its Rules &and Regulations and Utility Rates and any Interconnection Agreement, including the Net Energy Metering and Interconnection Agreement, between CPAU and the Producer. 7. Confidentiality of Information. Any information pertaining to Generating Facility and/or Interconnection Facilities provided to CPAU by a Producer shall be treated by CPAU in a confidential manner. CPAU shall not use information contained in the Application to propose discounted rates to the Customer unless authorized to do so by the Customer or the information is provided to CPAU by the Customer through other means. 7. 8. Prudent Operation and Maintenance Required. A ProducerThe Customer shall operate and maintain its Generating Facility and Interconnection Facilities in accordance with Prudent Electrical Practices and shall maintain compliance with this RuleCPAU GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 42 Rules and Regulations. 9. Curtailment and Disconnection. CPAU may limit the operation or, disconnect or require the disconnection of a Producer’sCustomer’s Generating Facility from CPAU’s Distribution System at any time, with or without notice, in the event of an Emergency, or to correct Unsafe Operating Conditions. CPAU may also limit the operation or, disconnect or require the disconnection of GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 5 8. a Producer’sCustomer’s Generating Facility from CPAU’s Distribution System upon the Provision ofwith reasonable written notice: (1) to allow for routine maintenance, repairs or modifications to CPAU’s Distribution System; (2) upon CPAU’s determination that a Producer’sCustomer’s Generating Facility is not in compliance with this Ruleany CPAU Rules and Regulations; or (3) upon termination of the applicable Interconnection Agreement or the Net Energy Metering and Interconnection Agreement. Upon the Producer’sWithin a reasonable period after the Customer’s written request, CPAU shallwill provide a written explanation of the reason for such Curtailment or disconnection. 9. Coordination with Affected Systems. CPAU will notify the Affected System Operators that are potentially affected by an Applicant’s Interconnection Request(s). CPAU will coordinate the conduct of any studies required to determine the impact of the Interconnection Request on Affected Systems with Affected System Operators and, if possible, include those results in its Interconnection Study. CPAU will invite such Affected System Operators to all meetings held with Applicant as required by this Rule. Applicants and transmission providers which may be an Affected System shall cooperate with CPAU in all matters related to the conduct of relevant studies and the determination of modifications to Affected Systems. Applicant shall enter into an agreement with the owner of the Affected System, as applicable and upon request by CPAU. The agreement will specify the terms governing payments to be made by Applicant to the owner of the Affected System as well as the repayment, if applicable, by the owner of the Affected System. 10. Transferability of Interconnection Request. An Applicant may transfer its Interconnection Request to another entity only if such entity acquires the proposed Generating Facility identified in the Interconnection Request and the Point of Interconnection and operating parameters do not change. CPAU at its discretion may deny such requests if CPAU determines applicable requirements will not be met as a result of the transfer. 11. Special Provisions Applicable to Net Energy Metering Applicants (NEM). Notwithstanding any other provision in this Rule: a. For Generating Facilities qualifying for service under PUC Sections 2827, 2827.8 and 2827.10, as amended, the Applicant is not responsible for payment of study costs. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 6 b. For Generating Facilities qualifying for service under PUC Sections 2827 and 2827.8, as amended, CPAU’s approval for Interconnection will normally be processed not later than thirty (30) Business Days following CPAU’s receipt of: i. a completed Net Energy Metering Interconnection Request including all supporting documents and required payments; ii. a completed signed Net Energy Metering Generator Interconnection Agreement; and iii. evidence of Applicant’s final electric inspection clearance from the Palo Alto Building Department. If the 30-day period cannot be met, CPAU will notify Applicant of the reason for the inability to process the Interconnection Request and the expected completion date. Applicants with PUC Section 2827 Generating Facilities that include non-inverter based Generators and/or Generators with non-Certified Equipment should submit a completed Net Energy Metering Interconnection Request, including all supporting documents sufficient for CPAU to start the review process, without waiting for the final inspection clearance. Applicants with such Generating Facilities are advised to submit their Interconnection Request at least six (6) months in advance of their planned Commercial Operation Date. Depending on the size and location of these Generating Facilities, additional time for review and study may be required. C. APPLICATION AND INTERCONNECTION PROCESS 1. APPLICATION PROCESS a. a. Applicant initiates contact with CPAU. Upon request, CPAU will provide information and documents (such as sample agreements, Load Sheets, technical information, listing of Certified Equipment, applicable Rate Schedules and Metering requirements) to a potential Applicant. Unless otherwise agreed upon, all such information shall normally be sent to the Applicant within three (3) Business Days following the initial request from the Applicant.a. Utility Service Application (Application). GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 7 b. Applicant Completes a Load Sheet. All Applicants shallmust complete and submit a Load Sheetthe Application and three (3) sets of plan drawings for review. Load Sheets and plans may be dropped off at the Development Center located at 285 Hamilton Avenue, or Utilities Engineering at 1007 Elwell Court.. 1. CPAU shall complete the Initial Review, absent any extraordinary circumstances, within 10 Business Days of receiving the Load Sheet and plans. If defects are noted, CPAU and Applicant shall cooperate to establish a satisfactory Application. 2. Applications that are over one year old (from the date of CPAU’s acknowledgement) without a signed Interconnection Agreement or Net Energy Metering and Interconnection Agreement, or a Generating Facility that has not been approved for Parallel Operation within one year of completion of all applicable review and/or studies are subject to cancellation by CPAU; however, CPAU may not cancel an Application if the Producer provides reasonable evidence that the project is still active. c. CPAU Performs an Initial and Supplemental Review and Develops Preliminary Cost Estimates and Interconnection Requirements. 2. 1. UPON RECEIPT OF A SATISFACTORILY COMPLETED APPLICATION AND ANY ADDITIONAL INFORMATION NECESSARY TO EVALUATE THE INTERCONNECTION OF A GENERATING FACILITYOVERVIEW OF THE INTERCONNECTION REVIEW PROCESS a. Valid Interconnection Request. After an Application is received and deemed complete and valid, CPAU will start the interconnection review process. See Section B.11 for special provisions related to the timeframe and costs applicable to NEM Applicants. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 8 a.b. Initial Review. Upon receipt of a complete and valid Application and plans, CPAU shall perform an Initial Review using the process defined in Section G. . The Initial Review determines if: (a) (i) the Generating Facility qualifies for a Simplified Interconnection;, or (bii) the Generating Facility requires a Supplemental Review. Absent extraordinary circumstances, CPAU shall notify Applicant in writing of the results of Initial Review within ten (10) Business Days following validation of an Interconnection Request. 2. CPAU shall complete its Passage of Initial Review, absent any extraordinary circumstances, within 10 Business Days after receipt of a completed Application including Load Sheet and plan drawings. If the Initial Review determines the proposed Generating Facility can be Interconnected by means of a Simplified. For Interconnection, CPAU will provide the Applicant with an Interconnection Agreement for Applicant’s signature. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 9 3. If the Generating Facility does not Requests that pass the Initial Review for Simplifiedand do not require Interconnection as proposedFacilities or Distribution Upgrades, CPAU will notifyprovide the Applicant and performwith a Supplemental Review. Applicant shall pay the applicable Advance Engineering Fee described in Rate Schedule E-15 unless the Application is withdrawn. The Supplemental Review will result in CPAU providing either: (a)Generator Interconnection requirements beyond those for a Simplified Interconnection, and anAgreement or Generator Interconnection Agreement or theand Net Energy Metering and Interconnection Agreement for Applicant’s signature; or (b) a cost estimate and schedule for an Interconnection Study. The Supplemental Review shall be completed, absent any extraordinary circumstances, within 20 Business Days of receipt of a completed Application and fees. The Interconnection Study may require additional fees and more time to complete, depending on the complexity of the project to be studied. If the Supplemental Review determines that new or modified Utility-owned distribution and/or protection facilities are required, the Applicant will be charged the estimated cost of any Utility-owned facilities determined to be required by the Review. These facilities will be treated as Special Facilities for the purpose of determining Applicant costs. , if applicable, within fifteen (15) Business Days of providing notice of Initial Review results. For Interconnection Requests d. When Required, Applicant and CPAU Commit to Additional Interconnection Study Steps. When a Supplemental Review reveals that the proposed Generating Facility cannot be Interconnected to CPAU’s Distribution System by means of a Simplified Interconnection, or that significantpass the Initial Review but also require Interconnection Facilities installed on CPAU’s system or Distribution System modifications will be needed to accommodate an Applicant’s Generating Facility, CPAU and Applicant shall enter into an agreement that provides for CPAU to perform additional studies, facility design and engineering, and to provide an estimate for actual cost billing to the Applicant, at the Applicant’s expense (the Advanced Engineering Fee). The Interconnection Study agreement shall set forth CPAU’s estimated schedule and Charges for completing such work. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 10 2. INTERCONNECTION PROCESS GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 11 i. a. Applicant and CPAU enter into an Interconnection Agreement or a New Energy Metering and Interconnection Agreement and, where required, a Special Facilities Agreement forupgrades, CPAU will provide Applicant with a non-binding cost estimate of the Interconnection Facilities or Distribution System Modifications. upgrades within thirty (30) Business Days of providing notice of Initial Review results. These facilities may be treated as Special Facilities (depending on circumstance) for the purpose of determining Applicant costs. The applicant can then proceed with executing an Interconnection Agreement in accordance with Section C.1.e below. ii. Failure of Initial Review. For Interconnection Requests that fail Initial Review, CPAU shallwill provide the technical reason, data and analysis supporting the Initial Review results in writing and provide Applicant the option to proceed directly to a Supplemental Review. The Applicant shall notify CPAU within ten (10) Business Days following such notification whether to (i) proceed to a Supplemental Review, or (ii) withdraw the Interconnection Request. Applicants that elect to proceed to a Supplemental Review shall provide a nonrefundable Advance Engineering Fee set forth in Rate Schedule E-15 with their response. CPAU will proceed with the Supplemental Review once payment of the required Advance Engineering Fee has been received. If Applicant fails to notify CPAU within ten (10) Business Days of such notification, the Interconnection Request will be deemed withdrawn. iii. Additional Initial Review Information. No changes may be made to the planned Point of Interconnection or Generating Facility size included in the Interconnection Request during the review process, unless such changes are agreed to by CPAU. Where agreement has not been reached, Applicants choosing to change the Point of Interconnection or Generating Facility size must reapply and submit a new Interconnection Request. c. Supplemental Review. If Applicant requests a Supplemental Review and submits an Advance Engineering Fee as described in Rate Schedule E-15, if required, CPAU will GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 12 perform the Supplemental Review using the review process in Section H.2., and complete the Supplemental Review within twenty (20) Business Days, absent extraordinary circumstances, following authorization and receipt of the fee. The Supplemental Review will determine if (i) the Generating Facility qualifies for interconnection, or interconnection with additional requirements, or (ii) the Generating Facility requires a Detailed Study. Theexecutable version of the Applicant must provide the following data to CPAU when requesting a Supplemental Review: Generator: 1. MVA Rating 2. kV Rating 3. Base MVA 4. Base kV 5. Xd" (direct axis subtransient reactance) 6. Xd' (direct axis transient reactance) 7. Xd (Synchronous reactance) 8. X2 (Negative Sequence reactance) 9. X0 (Zero Sequence reactance) Generating Facility Transformer Data: 1. Winding configuration (delta-Wye gnd or Wye gnd-Delta) 2. MVA Rating 3. KV Rating 4. Base MVA 5. Base KV 6. Z1 HV-LV 7. Z0 HV-LV Line Data: 1. Impedance data for line from Transformer to POI (if applicable) 2. Z1 3. Z0 4. Point of Interconnection (POI) Location i. Passage of Supplemental Review. For Interconnection Requests that pass a GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 13 Supplemental Review and do not require Interconnection Facilities or Distribution Upgrades, CPAU will provide Applicant with a Generator Interconnection Agreement or the Net Energy Metering and within fifteen (15) Business Days of providing notice of the Supplemental Review results. For Interconnection Requests that pass a Supplemental Review but also require Interconnection Facilities or Distribution upgrades, CPAU will provide Applicant with a non-binding cost estimate of the Interconnection Facilities or Distribution upgrades within thirty (30) Business Days of providing notice of the Supplemental Review results. These facilities may be treated as Special Facilities (depending on circumstance) for the purpose of determining Applicant costs. The Applicant can then proceed with executing an Interconnection Agreement in accordance with Section C.1.e below. ii. Failure of Supplemental Review. For Interconnection Requests that fail a Supplemental Review, CPAU will provide the technical reason, data and analysis supporting the Supplemental Review results in writing and provide Applicant the option to proceed directly to a cost estimate and schedule for a Detailed Study. The Applicant shall notify CPAU within fifteen (15) Business Days following such notification whether to (i) proceed to a cost estimate and schedule for a Detailed Study, or (ii) withdraw the Interconnection Request. If the Applicant elects to proceed with the cost estimate and schedule for a Detailed Study, CPAU shall provide Applicant with a non-binding cost estimate and schedule within thirty (30) Business Days of the Applicant providing notice to proceed. If Applicant fails to notify CPAU within fifteen (15) Business Days of such notification, the Interconnection Request shall be deemed withdrawn. d.as appropriate, for Detailed Study. If the Applicant requests to proceed with the cost estimate and schedule for a Detailed Study as provided by CPAU in Section C.1.c.ii above, CPAU and the Applicant may enter into a Detailed Study agreement that provides for CPAU to perform additional studies, facility design and engineering, and to provide an estimate for the actual cost of CPAU provided Interconnection Facilities or Distribution Upgrades as required to allow for the interconnection of the GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 14 generating facility at the Applicant’s Generating Facility and desired mode of operation. Where the Supplemental Review or Interconnection Study performed by CPAU has determined that modifications or additions to expense. The Detailed Study agreement shall set forth CPAU’s estimated time schedule and charges for completing such work. Note: the Detailed Study fee shall be waived for NEM applicants meeting the requirements of Section B.11. Following payment of the cost estimate by the Applicant, CPAU will proceed with the Detail Study in accordance with the agreed upon time schedule, and upon completion of the Detailed Study, CPAU will provide the results in writing to the Applicant along with the final cost estimate of any required Interconnection or Distribution Facilities. These facilities may be treated as Special Facilities (depending on circumstance) for the purpose of determining Applicant costs. The applicant can then proceed with executing an Interconnection Agreement in accordance with Section C.1.e below. e. Execution of the Generator Interconnection Agreement. i. Following the receipt of a cost estimate for any Distribution Upgrades and/or Interconnection Facilities that have been identified (Applicants that did not require a cost estimate may proceed to Section C.1.e.ii below), Applicant shall notify CPAU within fifteen (15) Business Days whether Applicant: (i) requests a Generator Interconnection Agreement, or (ii) withdraws its Distribution System are required, or that additional Interconnection Facilities will be necessary to accommodate an Interconnection Request. If Applicant fails to notify CPAU within fifteen (15) Business Days, the Interconnection Request shall be deemed withdrawn. If Applicant elects to proceed to a Generator Interconnection Agreement, CPAU will provide Applicant with a Generator Interconnection Agreement for Applicant’s Generating Facility, CPAU may also provide the Applicant with a Special Facilities Agreement. This agreement shall set forth CPAU and the signature within fifteen (15) Business Days of Applicant’s responsibilities, completion schedules, and estimated costs for the required workrequest. b. Where applicable, CPAU installs required Interconnection Facilities or modifies CPAU’s Distribution System. ii. After executing the applicable agreementsUpon receipt of a draft GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 15 Generator Interconnection Agreement, Applicant has ninety (90) Calendar Days to sign and return the Generator Interconnection Agreement. Applicant shall provide to CPAU written comments, or notification of a lack of any comments, on the draft Generator Interconnection Agreement and appendices within thirty (30) Calendar Days. At the request of Applicant, CPAU shall begin negotiations with Applicant at any time after CPAU provides Applicant with the draft Generator Interconnection Agreement, which contains in its appendices the cost estimate for any Distribution Upgrades and/or Interconnection Facilities that have been identified by CPAU. If Applicant fails to execute the Generator Interconnection Agreement within the ninety (90) Calendar Days described in this section, the Interconnection Request shall be deemed withdrawn. ii.iii. After Applicant has executed the Generator Interconnection Agreement and paid the final invoice for estimated cost of Distribution Upgrades and/or Interconnection Facilities, CPAU will commence with the design, procurement, construction/ and installation of CPAU’s Distribution System modifications or Interconnection Facilities which have been identified in the agreements. The parties required facilities identified in the Generator Interconnection Agreement. (Note: once the Applicant executes the agreement, the Applicant is thereafter referred to as a Producer) CPAU and Producer will use good faith efforts to meet schedules and estimated costs as appropriatein accordance with the requirements of the Generator Interconnection Agreement. Producer is responsible for all costs associated with Parallel Operation to support the safe and reliable operation of the Distribution System and Transmission System. 3. C. PRODUCER ARRANGES FOR AND COMPLETES PRE- PARALLELCOMMISSIONING TESTING AND PARALLEL OPERATION a. Commissioning Testing of Generating Facility and Producer’s Interconnection Facilities. . The Producer is responsible for commissioning and testing new Generating Facilities and associated Interconnection Facilities to ensure compliance with the safety and reliability Provisionsprovisions of this Rule prior to being operated in parallel GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 16 with CPAU’s Distribution or Transmission System. For non-Certified Equipment, Producer shall develop a written testing plan to be submitted to CPAU for its review and acceptance. Where applicable, the testing plan shall include the installation test procedures published by the manufacturer of the Generating Facility or Interconnection Facilities. Facility testing shall be conducted at a mutually agreeable time, and CPAU shall be given the opportunity to witness the tests. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 17 Where applicable, the test plan shall include the installation test procedures published by the manufacturer of the generation or Interconnection equipment. Facility testing shall be conducted at a mutually agreeable time, and CPAU and Producer shall be given the opportunity to witness the tests. d. CPAU Authorizes b. Parallel Operation or Momentary Parallel Operation. CPAU shall authorize the Producer’s Generating Facility for Parallel Operation or Momentary Parallel Operation with CPAU’s Distribution System, in writing, within 5 days of satisfactory compliance with the terms of all applicable agreements. Compliance may include, but not be limited to, Provision of any required documentation and satisfactorily completing any required inspections or tests as described herein or in the agreements formed between the Producer and CPAU. A Producer shall not commence Parallel Operation of its Generating Facility with CPAU’s system unless it has received CPAU’s express written permission to do so. CPAU will authorize Producer’s Generating Facility for Parallel Operation or momentary Parallel Operation with CPAU’s Distribution or Transmission System, in writing, within five (5) Calendar Days of satisfactory compliance with the terms of all applicable agreements. 4. D. WITHDRAWAL / CANCELLATION Applicant may withdraw its Interconnection Request at any time by written notice of such withdrawal to CPAU. In addition, after receipt of the Interconnection Request, if Applicant fails to adhere to the requirements and timelines of this rule, CPAU shall deem the Interconnection Request to be withdrawn and shall provide written notice to Applicant of the deemed withdrawal within five (5) Business Days and an explanation of the reasons for such deemed withdrawal. Upon receipt of such written notice, Applicant shall have five (5) Business Days in which to either respond with information or action that either cures the deficiency or supports its position that the deemed withdrawal was erroneous. Applications that are over one year old (from the date of CPAU’s receipt) without resulting in a signed Interconnection Agreement or Net Energy Metering and Interconnection Agreement, or approval for Parallel Operation of a Generating Facility within one year of completion of all applicable review and/or studies, are subject to cancellation by CPAU. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 18 D. GENERATING FACILITY DESIGN AND OPERATING REQUIREMENTS This section D. has been revised to be consistent with the requirements of ANSI/IEEE 1547- 2003 Standard for Interconnecting Distributed Resources with Electric Power Systems (IEEE 1547). Exceptions are taken to IEEE 1547 Clauses 4.1.4.2 Distribution Secondary Spot Networks and Clauses 4.1.8.1 or 5.1.3.1, which address Protection from Electromagnetic Interference. Also, RULE AND REGULATIONNote that this Rule and Regulation 27 does not adopt the Generating Facility power limitation of 10 MW incorporated in IEEE 1547. 1. 1. GENERAL INTERCONNECTION AND PROTECTION FUNCTION REQUIREMENTS The Protective Functions and requirements of this Rule are designed to protect CPAU’s Distribution System and not the Generating Facility. A ProducerCustomer shall be solely responsible for providing adequate protection for its Generating Facility and Interconnection Facilities. The Producer’sCustomer’s Protective Functions shall not impact the operation of other Protective Functions utilized on CPAU’s Distribution System in a manner that would affect CPAU’s capability of providing reliable service to its Customers. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 19 a. Protective Functions Required. A Generating Facility operating in parallel with CPAU’s Distribution System shall be equipped with the following Protective Functions to sense abnormal conditions on CPAU’s Distribution System and cause the Generating Facility to be automatically disconnected from CPAU’s Distribution System or to prevent the Generating Facility from being connected to CPAU’s Distribution System inappropriately: 1i. Over and under voltage trip functions and over and under frequency trip functions; 2ii. A voltage and frequency sensing and time-delay Function to prevent the Generating Facility from energizing a de-energized Distribution System circuit and to prevent the Generating Facility from reconnecting with CPAU’s Distribution System unless CPAU’s Distribution System service voltage and frequency is within the ANSI C84.1-1995 Table 1 Range B Voltage Range of 106V to 127V on a 120V basis, inclusive, and a frequency range of 59.3 Hz to 60.5 Hz, inclusive, and are stable for at least 60 seconds, and; 3iii. A Function to prevent the Generating Facility from contributing to the formation of an Unintended Island, and cease to energize the CPAU system within two seconds of the formation of an Unintended Island. The Generating Facility shall cease to energize CPAU’s Distribution System for faults on CPAU’s Distribution System circuit to which it is connected (IEEE1547-4.2.1). The Generating Facility shall cease to energize CPAU’s Distribution circuit prior to re-closure by CPAU’s Distribution System equipment (IEEE1547-4.2.2). b. Momentary Paralleling Generating Facilities. With CPAU’s approval, the transfer switch or scheme used to transfer the Producer’s Loads from CPAU’s Distribution System to Producer’s Generating Facility may be used in lieu of the Protective Functions required for Parallel Operation. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 20 c. Suitable Equipment Required. Circuit breakers or other interrupting devices located at the Point of Common Coupling must be Certified or "Listed" (as defined in Article 100, the Definitions Section of the National Electrical Code) as suitable for their intended application. This includes being capable of interrupting the maximum available fault current expected at their location. Producer’s Generating Facility and Interconnection Facilities shall be designed so that the failure of any one device shall not potentially compromise the safety and reliability of CPAU’s Distribution System. The Generating Facility’s paralleling-device shall be capable of withstanding 220% of the Interconnection Facilities’ rated voltage (IEEE 1547-4.1.8.3). The Interconnection Facilities shall have the capability to withstand voltage and current surges in accordance with the environments defined in IEEE Std C62.41.2-2002 or IEEE Std C37.90.1-2002 as applicable and as described in IEEE 1547-4.1.8.2. d. Visible Disconnect Required: The Producer shall furnish and install a ganged, manually-operated isolating switch (or a comparable device mutually agreed upon by CPAU and the Producer) near the Point of Interconnection to isolate the Generating Facility from CPAU’s Distribution System. The device does not have to be rated for Load break nor provide over-currentovercurrent protection. The device must: 1i. Allow visible verification that separation has been accomplished. (This requirement may be met by opening the enclosure to observe contact separation.) Molded case circuit breakers do not meet the visible contact requirement and are not acceptable as a Visible Disconnect device. 2ii. Include markings or signage that clearly indicates open and closed positions. 3iii. Be capable of being reached quickly and conveniently 24 hours a day by CPAU personnel for construction, maintenance, inspection, testing or reading, without obstacles or requiring those seeking access to obtain keys, special permission, or security clearances. 4iv. Be capable of being locked in the open position. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 21 5v. Be clearly marked on the submitted Single Line Diagram and its type and location approved by the CPAU prior to installation. If the device is not adjacent to the Point of Common Coupling (PCC,), permanent signage must be installed at a CPAU-approved location providing a clear description of the location of the device. Generating Facilities with Non-Islanding inverters totaling one (1) kilovolt- ampere (kVA) or less are exempt from this requirement. e. Drawings Required. Prior to Parallel Operation or Momentary Parallel Operation of the Generating Facility, CPAU shall approve the Producer's Protective Function and control diagrams. A Generating Facility equipped with a Protective Function and control scheme previously approved by CPAU for system-wide application or only Certified Equipment may satisfy this requirement by reference to previously approved drawings and diagrams. f. Generating Facility Conditions Not Identified. In the event this Rule does not address the Interconnection conditions for a particular Generating Facility, CPAU and Producer may agree upon other arrangements, to be approved by CPAU. 2. 2. PREVENTION OF INTERFERENCE The Producer shall not operate a Generating Facility or Interconnection Facilities that superimpose a voltage or current upon CPAU’s Distribution System that interferes with CPAU operations, service to CPAU Customers, or communication facilities. If such interference occurs, the Producer must diligently pursue and take corrective action at its own expense after being given notice and reasonable time to do so by CPAU. If the Producer does not take corrective action in a timely manner, or continues to operate the facilities causing interference without restriction or limit, CPAU may, without liability, disconnect the Producer's facilities from CPAU’s Distribution System, in accordance with Section B.98 of this Rule. To eliminate undesirable interference caused by its operation, each Generating Facility shall meet the following criteria: a. Voltage Regulation. The Generating Facility shall not actively regulate the voltage at the PCC while in parallel with CPAU’s Distribution System. The Generating Facility shall not cause the service voltage at other Customers to go outside the requirements of ANSI C84.1-1995, Range A (IEEE 1547-4.1.1). GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 22 b. b. Operating Voltage Range. The voltage ranges in Table D.1 define protective trip limits for the Protective Function and are not intended to define or imply a voltage regulation Function. A Generating Facility shall cease to energize CPAU’s Distribution System within the prescribed trip time whenever the voltage at the PCC deviates from the allowable voltage operating range. The Protective Function shall detect and respond to voltage on all phases to which the Generating Facility is connected. 1i. Generating Facilities (30 kVA or less).. Generating Facilities with a Gross Nameplate Rating of 30 kVA or less shall be capable of operating within the voltage range normally experienced on CPAU’s Distribution System. The operating range from plus to minus 5% of the nominal voltage (e.g. 114 volts to 126 volts on a 120 volt base), at the service panel or PCC. The trip settings at the generator terminals shall be selected in a manner that minimizes nuisance tripping between 106 volts and 132 volts on a 120-volt base (88-110% of nominal voltage). ) to compensate for voltage drop between the generator terminals and the PCC. Voltage shall be detected at either the PCC or the Point of Interconnection. However, the voltage range at the PCC with the generator on-line shall stay within +/- 5% of nominal. 2. Generating Facilities (greater than 30 kVA). CPAU may have specific operating voltage ranges for a Generating Facility with a Gross Nameplate Rating greater than 30 kVA, and may require adjustable operating voltage settings. In the absence of such requirements, the Generating Facility shall operate at a range between 88% and 110% of the applicable Interconnection voltage. Voltage shall be detected at either the PCC or the Point of Interconnection, with settings compensated to account for the voltage at the PCC. Generating Facilities that are Certified Non-Islanding or that meet one of the options of the Export Screen (Section l.3.b) may detect voltage at the Point of Interconnection without compensation. 3 ii. Voltage Disturbances. Whenever CPAU’s Distribution System voltage at the PCC varies from and remains outside normal (nominally 120 volts) by the predetermined amounts set forth in Table D-.1, the Generating Facility’s Protective Functions shall cause the Generator(s) to become GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 23 isolated from CPAU’s Distribution System:. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 24 TABLE D.1: Voltage Trip Settings Voltage at Point of Common Coupling Maximum Trip Time(1) Assuming 120 V Base % of Nominal Voltage # of Cycles (Assuming 60 Hz Nominal) Seconds Less than 60 Volts Less than 50% 10 Cycles 0.16 Seconds Greater than or equal to 60 Volts but less than 106 Volts Greater than or equal to 50% but less than 88% 120 Cycles 2 Seconds Greater than or equal to 106 Volts but less than or equal to 132 Volts Greater than or equal to 88% but less than or equal to 110% Normal Operation Greater than 132 Volts but less than or equal to 144 Volts Greater than 110% but less than or equal to 120% 60 Cycles 1 Second Greater than 144 Volts Greater than 120% 10 Cycles 0.16 Seconds (1) “Maximum Trip time” refers to the time between the onset of the abnormal condition and the Generating Facility ceasing to energize CPAU’s Distribution System. Protective Function sensing equipment and circuits may remain connected to CPAU’s Distribution System to allow sensing of electrical conditions for use by the “reconnect” feature. The purpose of the allowed time delay is to allow a Generating Facility to “ride through” short-term disturbances to avoid nuisance tripping. Set points shall not be user adjustable (though they may be field adjustable by qualified personnel). For Generating Facilities with a Gross Nameplate Rating greater than 30 kVA, set points shall be field adjustable and different voltage set points and trip times from those in Table D.1 may be negotiated with CPAU. c. Paralleling. The Generating Facility shall parallel with CPAU’s Distribution System without causing a voltage fluctuation at the PCC greater than ±5% of the prevailing voltage level of CPAU’s Distribution System at the PCC, and meet the flicker requirements of D.2.d. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 25 d. Flicker. The Generating Facility shall not create objectionable flicker for other Customers on CPAU’s Distribution System. To minimize the adverse voltage effects experienced by other Customers (IEEE 1547-4.3.2), flicker at the PCC caused by the Generating Facility should not exceed the limits defined by the “Maximum Borderline of Irritation Curve” identified in IEEE 519-1992 (IEEE Recommended Practices and Requirements for Harmonic Control in Electric Power Systems, IEEE STD 519-1992, Institute of Electrical and Electronic Engineers, Piscataway, NJ). ). This requirement is necessary to minimize the adverse voltage affects experienced by others Customers on CPAU’s Distribution System. Generators may be connected and brought up to synchronous speed (as an induction motor) provided these flicker limits are not exceeded. e. Integration with CPAU’s Distribution System Grounding. The grounding scheme of the Generating Facility Interconnection shall not cause over-voltages that exceed the rating of the equipment connected to CPAUCPAU’s Distribution System and shall not disrupt the coordination of the ground fault protection on CPAU’s Distribution System (IEEE 1547-4.1.2). Also see Section F. f. Frequency. CPAU’s controls system frequency, and theThe Generating Facility shall operate in synchronism with CPAU’s Distribution System. Whenever CPAU’s Distribution System Frequency at the PCC varies from and remains outside normal (nominally 60 Hz) by the predetermined amounts set forth in Table D.2, the Generating Facility’s Protective Functions shall cease to energize CPAU’s Distribution System within the stated maximum trip time. TABLE D.2: Frequency Trip Settings Generating Facility Rating Frequency Range (Assuming 60 Hz Nominal) Maximum Trip Time (1) (Assuming 60 Cycles per Second Less or equal to 30 kW Less than 59.3 Hz 10 Cycles Greater than 60.5 Hz 10 Cycles Greater than 30 kW Less than 57 Hz 10 Cycles Less than an adjustable value between 59.8 Hz and 57 Hz but greater than 57 Hz (2) Adjustable between 10 and 18,000 Cycles (2),(3) Greater than 60.5 Hz 10 Cycles GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 26 ( 1) “Maximum Trip time” refers to the time between the onset of the abnormal condition and the Generating Facility ceasing to energize CPAU’s Distribution System. Protective Function sensing equipment and circuits may remain connected to CPAU’s Distribution System to allow sensing of electrical conditions for use by the “reconnect” feature. The purpose of the allowed time delay is to allow a Generating Facility to “ride through” short-term disturbances to avoid nuisance tripping. Set points shall not be user adjustable (though they may be field adjustable by qualified personnel). For Generating Facilities with a Gross Nameplate Rating greater than 30 kVA, set points shall be field adjustable and different voltage set points and trip times from those in Table D.2 may be negotiated with CPAU. (2) Unless otherwise required by CPAU, a trip frequency of 59.3 Hz and a maximum trip time of 10 cycles shall be used. (3) When a 10-cycle maximum trip time is used, a second under frequency trip setting is not required. g. Harmonics. When the Generating Facility is serving balanced linear Loads, harmonic current injection into CPAU’s Distribution System at the PCC shall not exceed the limits stated below in Table D.3. The harmonic current injections shall be exclusive of any harmonic currents due to harmonic voltage distortion present in CPAU’s Distribution System without the Generating Facility connected (IEEE 1547-4.3.3). The harmonic distortion of a Generating Facility located at a Customer’s site shall be evaluated using the same criteria as for the Host Loads. Table D.3 Maximum Harmonic Current Distortion in Percent of Current (I)(1,2) Individual Harmonic Order h, (odd harmonics) (3) h<11 11 ≤ h < 17 17 ≤ h < 23 23 ≤ h < 35 35 ≤ h Total Demand distortion (TDD) Max Distortion (%) 4.0 2.0 1.5 0.6 0.3 5.0 (1) IEEE 1547-4.3.3 (2) I = the greater of the maximum Host Load current average Demand over 15 or 30 minutes without the GF, or the GF rated current capacity (transformed to the PCC when a transformer exists between the GF and the PCC). (3) Even harmonics are limited to 25% of the odd harmonic limits above. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 27 GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 28 h. Direct Current Injection. Generating Facilities should not inject direct current greater than 0.5% of rated output current into CPAU’s Distribution System. i. Power Factor. Each Generator in a Generating Facility shall be capable of operating at some point within a Power Factor range from 0.9 leading to 0.9 lagging. Operation outside this range is acceptable provided the reactive power of the Generating Facility is used to meet the reactive power needs of the Host Loads or that reactive power is otherwise provided under tariff by CPAU. The Producer shall notify CPAU if it is using the Generating Facility for Power Factor correction. Unless otherwise agreed upon by the Producer and CPAU, Generating Facilities shall automatically regulate Power Factor, not voltage, while operating in parallel with CPAU’s Distribution System. 3. 3. TECHNOLOGY SPECIFIC REQUIREMENTS a. Three-Phase Synchronous Generators. For three-phase Generators, the Generating Facility circuit breakers shall be three-phase devices with electronic or electromechanical control. The Producer shall be responsible for properly synchronizing its Generating Facility with CPAU’s Distribution System by means of either manual or automatic synchronizing equipment. Automatic synchronizing is required for all synchronous Generators that have a Short Circuit Contribution Ratio (SCCR) exceeding 0.05. Loss of synchronism protection is not required except as may be necessary to meet D.2.d (Flicker) (IEEE 1547- 4.2.5). Unless otherwise agreed upon by the Producer and CPAU, synchronous Generators shall automatically regulate Power Factor, not voltage, while operating in parallel with CPAU’s Distribution System. A power system stabilization function is specifically not required for Generating Facilities under 10 MW Net Nameplate Rating. Ground Fault Protection is required for generators > 40 kW. Voltage Restraint Overcurrent or Voltage Controlled Overcurrent relays are required for generators or a group of generators > 400 kW. b. Induction Generators. Induction Generators (except self-excited Induction Generators) do not require a synchronizing Function. Starting or rapid Load fluctuations on induction Generators can adversely impact CPAU’s Distribution System's voltage. Corrective step-switched capacitors or other techniques may be necessary and may cause undesirable ferro-resonance.ferroresonance. When these counter measures (e.g.,. additional capacitors) are installed on the Producer's side of the Point of Common Coupling, CPAU must review these measures. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 29 Additional equipment may be required as determined in a Supplemental Review or an Interconnectiona Detailed Study. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 30 Ground Fault Protection is required for generators > 40 kW. Voltage Restraint Overcurrent or Voltage Controlled Overcurrent relays are required for generators or a group of generators > 400 kW. c. Inverters. Only Certified inverters are approved for interconnection. Utility- interactive inverters do not require separate synchronizing equipment. Non- utility-interactive or “stand-alone” inverters shall not be used for Parallel Operation with CPAU’s Distribution System. Inverters or a group of inverters > 400 kW require Ground Fault Protection. Inverter based systems not classified as “Smart Inverters” may continue to be installed per Section D.3.c until the later of either (1) December 31, 2015 or (2) September 8, 2017, which is twelve (12) months after the date the Supplement SA of UL-1741 (with California requirements) is approved. Section D.5 may be used in all or in part, for inverter based technologies by mutual agreement of CPAU and the Applicant. The replacement of an existing inverter to an inverter that is of equal or greater ability than the original is allowed per Section D.3.c. Section D.5 may be used in all or in part, for replacement inverter based technologies by mutual agreement of CPAU and the Applicant. d. Single-Phase Generators. For single-phase Generators connected to a shared single-phase secondary system, the maximum Net Nameplate Rating of the Generating Facilities shall be 20 kVA. Generators connected to a center-tapped service neutral 240-volt service must be installed such that no more than 6 kVA of unbalanced power is applied to the two “legs” of the 240-volt service.service. The current in the most heavily loaded leg must not exceed twice that of the other leg. For Dedicated Distribution Transformer Services, the maximum Net Nameplate Rating of a single-phase Generating Facility shall be the transformer nameplate rating. 4. 4. SUPPLEMENTAL GENERATING FACILITY REQUIREMENTS a. Fault Detection. A Generating Facility with an SCCR exceeding 0.1 or one that does not cease to energize CPAU’s Distribution System within two seconds of the formation of an Unintended Island shall be equipped with Protective Functions designed to detect Distribution System faults, both line-to-line and line-to-ground, GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 31 and shall cease to energize CPAU’s Distribution System within two seconds of the initiation of a fault. b. Transfer Trip. For a Generating Facility that cannot detect Distribution System faults (both line-to-line and line-to-ground) or the formation of an Unintended Island, and cease to energize CPAU’s Distribution System within two seconds, CPAU may require a Transfer Trip system or an equivalent Protective Function. For net metered or non-net metered Generating Facilities, the Facility will be considered capable of supporting an Unintended Island if the aggregate distributed generation output is 80% or more of the Distribution System real-time load kW seen at CPAU’s source-side Distribution Protection Device. c. Reclose Blocking. Where the aggregate Generating Facility capacity exceeds 15% of the peak Load on any automatic reclosing device, CPAU may require additional Protective Functions, including, but not limited to reclose-blocking on some of the automatic reclosing devices. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 32 E. 5. SMART INVERTER GENERATING FACILITY DESIGN AND OPERATING REQUIREMENTS Section D.3.c shall continue to be used for interconnection of inverter based technologies until September 8, 2017, twelve (12) months after the date the Supplement SA of UL- 1741 (with CA requirements) is approved by the full UL-1741 Standards Technical Panel (STP). Following such date, Section D.5 shall apply for interconnection of inverter based technologies. Until such date, Section D.5 may be used in all or in part, for inverter based technologies by mutual agreement of the CPAU and the Applicant. The inverter requirements are intended to be consistent with ANSI/IEEE 1547- 2003 and 1547a Standard for Interconnecting Distributed Resources with Electric Power Systems (IEEE 1547 including amendment 1547a). In the event of conflict between this Rule and IEEE 1547-2003, this Rule shall take precedence. Exceptions are taken to IEEE 1547 Clauses 4.1.4.2 Distribution Secondary Spot Networks and Clauses 4.1.8.1 or 5.1.3.1, which address Protection from Electromagnetic Interference. Rule 27 does not adopt the Generating Facility power limitation of 10 MW incorporated in IEEE1547. a. Protective Functions Required. Smart Inverters operating in parallel with CPAU’s Distribution System shall be equipped with the following Protective Functions to sense abnormal conditions on CPAU’s Distribution System and cause the Smart Inverter to be automatically disconnected from CPAU’s Distribution System or to prevent the Smart Inverter from being connected to CPAU’s Distribution System inappropriately: i. Over and under voltage trip functions and over and under frequency trip functions; ii. A voltage and frequency sensing and time-delay function to prevent the Smart Inverter from energizing a de-energized Distribution System circuit and to prevent the Smart Inverter from reconnecting with CPAU’s System unless CPAU’s Distribution System service voltage and frequency is within the ANSI C84.1-1995 Table 1 Range B voltage Range of 106 volts to 127 volts (on a 120 volt basis), inclusive, and a frequency range of 59.3 Hz to 60.5 Hz, inclusive, and are stable for at least 15 seconds; and GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 33 iii. A function to prevent the Smart Inverter from contributing to the formation of an Unintended Island, and cease to energize CPAU’s Distribution System within two seconds of the formation of an Unintended Island. iv. Only Certified Smart Inverters are approved for interconnection. Smart Inverters or a group of Smart Inverters > 400 kW require Ground Fault Protection. The Smart Inverter shall cease to energize CPAU’s Distribution System for faults on CPAU’s Distribution System circuit to which it is connected (IEEE 1547-4.2.1). The Smart Inverter shall cease to energize CPAU’s Distribution circuit prior to reclosing by CPAU’s Distribution System equipment (IEEE 1547-4.2.2). b. Momentary Paralleling Generating Facilities. With CPAU’s approval, the transfer switch or scheme used to transfer Producer’s loads from CPAU’s Distribution System to Producer’s Generating Facility may be used in lieu of the Protective Functions required for Parallel Operation. c. Suitable Equipment Required. Circuit breakers or other interrupting equipment located at the PCC must be Certified or “Listed” (as defined in Article 100, the Definitions Section of the National Electrical Code) as suitable for their intended application. This includes being capable of interrupting the maximum available fault current expected at their location. Producer’s Smart Inverter and Interconnection Facilities shall be designed so that the failure of any single device or component shall not potentially compromise the safety and reliability of CPAU’s Distribution System. The Smart Inverter paralleling-device shall be capable of withstanding 220% of the Interconnection Facility rated voltage (IEEE 1547- 4.1.8.3). The Interconnection Facility shall have the capability to withstand voltage and current surges in accordance with the environments defined in IEEE Std. C62.41.2-2002 or IEEE Std. C37.90.1-2002 as applicable and as described in L.3.e (IEEE 1547- 4.1.8.2). d. Visible Disconnect Required. Producer shall furnish and install a ganged, manually-operated isolating switch (or a comparable device mutually agreed upon by CPAU and Producer) near the Point of Common Coupling to isolate the Smart Inverter from CPAU’s Distribution System. The device does not have to provide GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 34 over-current protection. The device must: i. Allow visible verification that separation has been accomplished. (This requirement may be met by opening the enclosure to observe contact separation.) Molded case circuit breakers do not meet the visible contact requirement and are not acceptable as a Visible Disconnect device. ii. Include markings or signage that clearly indicates open and closed positions. iii. Be capable of being reached quickly and conveniently 24 hours a day by CPAU personnel for construction, maintenance, inspection, testing or reading, without obstacles or requiring those seeking access to obtain keys, special permission, or security clearances. iv. Be capable of being locked in the open position. v. Be clearly marked on the submitted single line diagram and its type and location approved by CPAU prior to installation. If the device is not adjacent to the PCC, permanent signage must be installed at a CPAU approved location providing a clear description of the location of the device. If the switch is not accessible outside the locked premises, signage with contact information and a CPAU approved locking device for the premises shall be installed. Generating Facilities with Non-Islanding inverters totaling one (1) kilovolt-ampere (kVA) or less are exempt from this requirement. e. Drawings Required. Prior to Parallel Operation or Momentary Parallel Operation of the Smart Inverter, CPAU shall approve Producer’s Protective Function and control diagrams. Generating Facilities equipped with Protective Functions and a control scheme previously approved by CPAU for system-wide application or only Certified Equipment may satisfy this requirement by reference to previously approved drawings and diagrams. f. Generating Facility Conditions Not Identified. In the event this Rule does not GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 35 address the Interconnection conditions for a particular Smart Inverter, CPAU and Producer may agree upon other arrangements, to be approved by CPAU. g. Prevention of Interference. Producer shall not operate Smart Inverters that superimpose a voltage or current upon CPAU’s Distribution System that interferes with CPAU operations, service to CPAU Customers or communication facilities. If such interference occurs, Producer must diligently pursue and take corrective action at its own expense after being given notice and reasonable time to do so by CPAU. If Producer does not take corrective action in a timely manner, or continues to operate the facilities causing interference without restriction or limit, CPAU may, without liability, disconnect Producer's facilities from CPAU’s Distribution System, in accordance with Section B.8 of this Rule. h. Voltage Regulation. If approved by CPAU, the Smart Inverter may actively regulate the voltage at the Point of Common Coupling (PCC) while in parallel with CPAU’s Distribution System. The Smart Inverter shall not cause the service voltage at other customers to go outside the requirements of ANSI C84.1-1995, Range A (IEEE 1547-4.1.1). i. Voltage Trip and Ride-Through Settings. The voltage ranges in Table D.4 define protective trip limits for the Protective Function and are not intended to define or imply a voltage regulation Function. Generating Facilities shall cease to energize CPAU’s Distribution System within the prescribed trip time whenever the voltage at the PCC deviates from the allowable voltage operating range. The Protection Function shall detect and respond to voltage on all phases to which the Generating Facility is connected. j. Smart Inverters. Smart Inverters shall be capable of operating within the voltage range normally experienced on CPAU’s Distribution System from plus to minus 5% of the nominal voltage (e.g. 114 volts to 126 volts, on a 120 volt base), at the service panel or PCC. The trip settings at the generator terminals may be selected in a manner that minimizes nuisance tripping in accordance with Table D.4 to compensate for voltage drop between the generator terminals and the PCC. Voltage may be detected at either the PCC or the Point of Interconnection. However, the voltage range at the PCC, with the generator on-line, shall stay within +/-5% of nominal. k. Voltage Disturbances. Whenever CPAU’s Distribution System voltage at the PCC GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 36 varies from and remains outside Near Nominal voltage for the predetermined parameters set forth in Table D.4, the Smart Inverter’s Protective Functions shall cause the Smart Inverter(s) to become isolated from CPAU’s Distribution System: i. The Smart Inverter shall stay connected to CPAU’s Distribution System while the grid remains within the “Ride-Through Until” voltage-time range and must stay connected in the corresponding “Operating Mode”. ii. For voltage excursions beyond the near Nominal (NN) magnitude range and within the range of the HV1 or LV3 regions, the Smart Inverter shall momentarily cease to energize within 0.16 seconds. iii. In the HV1 region, the Smart Inverter is permitted to reduce power output as a function of voltage under mutual agreement between the Producer and CPAU. iv. If the distribution system voltage does not exit the ride-through region and recovers to normal system voltage, the Smart Inverter shall restore continuous operation within 2 seconds. v. If the CPAU’s Distribution System voltage does not exit the ride-through region and returns from the LV3 region to the LV2 or LV1 region, the Smart Inverter shall restore available current within 2 seconds. vi. Different voltage-time settings could be permitted by CPAU. Table D.4: Voltage Ride-Through Table Region Voltage at Point of Common Coupling (% Nominal Volts) Ride-Through Until Operating Mode Maximum Trip Time High Voltage 2 (HV2) V > 120 0.16 seconds High Voltage 1 (HV1) 110 < V < 120 12 seconds Momentary Cessation 13 seconds GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 37 Near Nominal (NN) 88 < V < 110 Indefinite Continuous Operation Not Applicable Low Voltage 1 (LV1) 70 < V < 88 20 seconds Mandatory Operation 21 seconds Low Voltage 2 (LV2) 50 < V < 70 10 seconds Mandatory Operation 11 seconds Low Voltage 3 (LV3) V < 50 1 second Momentary Cessation 1.5 seconds l. Paralleling. The Generating Facility shall parallel with CPAU’s Distribution System without causing a voltage fluctuation at the PCC greater than plus/minus 5% of the prevailing voltage level of CPAU’s Distribution System at the PCC, and meet the flicker requirements of Section D.5.m below. m. Flicker. The Generating Facility shall not create objectionable flicker for other customers on CPAU’s Distribution System. To minimize the adverse voltage effects experienced by other customers (IEEE 1547-4.3.2), flicker at the PCC caused by the Generating Facility should not exceed the limits defined by the "Maximum Borderline of Irritation Curve" identified in IEEE 519-1992 (IEEE Recommended Practices and Requirements for Harmonic Control in Electric Power Systems, IEEE STD 519-1992). This requirement is necessary to minimize the adverse voltage affects experienced by other Customers on CPAU’s Distribution System. Generators may be connected and brought up to synchronous speed (as an induction motor) provided these flicker limits are not exceeded. n. Integration with CPAU’s Distribution System Grounding. The grounding scheme of the Generating Facility shall not cause over-voltages that exceed the rating of the equipment connected to CPAU’s Distribution System and shall not disrupt the coordination of the ground fault protection on CPAU’s Distribution System (IEEE 1547-4.1.2). o. Frequency. CPAU controls system frequency, and the Generating Facility shall operate in synchronism with CPAU’s Distribution System. Whenever CPAU’s Distribution System frequency at the PCC varies from and remains outside normal (nominally 60 Hz) by the predetermined amounts set forth in Table D.2, the Generating Facility’s Protective Functions shall cease to energize CPAU’s GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 38 Distribution System within the stated maximum trip time. p. Frequency Ride-Through Requirements. Smart Inverter based systems shall remain connected to CPAU’s Distribution System while the grid is within the frequency-time range indicated in Table D.5, and shall disconnect from the electric grid during a high or low frequency event that is outside that frequency- time range. The frequency values are shown in Table D.5. These values provide default interconnection system response to abnormal frequencies. The inverter shall disconnect by the default clearing times. In the high frequency range between 60.2 Hz and 61.5 Hz, or some other mutually agreed range, the Smart Inverter is permitted to reduce real power output until it ceases to export power by 61.5 Hz, or other frequency value mutually agreed between the generating facility operator and CPAU. Islands and microgrids may need different default frequency settings. Table D.5: Frequency Ride-Through and Trip Settings Table System Frequency Default Settings (Hz) Minimum Range of Adjustability (Hz) Ride-Through Until Ride –Through Operational Mode Maximum Trip Time f > 62 62 – 64 No Ride Through Not Applicable 0.16 seconds 60.5 < f < 62 60.1 – 62 299 seconds Mandatory Operation 300 seconds 58.5 < f < 60.5 Not Applicable Indefinite Continuous Operation Not Applicable GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 39 57.0 < f < 58.5 57 – 59.9 299 seconds Mandatory Operation 300 seconds f < 57.0 53 – 57 No Ride Through Not Applicable 0.16 seconds q. Harmonics. When the Smart Inverter is serving balanced linear loads, harmonic current injection into CPAU’s Distribution System at the PCC shall not exceed the limits stated in Table D.3. The harmonic current injections shall be exclusive of any harmonic currents due to harmonic voltage distortion present in CPAU’s Distribution System without the Smart Inverter connected (IEEE 1547- 4.3.3.). The harmonic distortion of a Smart Inverter shall be evaluated using the same criteria as for the Host Loads. r. Direct Current Injection. Smart Inverter should not inject direct current greater than 0.5% of rated output current into CPAU’s Distribution System. s. Power Factor. Producer shall provide adequate reactive power compensation on site to maintain the Smart Inverter power factor near unity at rated output or a CPAU specified power factor in accordance with the following requirements: i. Default Power Factor setting: 1.0 +/- 0.01 (0.99 Lagging to 0.99 Leading). ii. Aggregate generating facility is greater than 15 kW: 1.0 +/- 0.15 (0.85 Lagging to 0.85 Leading) down to 20% rated power based on available reactive power. iii. Aggregate generating facility is less than or equal to 15 kW: 1.0 +/- 0.10 (0.90 Lagging to 0.90 Leading) down to 20% rated power based on available reactive power. t. Dynamic Volt/VAR Operations. The Smart Inverter shall be capable of operating dynamically within a power factor range of +/- 0.85 PF for larger (>15 kW) systems, down to 20% of rated power, and +/- 0.9 PF for smaller systems (≤15 kW), down to 20% of rated power, based on available reactive power. This dynamic Volt/VAR capability shall be able to be activated or deactivated in accordance with CPAU requirements. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 40 CPAU may permit or require the Smart Inverter systems to operate in larger power factor ranges, including in 4-quadrant operations for storage systems with the implementation of additional anti-islanding protection as determined by CPAU. The Smart Inverter shall be capable of providing dynamic reactive power compensation (dynamic Volt/VAR operation) within the following constraints: The Smart Inverter shall not cause the line voltage at the point of common coupling to go outside the requirements of the latest version of ANSI C84.1, Range A. The Smart Inverter shall be able to consume reactive power in response to an increase in line voltage, and produce reactive power in response to a decrease in line voltage. The reactive power provided shall be based on available reactive power, but the maximum reactive power provided to the system shall be as directed by CPAU. u. Ramp Rate Requirements. The Smart Inverter is required to have the following ramp controls for at least the following two conditions. These functions can be established by multiple control functions or by one general ramp rate control function. Ramp rates are contingent upon sufficient energy available from the Smart Inverter. Normal ramp-up rate: For transitions between energy output levels over the normal course of operation. The default value is 100% of maximum current output per second with a range of adjustment between 1% to 100%, with specific settings as mutually agreed by the CPAU and the Producer. Connect/Reconnect Ramp-up rate: Upon starting to inject power into the grid, following a period of inactivity or a disconnection, the inverter shall be able to control its rate of increase of power from 1 to 100% maximum current per second, with specific settings as mutually agreed upon by GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 41 CPAU and the Producer. v. Default Activation States for Phase 1 Functions. Unless otherwise provided by CPAU, the default settings will be as follows: Anti-islanding – activated Low/High Voltage Ride-Through – activated Low/High Frequency Ride-Through – activated Dynamic Volt/VAR operations – deactivated Ramp rates – activated Fixed power factor – activated Reconnect by “soft-start” methods – activated These default activation states may be modified by mutual agreement between CPAU and Producer. w. Automatic Transfer (Load Shedding or Transfer). The voltage and frequency ride- through requirements of D.5.i and D.5.m shall not apply if either: a) The real power across the Point of Common Coupling is continuously maintained at a value less than 10% of the aggregate rating of the Smart Inverters connected to the Generation Facility prior to any voltage disturbance, and the Generation Facility disconnects from CPAU’s distribution system, along with Generation Facility load, such that the net change in real power flow from or to CPAU is less than 10% of the aggregate Smart Inverter capacity; or b) Generation Facility load real power demand equal to 90% to 120% of the pre-disturbance aggregate Smart Inverter real power output is shed within 0.1 seconds of Smart Inverter disconnection. x. Fault Detection. A Smart Inverter with an SCCR exceeding 0.1 or one that does not cease to energize CPAU’s Distribution System within two seconds of the formation of an Unintended Island shall be equipped with Protective Functions GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 42 designed to detect Distribution System faults, both line-to-line and line-to-ground, and cease to energize CPAU’s Distribution System within two seconds of the initiation of a fault. y. Transfer Trip. For a Generating Facility that cannot detect Distribution System faults (both line-to-line and line-to-ground) or the formation of an Unintended Island, and cease to energize CPAU’s Distribution System within two seconds, CPAU may require a Transfer Trip system or an equivalent Protective Function. z. Reclose Blocking. Where the aggregate Generating Facility capacity exceeds 15% of the peak load on any automatic reclosing device, CPAU may require additional Protective Functions, including, but not limited to reclose-blocking on some of the automatic reclosing devices. E. INTERCONNECTION FACILITIES AND DISTRIBUTION SYSTEM MODIFICATIONS OWNERSHIP AND FINANCING COST ALLOCATION 1. 1. SCOPE AND OWNERSHIP OF INTERCONNECTION FACILITIES AND DISTRIBUTION SYSTEM MODIFICATIONS a. Scope. Parallel Operation of Generating Facilities may require Interconnection Facilities or modifications to CPAU’s Distribution System (“Distribution System modifications”). The type, extent and costs of Interconnection Facilities and Distribution System modifications shall be consistent with this Rule and determined through the Supplemental Review and/or Interconnection Studies described in Section C. b. Ownership. Interconnection Facilities installed on Producer’s side of the Point of Common Coupling (PCC) may be owned, operated and maintained by the Producer or CPAU. Interconnection Facilities installed on CPAU’s side of the PCC and Distribution System modifications shall be owned, operated and maintained only by CPAU. 2. 2. RESPONSIBILITY OF COSTS OF INTERCONNECTING A GENERATING FACILITY a. Study and Review Costs. A Producer shall be responsible for the reasonably incurred costs of the reviews and studies conducted pursuant to Section C.1 of this GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-2012 Sheet No. 43 Rule. b. Facility Costs. A Producer shall be responsible for all costs associated with Interconnection Facilities owned by the Producer. The Producer shall also be responsible for any costs reasonably incurred by CPAU in providing, operating, or maintaining the Interconnection Facilities and Distribution System modifications required solely for the Interconnection of the Producer’s Generating Facility with CPAU’s Distribution System. c. Separation of Costs. Should CPAU combine the installation of Interconnection Facilities or Distribution System modifications required for the Interconnection of a Generating Facility with modifications to CPAU’s Distribution System to serve other Customers or Producers, CPAU shall not include the costs of such separate or incremental facilities in the amounts billed to the Producer. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-201212-12-2016 Sheet No. 2044 d. b.d. Reconciliation of Costs and Payments. The Producer must pay applicable costs prior to the scheduling of any engineering reviews and studies; construction of distribution system modifications; or interconnection of generating facilities to CPAU’s Distribution SystemIf the Producer selected a fixed price billing for the Interconnection Facilities or Distribution System modifications, no reconciliation will be necessary. If the Producer selected actual cost billing, a true-up will be required. Within a reasonable time after the Interconnection of a Producer’s Generating Facility, CPAU will reconcile its actual costs related to the Generating Facility against any advance payments made by the Producer. The Producer will receive either a bill for any balance due or a reimbursement for overpayment as determined by CPAU’s reconciliation. The Producer shall be entitled to a reasonably detailed and understandable accounting for the payments. 3. 3. INSTALLATION AND FINANCING OF INTERCONNECTION FACILITIES AND DISTRIBUTION SYSTEM MODIFICATIONS a. a. Agreement Required. The costs for Interconnection Facilities and Distribution System modifications shall be paid by the Producer pursuant to the Provisions contained in the Special Facilities Agreement. Where the type and extent of the Interconnection Facilities or Distribution System modifications warrant additional detail, Producer and CPAU shall execute separate agreement(s) to more fully describe and allocate the parties’ responsibilities for installing, owning, operating and maintaining the Interconnection Facilities and Distribution System modifications. b. b. Interconnection Facilities and Distribution System Modifications. Interconnection Facilities connected to CPAU’s side of the Point of Common Coupling and Distribution System modifications shall be provided, installed, owned and maintained by CPAU at Producer’s expense. c. c. Reservation of Unused Facilities. When a Producer wishes to reserve CPAU-owned Interconnection Facilities or Distribution System modifications installed and operated as Special Facilities for the Producer at Producer’s expense, but idled by a change in the operation of the Producer's Generating Facility or otherwise, Producer may elect to abandon or reserve such facilities consistent GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-201212-12-2016 Sheet No. 2045 with the terms of its agreement with CPAU. If Producer elects to reserve idle Interconnection Facilities or Distribution System modifications, CPAU shall be entitled to continue to Charge Producer for the costs related to the ongoing operation and maintenance of the Special Facilities. d. Refund of Salvage Value. When a Producer elects to abandon the Special Facilities for which it has either advanced the installed costs or constructed and transferred to CPAU, the Producer shall, at a minimum, not receive from CPAU a credit for the net salvage value of the Special Facilities. F. METERING, MONITORING AND TELEMETRY 1. GENERAL REQUIREMENTS All Generating Facilities shall be metered in accordance with this Section F and shall meet all applicable standards of CPAU contained in CPAU’s applicable rules and published CPAU manuals dealing with Metering specifications. For general metering requirements, see CPAU Rule and Regulation 15. For net metering requirements, see CPAU Rule and Regulation 29. 2. METERING BY CPAU The ownership, installation, operation, reading and testing of revenue Metering Equipment for Generating Facilities shall be by CPAU only. 3. NET GENERATION METERING For purposes of monitoring Generating Facility operation to determine standby Charges and applicable non-bypassable Charges as defined in CPAU’s tariffs, and for Distribution System planning and operations, consistent with Section B.4 of this Rule, CPAU shall have the right to specify the type, and require the installation of Net Generation Metering equipment. CPAU shall only require Net Generation Metering to the extent that less intrusive and/or more cost effective options for providing the necessary Generating Facility output data are not available. In exercising its discretion to require Net Generation Metering, CPAU shall consider all relevant factors, including but not limited to: a. Data requirements in proportion to need for information; b. Producer’s election to install equipment that adequately addresses CPAU’s GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-201212-12-2016 Sheet No. 2046 operational requirements; c. Accuracy and type of required Metering consistent with purposes of collecting data; d. Cost of Metering relative to the need for and accuracy of the data; e. The Generating Facility’s size relative to the cost of the Metering/monitoring; f. Other means of obtaining the data (e.g., Generating Facility logs, proxy data etc.); and g. Requirements under any Interconnection Agreement with the Producer. 4. POINT OF COMMON COUPLING METERING For purposes of assessing CPAU Charges for retail service, the Producer’s PCC Metering shall be reviewed by CPAU, and if required, replaced to ensure that it will appropriately measure Electric power according to the Provisions of the Customer’s Electric Service tariff. Where required, the Customer’s existing Meter may be replaced with a bi- directional meter so that power deliveries to and from the Producer’s site can be separately recorded. Alternately, the Producer may, at its sole option and cost, require CPAU to install Multi-Metering Equipment to separately record power deliveries to CPAU’s Distribution System and retail purchases from CPAU. Where necessary, such PCC Metering shall be designed to prevent reverse registration. 5. TELEMETERING If the nameplate rating of the Generating Facility is 1 MW or greater, Telemeteringtelemetering equipment at the Net Generator Metering location may be required at the Producer's expense. If the Generating Facility is Interconnectedinterconnected to a portion of CPAU’s Distribution System operating at a voltage below 10 kV, then Telemetering equipment may be required on Generating Facilities 250 kW or greater. CPAU shall only require Telemetering to the extent that less intrusive and/or more cost effective options for providing the necessary data in real time are not available 6. LOCATION Where CPAU-owned Metering is located on the Producer’s Premises, Producer shall provide, at no expense to CPAU, a suitable location for all such Metering Equipment as set forth in CPAU Rule and Regulation 15. GENERATING FACILITY INTERCONNECTIONS RULE AND REGULATION 27 CITY OF PALO ALTO UTILITIES RULES AND REGULATIONS Issued by the City Council Effective 4-2-201212-12-2016 Sheet No. 2047 7. COSTS OF METERING The Producer will bear all costs of the Metering required by this Rule, including the incremental costs of operating and maintaining the Metering Equipment. G. SUPPLEMENTAL REVIEW If the Generating Facility meets any of the following criteria, the Facility does not qualify for Simplified Interconnection Review and must undergo a Supplemental Review: 1. Output from the Generating Facility at any time will be equal to or greater than 15% of the load on the distribution line section. 2. The aggregate distributed generation on the distribution line section exceeds 80% of the real-time peak load kW. 3. Startup, shutdown or other operating characteristics of the Generating Facility cause voltage drop or flicker to exceed CPAU’s allowable limits as specified in Section D. 4. The Generating Facility is connected to a 4kV distribution feeder which has line-to – neutral connected load and the Generating Facility nameplate rating exceeds 10% of the line section peak load. 5. The Generating Facility, in aggregate with other generation, shall not contribute more than 10% to the circuit’s maximum fault current (END) City of Palo Alto (ID # 7325) City Council Staff Report Report Type: Consent Calendar Meeting Date: 12/12/2016 City of Palo Alto Page 1 Summary Title: Appeal of Avenidas Expansion Architectural Review Approval Title: 450 Bryant Street [16PLN-92]: Consideration of an Appeal and Adoption of Findings of Approval by the Director of Planning and Community Environment for Architectural Review of an Expansion to a Category 2 Historic Resource (Avenidas) and Associated Approval of a Mitigated Negative Declaration and Mitigation, Monitoring and Reporting Plan. From: City Manager Lead Department: Planning and Community Environment Recommendation: Staff recommends that the City Council, by adoption of this item on consent calendar, deny the appeal and uphold the Director’s approval of a Mitigated Negative Declaration, Mitigation Monitoring and Reporting Program, and Architectural Review application with the findings and conditions attached (Attachments A-C). Executive Summary: Avenidas is a community-based, non-profit organization serving aging adults with services that promote active living, maintaining independence and related support services. Avenidas’ facility in Palo Alto is located on city-owned property zoned Public Facilities and abutting Cogswell Plaza and Parking Lot C. The organization is seeking city approval to modify, partially demolish and construct new building area to an historic building to support their program goals. The City’s Architectural Review Board (ARB) and Historic Resources Board (HRB) each independently reviewed the proposed project at three public hearings and recommended approval to the Planning and Community Environment Director (Director). The Director’s determination (Attachment A) was made on October 27 and subsequently appealed on November 9 by La Comida, a sub-lessee using the kitchen and dining room to provide meal service at the Avenidas facility. Avenidas’ proposal is for an enlarged, updated kitchen but a smaller dining room. La Comida is concerned that the smaller dining room will allow fewer people to be served at one time, as City of Palo Alto Page 2 stated in the appeal (Attachment F). Avenidas contends that the same number of people can be served in shifts, which is consistent with their current practice. The project plans are available online: http://www.cityofpaloalto.org/civicax/filebank/documents/47537. This appeal is less about the AR findings and more about a dispute between the leaseholder and sub-lessee, which may be more appropriately resolved outside of this appeal process. Nonetheless, Palo Alto Municipal Code Section 18.77.070(f) requires that an appeal be placed on the City Council’s consent calendar so that the City Council may adopt the findings and decision of the director, or pull the item from consent (which takes three votes), and set it for a public hearing. City staff continues to be engaged with Avenidas and La Comida to help support their efforts toward an amenable resolution to this conflict and has informed both parties that the hearing will take place on the same day if the item is pulled from consent. Background: The Appellant, La Comida, provides meals in accordance with and made possible through a County of Santa Clara funding program with additional financial help from the City’s through the Human Services Resource Allocation Program (HSRAP) at a discounted rate to seniors, at three facilities in Palo Alto: Stevenson House (35 meals per day, temporarily suspended due to construction), Cubberley Center (once per week), and at Avenidas, Mondays through Fridays. The meals are required to be supplemented by other programs for seniors, in order to fit with the County’s vision of the program for senior socialization. La Comida pays rent to Avenidas every month on a month-to-month lease for use of the dining hall and kitchen for the meals program. La Comida uses the kitchen at Avenidas to prepare meals for all of the senior meals service throughout Palo Alto. The applicant, Avenidas, has been serving Palo Alto and other mid-peninsula cities for over four decades. It is a non-profit organization that is supported by donors, including the City of Palo Alto, volunteers and Avenidas employees. The City has leased the building to Avenidas since May 11, 1977. The current lease agreement between the City and Avenidas was entered into on January 1, 2015 and runs for 50 years. The lease agreement allows Avenidas to sublet to other entities with written City consent. For the past several years, Avenidas has been exploring changes to the building to support its stated project goals of more efficiently accommodating as many as 360 more people each day. The expectation for increasing attendance at the facility is directly related to the anticipated growth in the senior population; half of all city residents will be over 55 years old by 2020. Avenidas’ program description, submitted in March 2016, is provided as Attachment J. The existing building has 18,375 square feet (sf) of floor area. The original building was designed by Birge Clark to serve as the city’s downtown police and fire station. In the 1970’s, the current dining room was added. The partial demolition and expansion of the existing building is subject to Architectural Review and, because it is listed on the City’s Historic Resources Inventory as a Category 2 historic resource in the Downtown, review by the Historic City of Palo Alto Page 3 Resources Board (HRB) was also required. Project Description The applicant’s proposal includes: 1) demolition of the existing dining hall; 2) construction of a 9,751 sf, three-story addition attached to the primary historic building via a glass hyphen; and 3) renovation of the interior of the Category 2 historic resource and preservation of the former garage (also designed by Clark) that contributes to the significance of the historic resource. The net new floor area, originally proposed at 8,129 sf, was reduced to 7,158 sf during the public hearing process; the third floor area was reduced so that the volume steps back on all facades. The design includes a courtyard with overlooking second floor balcony and third floor deck. The Clark garage was recognized by two historic experts as contributing to the significance of the listed historic resource; its retention for “the Villages” and location next to a smaller courtyard space is key to Avenidas’ programming. Due to site limitations, no parking spaces are feasible to add onto the site; in-lieu fees will be paid for parking spaces not provided in association with 7,158 square feet of net new floor area. Further general description of the project, history, architecture and reviews of the project are found in staff reports to the ARB and HRB. Below further description relates to spaces used by La Comida for meal service. Downsizing Dining Room – Subject of the Appeal The proposed dining hall will be smaller than the existing hall. It will have large (bird-friendly) windows facing the park and a door opening toward the park. The dining room will also have windows facing the parking lot, which the current dining hall does not have, with access to the kitchen and hallways leading to lobbies, stairs and elevators to upper floors, restrooms, the courtyard, and the parking lot. Further description of the existing dining room and proposed dining room design is provided in the Discussion section of this report. Upsizing and Upgrading Kitchen The existing kitchen, located next to the dining room, was added in the 1950’s to the original building, and needs updating. It would be enlarged by approximately 250 sf and updated for continued use by La Comida to prepare meals for seniors. Temporary Relocation During construction, Avenidas will be leasing 10,000 sf of space at the Cubberley Community Center. La Comida plans to temporarily relocate the meal services either within a Downtown church (which necessitates expenses for updates to the kitchen) or within a senior facility on Charleston Road (Stevenson house, which is undergoing updates). ARB / HRB Public Hearings The Architectural Review Board (ARB) conducted three public hearings, the last of which occurred on October 20, 2016. The proposed size of the dining room has not changed since the application submittal in March. However, the total floor area of the addition was reduced in response to concerns about massing of the new addition with respect to the existing historic buildings, courtyard, and adjacent park. City of Palo Alto Page 4 The HRB recommended approval of the revised project on October 12th and the ARB recommended approval on October 20th. Meeting minutes of the most recent ARB and HRB meetings are attached to this report. Staff reports for the ARB and HRB meetings (which contain earlier meeting minutes) are provided in the below links, from most recent reports to prior reports: The ARB report of October 20, 2016, is viewable at this link, http://www.cityofpaloalto.org/civicax/filebank/documents/54327 The HRB report of October 11, 2016, is viewable at this link, https://www.cityofpaloalto.org/civicax/filebank/documents/54162 The ARB report of September 1, 2016, is viewable at this link, http://www.cityofpaloalto.org/civicax/filebank/documents/53658. The HRB report of September 8, 2016, is viewable at this link, https://www.cityofpaloalto.org/civicax/filebank/documents/53712. The ARB report of June 16, 2016, is viewable at this link, https://www.cityofpaloalto.org/civicax/filebank/documents/52840. It provides additional background regarding 2015 reviews of preliminary plans by the Parks and Recreation Commission, ARB and HRB. The HRB report of May 26, 2016 is viewable at this link, https://www.cityofpaloalto.org/civicax/filebank/documents/52515. Director’s Decision The approval issued October 27, 2016 followed the Director’s determination with respect to the Mitigated Negative Declaration and Mitigation Monitoring Program. The Director’s approval includes AR findings and approval conditions upon which the decision was based; the AR findings are provided as Attachment C. Approval conditions are provided as Attachment B. The PCE Director’s decision was based upon Architectural Review Findings and made subject to the Conditions of Approval which include a condition related to the Mitigation Monitoring and Reporting Program. Discussion The appeal (Attachment F) was submitted by the Board of Directors of the La Comida Senior Meal Program and takes issue with the reduction in the amount of interior space that La Comida would lease from Avenidas for meal service following construction. The appeal notes that the capacity would be reduced from the current 140 people1 in one seating to 78 to 90 people in one seating. 1 While the maximum seating capacity of the current dining room is 140 people, La Comida sets approximately 126-128 seats in order to accommodate wheelchairs and walkers. As a condition to its County funding, La Comida is required to serve both Palo Alto and non-Palo Alto residents at the Avenidas facility. City of Palo Alto Page 5 The appellant had been in conversation with Avenidas for some time, but had not contacted City staff nor submitted comments to the City until October 11, 2016. A petition (Attachment H) followed on October 20. The appellant seeks to obtain “spillover space” for dining in the front, corner room facing Bryant Street, adjacent to the kitchen; Avenidas plans to improve this room as a “club” room. La Comida expressed a concern that the reduced area dedicated to meal service would mean a change in their operations, and may cost more. The appellant states that Avenidas has been unwilling to firmly commit any auxiliary space to La Comida for use during lunch hours. La Comida wishes to decide now on the relocation of the program during the renovation and states that not having a clear and definite commitment from Avenidas for additional “spillover” space after the renovation hampers this decision. The appellant also requests that the City “withhold final approval until an interior space plan adequate for the needs of the La Comida Program is provided.” During the review process, Avenidas approached the owner of an offsite location (a church) regarding use of those facilities for Avenidas’ downtown operations during construction, including housing the La Comida function. La Comida has noted receptivity to relocating to this location permanently, if additional floor area is not found for the program at the Avenidas site. La Comida believes the cost of updating the church kitchen for temporary use is prohibitive, and has noted a preference for interim relocation to the Stevenson House facilities on Charleston Road during construction, given the proximity of that facility to Cubberley, where Avenidas would be located during construction at 450 Bryant.2 Dining Room Layout – Existing and Proposed Existing: The dining room, square-shaped with closets in each corner (yielding 2,383 sf net area), provides capacity for 140 people (actual seating is provided for 120 people). Proposed: The replacement room would be L-shaped without closets in each corner; a required staircase providing egress to the upper floor reduces the space to 1,512 sf of net floor area and seating for between 78 and 90 people; this is 871 sf smaller than the existing room, seating 30 to 60 less people in a single seating. Existing Dining Room (highlighted) Proposed “L”-Shaped Room 2 Avenidas has offered to contribute funding for the relocation and kitchen upgrades, but again these particular operational issues are outside the scope of this appeal. City of Palo Alto Page 6 Dining Room Visibility Existing: The existing dining room has several windows and one door allowing views and access to the park (Cogswell Plaza). The existing dining room also has three doors allowing access to a courtyard which is nearly twice as large as the proposed courtyard. The image below shows the existing dining hall’s north-facing windows. The existing dining hall has no windows facing the public parking lot (Lot C). Proposed: The proposed dining room would have a bank of north-facing windows allowing park views, and a door allowing access to the park. The glass “hyphen” connecting the historic building to the new addition may afford park views for diners chosing to congregate near the kitchen. The glass hyphen and windows of the proposed addition are shown below without the existing park vegetation that provides screening: The below image shows the existing mature park vegetation that would be seen by the diners: The below image shows the three windows of the dining room that face the public parking lot: City of Palo Alto Page 7 Before and After - Gathering Spaces Existing: The current dining hall leads directly to an uncovered courtyard. Proposed: The gathering of diners before and after meals could take place in protected lobbies and hallways, and in the game room. The portion of the proposed dining hall near the kitchen would have double doors opening to hallways that lead to the lobbies serving the center, the parking lot and the courtyard. The parking lot lobby would be light-filled and weather-protected. The courtyard would be sunny in the summer with partial afternoon shade in other seasons, for diners to enjoy after meals. Applicant’s Response to the Issues Raised on Appeal Avenidas has stated that the existing seating accommodates only 120 people, so the new dining room would have 30 fewer seats than the existing dining room. Avenidas says they have offered additional volunteers to help La Comida with multiple seatings, and that multiple seatings are already occurring given the arrival time of Lytton Gardens diners nearly an hour before noon. Avenidas further states: They are considering using the corner space that La Comida seeks to use a ‘spillover space’ as a “clubroom” for seniors to spend leisure time enjoying offerings on a flat screen television and game tables. They have offered to extend the hours of use to La Comida to allow for additional servings. They have explained to La Comida’s board that the improvements to the building are necessary to meet current codes, and that the biggest room in the building is the dining room that would be leased to La Comida. They would like to reserve flexibility to change the meal program to address evolving interests such as cooking and nutrition classes. They have urged La Comida to enter into mediation to reach an agreeable solution. They have made numerous efforts to make the new space work for La Comida, and offered them various resources and suggestions including a new commercial kitchen. City of Palo Alto Page 8 As of the writing of this report, La Comida representatives have agreed to participate in mediation with Avenidas on December 1, 2016, regarding the operational issues. As noted in this report, and shown in above images, the replacement dining room on the first floor would be smaller than the existing dining room. The applicant maintains that the service of meals would continue to take place with ‘wave’ seating (i.e. several seatings), with opportunities for diners to engage in multiple activities before and after the meal services. Architectural Review Findings as Related to Appeal Statement The record shows the ARB followed their purview related to site planning, massing, articulation and compatibility of the addition. While site circulation and design of ancillary functions are also within the ARB’s purview, interior space planning is not typically within the ARB’s purview to discuss. The ARB’s purview does include the placement and quantity of exterior windows providing daylight into proposed interior spaces, as well as site circulation and functionality or convenience with respect to access to ancillary functions. The AR findings related to functionality could be considered by City Council as applicable to the dining room design. Staff notes, after reviewing the appellant’s statement, three architectural findings may be relevant to the appeal. Finding 3: The design is appropriate to the function of the project. Finding 7: The planning and siting of the various functions and buildings on the site create an internal sense of order and provide a desirable environment for occupants, visitors, and the general community. Finding 9: Sufficient ancillary functions are provided to support the main functions of the project and the same are compatible with the project’s design concept. Based on staff’s review of the appeal statement and conversations with the applicant and appellant following the appeal, staff concludes that the issues expressed by La Comida are mostly to do with La Comida’s desire to: Continue operations without any changes, and Secure the front corner room as an interior “spillover” area for diners, with the assumption that the current practice of providing meals to diners in shifts may not be adequate in the future. Accordingly, staff does not believe the appeal is principally related to the Director’s decision on the proposed project. The Architectural Review Board’s (ARB) recommendations and the Director’s determination, and, if a hearing is conducted, the City Council’s action on this project must be based on required AR approval findings. The AR findings do not reference interior space planning, and any proposal for future interior changes within the building are not subject to ARB review and approval. While these operational and programming issues are important they do not fall under traditional design review purview. Even examining the functionality findings, Avenidas has demonstrated that La Comida could continue to stagger meal service, with help from Avenidas volunteers, so that the total number of people served today can be served in the future. Staff believes Council can take action on consent based on City of Palo Alto Page 9 the record without removing the item from consent calendar to further review the AR findings approved by the Director of Planning and Community Environment. In addition, Real Estate, Community Service Department, Legal and Planning staff have met with both parties and offered to facilitate and even participate in the pending mediation over the operational issues. Notwithstanding the above, the appeal is a request for a de novo hearing before the City Council. If granted, the public hearing would not be limited to the appeal statement, but include the entirety of the project and be subject to review based on the architectural review findings. To conduct a hearing, three Councilmembers would need to agree to pull the item from the agenda; since notice was provided regarding the potential hearing on December 12, the hearing can occur the same night as the consent calendar review. Resource Impact: There are no financial impacts from the recommendation to deny the appeal and uphold the Director’s decision. Policy Implications: As noted, the Applicant has invited City staff to attend a facilitated discussion with the appellant about the sub-lease. This mediation is targeted for December 1, 2016. Approval of this application on consent by City Council would not preclude the conversation continuing among the City staff representing the Human Services Commission, and representatives of La Comida and Avenidas. A public hearing to discuss at length the project’s compliance with Architectural Review approval findings would not result in resolution of the issues raised in the appeal. The current 50-year lease was provided as an attachment to an informational staff report about this project provided to Council in June 2016. The report provided a brief history of Council actions in 2014 and 2015 regarding financial support for several fiscal years.Council meeting minutes from the October 19, 2015 meeting are found here: http://www.cityofpaloalto.org/civicax/filebank/documents/49560. The June 23, 2014 staff report (ID #4922) regarding the lease update is found here: https://www.cityofpaloalto.org/civicax/filebank/documents/42767 Timeline: Palo Alto Municipal Code (PAMC) Chapter 18.77 section 18.77.070 requires appeals to be brought to City Council within 45 days of the City’s receipt of the appeal. The appeal was submitted November 9, 2016. Environmental Review: The project was reviewed in accordance with the California Environmental Quality Act City of Palo Alto Page 10 (CEQA), with circulation of an Initial Study and publication of revisions to that Initial Study to address project revisions during the process. A Mitigated Negative Declaration was approved by the PCE Director and a Notice of Determination for the project was filed at the County of Santa Clara within five days of the PCE Director’s approval. The IS/MND is viewable at this link: http://www.cityofpaloalto.org/civicax/filebank/documents/54166; the MND is attached to this report (Attachment G), as is the initial Study (Attachment K). Another Notice of Determination will be filed following the Council’s decision on this project. Attachments: Attachment A: Signed Approval Letter October 27, 2016 (PDF) Attachment B: Conditions of Approval (DOCX) Exhibit 1 of Attachment B: MMRP 10.27.16 (DOCX) Attachment C: ARB findings (DOC) Attachment D: Excerpt October 12th HRB 2nd meeting (DOCX) Attachment E: 10-20-2016 ARB transcript Excerpt (DOCX) Attachment F: Appeal (PDF) Attachment G: 450 Bryant MND adopted (DOC) Attachment H: Petition from La Comida Diners (PDF) Attachment I: October 11, 2016 HRB meeting minutes (DOCX) Attachment J: Avenidas Project Description 3.1.16 (PDF) Attachment K: Avenidas Initial Study Final (PDF) ATTACHMENT B CONDITIONS OF APPROVAL 450 Bryant Street, Avenidas Expansion (File 16PLN-92) On October 20, 2016, the Architectural Review Board (ARB) recommended approvalof the application referenced above, and the Director of Planning and Community Environment (Director) approved the project on October 27, 2016. Project Planner: Amy French. GENERAL CONDITION The plans submitted for Building Permit shall be in substantial conformance with plans dated received September 26, 2016, except as modified to incorporate these conditions of approval. These conditions of approval shall be printed on the plans submitted for building permits. PLANNING AND COMMUNITY ENVIRONMENT 1. Mitigation Measures: The measures included in the MMRP attached as Exhibit 1 are hereby incorporated as a condition of approval. 2. Architectural Review Approval: a) The project approval shall be valid for a period of one year from the original date of approval. In the event a building permit(s), if applicable, is not secured for the project within the time limit specified above, the AR approval shall expire and be of no further force or effect unless application for extension of this entitlement is submit prior to the one year expiration. b) The following additional conditions shall be satisfied in building permit plans: (1) bird friendly glass shall be incorporated on the parking-lot facing side as well as the park-facing side of the addition, (2) reflect the location of public art. c) The following project details shall return to a subcommittee of the ARB to ensure project details listed herein are consistent with the approval findings, prior to the submittal of associated building permits: (1) consider revising the light fixtures (i.e. the art-deco sconces in the 10/20/16 ARB plan set), and include courtyard trellis light fixture, photometric plan, and any exterior emergency egress lighting for the former garage (if separate from the trellis lighting), (2) a detail of the trash enclosure roof/trellis showing material, and (3) final palette showing the paint color to be used for the exterior of the existing Category 2 building (which staff may present first to a subcommittee of HRB members). d) All future signage proposed for this site and any exterior modifications to the building or property shall be subject to Architectural Review/Historic Resources review prior to installation. 3. Legal Matters/Fees: a) To the extent permitted by law, the applicant shall indemnify and hold harmless the City, its City Council, its officers, employees and agents (the “indemnified parties”)from and against any claim, action, or proceeding brought by a third party against the indemnified parties and the applicant to attack, set aside or void, any permit or approval authorized hereby for the Project, including (without limitation) reimbursing the City its actual attorney’s fees and costs incurred in defense of the litigation. The City may, in its sole discretion, elect to defend any such action with attorneys of its own choice. b) This matter is subject to the Code of Civil Procedures (CCP) Section 1094.5, and the time by which judicial review must be sought is governed by CCP Section 1094.6. c) Government Code Section 66020 provides that project applicant who desires to protest the fees, dedications, reservations, or other exactions imposed on a development project must initiate the protest at the time the development project is approved or conditionally approved or within ninety (90) days after the October 27, 2016 that fees, dedications, reservations or exactions are imposed on the project. Additionally, procedural requirements for protesting these development fees, dedications, reservations and exactions are set forth in Government Code Section 66020. IF YOU FAIL TO INITIATE A PROTEST WITHIN THE 90-DAY PERIOD OR TO FOLLOW THE PROTEST PROCEDURES DESCRIBED IN GOVERNMENT CODE SECTION 66020, YOU WILL BE BARRED FROM CHALLENGING THE VALIDITY OR REASONABLENESS OF THE FEES, DEDICATIONS, RESERVATIONS, AND EXACTIONS. d) Parking In-Lieu Fees: Fees in the amount of $1,955,441.00 shall be paid for 29 parking spaces associated with the net new floor area but not provided on site. The amount reflects the rate in effect at the time of planning entitlement ($67,429 per space); this amount shall be paid prior to the issuance of the building permit associated with this entitlement. 4. Noise: All noise producing equipment shall not exceed the allowance specified in Chapter 9.10 (Noise) of the Palo Alto Municipal Code. UTILITIES - ELECTRICAL 5. Prior to Building Permit a) The applicant shall comply with all the Electric Utility Engineering Department service requirements noted during plan review. b) The applicant shall be responsible for identification and location of all utilities, both public and private, within the work area. Prior to any excavation work at the site, the applicant shall contact Underground Service Alert (USA) at 1-800-227-2600, at least 48 hours prior to beginning work. c) Only one electric service lateral is permitted per parcel. Utilities Rule & Regulation #18. d) If this project requires padmount transformers, the location of the transformers shall be shown on the site plan and approved by the Utilities Department and the Architectural Review Board. Utilities Rule & Regulations #3 & #16 (see detail comments below). e) The developer/owner shall provide space for installing padmount equipment (i.e. transformers, switches, and interrupters) and associated substructure as required by the City. f) The location of the electric panel/switchboard shall be shown on the site plan and approved by the Architectural Review Board and Utilities Department. g) The customer shall install all electrical substructures (conduits, boxes and pads) required from the service point to the customer’s switchgear. The design and installation shall be according to the City standards and shown on plans. Utilities Rule & Regulations #16 & #18. h) The customer is responsible for sizing the service conductors and other required equipment according to the California Electric Code requirements and City standards. i) For primary services, the standard service protection is a padmount fault interrupter owned and maintained by the City, installed at the customer’s expense. The customer must provide and install the pad and associated substructure required for the fault interrupter. j) Any additional facilities and services requested by the Applicant that are beyond what the utility deems standard facilities will be subject to Special Facilities charges. The Special Facilities charges include the cost of installing the additional facilities as well as the cost of ownership. Utilities Rule & Regulation #20. k) Projects that require the extension of high voltage primary distribution lines or reinforcement of offsite electric facilities will be at the customer’s expense and must be coordinated with the Electric Utility. l) The applicant shall secure a Public Utilities Easement for facilities installed on private property for City use. 6. Building Permit Requirements a) Industrial and large commercial customers must allow sufficient lead-time for Electric Utility Engineering and Operations (typically 8-12 weeks after advance engineering fees have been paid) to design and construct the electric service requested. b) A completed Utility Service Application and a full set of plans must be included with all applications involving electrical work. The Application must be included with the preliminary submittal. c) The applicant shall submit a request to disconnect all existing utility services and/or meters including a signed affidavit of vacancy, on the form provided by the Building Inspection Division. Utilities will be disconnected or removed within 10 working days after receipt of request. The demolition permit will be issued after all utility services and/or meters have been disconnected and removed. d) All utility meters, lines, transformers, backflow preventers, and any other required equipment shall be shown on the landscape and irrigation plans and shall show that no conflict will occur between the utilities and landscape materials. In addition, all aboveground equipment shall be screened in a manner that is consistent with the building design and setback requirements. e) Contractors and developers shall obtain permit from the Department of Public Works before digging in the street right-of-way. This includes sidewalks, driveways and planter strips. f) At least 48 hours prior to starting any excavation, the customer must call Underground Service Alert (USA) at 1-800-227-2600 to have existing underground utilities located and marked. The areas to be checked for underground facility marking shall be delineated with white paint. All USA markings shall be removed by the customer or contractor when construction is complete. g) The customer is responsible for installing all on-site substructures (conduits, boxes and pads) required for the electric service. No more than 270 degrees of bends are allowed in a secondary conduit run. All conduits must be sized according to California Electric Code requirements and no 1/2 – inch size conduits are permitted. All off-site substructure work will be constructed by the City at the customer’s expense. Where mutually agreed upon by the City and the Applicant, all or part of the off-site substructure work may be constructed by the Applicant. h) All primary electric conduits shall be concrete encased with the top of the encasement at the depth of 30 inches. No more than 180 degrees of bends are allowed in a primary conduit run. Conduit runs over 500 feet in length require additional pull boxes. i) All new underground conduits and substructures shall be installed per City standards and shall be inspected by the Electrical Underground Inspector before backfilling. j) For services larger than 1600 amps, a transition cabinet as the interconnection point between the utility’s padmount transformer and the customer’s main switchgear may be required. See City of Palo Alto Utilities Standard Drawing SR-XF-E-1020. The cabinet design drawings must be submitted to the Electric Utility Engineering Division for review and approval. k) For underground services, no more than four (4) 750 MCM conductors per phase can be connected to the transformer secondary terminals; otherwise, bus duct or x-flex cable must be used for connections to padmount transformers. If customer installs a bus duct directly between the transformer secondary terminals and the main switchgear, the installation of a transition cabinet will not be required. l) The customer is responsible for installing all underground electric service conductors, bus duct, transition cabinets, and other required equipment. The installation shall meet the California Electric Code and the City Standards. m) Meter and switchboard requirements shall be in accordance with Electric Utility Service Equipment Requirements Committee (EUSERC) drawings accepted by Utility and CPA standards for meter installations. n) Shop/factory drawings for switchboards (400A and greater) and associated hardware must be submitted for review and approval prior to installing the switchgear to Gopal Jagannath, P.E. Supervising Electric Project Engineer, Utilities Engineering (Electrical) 1007 Elwell Court, Palo Alto, CA 94303 o) For 400A switchboards only, catalog cut sheets may be substituted in place of factory drawings. p) All new underground electric services shall be inspected and approved by both the Building Inspection Division and the Electrical Underground Inspector before energizing. q) The customer shall provide as-built drawings showing the location of all switchboards, conduits (number and size), conductors (number and size), splice boxes, vaults and switch/transformer pads. r) The follow must be completed before Utilities will make the connection to the utility system and energize the service: o All fees must be paid. o All required inspections have been completed and approved by both the Building Inspection Division and the Electrical Underground Inspector. o All Special Facilities contracts or other agreements need to be signed by the City and applicant. o Easement documents must be completed. UTILITIES – WATER GAS WASTEWATER 7. Prior to Demolition Permit Issuance a) The applicant shall submit the existing water/wastewater fixture unit loads (and building as-built plans to verify the existing loads) to determine the capacity fee credit for the existing load. If the applicant does not submit loads and plans they may not receive credit for the existing water/wastewater fixtures. b) The applicant shall submit a request to disconnect all utility services and/or meters including a signed affidavit of vacancy. Utilities will be disconnected or removed within 10 working days after receipt of request. The demolition permit will be issued by the building inspection division after all utility services and/or meters have been disconnected and removed (existing building). 8. Plan Requirements a) The applicant shall submit improvement plans for utility construction. The plans must show the size and location of all underground utilities within the development and the public right of way including meters, backflow preventers, fire service requirements, sewer mains, sewer cleanouts, sewer lift stations and any other required utilities. b) The applicant must show on the site plan the existence of any auxiliary water supply, (i.e. water well, gray water, recycled water, rain catchment, water storage tank, etc). c) The applicant shall be responsible for installing and upgrading the existing utility mains and/or services as necessary to handle anticipated peak loads. This responsibility includes all costs associated with the design and construction for the installation/upgrade of the utility mains and/or services (if required). d) An approved reduced pressure principle assembly (RPPA backflow preventer device) is required for all existing and new water connections from Palo Alto Utilities to comply with requirements of California administrative code, title 17, sections 7583 through 7605 inclusive. The RPPA shall be installed on the owner's property and directly behind the water meter within 5 feet of the property line. RPPA’s for domestic service shall be lead free. Show the location of the RPPA on the plans. e) An approved reduced pressure detector assembly is required for the existing or new water connection for the fire system to comply with requirements of California administrative code, title 17, sections 7583 through 7605 inclusive (a double detector assembly may be allowed for existing fire sprinkler systems upon the CPAU’s approval). Reduced pressure detector assemblies shall be installed on the owner's property adjacent to the property line, within 5’ of the property line. Show the location of the reduced pressure detector assembly on the plans. f) Existing wastewater laterals that are not plastic (ABS, PVC, or PE) shall be replaced at the applicant’s expense. g) Existing water services that are not a currently standard material shall be replaced at the applicant’s expense. h) The applicant shall pay the capacity fees and connection fees associated with new utility service/s or added demand on existing services. The approved relocation of services, meters, hydrants, or other facilities will be performed at the cost of the person/entity requesting the relocation. i) Each unit or place of business shall have its own water and gas meter shown on the plans. Each parcel shall have its own water service, gas service and sewer lateral connection shown on the plans. j) A separate water meter and backflow preventer is required to irrigate the approved landscape plan (≥ 1000 SQFT lawn area). Show the location of the irrigation meter on the plans. This meter shall be designated as an irrigation account an no other water service will be billed on the account. The irrigation and landscape plans submitted with the application for a grading or building permit shall conform to the City of Palo Alto water efficiency standards. 9. For Building Permit a) The applicant shall submit a completed water-gas-wastewater service connection application - load sheet for City of Palo Alto Utilities. The applicant must provide all the information requested for utility service demands (water in fixture units/g.p.m., gas in b.t.u.p.h, and sewer in fixture units/g.p.d.). The applicant shall provide the existing (prior) loads, the new loads, and the combined/total loads (the new loads plus any existing loads to remain). b) The applicant's engineer may require to submit flow calculations and system capacity study showing that the on-site and off-site water and sanitary sewer mains (existing 5.4” PE sewer main) and services will provide the domestic, irrigation, fire flows, and wastewater capacity needed to service the development and adjacent properties during anticipated peak flow demands. Field testing may be required to determined current flows and water pressures on existing water main. Calculations must be signed and stamped by a registered civil engineer. The applicant is required to perform, at his/her expense, a flow monitoring study of the existing sewer main to determine the remaining capacity. The report must include existing peak flows or depth of flow based on a minimum monitoring period of seven continuous days or as determined by the senior wastewater engineer. The study shall meet the requirements and the approval of the WGW engineering section. No downstream overloading of existing sewer main will be permitted. c) All backflow preventer devices shall be approved by the WGW engineering division. Inspection by the utilities cross connection inspector is required for the supply pipe between the meter and the assembly. d) Existing wastewater main is 5.4” PE on Bryant Street (sewer lateral to be 4”) e) If a new water service line installation for domestic usage is required. For service connections of 4-inch through 8-inch sizes, the applicant's contractor must provide and install a concrete vault with meter reading lid covers for water meter and other required control equipment in accordance with the utilities standard detail. Show the location of the new water service and meter on the plans. f) If a new water service line installation for fire system usage is required. Show the location of the new water service on the plans. The applicant shall provide to the engineering department a copy of the plans for fire system including all fire department's requirements. Please see a fire/domestic combination service connection for your project - see City of Palo Alto standard WD-11. g) If a new gas service line installation is required. Show the new gas meter location on the plans. The gas meter location must conform to utilities standard details. Gas meter to be installed above ground. h) A new sewer lateral installation per lot is required. Show the location of the new sewer lateral on the plans i) All existing water and wastewater services that will not be reused shall be abandoned at the main per WGW utilities procedures. j) Utility vaults, transformers, utility cabinets, concrete bases, or other structures cannot be placed over existing water, gas or wastewater mains/services. Maintain 1’ horizontal clear separation from the vault/cabinet/concrete base to existing utilities as found in the field. If there is a conflict with existing utilities, Cabinets/vaults/bases shall be relocated from the plan location as needed to meet field conditions. Trees may not be planted within 10 feet of existing water, gas or wastewater mains/services or meters. New water, gas or wastewater services/meters may not be installed within 10’ or existing trees. Maintain 10’ between new trees and new water, gas and wastewater services/mains/meters. k) To install new gas service by directional boring, the applicant is required to have a sewer cleanout at the front of the building. This cleanout is required so the sewer lateral can be videoed for verification of no damage after the gas service is installed by directional boring. l) All utility installations shall be in accordance with the City of Palo Alto utility standards for water, gas & wastewater. FIRE DEPARTMENT 10. Install a NFPA 13 fire sprinkler, NFPA 14 standpipe and NFPA 72 fire alarm system. Extend fire sprinkler protection to covered trash enclosure. 11. Public safety radio amplifier system is required in the facility if the property owner’s analysis determines two-way fire/police radio transmission is not adequate. 12. New elevator car shall be sized to accommodate a gurney and two medical personnel. WATERSHED PROTECTION 13. PAMC 16.09.180(b)(10) Dumpsters for New and Remodeled Facilities: New buildings providing centralized solid waste collection, except for single-family and duplex residences, shall provide a covered area for a dumpster. The area shall be adequately sized for all waste streams and designed with grading or a berm system to prevent water run-on and runoff from the area. The current plans show a trash enclosure. Zero Waste will determine whether all waste streams will fit into this structure. Such a waste stream shall include tallow from the kitchen if applicable. 14. PAMC 16.09.170, 16.09.040 Discharge of Groundwater: Prior approval shall be obtained from the city engineer or designee to discharge water pumped from construction sites to the storm drain. The city engineer or designee may require gravity settling and filtration upon a determination that either or both would improve the water quality of the discharge. Contaminated ground water or water that exceeds state or federal requirements for discharge to navigable waters may not be discharged to the storm drain. Such water may be discharged to the sewer, provided that the discharge limits contained in Palo Alto Municipal Code (16.09.040(m)) are not exceeded and the approval of the superintendent is obtained prior to discharge. The City shall be compensated for any costs it incurs in authorizing such discharge, at the rate set forth in the Municipal Fee Schedule. 15. PAMC 16.09.055 Unpolluted Water: Unpolluted water shall not be discharged through direct or indirect connection to the sanitary sewer system. And PAMC 16.09.175 (b) General prohibitions and practices, Exterior (outdoor) drains may be connected to the sanitary sewer system only if the area in which the drain is located is covered or protected from rainwater run-on by berms and/or grading, and appropriate wastewater treatment approved by the Superintendent is provided. For additional information regarding loading docks, see section 16.09.175(k) 16. PAMC 16.09.180(b)(14) Architectural Copper: On and after January 1, 2003, copper metal roofing, copper metal gutters, copper metal down spouts, and copper granule containing asphalt shingles shall not be permitted for use on any residential, commercial or industrial building for which a building permit is required. Copper flashing for use under tiles or slates and small copper ornaments are exempt from this prohibition. Replacement roofing, gutters and downspouts on historic structures are exempt, provided that the roofing material used shall be prepatinated at the factory. For the purposes of this exemption, the definition of "historic" shall be limited to structures designated as Category 1 or Category 2 buildings in the current edition of the Palo Alto Historical and Architectural Resources Report and Inventory. 17. PAMC 16.09.180(b)(5) Condensate from HVAC: Condensate lines shall not be connected or allowed to drain to the storm drain system. 18. PAMC 16.09.205 Cooling Towers: No person shall discharge or add to the sanitary sewer system or storm drain system, or add to a cooling system, pool, spa, fountain, boiler or heat exchanger, any substance that contains any of the following: (1) Copper in excess of 2.0 mg/liter; (2) Any tri-butyl tin compound in excess of 0.10 mg/liter; (3) Chromium in excess of 2.0 mg/liter. (4) Zinc in excess of 2.0 mg/liter; or (5) Molybdenum in excess of 2.0 mg/liter. The above limits shall apply to any of the above-listed substances prior to dilution with the cooling system, pool, spa or fountain water. A flow meter shall be installed to measure the volume of blowdown water from the new cooling tower. Cooling systems discharging greater than 2,000 gallons per day are required to meet a copper discharge limit of 0.25 milligrams per liter. 19. PAMC 16.09.180(b)(b) Copper Piping: Copper, copper alloys, lead and lead alloys, including brass, shall not be used in sewer lines, connectors, or seals coming in contact with sewage except for domestic waste sink traps and short lengths of associated connecting pipes where alternate materials are not practical. The plans must specify that copper piping will not be used for wastewater plumbing. 20. 16.09.180(12) Mercury Switches: Mercury switches shall not be installed in sewer or storm drain sumps. 21. PAMC 16.09.205(a) Cooling Systems, Pools, Spas, Fountains, Boilers and Heat Exchangers: It shall be unlawful to discharge water from cooling systems, pools, spas, fountains boilers and heat exchangers to the storm drain system. 22. PAMC 16.09.165(h) Storm Drain Labeling: Storm drain inlets shall be clearly marked with the words "No dumping - Flows to Bay," or equivalent. 23. If any of the offices are used for medical purposes, including a dental facility, they must comply with PAMC 16.09.220 and install an amalgam separator. 24. If work occurs on the kitchen area, all Food Service Establishment Requirements must be met PAMC 16.09, including Grease Control Device Requirements. PUBLIC ART 25. The applicant intends to incorporate art into the project and has been working with public art program staff to meet with the Public Art Commission. The final review with the Public Art Commission must be completed and the project artist and artwork approved prior to the issuance of a building permit. The artwork must be installed as approved prior to the issuance of the Certificate of Occupancy. If the applicant chooses to instead pay to the public art fund in – lieu of commissioning art on site, the funds must be received prior to the issuance of a building permit. PUBLIC WORKS ENGINEERING 26. Prior to Demolition Permit Issuance a. LOGISTICS PLAN: The applicant and contractor shall prepare a construction logistics plan for the work associated with the building permits, including demolition. Plan shall be submitted to Public Works Engineering and shall address all impacts to the City’s right-of-way, including, but not limited to: pedestrian control, traffic control, truck routes, material deliveries, contractor’s parking, on-site staging and storage areas, concrete pours, crane lifts, work hours, noise control, dust control, storm water pollution prevention, contractor’s contact. The plan shall be prepared and submitted along the building permit application. It shall include notes as indicated on the approved Truck Route Map for construction traffic to and from the site. b. The plan provided shows that the applicant is proposing to take up the entire parking lot and potentially close off lane 13. This is not acceptable. Revise the plan to show the 20-foot wide lane 13 is open and accessible to the public. The construction main entrance/exit shall be located at the parking drive aisle that is immediately west of the project site, with primary access to the lane. Gate swings to open into the parking area. The parking area (22 parking spaces) closest to the street shall remain open to general public. Contractors will not be permitted to use this area for temporary parking. A secondary construction gate may be required for larger cranes to exit the work site. For the secondary exit, provide flagger control exit only at second gate (near the proposed concrete washout area). Provide a note on the plans to indicate the second gate, exit only is for crane or larger trucks use only. Relocate the VBI trailer to the parking spaces on the other side of the landscape island or the contractor shall use the office within the building during construction. Plot and label all of the construction fence area. c. Provide the long term traffic control measures directly on the logistics plan, include no left turn sign into the parking lot from the lane, flagger at the 2nd construction entrance, etc. d. Demolition Plan: Place the following note adjacent to an affected tree on the Site Plan and Demolition Plan: “Excavation activities associated with the proposed scope of work shall occur no closer than 10-feet from the existing street tree, or as approved by the Urban Forestry Division contact 650-496-5953. Any changes shall be approved by the same”. 27. Prior to Issuance of a Building Permit a. GRADING PERMIT: The site plan must include an earthworks table showing cut and fill volumes. If the total is more than 100 cubic yards, a grading permit will be required. An application and plans for a grading permit are submitted to Public Works separately from the building permit plan set. The application and guidelines are available at the Development Center and on our website. b. GRADING & DRAINAGE PLAN: Provide a separate Grading and Drainage Plan prepared by a qualified licensed engineer, surveyor or architect. Plan shall be wet-stamped and signed by the same. Plan shall include the following: existing and proposed spot elevations, earthwork volumes (cut and fill in CY), pad, finished floor, garage elevation, base flood elevation (if applicable) grades along the project conforms, property lines, or back of walk. See PAMC Section 16.28.110 for additional items. Projects that front directly into the public sidewalk, shall include grades at the doors or building entrances. Provide drainage flow arrows to demonstrate positive drainage away from building foundations at minimum of 2% or 5% for 10-feet per 2013 CBC Section 1804.3. Label the downspouts, splashblocks (2-feet long min) and any site drainage features such as swales, area drains, bubble-up locations. Include grate elevations, low points and grade breaks. Provide dimensions between the bubblers and property lines. Bubblers shall not be closer than 10-feet from the property line. In no case shall drainage across property lines exceed that which existed prior to grading per 2013 CBC Section J109.4. In particular, runoff from the new garage shall not drain into neighboring property. For additional grading and drainage detail design see Grading and Drainage Plan Guidelines for Residential Development. http://www.cityofpaloalto.org/civicax/filebank/documents/2717 c. As discussed at the DRC the applicant does not foresee any additional structural or excavation associated with the basement. Should this change in the future, the project will be subject to Basement Shoring, Dewatering and Geotechnical requirements applicable at that time. d. Public Works generally does not allow rainwater to be collected and discharged into the street gutter or connect directly to the City’s infrastructure, revise the Grading and Drainage plan to direct downspout runoff to landscaped and other pervious areas of the site. The storm drain plans shall clearly show how this project will allow the site runoff to infiltrate on-site and reduce the storm water quantity before it reaches the main line. 28. Stormwater (C3) Requirements: Based on the project site and size, it is assumed that this project will trigger the California Regional Water Quality Control Board’s revised provision C.3 for storm water regulations (incorporated into the Palo Alto Municipal Code, Section 16.11) that apply to small projects or residential land development projects that create or replace between 2,500 and 10,000 square feet of impervious surface area. If triggered the applicant must implement one or more of the following site design measures on the grading and drainage plan: a. Direct roof runoff into cisterns or rain barrels for reuse. b. Direct roof runoff onto vegetated areas. c. Direct runoff from sidewalks, walkways, and/or patios onto vegetated areas. d. Direct runoff from driveways and/or uncovered parking lots onto vegetated areas. e. Construct sidewalks, walkways, and/or patios with permeable surfaces. f. Construct driveways, and/or uncovered parking lots with permeable surfaces 29. Work in the Right of Way: The plans must clearly indicate any work that is proposed in the public right- of-way, such as sidewalk replacement, driveway approach, or utility laterals. The plans must include notes that the work must be done per City standards and that the contractor performing this work must first obtain a Street Work Permit from Public Works at the Development Center. If a new driveway is in a different location than the existing driveway, then the sidewalk associated with the new driveway must be replaced with a thickened (6” thick instead of the standard 4” thick) section. Additionally, curb cuts and driveway approaches for abandoned driveways must be replaced with new curb, gutter and planter strip. a. Provide the following note adjacent to the area on the Site Plan: “Any construction within the city right-of-way must have an approved Permit for Construction in the Public Street prior to commencement of this work. THE PERFORMANCE OF THIS WORK IS NOT AUTHORIZED BY THE BUILDING PERMIT ISSUANCE BUT SHOWN ON THE BUILDING PERMIT FOR INFORMATION ONLY.” b. Provide the following note on the Site Plan and Grading and Drainage Plan: “Contractor shall not stage, store, or stockpile any material or equipment within the public road right-of-way. Construction phasing shall be coordinated to keep materials and equipment onsite or within private property.” 30. Utility Plan: Given the proposed scope of work, it appears that this project will trigger utility upgrades including but limited to water meter, backflow prevention, transformers or a grease interceptor. Plot and label the proposed utilities on the utility plan, note that these shall be located completely within the parcel and out of the road or lane right-of-way. 31. Sidewalk, Curb and Gutter: As part of this project, the applicant must replace all existing sidewalk, curbs, gutters and driveway approaches in the public right-of-way along the frontage(s) of the property. The site plan submitted with the building permit plan set must show the extent of the replacement work (at a minimum all curb and gutter and sidewalk along the project frontage). The plan must note that any work in the right-of-way must be done per Public Works’ standards by a licensed contractor who must first obtain a Street Work Permit from Public Works at the Development Center. 32. Pavement: Any cutting into the pavement will trigger additional pavement requirements. Add the following note to the Site Plan: “Applicant and contractor may be responsible for resurfacing portions of Bryant Street and parking lot area based the roadway surface condition after project completion and limits of trench work. At a minimum pavement resurfacing of the full width of the street along the project frontage and parking lot area may be required.” Plot and label the area to be resurfaced as hatched on the site plan. 33. Stormwater Pollution Prevention: The City's full-sized "Pollution Prevention - It's Part of the Plan" sheet must be included in the plan set. The sheet is available here: http://www.cityofpaloalto.org/civicax/filebank/documents/2732 34. Impervious Surface Area: The project will be creating or replacing 500 square feet or more of impervious surface. Accordingly, the applicant shall provide calculations of the existing and proposed impervious surface areas with the building permit application. The Impervious Area Worksheet for Land Developments form and instructions are available at the Development Center or on our website. BUILDING INSPECTION 35. The accessible elevator landings above or below the level of exit discharge (Grade level) shall include a Two- Way communication system per CBC 1007.8 36. Show Type of Construction on the plans and submit building area calculations to verify the allowable story height and floor area of the single use and/or mixed use buildings. Include which method is proposed, Accessory, Separated or Non-separated. In addition, provide calculations to verify the total allowable building area of the building. For mixed occupancies, the total allowable building area of a mixed occupancy building with more than one story above grade shall comply with CBC 508.1. (2013 CBC 506.1) 37. A structural analysis of the horizontal resistance system(s) shall be included for the modifications to the existing structure. 38. The materials used in the proposed construction shall be of a material that is consistent with the existing structures building construction type. GREEN BUILDING 39. Green Building Requirements. The project shall be subject to all applicable building codes, including Green Building requirements. Requirements are subject to change. In particular, there will be new Palo Alto ordinance amendments targeted to become effective January 1st, 2017. In addition, the project is subject to the City Council’s 2007 Green Building Policy for City Facilities. You may email Liz Cordero at Liz.Cordero@cityofpaloalto.org for specific questions about your project. Please also visit the Green Building Compliance page for more details: http://www.cityofpaloalto.org/gov/depts/ds/green_building/default.asp URBAN FORESTRY 40. Tree Protection Report (TPR): The TPR submitted with the Building Permit shall include protection and water monitoring for any trees to be retained on the site and adjacent trees that overhang the project site. The city parking lot adjacent to this site, outside the lease line, contains Regulated Trees, including trees that overhang the project site. 41. Building Permit: The Building Permit shall include: a. A Tree Disposition Sheet showing all existing conditions of the site, curb cuts, utilities and trees to be retained, removed, and relocated. b. Grading and drainage plan that includes existing and proposed contours @ 2-foot intervals, shows any excavation proposed in the tree protection zone of any regulated trees including parking lot trees overhanging the site. Drainage shall be directed away from any oak. c. Plan notes for any excavation or activity proposed in the TPZ any regulated tree. Indicate on plans the area and details for removal of existing concrete, grading, and irrigation system over tree roots with the dripline area, consistent with TTM, Sec.2.40. d. Accurate locations for TPZ fencing placement, specifying ‘Type I’ around the protected trees and public street trees, as noted in the tree survey or tree preservation report. e. All existing and proposed utility, telecommunication, driveway construction, transformer and pad size, above and below ground locations within the dripline of any regulated tree. Avoid any reference to utilities within 10 feet of public trees on either side of the sidewalk. 42. Tree Removal: One regulated Camphor tree in the City parking lot outside of the lease line is proposed to be removed. The construction project may impact other existing mature shade trees beyond recovery. A replacement plan consistent with the Tree Technical Manual, Section 3.25 requires contribution to the Forestry Fund to achieve parity with tree loss. 43. During Construction: a. TREE PROTECTION VERIFICATION. Prior to any site work a written verification from the contractor that the required protective fencing is in place shall be submitted to the Urban Forestry Section (derek.sproat@cityofpaloalto.org). The fencing shall contain required warning sign and remain in place until final inspection of the project. b. EXCAVATION RESTRICTIONS APPLY (TTM, Sec. 2.20 C & D). Any approved grading, digging or trenching beneath a tree canopy shall be performed using ‘air-spade’ method as a preference, with manual hand shovel as a backup. For utility trenching, including sewer line, roots exposed with diameter of 1.5 inches and greater shall remain intact and not be damaged. If directional boring method is used to tunnel beneath roots, then Table 2-1, Trenching and Tunneling Distance, shall be printed on the final plans to be implemented by Contractor. c. PLAN CHANGES. Revisions and/or changes to plans before or during construction shall be reviewed and responded to by the (a) project site arborist, (name of certified arborist of record and phone #), or (b) landscape architect with written letter of acceptance before submitting the revision to the Building Department for review by Planning, PW or Urban Forestry. d. CONDITIONS. All Planning Department conditions of approval for the project shall be printed on the plans submitted for building permit. e. TREE PROTECTION COMPLIANCE. The owner and contractor shall implement all protection and inspection schedule measures, design recommendations and construction scheduling as stated in the TPR & Sheet T-1, and is subject to code compliance action pursuant to PAMC 8.10.080. The required protective fencing shall remain in place until final landscaping and inspection of the project. Project arborist approval must be obtained and documented in the monthly activity report sent to the City. The mandatory Contractor and Arborist Monthly Tree Activity Report shall be sent monthly to the City (pwps@cityofpaloalto.org) beginning with the initial verification approval, using the template in the Tree Technical Manual, Addendum 11. f. TREE DAMAGE. Tree Damage, Injury Mitigation and Inspections apply to Contractor. Reporting, injury mitigation measures and arborist inspection schedule (1-5) apply pursuant to TTM, Section 2.20-2.30. Contractor shall be responsible for the repair or replacement of any publicly owned or protected trees that are damaged during the course of construction, pursuant to Title 8 of the Palo Alto Municipal Code, and city Tree Technical Manual, Section 2.25. g. GENERAL. The following general tree preservation measures apply to all trees to be retained: No storage of material, topsoil, vehicles or equipment shall be permitted within the tree enclosure area. The ground under and around the tree canopy area shall not be altered. Trees to be retained shall be irrigated, aerated and maintained as necessary to ensure survival. 44. Prior to Occupancy: a. URBAN FORESTRY DIGITAL FILE & INSPECTION. The applicant or architect shall provide a digital file of the landscape plan, including new off-site trees in the publicly owned right-of-way. A USB Flash Drive, with CAD or other files that show species, size and exact scaled location of each tree on public property, shall be delivered to Urban Forestry at a tree and landscape inspection scheduled by Urban Forestry (650-496-5953). b. LANDSCAPE CERTIFICATION LETTER. The Planning Department shall be in receipt of a verification letter that the Landscape Architect has inspected all trees, shrubs, planting and irrigation and that they are installed and functioning as specified in the approved plans. c. PROJECT ARBORIST CERTIFICATION LETTER. Prior to written request for temporary or final occupancy, the contractor shall provide to the Planning Department and property owner a final inspection letter by the Project Arborist. The inspection shall evaluate the success or needs of Regulated tree protection, including new landscape trees, as indicated on the approved plans. The written acceptance of successful tree preservation shall include a photograph record and/or recommendations for the health, welfare, mitigation remedies for injuries (if any). The final report may be used to navigate any outstanding issues, concerns or security guarantee return process, when applicable. d. PLANNING INSPECTION. Prior to final sign off, contractor or owner shall contact the city planner (650-329-2441) to inspect and verify Special Conditions relating to the conditions for structures, fixtures, colors and site plan accessories. 45. Post Construction: All landscape and trees shall be maintained, watered, fertilized, and pruned according to Best Management Practices-Pruning (ANSI A300-2008 or current version) and the City Tree Technical Manual, Section 5.00. Any vegetation that dies shall be replaced or failed automatic irrigation repaired by the current property owner within 30 days of discovery. MMRP Page 1 of 8 Exhibit 1: Mitigation Monitoring and Reporting Program Project Name Avenidas Expansion Project Application Number 16 PLN-92 Applicant Agreement Signed by applicant before final approval action Date 6/30/16 Approved by Signed by Director after MND approval action Date 10/27/16 Environmental Impacts Mitigation Measures Responsible for Implementation Timing of Compliance Oversight of Implementation Mitigation Measure BIO-1: If feasible, vegetation on the project site shall be removed outside of the bird- nesting season. If the start of site clearing, tree removal, or building demolition occurs between February 1 and August 31, a pre-construction survey for nesting birds protected under the Migratory Bird Treaty Act shall be conducted by a qualified biologist to identify the location of nests in active use that were established prior to the start of project implementation activities. The pre-construction survey shall take place no more than 7 days prior to initiation of construction. All trees and shrubs on the site and on adjacent properties shall be surveyed, with particular attention to any trees or shrubs that would be removed or directly disturbed. If an active nest of a protected bird is found on site, the biologist shall, in consultation with the California Department of Fish and Wildlife (CDFW), Applicant/ Construction Crew/ Project Biologist February 1 through August 31 Director of Planning and Community Environment MMRP Page 2 of 8 determine whether construction work would affect the active nest or disrupt reproductive behavior. Criteria used for this evaluation shall include presence of visual screening between the nest and construction activities, and behavior of adult birds in response to the surveyors or other ambient human activity. If construction could affect the nest or disrupt reproductive behavior, the biologist shall, in consultation with CDFW, determine an appropriate construction-free buffer zone around the nest to remain in place until the young have fledged or other appropriate protective measures are taken to ensure no take of protected species occurs. If it is determined that construction will affect an active raptor nest or disrupt reproductive behavior, then avoidance is the only mitigation available. Construction shall not be permitted within 300 feet of such a nest until a qualified biologist determines that the subject nests are no longer active. Prior to issuance of a demolition permit or tree removal permit, the City of Palo Alto (City) shall verify that pre-construction surveys have been conducted within 10 days of the proposed start of demolition. If active bird nests are present, the City shall verify that CDFW has been consulted and either determined that construction will not affect an active bird nest or that appropriate MMRP Page 3 of 8 construction-free buffer zones have been established or other appropriate protective measures have been taken. Mitigation Measure BIO-2: No earlier than 30 days prior to initiation of construction activities, a pre- construction survey shall be conducted by a qualified biologist (i.e., a biologist holding a California Department of Fish and Wildlife (CDFW) collection permit and a Memorandum of Understanding with CDFW allowing the biologist to handle bats) to determine if active bat roosts or maternal colonies are present on or within 300 feet of the construction area. Surveys shall include the structures proposed for demolition. Should an active maternity roost be identified, the roost shall not be disturbed and construction within 300 feet of the maternity roost shall be postponed or halted until the juveniles have fledged and the roost is vacated, as determined by a qualified biologist. Consultation with CDFW shall also be initiated. Under no circumstance shall an active roost be directly disturbed. If nonbreeding bat hibernacula are found on the project site, the individuals shall be safely evicted under the direction of a qualified bat biologist Applicant/ Construction Crew/Project Biologist Before construction activities commence Director of Planning and Community Environment MMRP Page 4 of 8 and with consultation with CDFW. These actions shall allow bats to leave during nighttime hours, thus increasing their chance of finding new roosts with a minimum of potential predation during daylight. If it is determined that construction will not affect roosting behavior or disrupt a maternal colony, construction may proceed without any restriction or mitigation measure. If it is determined that construction will affect an active bat roost or disrupt reproductive behavior, then avoidance is the only mitigation available. Under no circumstance shall an active roost be directly disturbed. Construction within 300 feet shall be postponed or halted until the roost is naturally vacated as determined by a qualified biologist. Prior to issuance of a demolition permit, the City of Palo Alto (City) shall verify that pre- construction surveys have been conducted within 30 days of the proposed start of demolition. If bats are present, the City shall verify that CDFW has been consulted and either determined that construction will not affect an active bat roost or disrupt a maternal colony, or that individuals in a nonbreeding bat hibernacula have been safely MMRP Page 5 of 8 evicted. Due to regulations from the California Health Department, direct contact by construction workers with any bat is not allowed. Mitigation Measure BIO-3: A Tree Protection Plan shall be prepared addressing each tree that would be subject to project construction activities occurring within the tree’s dripline. Further, the tree protection measures recommended in the Arborists report for the proposed project shall be incorporated into project construction plans. Specifically, the construction plans and Tree Protection Plan shall include: All existing trees shall be numbered on the site plans to match the tree tag numbers used in the arborist report. Any trees that will be near construction or demolition disturbance shall be well-hydrated before any demolition or construction work begins and throughout construction A qualified tree service shall be used for all tree pruning, which shall include only what is required for site access, demolition, and construction Tree protection fencing must be installed around Applicant/ Project Arborist Prior to Building Permit Issuance (including Demolition) Director of Planning and Community Environment/ Urban Forester MMRP Page 6 of 8 trees within or adjacent to the construction area that will not be removed. Fencing must be installed as described in the Tree Protection Plan. The fencing shall be inspected by an arborist prior to initiation of construction and all construction activities shall be conducted outside any tree protection fencing. Mitigation Measure CUL-1: If artifacts or unusual amounts of shell or bone or other items indicative of buried archaeological resources or human remains are encountered during earth disturbance associated with the proposed project, the on-site contractor shall immediately notify the City of Palo Alto (City) and the Native American Heritage Commission as appropriate. All soil-disturbing work shall be halted within 100 feet of the discovery until a qualified archaeologist, as defined by the California Environmental Quality Act (CEQA) Guidelines (14 CCR 15000 et seq.) and the City, completes a significance evaluation of the finds pursuant to Section 106 of the National Historic Preservation Act. Any human remains unearthed shall be treated in accordance with California Health and Safety Code, Section 7050.5, and California Public Resources Code, Sections 5097.94, 5097.98, and 5097.99, which include requirements to notify the Santa Clara County Medical Examiner’s office Applicant/Const ruction Crew During construction Director of Planning and Community Environment MMRP Page 7 of 8 and consult with Native American representatives determined to be the Most Likely Descendants, as appointed by the Native American Heritage Commission. Identified cultural resources shall be recorded on State Department of Parks and Recreation Form 523 (archaeological sites). Mitigation measures prescribed by the Native American Heritage Commission, the Santa Clara County Medical Examiner’s office, and any Native American representatives determined to be the Most Likely Descendants and required by the City shall be undertaken before construction activities are resumed. If disturbance of a project area cultural resource cannot be avoided, a mitigation program, including measures set forth in the City’s Cultural Resources Management Program and in compliance with Sections 15064.5 and 15126.4 of the CEQA Guidelines, shall be implemented. Mitigation Measure HAZ-1: Prior to building demolition, the project applicant shall demonstrate to the satisfaction of the City of Palo Alto that a survey of the existing buildings has been conducted by a qualified environmental specialist who meets the requirements of the current U.S. Environmental Protection Agency regulations for suspected lead- containing materials (LCMs), including lead-based Applicant Prior to building demolition Director of Planning and Community Environment And Development Services MMRP Page 8 of 8 paint/coatings; asbestos containing materials (ACMs); and the presence of polychlorinated biphenyls (PCBs). Any demolition activities likely to disturb LCMs or ACMs shall be carried out by a contractor trained and qualified to conduct lead- or asbestos-related construction work. If found, LCMs and ACMs shall be disposed of properly. If PCBs are found, these materials shall be managed in accordance with the Metallic Discards Act of 1991 (California Public Resources Code, Sections 42160–42185) and other state and federal guidelines and regulations. Demolition plans and contract specifications shall incorporate any necessary abatement measures in compliance with the Metallic Discards Act, particularly Section 42175, Materials Requiring Special Handling, for the removal of mercury switches, PCB-containing ballasts, and refrigerants. __________________________________________________________________________ ATTACHMENT A FINDINGS FOR ARCHITECTURAL REVIEW APPROVAL 450 Bryant Street/Avenidas Senior Center ______________________________________________________________________________ The design and architecture of the proposed project complies with the Findings for Architec- tural Review as required in Palo Alto Municipal Code Chapter 18.76 Section 18.76.020. Comprehensive Plan and Purpose of ARB: Finding #1: The design is consistent and compatible with applicable elements of the Palo Alto Comprehensive Plan. Finding #16: The design is consistent and compatible with the purpose of architectural review, which is to promote orderly and harmonious development in the city, enhance the desirability of residence or investment in the city, encourage the attainment of the most desirable use of land and improvements, enhance the desirability of living conditions upon the immediate site or in adjacent areas, and promote visual environments which are of high aesthetic quality and variety and which, at the same time, are considerate of each other. The project is consistent with Findings #1 and #16 because: The project complies with the policies of the Comprehensive Plan (Plan), which notes that the Senior Center (Avenidas) is a ‘central facility for delivery of services and a social center for seniors’, and that the City promotes provision of senior services and intends to facilitate permits for senior centers. The Plan notes that the City supports implementation of the Downtown Urban Design Guide (Guide) which, though not mandatory, provides ‘useful ideas and direction for development.’ Avenidas is an “important landmark” in the Civic Cross Axis in the Guide, which also asks that Cogswell Plaza be transformed into an “appealing and active public space”, and encourages 2- to 3-stories on Bryant and Ramona facing Cogswell Plaza, to create an ‘outdoor room’. A 3-story addition facing Cogswell Plaza is proposed. The project design is of high aesthetic quality and variety, as seen from different viewpoints, and reflects a desirable use of land and improvements. Compatibility and Character: Finding #2: The design is compatible with the immediate environment of the site. Finding #4: In areas considered by the board as having a unified design character or historical character, the design is compatible with such character; Finding #5: The design promotes harmonious transitions in scale and character in areas between different designated land uses. Finding #6: The design is compatible with approved improvements both on and off the site. The project is consistent with Findings #2, #4, #5, and #6 because: The project is to retain and rehabilitate the existing historic buildings (a Category 2 historic resource and the ‘garden room’/former garage of the same era that contributes significance), and provide a compatible but differentiated addition meeting the Secretary of Interior’s Standards. The addition will not encroach upon the adjacent park (Cogswell Plaza), upon the public parking lot, or into the alley. The addition is connected to the historic building with a glass ‘hyphen’ in a way that retains a view of the existing building and allows the addition to be subordinate to the existing main building. The La Comida dining room is a non-historic, later addition. The addition is compatible with the historic resource, but reflects differentiation by not ‘mimicking’ the listed historic resource in a way that was evident in the existing dining room to be removed. The historic site is the northwesterly terminus of Civic Cross Axis which begins at the Civic Center Plaza/City Hall, as cited in the Downtown Urban Design Guide. The Guide notes this axis reflects a “Mediterranean style” of many existing buildings which is a “positive and unifying element” that “future development should support but not necessarily imitate.” The expansion will allow continued use and upgrades to allow a successful program to serve the senior community into the future. The addition will be compatible with the character of the surrounding area, which includes historical context: o Avenidas is located across from the 50’ tall City parking structure, built in 2002. o Avenidas is fairly distant from Ramona Street and Lytton Avenue, as follows: 95’ from the parking lot’s outer edge abutting Ramona Street right of way. 150’ from Cogswell Plaza’s northernmost edge abutting Lytton Avenue. o There are two Category 3 historic resources fronting University Avenue: 251-255 University, a financial services building built in 1910, and 271 University, a restaurant built in 1935; the other buildings are not listed nor deemed eligible in 1998 for listing on the California and National Registers (281 University, retail, and 259-267 University, restaurants and personal services uses). The 15’ wide Paulsen Lane separates Avenidas from these one- and two-story buildings. o Two buildings on the opposite block of Ramona Street were deemed “potentially eligible” for the California Register in 1998: 470 Ramona, built in 1925, and 235 University, built 1920-25. The remaining buildings on Ramona were built between 1949 and 1986. o Two buildings are listed as Category 4 resources on the opposite block of Lytton Avenue: 251 and 255 Lytton; the other buildings were built in the 1970s. The project site is zoned Public Facility and adjacent to a park and a parking lot, also zoned and designated for public land uses. The taller walls of nearby buildings (on Bryant, Lytton, and Ramona) help the park (Cogswell Plaza) meet the Guide’s goal for an ‘outdoor room’. The placement of the three story addition with its third floor step-back next to mature trees along the edge of Cogswell Plaza, contributes to meeting the Guide’s goal. The project’s design is intended to be compatible with, and differentiated from the existing historic buildings on the site. Though there are no approved improvements for the Lot C parking lot, the project would not impede ADA improvements currently under consideration, nor any future landscaping improvements. The Avenidas expansion project would be subject to requirements for replacing damaged parking lot asphalt, curbs, and restriping, at a minimum, following project construction. Functionality and Open Space: Finding #3: The design is appropriate to the function of the project. Finding #7: The planning and siting of the building on the site creates an internal sense of order and provides a desirable environment for occupants, visitors and the general community. Finding #8: The amount and arrangement of open space are appropriate to the design and the function of the structures. The project is consistent with Finding #3, #7, and #8, because: The main entry to the historic building will remain on the primary façade on Bryant Street; new bike racks proposed along Bryant will serve the staff and visiting bicyclists. The addition replaces the existing first floor dining room with an upgraded dining room, and provides improved and expanded indoor facilities for other critical Avenidas senior activities. The addition retains a courtyard with an overlooking second floor balcony and two third floor decks. The design will allow indoor-outdoor circulation and vibrancy for senior activities to provide a desirable environment for occupants and visitors. The addition provides a secondary entry to the main entry on Bryant Street, allowing visitors to the center easy access from the parking lot behind the center. Improved trash and recycling facilities are provided, accessible from the service alley. The addition’s third floor would be set back from the first and second floor volume to reduce the perceived scale of the building as seen from the park and courtyard. Roof decks and the courtyard provide amenity space for the seniors and staff of Avenidas. Circulation and Traffic: Finding #9: Sufficient ancillary functions are provided to support the main functions of the project and the same are compatible with the project’s design concept. Finding #10: Access to the property and circulation thereon are safe and convenient for pedestrians, cyclists and vehicles. The project is consistent with Finding #9 and #10 because: A new trash enclosure is proposed to serve the needs of the center. The proposal includes pedestrian and bicycle improvements to facilitate pedestrian movement around and into the building. Landscaping and Plant Materials: Finding #11: Natural features are appropriately preserved and integrated with the project. Finding #12: The materials, textures and colors and details of construction and plant material are an appropriate expression to the design and function and compatible with the adjacent and neighboring structures, landscape elements and functions. Finding #13: The landscape design concept for the site, as shown by the relationship of plant masses, open space, scale, plant forms and foliage textures and colors create a desirable and functional environment on the site and the landscape concept depicts an appropriate unit with the various buildings on the site. Finding #14: Plant material is suitable and adaptable to the site, capable of being properly maintained on the site, and is of a variety that would tend to be drought-resistant and to reduce consumption of water in its installation and maintenance. The project is consistent with Finding #11, #12, #13, #14 because: Existing natural features (street trees along the Bryant Street frontage, and mature trees at the southerly edge of Cogswell Plaza) will be appropriately preserved. One Camphor Tree in the parking lot adjacent to the project site will be removed; a City CIP project will address future parking lot improvements. The proposal includes materials that will be compatible and appropriate in that they will not ‘mimic’ the historic materials, but the colors will help the addition to be compatible. Bird-friendly glass will be used on large windows facing the park. The proposed addition will be located behind mature screen trees in the park, which will interrupt views of the addition from the park and provide “scale” for the addition. The proposed landscape materials are well suited for the proposed environment. Plantings along Bryant Street frontage and park frontage will be installed. New vine plantings on the addition facing the parking lot will be compatible with existing vines on the garden room facing the parking lot. The Japanese maple in the courtyard will be retained and supplemented with new, appropriate plantings. Sustainability: Finding #15: The design is energy efficient and incorporates renewable energy design elements including, but not limited to careful building orientation to optimize daylight to interiors, high performance, low-emissivity glazing, cool roof and roof insulation beyond Code minimum, solar ready roof, use of energy efficient LED lighting, low-flow plumbing and shower fixtures, below grade parking to allow for increased landscape and stormwater treatment areas. The project is consistent with Finding #15. The project includes bird-friendly glass, and would comply with the City’s green building requirements for the new addition, including CalGreen Tier 2 and the local energy reach code. Given the long term lease of the building, an exemption will be granted from the City policy requiring LEED Silver for City buildings. City of Palo Alto Page 1 Call to Order/Roll Call Present: Vice Chair Margaret Wimmer; Board Members David Bower, Roger Kohler, Patricia Di Cicco [via conference call] Absent: Beth Bunnenberg, Chair Martin Bernstein, Michael Makinen Oral Communications Vice Chair Wimmer: We’d like to call this meeting to order. Today is Wednesday, October 12th and this is the meeting of the continuation of the meeting of yesterday for the City of Palo Alto Historic Resources Board. We are again convening to pick up where we left off on our Action Item #2. Ms. Cara Silver: Let the record reflect that we have one absent, and two recusals based on a common law conflict of interest. I am Cara Silver. I’m the Senior Assistant City Attorney and I wanted to just say a few remarks about the process that we will be following today for the continued hearing. As you know, this has been a very difficult meeting to schedule. We have two members who have been recused. We have one member who is out of town. One member who is at home, recovering from surgery and we thank her for joining us telephonically. We also have another member that is scheduled to go out of town on Thursday thus necessitating the need to conduct this meeting on a rather expedited basis this week. As you know, the Brown Act does allow for telephonic meetings; however, when there are some absences, the Brown Act says that telephonic meetings require that there be a quorum of people participating within Palo Alto. Since there are so many absences, we needed to conduct this rather unusual process of requiring that somebody who is out of town cannot participate telephonically. That would not allow for a quorum to be present in Palo Alto. Yesterday, what happened is that we did not notice that the meeting would be – that one of the Board Members would be participating telephonically and so we have now corrected that technical issue. We have posted the agenda on the board outside and publicly noticed that one of the Board Members will be participating telephonically. We’ve noticed the address and any member of the public who would like to appear at the address and observe the Member who is participating telephonically may do that, as allowed under the Brown Act. What we will proceed to do now is to conduct a continued hearing. What we would suggest is that since there was a quorum present yesterday but there was this technical issue, we would suggest what you do is that you make a motion to incorporate by reference all of the comments that were made at the hearing yesterday. Those comments were recorded through the media center and we would suggest that you would incorporate them into the record of proceedings so that then you do not repeat your comments, but that you allow members of the public who would like to participate today to make additional comments and then you can, today, use your time to make any additional comments that you would like in response to the comments you’ve received today. Then, we would ask that you do make a motion on the project and that motion will be delivered to Architectural Review Board which is the next administrative body to hear this item. Agenda Changes, Additions, and Deletions None HISTORIC RESOURCES BOARD MEETING SPECIAL MEETING DRAFT MINUTES: October 12, 2016 City Hall/City Council Chambers 250 Hamilton Avenue 10:30 A.M. City of Palo Alto Page 2 Action Items Member Pat DiCicco will be participating from her home at 860 University Avenue in Palo Alto 1. QUASI‐JUDICIAL MATTER. 450 Bryant Street, Avenidas [16PLN‐92]: Recommendation to the Director of Planning and Community Environment on the Project’s Mitigated Negative Declaration and Recommendation to the Architectural Review Board for approval of an Architectural Review Permit to allow the renovation, partial demolition and addition to an existing historic resource resulting in a net floor area increase of 7,128 square feet. The Project was evaluated in compliance with the California Environmental Quality Act (CEQA) and the CEQA Guidelines. An Initial Study/Mitigated Negative Declaration has been prepared in accordance with CEQA. The public hearing for this project was continued to this date from October 11, 2016. Vice Chair Wimmer: I guess first should we see if there are any members of the public who would like to speak on behalf of the project in acknowledgment of what you have already said yesterday? Ms. Lisa Hendrickson: May I just speak briefly? Vice Chair Wimmer: Sure. Ms. Hendrickson: Lisa Hendrickson and I will be very brief. I wanted, on behalf of all of us at Avenidas, to thank you all for your considerable effort to be here today to conclude the business of yesterday’s meeting. I also wanted to share with you how grateful we all are for your expressions of support and not a little bit relieved. We agree with you. This building has only gotten better. The design has only gotten better and largely because the suggestions you’ve made over the meetings that we’ve spent together. We are really looking forward to building it and opening it to the public so that everybody may enjoy it. At which time we will be truly able to say that it took a village, and so thank you for being part of that village. Vice Chair Wimmer: Thank you. MOTION Board Member Bower: Chair Wimmer, can I make a motion that we include all of our deliberations as part of this meeting today so that the discussion we had yesterday can be part of the record and I hope that we get the support of the rest of the Board and then a second and then an affirmative vote? Vice Chair Wimmer: It sounds like we have a motion to kind of pick up where we left off yesterday and yesterday we were all in support of the project. I guess the motion is to incorporate…(Crosstalk) Board Member Bower: This is just to incorporate yesterday's information, public input, our discussion with staff so that that body of information (Crosstalk) can be included. Board Member Makinen: I’ll second that motion. Vice Chair Wimmer: With Board Member Di Cicco on the phone, all those for that motion say I. Everybody: I. Vice Chair Wimmer: All those opposed? So, that passes unanimously. City of Palo Alto Page 3 Ms. French: 4-0 and then two… Vice Chair Wimmer: With one absent and two… Board Member Bower: two abstentions or two recusals, correct. Vice Chair Wimmer: That passes. Ms. French: Thank you. Vice Chair Wimmer: Is there any new business or anything else we need to talk about. Ms. Silver: The second piece of your discussion I think is that you should make a motion on the substance of the project. So the first motion incorporated all of your deliberation and the public testimony and then the second piece for you to discuss is whether to recommend approval of the project to ARB. Vice Chair Wimmer: Ok. MOTION Board Member Bower: I would like to make two motions. Let's just start with the first one. I think one of the things we need to weigh in on for both the director of planning and the ARB is the issue of the negative declaration – neg. dec. – I can’t… Ms. French: Mitigated Negative Declaration. Board Member Bower: Mitigated Negative Declaration. Anyway, so I think that I’d like to move that we -- I think we support the report as it’s presented to the Board, which does show that negative impacts of the projects can be mitigated, and it’s discussed in great detail, starting on page 35, I think, of our packet? It’s the DUDEK report and it goes through all of the issues, the environmental issues. To my reading this report, I think it’s thorough and demonstrates that the impacts can be mitigated. I’m proposing that we accept the report. Vice Chair Wimmer: Should we vote on that one? Board Member Bower: We have to have a second. Vice Chair Wimmer: I’ll second that. Board Member Bower: Is there any discussion? Vice Chair Wimmer: I don’t think so. Board Member Bower: Pat? Any discussion? Board Member Di Cicco: I would agree. Vice Chair Wimmer: All those in favor of accepting the information on the negative – study – the mitigated negative declaration. All those in favor of supporting that information say I. Everybody: I. Vice Chair Wimmer: All those opposed say nay. That also passes with 4 members present, two recused and one absent. Then your second question. City of Palo Alto Page 4 Female: You’re doing a great job, David. MOTION Board Member Bower: I don’t want to monopolize the time here but since time is short and Pat – we’ve done most of our work yesterday, I would like to move that we accept – that we recommend to the ARB the project as is currently designed, and I’ll just read a couple of things into this motion: that we agree that the garage is original fabric and should be retained, that the addition as described in the memo from ARG, which is dated October 4th, 2016 and is part of our packet, convincingly discussed Secretary of Interior Standards number 9 and 10, and how this project is now compatible in its massing and its material selections and does not overwhelm the original building, one of the most important things that we discussed as a Board over the many meetings. I’m hoping that the rest of the Board will join me in supporting this and moving this on to construction. Vice Chair Wimmer: I’ll second that motion. Let’s have a vote, all in favor… Board Member Bower: Discussion? Board Member Di Cicco: I agree. I vote yes. Board Member Kohler: I’m voting yes as well, but I think David did a very appropriate summary that really narrows it down. As we (Inaudible) noted yesterday that we thought that this was an excellent project. I vote yes. Board Member Bower: I’m also voting yes. That’s four yeses and no nays. Board Member Kohler: Well, several absent. Board Member Bower: With two recusals and one absence; seems to be a pattern here. I don’t know. Is there anything else we need to do? Vice Chair Wimmer: I think that pretty much concludes what we started yesterday so I think… Board Member Bower: Right. I mean… (Crosstalk) Board Member Di Cicco: (Inaudible) Board Member Bower: … that’s what the staff had asked us in the report to weigh in on. Ms. French: I would just say it would be important for me to acknowledge, because I don’t know if I did yesterday, there was some email from a gentleman named David Hirsch, who you are familiar with, and I did forward that email to all of you and you did receive that email. He was interested in knowing that, so I would like to state for the record that it was forwarded and you did… Vice Chair Wimmer: Yes, and we all received that, yes. Board Member Di Cicco: I would agree with your statement. I did read it. I reviewed it. I did receive it, I believe three or four days ago before the last meeting. Ms. French: Thank you. Board Member Di Cicco: Yes, and with that, I think, as far as I can understand, we’ve all unanimously agreed that this project will go forward and that my vote will count. Ok? Board Member Bower: Good. City of Palo Alto Page 5 Ms. French: Thank you so much for participating. Board Member Bower: I guess we can adjourn the meeting. Vice Chair Wimmer: I guess if there’s no – any other business or anything else we… (Crosstalk) Board Member Kohler: We have any meetings of the future that you know of? Ms. French: The next meeting we are targeting is November 10th. Due to the change in staffing here, Matt’s last day is coming up next week. There is a note later, but we will be acknowledging his leaving in a way you can participate in. Because of the staffing change, I think we’re going to wait until November 10th to pull together anything that needs to come forward. We have no projects right now, other than follow up on the bulletin and… Board Member Kohler: Is there a replacement planned? Ms. French: We’re working on getting some consultant help for the moment in the interim. Board Member Kohler: Alright. Vice Chair Wimmer: One other item I just wanted to discuss with (Inaudible) – this is just a Board issue, what can we learn from Board Members speaking in front of the ARB or speaking at other meetings, with the result of them not being able to participate. I don’t think they realized that that would happen when they did speak. Maybe just as a reminder or lesson for the Board is that maybe we need to gain clearance or ask, is it ok if I speak at another Committee or Council Chamber or any kind of other ARB meeting on the project that is also considered one of our projects that we’re reviewing. I think that was the conflict that this was a project that was also a continuation project for us. I don’t think that they realized that that would prevent them from participating as Board Members. That’s what I’m thinking. It’s a lesson for us. I don’t know that… Board Member Bower: Can I make a suggestion that since this is not on the agenda that we put this on our next agenda? Vice Chair Wimmer: Yes, I think we should. Board Member Bower: That’s the suggestion I think you are making. Vice Chair Wimmer: Yes, I think we should. Board Member Bower: I think that maybe Cara you could come back and talk to us about this. Ms. Silver: Good idea. Board Member Bower: So that we understand. (Crosstalk) Vice Chair Wimmer: (Inaudible) Board Member Bower: I was intending to go to that meeting and had I gone, there’d be no quorum today. Ms. French: Well I think generally speaking we encourage the Chair – invite the Chair actually - to go and convey what the Board as a Board did at their last meeting. You know we reviewed, we did this, we did that, as a group. I think we can talk more about this on November 10th. City of Palo Alto Page 6 Ms. Silver: We will actually – we are preparing a confidential writing for you on these issues and it will actually be delivered to you, either today or tomorrow and then I will be happy to come back and have a public presentation with the whole Board and so members of the public can also learn about…(Crosstalk) Vice Chair Wimmer: I think that would be educational and helpful for us to better understand that. Board Member Bower: And the public can comment. (Crosstalk). Board Member Kohler: Confidential? Ms. Silver: Yes. (Inaudible) Ms. French: Another item I might put on…(Crosstalk) Board Member Bower: (Inaudible) Ms. French: Another item for the November 10th meeting. I was thinking because we do have our joint meeting coming up with the Council on December 12th, I think that’s the target date right now. We could have a discussion of what we might bring to that joint meeting. Vice Chair Wimmer: That would be great. Board Member Bower: So is that technically scheduled with the Council? Ms. French: I believe it is. I’ve seen it on the advanced scheduled, December 12th. Mark your calendars. Hopefully, we can get a quorum to be there. Board Member Bower: It’s important that we are there… to talk to the council. I think I’ll be in town. Ms. French: It would be great. I can prepare a report from last year’s meeting with the Council and the historic program for that meeting on the 10th. Vice Chair Wimmer: With that, we are adjourned. Adjournment City of Palo Alto Page 1 Present: Chair Robert Gooyer, Vice Chair Alexander Lew, Kyu Kim Absent: Board Member Baltay, Board Member Furth Amy French: Board Member Furth and Board Member Baltay are recused on the two items today and will not be participating. Thanks. Action Item 3 3. 450 Bryant Street [16PLN-00092]: Recommendation to the Director of Planning and Community Environment for Approval of an Architectural Review Permit to Allow the Renovation, Partial Demolition, and Addition to an Existing Historic Resource Resulting in a net Floor Area Increase of 7,158 square feet. Environmental Assessment: This project has been reviewed in accordance with the California Environmental Quality Act (CEQA). An Initial Study and Mitigated Negative Declaration has been prepared for this Project. Zoning District: Public Facilities (PF) zoning district. The ARB hearing of this Project is continued from September 1, 2016. For additional information contact amy.french@cityofpaloalto.org. Chair Gooyer: If that's the case, why don't we start with Item 3, which is 450 Bryant Street, recommendation to the Director of Planning and Community Environment for approval of an Architectural Review permit to allow the renovation, partial demolition and addition to the existing historic resource resulting in a net floor area increase of 7,158 square feet. Environmental assessment, this project has been reviewed in accordance with the California Environmental Quality Act, CEQA. An Initial Study and Mitigated Negative Declaration has been prepared for this project. Zoning district, public facilities, PF, zoning district. The ARB hearing of this project is continued from September 1st, 2016. Ms. French: Good morning. Amy French, Chief Planning Official. Today we are here for the third formal hearing of the 450 Bryant Street, the Avenidas Senior Center, project. As you are aware, we have three members participating today. We do have a quorum. This went to the HRB last week. On the 12th, they rendered a decision which was to recommend to the ARB and the Director approval of the project. Today we are seeking the ARB's recommendation. As the third formal hearing, today is the day, per our Code, that we're looking for a recommendation one way or the other. We're interested in hearing your comments on the revised Initial Study, Mitigated Negative Declaration. It was revised to reference a more recent report from the historic consultant on the project. There's been some discussion about retention of the former garage called the garden room. They weighed in on that and on the more recent project, which was the revisions made to address the ARB's comments made on the last meeting, which was in August. I'm sorry; September 1st is when that occurred with the ARB. Our request today is that you review and comment on the Architectural Review findings for approval, which is what staff is recommending. We reference the Comprehensive Plan and the Urban Design Guide, which is referenced in the Comprehensive Plan. Just a note. In the Public Facilities Zone, the Context Based Design Criteria that you're accustomed to seeing do not apply. Those are not contained in that chapter of the Zoning Code. The third floor has been reduced as you saw in plans. It's also been in-set as part of that reduction. The garden room is retained, and there's a new deck over the courtyard, providing some ARCHITECTURAL REVIEW BOARD DRAFT EXCERPT MINUTES: October 20, 2016 City Hall/City Council Chambers 250 Hamilton Avenue 8:30 AM City of Palo Alto Page 2 interaction there. Bird-friendly glass is being used on both the parking lot-facing elevation and the park- facing elevation. There's some new details. Looking at the Bryant Street elevation, we have an addition. This is the latest set of renderings showing the reduced third floor. The addition is definitely visible from Bryant Street, but it is subordinate to the primary facade. The HRB found that to be the case. The view from Cogswell Plaza with the trees shows that not a lot of it will be seen. It will be interrupted as far as views from Cogswell Plaza. You can see the hyphen is how the addition and the Category 2 building are connected. That allows visibility, viewing of the Category 2 building. Here we have a view from the parking lot. This view does not show street trees along Ramona. If you're on the sidewalk, there will be street trees to interrupt this view as well. There are a couple of trees in the parking lot, not a whole lot. This glassed-in tree is not really a tree, as we are clear that that's a placeholder for public art. The applicant is meeting with the art folks and will be going to the Public Art Commission to look at a piece of art for that space. As I noted, bird-friendly glass is proposed. It's the dotted glass. Here's this new courtyard. Sorry; this new deck where the third floor was pulled back. You can see in the June scheme where the floor came out to. That floor has been pulled back, and it's now a deck overlooking this courtyard. That does provide some interactive space. There were formerly panels, the metal panels, up here. Those have been replaced by glass. Just in summary. From the park and alley elevations, as you see here, you can see this glass hyphen. You can see the floor pulled back. Here's the courtyard where they have the trash facilities and the nice, new gate that they're proposing. This is about 65 feet from Bryant Street, so it's quite a distance from the main facade, the entry. Here I have the plans that are in front of you. This is an elevation from the set that came to you in September, showing Approach 1. You can see here that the pitch of the roof has changed a bit and flattened. It's gentler than it was in September. The height has been reduced from this set in September to this now. You can see the additional trim that comes out. As far as the Initial Study, Mitigated Negative Dec, I noted it's been revised to reflect the reduced square footage. This is the net square footage increase of 7,158 square feet. In terms of net floor area, it's not a large project for this increase. We have the aesthetic section of the document that is the purview of the ARB. That has not changed since the last time you saw this, the aesthetic section. There is a reference to cultural resources. That section did change to reflect that memo from the historic consultant. The AR findings are provided in this set. We are still on the findings that are in the existing Municipal Code. Council has not finalized its deliberations on the Architectural Review findings. We are still grouping those 16 findings into sets. I put those on the screen here. We could come back to those later. That concludes staff's presentation. The applicant is here to make a presentation. Chair Gooyer: Does the applicant ... Lisa Hendrickson, Avenidas: Good morning. I'm Lisa Hendrickson. I haven't spoken to you before. If I may this morning take a couple of minutes. I'm currently the capital project manager at Avenidas. We're returning today with modifications that respond to your comments at your September meeting. We're very hopeful that you will approve this design. We agree with others that the numerous modifications that we've made have only made this design better. I'd like to take a few minutes to explain why further delays, however, would put this project at serious risk and also to respond to Mr. Hirsch's comments at the last meeting and his letter to you requesting yet again that we demolish the old garage and start over with a two-story design. Next month it will be 2 years since we first met on this project. In November 2014, there was a study session at the site. We presented a two-story design that eliminated both the garage and the courtyard. At that meeting, we were urged by the City staff as well as members of the HRB and perhaps members of this Board—I don't remember—to further study the historic characteristics of the garage. We asked our historic consultants, ARG, to do that. They returned with a report that asserted that the garage is part of the historic fabric of the site and should be retained. To be honest, we were a little disappointed. The City accepted these findings, and it would have been, of course, unethical to seek a firm that would return with different findings. In July 2015, we returned with an entirely new design featuring a three-story addition where there is now a 1970s dining room and preserving the garage and much of the courtyard. This design reflected many of the comments that we received from this Board and the HRB. Our participants were very pleased that we were retaining much of the courtyard. There was concern expressed that the design called for the removal of some of the original eaves. We were asked to create a separation between the original building and the addition. We City of Palo Alto Page 3 were also asked for a design that was more compatible with the historic building. We returned again in May of 2016, this year, with a design that added a connector to preserve the eaves and with less contemporary styling, more in keeping with the historic building. Your comments were generally supportive, and we took note of the suggestions that you made with regard to massing and the additional detail that you requested. Over the summer, the City obtained a peer review of the historic resources evaluation, which confirmed ARG's findings about the garage. The CEQA document was completed. Last month we returned again with a design that reflected additional modifications and details that addressed your questions. We hope for your support for this design today for several reasons. Notwithstanding the comments that have been made about the significance of the garage and this design's compatibility with the Standards, that compatibility has been supported by two historic resource experts. A new design that demolished the garage would trigger a focused EIR, adding several more months to the entitlement process and could put the approving authority in the position of having to approve a design that did not comply with the Standards. We have been advised that if the City were to approve such a design, it would be risking a lawsuit for having approved the demolition of the garage. We also understand that the City usually asks the applicant to bear the cost of defense of such a lawsuit. Further delays put our project at risk for other reasons. Delays add unaffordable expense to the project. We've already spent about $500,000 on design costs and City fees and another $400,000 on fundraising expenses. Construction costs are escalating. There is only so much money that we can fundraise for this project, and delays add to the difficulties of funding the costs. Delays also put our fundraising at risk. We have a lead donor who will fund 20 percent of the project costs, but we will not be able to meet the conditions of his gift unless we start construction in 2017. Another $250,000 gift comes with the condition that the project be approved this year. Other gifts are contingent on design approval. Further delays put these pledges at risk. Our almost 90-year-old building is sorely in need of modernization. Our community's seniors deserve a better community center, one that is safer and with enough space for all of the programs that they want. We are 2 years into this entitlement process and have made numerous modifications to the design at the request of this Board and the HRB. The window to get this done is closing. We urge you to support this design today and hope you do. Thank you very much. With that, Kevin Jones, our architect, is going to describe the modifications. Chair Gooyer: Thank you. Kevin Jones: Good morning. My name is Kevin Jones. I'm with Kenneth Rodrigues and Partners Architects. I'm going to try to just do a fairly brief overview of some of the things that we've presented to you in the past, basically focusing on the comments that we heard from you and how we have addressed those comments in our drawings. I think the comments that we've heard from both the ARB and the HRB over these past couple of months have yielded a much better project as a result of those. I'd like to share that with you now. Here's a little bit of a summary in kind of bullet form of the items that we heard from this Board and how we've addressed them. I'd just sort of like to briefly walk through them. Basically concerns about the overall height of the building. The approach was to step the third floor back. In doing so, we reduced some floor area, but I think the result of it, as you can see in some of the materials, really does a good job of altering the perception of the massing of the building. In doing so, we also on the third level, as Amy pointed out, pulled the third level back along the courtyard face to allow for much more of a two-story feel on that edge, and then creating an exterior deck as well. The clay tile comment, which I think was a great one as well. We're utilizing a flat, clay tile instead of the barrel tile that occurs on the existing building, further creating a differentiation between the historic building and the proposed new building. The next items here are about some cornice details and glazing. I'll walk you through those as we kind of go through it. As just a general overview, the massing of the project consists of the main 1926 Birge Clark building, the garden room or the former shed building, which we are retaining. There is the connector element that helps to create a glass connection in some ways between the old and then the new addition. That vocabulary carries its way up through the project as you proceed up the levels. Again, the second story of the Birge Clark building and the connector between the Birge Clark building and then the new structure and then down at the one- story level the existing, former shed building or the garden room. The third floor only here. Here's the area where we pulled back the facade at the loss of some square footage, but we were able to create a very pleasant deck that would look down into the courtyard as well as reducing the massing of the City of Palo Alto Page 4 building along the courtyard face. At that level, we have an exterior patio deck here as well as a larger one here that the original design had proposed. We've also done some work to try to reduce the roof heights and the pitches to again create a much shallower impression of it. These are the elevations, one from Bryant Street. The other one here is from the alleyway. The renderings give you a more true-to- life appearance of what happens in terms of where the perspective enters into it. You can sort of see on the wall here and also in your packet these renderings which help give you a better feel for what that perception will be if you're really on the ground looking at the building. Those elements are highlighted by the existing garden room building. This large glass element, which enters into a two-story, atrium-like space, serves as both vertical circulation, a stair and elevator, and a connector between the old and the new. Most of the program inside of the building in terms of the new elements are within this wing of the building. The ground-level of it being the loo and the new dining room. The second level being a wellness center, and the third level being a fitness center component. I'm getting this sign to sum up. I'm going to zoom a little bit here. We spent some time developing particular details. Much of the building is limestone-clad in large-scale pieces as well as precast concrete trim elements, which you'll see through it further articulation of the glazing system on the third floor, which shows in the renderings as well. Railing details, all of this is in your packet. Additional elements in terms of providing sunshading throughout. Here the view of the project from Bryant Street with the addition in the background. A view from the parking lot as Amy described. You can see here the stepping back of the third floor, reducing the appearance of this element to be smaller than that of the main building. By pulling the building back on the third floor, I think it does create a feeling of this as being the second story. In addition to having the glazing here, it does create a much more ... Chair Gooyer: If you'll start to wrap it up. Mr. Jones: I can wrap it up now. Any questions you might have, please ask. I as well as our Avenidas contingent can try to answer them. Thank you. Chair Gooyer: I think we're good at the moment. Thank you. I have three speaker slips, starting with Kathleen Basak and then Linda Jolie. You'll have 3 minutes. Katherine Basak: My name is Katherine Basak. I'm presenting in behalf of my neighbor, David Hirsch, who could not attend today. David is a respected, thoughtful and articulate architect with over 50 years of experience designing public buildings in New York City. To the ARB. The entire Avenidas scheme that you have seen for months is the result of a mistaken conclusion by the historic consultants with the misguided urging of Avenidas and the approval of the Planning Department. This mistaken conclusion is a garage structure behind the Birge Clark-designed building merits special consideration as a historic feature. Consider the following. It was built after the original design as an afterthought by Birge Clark and not included in his original drawings. It was hidden for years, hemmed in by other buildings. See the Sanborn maps in the historic report. It was only exposed to view when the surrounding buildings were torn down and this area became a parking lot. It was never the intention of Clark for it to be seen from this open parking space as is clearly evident in its blank wall. It does not represent any of the special, significant design characteristics of Birge Clark buildings. The question is why should you accept this structure as a legitimate historical element. As architects, I am sure some of you know that preserving it while the three-story addition is constructed immediately adjacent to it, with the deep foundations that are required, will be an expensive piece of work and cause immeasurable complications and cost to the project. If you ask, as the HRB did in an official vote, that the applicant show you a scheme without the garage, you will discover that it is possible to construct a two-story structure containing the entire Avenidas program completely in scale with the Birge Clark building. The applicant and the City chose not to bother with this HRB request. You won't have the opportunity to see this unless you do not accept what is being presented here today. This will be a hard choice because there is a conspiracy between the applicant, City Planning and their hired historic consultant to preserve this meaningless garage structure and its adjacent minimal courtyard to the detriment of a proper design. These should not be the aesthetic judges. You should. Turn this proposal down and require the applicant to redesign a two-story scheme by eliminating the garage. Respectfully, David L. Hirsch, RA, AIA, 798 Palo Alto Avenue. City of Palo Alto Page 5 Chair Gooyer: Thank you. Now, I have Linda Jolie [phonetic], and then Wes Marinov. Linda Jolie: Hi. I'm Linda Jolie. I actually have attended Avenidas and so has my friend, Wes Marinov. We're familiar with the attitude of users there and we're familiar with the attitude of members of La Comida which supplies the meal. To make a long story short, there is massive opposition among those people to this proposal. The Board Members of La Comida have actually said that they can pull out of Avenidas, ending the meal, ending the relationship. There's also a chance that they will propose legal action to end this thing. This is a very disturbed proposal, which should not go any further. I have extra copies of the architect's article exposing this, if Board Members would like to consider that. The users of Avenidas do not want their program broken up. They don't want to be moved to another building during construction. These are older people in walkers that should not have to undergo this. They're not here because they are in walkers. I think we represent them. I think that the underpinnings of this project have not been examined. The need for this project has not been adequately examined. I described the mendacity behind us. It has been alleged that Avenidas is overcrowded and, therefore, has to expand. Why don't you go there and see how overcrowded it is? The dining room is only half empty. There has been an allegation that there will be seniors in the future who will need these facilities. I tell you I'm over 70, and I don't see seniors like me using these facilities. There is loud music. There are other things that we don't want. You're going to build a big, expensive, empty building if you build this. You should reconsider the motives behind this, money or whatever it is. As far as we can see, we do not want it. We don't want it. Chair Gooyer: I now have Wes Marinov, and then Herb Borock. Wes Marinov: Good morning. My name is Wes Marinov. I got involved in this project on the urging of some vocal opponents of the project among the La Comida diners, the seniors who are the customers of Avenidas and La Comida. I presented a list of 20 signatures, some of the more vocal opponents, during the Historical Review Board meeting about a week or 10 days ago. I hope that committees for the City Council communicate with each other so you can get a copy of that list. Unfortunately, the negative sentiment continues to persist; although, there have been efforts on the part of the project management to popularize it or to expose the diners to the truth of the project. The main objections are, one, the people like that building, the current La Comida building. They like the cozy style, Spanish type. They like the ability to look at the park and at the same time look at the patio. The patio is the other question here. Most of the diners are opposed to have this patio be demolished. I understand the new version will have part of the courtyard remaining. The current atmosphere of sitting in this building that people have gotten used to love will not be maintained. I don't know how much time I have. There is another point here. There were allegations that some of those opposed to the project, diners of La Comida, have gone to the management and have complained and have not been listened to. Unfortunately, this was not confirmed. I talked to the main opponent, Electra [phonetic] (inaudible). She was in the hospital. I waited until she got out. She is in some—I'm sorry, I can't say that word—convalescent home. I talked to her and she couldn't remember whom she talked to. I want to apologize to any present involved managers who got (crosstalk). Chair Gooyer: If you'll wrap it up. Mr. Marinov: A couple of sentences more. There was an event which was quite discussed, and that was an altercation between Bruce Felber [phonetic] and Phil. The La Comida management or manager did not listen to one of the parties. Maybe that's why Electra imagined this thing. We can safely assume this is not true, that the managers and La Comida and the Avenidas and the project ... Chair Gooyer: Thank you. Mr. Marinov: ... managers listened. Chair Gooyer. Thank you. I now have Herb Borock, and then Bruce Heister. City of Palo Alto Page 6 Herb Borock: Good morning, Chair Gooyer and Board Members. This agreement between the historic experts is a classic disagreement that the Council can decide on as an argument between experts. While you're being threatened that if you agree with Mr. Hirsch, the City would be sued, whoever sues will lose the case. There's no concern for economic reasons there. There is a potentially significant effect by going along with the proposal. That is, you will be spending all this money building a big building that's supposed to serve all the seniors, but it won't. We all know how crowded Downtown is with all the over- development. It really doesn't serve people who are unable to get there. The alternative that should be studied is to have an alternate, second location down at a place like Cubberley where you won't need all this building Downtown. You have what purports to be a recommendation from the Historic Resources Board. In fact, the Historic Resources Board could not make a legal recommendation because every member who participated on the October 12th meeting had already expressed an opinion on October 11 which was not a legal meeting. Therefore, they demonstrated bias. They could not incorporate what they did on October 11th into the October 12th meeting. If they could do that, they could do the same thing for Chair Bernstein and Board Member Bunnenberg, who also expressed an opinion outside of the regular meeting and, therefore, had to recuse themselves. I mentioned this on October 11th and urged the HRB not to proceed and make comments, but they did anyway. The history is that there was a public notice as required by environmental law that was not required to have a description that you would have for the Brown Act. It omitted the fact that actions were being taken. The Brown Act notice was correct. The agenda was posted and said that actions would be taken. There was someone participating from a remote location. It wasn't noticed on the official notice that that person would be participating. The agenda posted at the remote location was not the agenda for the Brown Act. It was what was published in the public hearing notice, which omitted the fact that actions would be taken. It's very clear that the meeting on October 11th was not a meeting of the HRB. What happened there could not be incorporated into the October 12th meeting because members of the HRB were expressing an opinion outside of a legal meeting and, therefore, had bias which prohibited them from participating in the action on October 12th. As far as Mr. Hirsch is concerned, since he's new to Palo Alto, he may not be aware of the process to preserve his rights going forward. The next stop would be, if he disagrees with the Director's decision ... Chair Gooyer: If you'll finish it up. Mr. Borock: ... to appeal. Thank you. Chair Gooyer: Thank you. I have one more speaker, and that is Bruce Heister. Bruce Heister: I am a member of Avenidas. I am former Chair of the Board and still on the Board. I live at 107 Emerson Street, within walking distance of Avenidas. I think that people have (inaudible) talked about 20 people signing a petition, for instance, from La Comida. Avenidas serves over 7,500 people a year, clients. Of that, 1,600 of them are actual members of Avenidas. Very few of the people who go to La Comida have actually joined Avenidas as memberships. Avenidas hosts the La Comida program. You're hearing not the majority of members who benefit from Avenidas, the 7,500. You're hearing from at most 150 people that make up the dining set. With respect to what Avenidas has been doing, we have started to look at obviously using Cubberley as a second point to relocate during construction but also to use that as a place to start setting up classes. Avenidas carried on for over 5 years a discussion with the City about actually locating a wellness center in conjunction with some other organizations at Cubberley. Of course, because of the problems of Cubberley's ownership or joint ownership or lack of a future, nobody was able to guarantee anything that would allow you to put money into a location down there. It would be using the existing buildings but not adding any new building with the kind of facilities that seniors demand today, particularly for physical fitness. Thank you for hearing me. Chair Gooyer: Thank you. Is there anyone else that would like to address the Board on this item? Seeing none, I'll bring it back to the Board. Kyu, why don't you start? City of Palo Alto Page 7 Board Member Kim: I'll start with two quick questions for clarification. In the staff report, it was noted that the HRB meeting minutes from October 11th and 12th would be provided. I did not see those yet. just wondering if ... Ms. French: I think they weren't returned from our transcriptionist. It was just last Wednesday. I can give a basic summary of that meeting. I think I provided a summary in the staff report itself. I apologize ... Chair Gooyer: That would probably be a good idea. Ms. French: ... that I did not have those available at places today. In essence, just to respond to Mr. Borock's comments. The ad was correctly placed in the newspaper. The agenda was posted on the Friday. It did not state that telephonic participation was going to happen. The morning of, we put something out on the table to clarify that. It was not 24 hours in advance, which was the requirement for that agenda. What happened then at that meeting on the 11th is at 10:30, there was a continuation of the meeting to the next day beginning at 10:30. A notice was placed outside and at the HRB member's house regarding that meeting the next day. The HRB incorporated the comments made on the 11th and made a decision on the 12th. That was posted, that agenda. All four members that were participating, one telephonically, recommended approval of the project. I guess we don't have a number here today to convey the Board's general opinion about that. To sum up, they were pleased at the changes, the revisions. They did read and they announced, and I asked each one of them to clarify that they had read Mr. Hirsch's letters to the Board. They had and considered all of that and considered the report that ARG had prepared regarding the compliance of the project with Secretary of Interior Standards 9 and 10, retention of the garage. They were resolved in their opinion and did forward that recommendation for approval of both the Initial Study and the project. Chair Gooyer: Thank you. Board Member Kim: My second question is regarding the approximate construction year of the garage/shed. In the architect's drawing set, it's been noted that it was an addition made in 1950. However, in the historic report, it says approximately 1930. Is there clarification on that? Ms. French: Yes. 1930 is the correct. The 1950s addition was the kind of kitchen area to the side that you can see from Bryant Street. It's the Bryant Street-facing, one-story component of the building, attached to the Category 2 building. The shed at the back is the 1930 building. I can show it on the screen if that would help. Board Member Kim: No, I think that's okay. Thank you. I just want to say thank you to the applicant and to the architect for the presentation. I'm actually very pleased with the way this project has progressed and the latest revisions that have been made. I actually find the project and the building to be very poetic. I think there's kind of a beauty that's been—there's a certain beauty that's come up throughout the evolution of the project. I think looking at the way that the old building is separated from the new building, the transition, the way that the new building is kind of nestled between two parts of the older buildings while also retaining the courtyard, the size, the massing, even though the new structure is taller, I do think there has been quite an effort made to make the taller portion of the building still feel subordinate to the historic structure. I think there's been a real careful kind of punctuation to the way that this project has begun to situate itself on the site. I think in a project like this it's the very little things that make a very big difference. I'm very pleased with the way that the project has come to where it's been presented today. I appreciate the changes that you've made to the metal panels along with the new entry on the parking lot side, changing them to glass, pulling back that third-story portion facing the courtyard and also the other architectural details to the roof, the eaves. The other accent elements, I think, make a big difference in bringing this project together. I do not find this three-story scheme to be overly massive. I think I've stated several times in previous meetings that facing towards Eleanor Cogswell Plaza, it's very well screened by those trees. Even if it wasn't for those trees, I think a case can be made that this building does not look out of place. I think there are other, City of Palo Alto Page 8 taller structures in the surroundings such as the parking structure itself even that do not make this building feel too large. It's very hard finding a balance. I think you've really, truly come to find that balance. I applaud your efforts and your resolution that you've come to. I would be more than happy to approve this project, seeing the changes that you've made. Again, thank you for your revisions and sticking through the process. Chair Gooyer: Thank you. Alex. Vice Chair Lew: Eloquently said, and I agree with everything that you described, Kyu. I think the only difference that I have is—I have like a list of nitpicky things that I think should come back to the Board at some point. I think ... Chair Gooyer: The Board or the ... Vice Chair Lew: I'll go through the list, and then we can talk about it. I think I did also want to distinguish two elements regarding the third floor. It seems like there are two issues. There's one issue which is the three-story mass overwhelming or over-scale to the park. There's a second issue of is the three-story addition over-scale to the historic, existing building. I think those are two issues. There's been opposition to them. I think that some of the other Board Members who aren't here today and then also David Hirsch are mixed up. They both sort of wanted to redo this scheme but, I think, they were making somewhat different arguments. With regard to the three-story, we have lots of three-story buildings around open space or courtyards here in Downtown. If you go all throughout the Stanford campus, you'll see lots of three-story buildings around courtyards. They're fine. They're beautiful spaces, and they're attractive. I think that's the case with this particular project. I'm not in a position to—I would not support somehow changing the ARG historic report and the peer review, which both state that retention of the garage is the correct solution. My list of things that I think should come back somehow. The new light fixtures; they seem like a little art deco style to me. They don't seem quite right. That's just a minor issue for me, though. They're illuminating outward. I would prefer ideally like some sort of shielded fixture or a down-light. We don't have a photometric plan of them. I think we have a photometric cut sheet of the fixture itself, but we don't have the photometric plan for the project. Also, I think you're showing trellis lights in the courtyard, but those don't appear in the lighting plan. I think my question would be if you have required egress through the courtyard, then do you need to meet the emerging lighting standards and whatnot for that. Also, in that courtyard, I think, we don't have any details of the trellis or the trash enclosure roof. It seems like it's somewhat of a combined structure. I would caution you that sometimes I've had like the Building Department require those trellises to be fire- rated if it's part of the egress path of travel. It seems like some of the landscape drawings are showing the trellis as wood, but in some other photos it looks like it's a metal structure. I think we need to see that. Also, the landscape plan is showing a pittosporum hedge along the park side of the project. It wraps into the—what do you call it? The hyphen, the glass connector window: that seems to me the wrong solution to have like a 15-foot high hedge blocking the nice window that you have there. I think that's like a feature window. It should make a connection between the building and the park. I'd like to see that revised. We don't have any—at least in our packets, in our drawings we didn't really have any of the colors or materials specified. I think maybe there's a color board. That's great. I haven't seen it. I think my question would be for the architect. Sometimes there's an issue when you have like sunshades and all the other metalwork. Sometimes it's hard to get those to match the windows. I don't know how you figured that out. Depending on what you specified, sometimes it works and sometimes it doesn't work. I think we just need to see all of the materials together. Also, I don't think we've seen any of the paint colors for the existing building. I was wondering if you're doing all of this work, that maybe the existing building would be repainted, maybe not. I don't know. We haven't seen anything for that. If that is happening, I would like to see the colors and have the HRB weigh in on those. That's what it is. They're nitpicky, but that's where I am. I can support the project. Chair Gooyer: I agree. This project, I think, is very nicely done. I think it's come a long way since the first time we saw it. It is a three-story building, but I don't think the way it's been designed that it overpowers the existing two-story building. As far as the couple of items you have, those to me are City of Palo Alto Page 9 subcommittee items if you want to do that. You're right with some of the things. As far as the anodized aluminum, for instance, sometimes you won't know that until it actually comes out in the field. Then, it's going to have to be a call on the architect's part to say, "I either accept these or don't accept these." I've done it myself, where you just have to do some work between the various vendors and see if you can get it done at the same time. I don't have a real problem with that. The same thing. I'm willing to approve it as it stands right now. Can I get a motion from one of you? Ms. Gerhardt: Chair, if I may. Can we just confirm that we've closed the public hearing before we make a motion? Chair Gooyer: I'm sorry? Ms. Gerhardt: Can we just confirm that we have closed the public hearing before we make a motion? Chair Gooyer: I'm sorry. I did close the public hearing already. I closed the public hearing and then brought it back to us. Can I get a motion from one of you? MOTION Board Member Kim: Sure. I will move that we approve the project with the following things to come back for subsequent review with the subcommittee. These items are to include possibly reconsidering the light fixtures and also seeing the details for the light fixtures that we do not have spec sheets on; an overall photometric light study; details of the trellis and also the trash enclosure roof, if they are separate or if they are a single structure; and the final colors and materials palette and that they also be reviewed one more time; and also to look at possibilities of repainting the existing historic structures. Chair Gooyer: He got everything pretty much that you have? Vice Chair Lew: I will second that. Chair Gooyer: All those in favor? Against? Passes 3-0 or 3-0-2, I guess. Ms. French: Two recused, absent actually. Board Member Kim: Can I just say on the record that I'm very appreciative of the comments that were made by the public, also including Mr. Hirsch. I think those comments are important. I do not want the public to think that we disregard those comments. They are taken into consideration. I really hope to see more of those kinds of comments and engagement by the public in the future. Thank you. Mitigated Negative Declaration 450 Bryant Avenue 1 October 2016 City of Palo Alto Department of Planning and Community Environment California Environmental Quality Act MITIGATED NEGATIVE DECLARATION I. DESCRIPTION OF PROJECT MND/Project Approval: October 27, 2016 Application No: 16PLN-00092 Address of Project: 450 Bryant Street Assessor’s Parcel Numbers: 120-26-095 Applicant: Lisa Hendrickson, for Avenidas Owner: City of Palo Alto Project Description and Location: Avenidas proposes to renovate 15,783 square feet (sf) within the existing Avenidas Community Center and construct a new 10,185-square-foot wing (inclusive of the 434- sf, uncovered deck on the third floor). The project would provide Avenidas with a total of 25,534 sf of new and modernized interior building space. The project would also provide for replacement and update of old mechanical, electrical, and plumbing systems, seismic upgrades and installation of an ADA- compliant elevator. The project includes demolition of the existing 2,592 sf dining room, such that the total increase in floor area would be 7,158 square feet. The proposed construction and building improvements would result in a facility that includes a ±11,000- square-foot first floor (comprised of a lobby, reception, classroom, dining room and kitchen, and an atrium in the lobby), a ±9,200-square-foot second floor spanning both the original and new buildings (consisting of multipurpose rooms, meeting rooms, classrooms, a wellness area, and administrative facilities), a ±2,342-square-foot third floor within the new building (containing a fitness room, restrooms, and small lounge leading to two uncovered outdoor decks, a ±818-square-foot shed (used for program space) and a renovated ±2,000-square-foot basement (encompassing a small auditorium). The site is located on a portion of Assessor’s parcel number 120-26-095, at 450 Bryant Street. The existing facility shares the block with a public parking lot and Cogswell Plaza. The project site is located in the northwestern section of the City of Palo Alto, in the northern part of Santa Clara County and across El Camino Real (State Route 82) from Stanford University. The project site is located on the north side of El Camino Real between Middlefield Road and Alma Street, more particularly, within the block bounded by University and Lytton Avenues and Bryant and Ramona Streets. II. DETERMINATION In accordance with the City of Palo Alto’s procedures for compliance with the California Environmental Quality Act (CEQA), the City has conducted an Initial Study to determine whether the proposed project Mitigated Negative Declaration 450 Bryant Avenue 2 October 2016 located at 385 Sherman Avenue could have a significant effect on the environment. On the basis of that study, the City makes the following determination: The proposed project COULD NOT have a significant effect on the environment, and a NEGATIVE DECLARATION is hereby adopted. X Although the project, as proposed, could have a significant effect on the environment, there will not be a significant effect on the environment in this case because mitigation measures have been added to the project and, therefore, a MITIGATED NEGATIVE DECLARATION is hereby adopted. The initial study prepared for this project described above incorporates all relevant information regarding the potential environmental effects of the project and confirms the determination that an EIR is not required for the project. The following describes the areas of analysis and any mitigation measures incorporated into the proposed project in accordance with CEQA. A. AESTHETICS. The project will not have a significant impact on aesthetics or visual resources, therefore no mitigation is required. B. AGRICULTURAL RESOURCES. The project will not have a significant impact on agriculture or forest resources, therefore no mitigation is required. C. AIR QUALITY. The project will not have a significant air quality impact, therefore no mitigation is required. D. BIOLOGICAL RESOURCES. Biological Resource Impact 1: Would the project have a substantial adverse effect, either directly or through habitat modifications, on any species identified as a candidate, sensitive, or special status species in local or regional plans, policies, or regulations, or by the California Department of Fish and Game or U.S. Fish and Wildlife Service. Mitigation Measure BIO-1: If feasible, vegetation on the project site shall be removed outside of the bird-nesting season. If the start of site clearing, tree removal, or building demolition occurs between February 1 and August 31, a pre-construction survey for nesting birds protected under the Migratory Bird Treaty Act shall be conducted by a qualified biologist to identify the location of nests in active use that were established prior to the start of project implementation activities. The pre-construction survey shall take place no more than 7 days prior to initiation of construction. All trees and shrubs on the site and on adjacent properties shall be surveyed, with particular attention to any trees or shrubs that would be removed or directly disturbed. If an active nest of a protected bird is found on site, the biologist shall, in consultation with the California Department of Fish and Wildlife (CDFW), determine whether construction work would affect the active nest or disrupt reproductive behavior. Criteria used for this evaluation shall include presence of visual screening between the nest and construction activities, and behavior of adult birds in response to the surveyors or other ambient human activity. If construction could affect the nest or disrupt reproductive behavior, the biologist shall, in consultation with CDFW, determine an appropriate construction-free buffer zone around the nest to remain in place until the Mitigated Negative Declaration 450 Bryant Avenue 3 October 2016 young have fledged or other appropriate protective measures are taken to ensure no take of protected species occurs. If it is determined that construction will affect an active raptor nest or disrupt reproductive behavior, then avoidance is the only mitigation available. Construction shall not be permitted within 300 feet of such a nest until a qualified biologist determines that the subject nests are no longer active. Prior to issuance of a demolition permit or tree removal permit, the City of Palo Alto (City) shall verify that pre-construction surveys have been conducted within 10 days of the proposed start of demolition. If active bird nests are present, the City shall verify that CDFW has been consulted and either determined that construction will not affect an active bird nest or that appropriate construction-free buffer zones have been established or other appropriate protective measures have been taken. Mitigation Measure BIO-2: No earlier than 30 days prior to initiation of construction activities, a pre-construction survey shall be conducted by a qualified biologist (i.e., a biologist holding a California Department of Fish and Wildlife (CDFW) collection permit and a Memorandum of Understanding with CDFW allowing the biologist to handle bats) to determine if active bat roosts or maternal colonies are present on or within 300 feet of the construction area. Surveys shall include the structures proposed for demolition. Should an active maternity roost be identified, the roost shall not be disturbed and construction within 300 feet of the maternity roost shall be postponed or halted until the juveniles have fledged and the roost is vacated, as determined by a qualified biologist. Consultation with CDFW shall also be initiated. Under no circumstance shall an active roost be directly disturbed. If nonbreeding bat hibernacula are found on the project site, the individuals shall be safely evicted under the direction of a qualified bat biologist and with consultation with CDFW. These actions shall allow bats to leave during nighttime hours, thus increasing their chance of finding new roosts with a minimum of potential predation during daylight. If it is determined that construction will not affect roosting behavior or disrupt a maternal colony, construction may proceed without any restriction or mitigation measure. If it is determined that construction will affect an active bat roost or disrupt reproductive behavior, then avoidance is the only mitigation available. Under no circumstance shall an active roost be directly disturbed. Construction within 300 feet shall be postponed or halted until the roost is naturally vacated as determined by a qualified biologist. Prior to issuance of a demolition permit, the City of Palo Alto (City) shall verify that pre- construction surveys have been conducted within 30 days of the proposed start of demolition. If bats are present, the City shall verify that CDFW has been consulted and either determined that construction will not affect an active bat roost or disrupt a maternal colony, or that individuals in a nonbreeding bat hibernacula have been safely evicted. Due to regulations from the California Health Department, direct contact by construction workers with any bat is not allowed. Biological Resource Impact 2: Mitigated Negative Declaration 450 Bryant Avenue 4 October 2016 Would the project conflict with any local policies or ordinances protecting biological resources, such as a tree preservation policy or ordinance Mitigation Measure BIO-3: A Tree Protection Plan shall be prepared addressing each tree that would be subject to project construction activities occurring within the tree’s dripline. Further, the tree protection measures recommended in the Arborists report for the proposed project shall be incorporated into project construction plans. Specifically, the construction plans and Tree Protection Plan shall include: All existing trees shall be numbered on the site plans to match the tree tag numbers used in the arborist report. Any trees that will be near construction or demolition disturbance shall be well-hydrated before any demolition or construction work begins and throughout construction A qualified tree service shall be used for all tree pruning, which shall include only what is required for site access, demolition, and construction Tree protection fencing must be installed around trees within or adjacent to the construction area that will not be removed. Fencing must be installed as described in the Tree Protection Plan. The fencing shall be inspected by an arborist prior to initiation of construction and all construction activities shall be conducted outside any tree protection fencing. E. CULTURAL RESOURCES. Cultural Resource Impact: Would the project cause a substantial adverse change in the significance of an archaeological resource pursuant to §15064.5 Mitigation Measure CUL-1: If artifacts or unusual amounts of shell or bone or other items indicative of buried archaeological resources or human remains are encountered during earth disturbance associated with the proposed project, the on-site contractor shall immediately notify the City of Palo Alto (City) and the Native American Heritage Commission as appropriate. All soil-disturbing work shall be halted within 100 feet of the discovery until a qualified archaeologist, as defined by the California Environmental Quality Act (CEQA) Guidelines (14 CCR 15000 et seq.) and the City, completes a significance evaluation of the finds pursuant to Section 106 of the National Historic Preservation Act. Any human remains unearthed shall be treated in accordance with California Health and Safety Code, Section 7050.5, and California Public Resources Code, Sections 5097.94, 5097.98, and 5097.99, which include requirements to notify the Santa Clara County Medical Examiner’s office and consult with Native American representatives determined to be the Most Likely Descendants, as appointed by the Native American Heritage Commission. Identified cultural resources shall be recorded on State Department of Parks and Recreation Form 523 (archaeological sites). Mitigation measures prescribed by the Native American Heritage Commission, the Santa Clara County Medical Examiner’s office, and any Native American representatives determined to be the Most Likely Descendants and required by the City shall be undertaken before construction activities are resumed. If disturbance of a project area cultural resource cannot be avoided, a mitigation program, including measures set forth in the City’s Cultural Resources Management Program and in compliance with Sections 15064.5 and 15126.4 of the CEQA Guidelines, shall be implemented. Mitigated Negative Declaration 450 Bryant Avenue 5 October 2016 F. GEOLOGY, SOILS, AND SEISMICITY. The project will not have a significant impact due to geologic features either on or off-site, therefore no mitigation is required. G. GREENHOUSE GAS EMISSIONS. The project will not have a significant impact due to greenhouse gas emissions, therefore no mitigation is required. H. HAZARDS AND HAZARDOUS MATERIALS. Hazards and Hazardous Materials Impact: Would the project create a significant hazard to the public or the environment through the routine transport, use, or disposal of hazardous materials? Mitigation Measure HAZ-1: Prior to building demolition, the project applicant shall demonstrate to the satisfaction of the City of Palo Alto that a survey of the existing buildings has been conducted by a qualified environmental specialist who meets the requirements of the current U.S. Environmental Protection Agency regulations for suspected lead-containing materials (LCMs), including lead-based paint/coatings; asbestos containing materials (ACMs); and the presence of polychlorinated biphenyls (PCBs). Any demolition activities likely to disturb LCMs or ACMs shall be carried out by a contractor trained and qualified to conduct lead- or asbestos-related construction work. If found, LCMs and ACMs shall be disposed of properly. If PCBs are found, these materials shall be managed in accordance with the Metallic Discards Act of 1991 (California Public Resources Code, Sections 42160–42185) and other state and federal guidelines and regulations. Demolition plans and contract specifications shall incorporate any necessary abatement measures in compliance with the Metallic Discards Act, particularly Section 42175, Materials Requiring Special Handling, for the removal of mercury switches, PCB-containing ballasts, and refrigerants. I. HYDROLOGY AND WATER QUALITY. The project will not have a significant impact on hydrology and water quality, therefore no mitigation is required. J. LAND USE AND PLANNING. The project will not have a significant land use impact, therefore no mitigation is required. K. MINERAL RESOURCES. The project will not have a significant impact on mineral resources, therefore no mitigation is required. L. NOISE. The project will not have a significant impact on noise, therefore no mitigation is required M. POPULATION AND HOUSING. The project will not have a significant impact on population and/or housing, therefore no mitigation is required. N. PUBLIC SERVICES. The project will not have a significant impact on public services, therefore no mitigation is required. O. RECREATION. The project will not have a significant recreation impact, therefore no mitigation is required. P. TRANSPORTATION AND TRAFFIC. he project will not have a significant impact on transportation and traffic, therefore no mitigation is required. Mitigated Negative Declaration 450 Bryant Avenue 6 October 2016 Q. UTILITIES AND SERVICE SYSTEMS. The project will not have a significant impact on utility and service systems, therefore no mitigation is required. R. MANDATORY FINDINGS OF SIGNIFICANCE. As described above, the proposed project, with the implementation of selected mitigation measures, would not have an impact on fish or wildlife habitat, nor would it impact cultural or historic resources. The proposed use is appropriate for the site and would not result in an adverse visual impact. There is nothing in the nature of the proposed development and property improvements that would have a substantial adverse effect on human beings, or other life or environmental impacts once mitigation is implemented to reduce potential impacts from hazardous materials and noise. PUBLIC REVIEW PERIOD The public review period began on July 1, 2016 and ended on July 30, 2016. Any comments received on the Proposed Mitigated Negative Declaration and project were submitted to Amy French, Chief Planning Official, City of Palo Alto City of Palo Alto Page 1 Present: Vice Chair Margaret Wimmer; Board Members David Bower, Roger Kohler, Patricia Di Cicco [via conference call] 3. QUASI-JUDICIAL MATTER. 450 Bryant Street [16PLN-00092]: Recommendation to the Director of Planning and Community Environment on the Project’s Mitigated Negative Declaration and Recommendation to the Architectural Review Board for Approval of an Architectural Review Permit to Allow the Renovation, Partial Demolition, and Addition to an Existing Historic Resource Resulting in a net Floor Area Increase of 7,158 square feet. The Project was Evaluated in Compliance with California Environmental Quality Act (CEQA) and the CEQA Guidelines. An Initial Study and Mitigated Negative Declaration has Been Prepared in Accordance With CEQA. This Project is Continued From September 8, 2016. Chair Bernstein: Next on the agenda item is action items of 450 Bryant Street. Shall there be any disclosures before we move ahead? Ms. French: (Inaudible) Chair Bernstein: I have my copy. Board Member Bunnenberg. Board Member Bunnenberg: On the advice of the Palo Alto City Attorney, I will recuse myself from participating on the agenda item in regarding 450 Bryant Street because I spoke at an ARB meeting prior to the rescheduling of an HRB meeting regarding this project. While this does not give rise to a conflict of interest, under the political reform act. It could have the appearance of bias and thus I have elected to recuse myself from future proceedings on this matter. Chair Bernstein: Thank you Beth, Board Member Bunnenberg. I also have a disclosure to make and a recusal comment. On behalf of the Palo Alto City attorney, I will recuse myself from participating on the agenda item regarding 450 Bryant Street because I spoke at an Architectural Review Board meeting prior to the rescheduled Historical Resources Board meeting regarding this project. While this does not give rise to a conflict of interest, under the political reform act. It could have the appearance of bias and thus I have elected to recuse myself from future proceedings on this matter. Now, I’m going to turn over this meeting to Vice Chair Wimmer, thank you. Ms. French: We are going to be calling or conferencing in our esteemed colleague Pat Di Cicco, from her home in Palo Alto where she’s posted the agenda. Her home is at 860 University Ave. We’ll take a moment to call in -- now Roger Kohler is the third member that is going to be sitting in this room along with the fourth member that is sitting in Palo Alto – Roger is on his way; we might just take a 5-minute break while we get Pat on the phone. Alright, thank you. Short Break Vice Chair Wimmer: Let’s continue the meeting and go onto our action item number 3 on the agenda. Which reads QUASI-JUDICIAL MATTER for 450 Bryant Street, also known as Avenidas. Recommendation HISTORIC RESOURCES BOARD MEETING SPECIAL MEETING DRAFT EXCERPT MINUTES 450 Bryant Street Project October 11, 2016 City Hall/City Council Chambers 250 Hamilton Avenue 8:30 A.M. City of Palo Alto Page 2 to the Director of Planning and Community Environment on the Project’s Mitigated Negative Declaration and Recommendation to the Architectural Review Board for Approval of an Architectural Review Permit to Allow the Renovation, Partial Demolition, and Addition to an Existing Historic Resource Resulting in a net Floor Area Increase of 7,158 square feet. The Project was evaluated in compliance with California Environmental Quality Act and the CEQA Guidelines. An initial study and Mitigated Negative Declaration has been prepared in accordance With CEQA. This Project is continued from our September 8, 2016, meeting. I guess we should start with the Staff report. Ms. French: Good morning, Amy French here, the project manager. Today, we are before the HRB with three members present and the fourth member present in Palo Alto with an agenda posted and discussing this, Patt DiCicco, who is on the teleconference now. Today our goal is to have comments provided on the revised initial study and mitigated negative declaration, and to recommend the revised project to the Architectural Review Board. The applicant is here to provide a brief presentation. The applicant has brought the Architectural Resources Group, the historic resources consultant that has prepared a recent memo as of last Tuesday. We have Katherine Waugh of DUDEK here, who was able to review that ARG memo and has recently updated the initial study to annotate it. These are clarifications again drawn from that recent ARG memo. She can summarize those after I give my presentation. Basically, it has been determined from the group that I just mentioned that the project does meet the Secretary of Interior Standards to rehabilitations. This is a point of discussion for the Board. The third floor has been reduced. It’s been inset on all sides and it is more subordinate than the version that the ARB saw and the HRB saw in September. Additional details have been provided. Bird-friendly glass, for instance, facing the park and the parking lot and a glass deck railing. They removed the metal panel railing and they have a trim projection that goes out a little further. They've retained the former garage. The request to prepare additional studies about that garage removal on a possible alternative project; I’ll let the applicant describe why they didn’t come forward with that. Basically, the main proposal showed the metal panel deck railing at the top and also on the side facing the park. You can see that on the update it’s now a glass – the storefront system extends up. It’s now a glass railing. The elevation on the screen does not show the trees that are in front of the new addition facing the park. It’s just showing it without those trees. Three sides of this building, the 1927 Category 2 building will be untouched and visible. The rear addition is attached via a glass hyphen, as in previous versions of this project. Looking at the second image up there on the screen, it’s an elevation view. It is not perspective view so that is not how it will be seen from the street. That is an elevation view. The addition will recede because it is some distance, 65 feet or so from Bryant Street. Here are just some visuals showing the two-foot inset all around. On the courtyard of course it’s set back even farther at the third floor, and has some engagement there with a deck, another deck has been provided to engage with the courtyard below. These are responses made to the ARB’s comments regarding approach number 1 that was shown in September to both ARB and HRB. These are just some of the changes that were made to the initial study mitigated negative declaration that appeared in the packet, along with that ARG memo. Secretary’s Standards number 9 and 10 are here on the screen. If you're familiar with those, those are the generic standards. Then here is the note about the compliance with those standards; number 9, number 10. I can go back and leave those up for discussion. Katherine would you like to say something there. Ms. Katherine Waugh: Good morning, again, Katherine Waugh with DUDEK. Amy asked me to just quickly summarize the additions we have made to the initial study. I know you have a version in your packet that has some new information, (Inaudible) changes and then once we got the October 4th ARG memo we added a little bit more. It’s basically what’s on the slide here. It’s just reiterating what ARG’s conclusions where with respects with Standards 9 and 10. Finding that the – that although the proposed addition is slightly taller than the original building, based on the – having the building step back on all sides and other measures that they’ve used to reduce the massing of the building, ARG was able to conclude that it is still compatible and subordinate to the existing historic building. With respect with Standard 10, the placement of the addition at the rear of the building is in an area that has received the most modification over time and so the design would preserve the historic features or the contributing features of the historic property, and would ensure that the essential form and physical integrity are retained… (Crosstalk) City of Palo Alto Page 3 Board Member Di Cicco: I’m having a little difficulty hearing you. I hear Amy French fine but you’re a little more garbled and there’s like interference, like people moving phones or something. Ms. Waugh: Sorry, I’ll repeat really quickly. The additional information added to… Board Member Di Cicco: Thank you. Ms. Waugh: ...is that better? Added to the initial study relies on the October 4th memo from ARG to demonstrate how the proposed addition complies with the Secretary of Interior Standards 9 and 10, with regard to the massing of the proposed addition relative to the existing building and the placement of that addition in a way that retains the integrity of the existing or the historic building. Amy French: Patt? Board Member Di Cicco: Thank you. I can hear you better. Ms. French: Ok, thanks. I was plugging in my iPhone to make sure it still had a battery. Vice Chair Wimmer: Excuse me, Katherine, are those – can you reference what pages in our packets just so it’s clear or what pages you just – I think it’s pages 17 and 18 but is that kind of the matrix that itemizes each standard and it checks whether it’s consistent or inconsistent… (Crosstalk) Ms. Waugh: Yes. Vice Chair Wimmer: ...is that kind of what you’re referring to now. Mr. Waugh: Yes. That’s the matrix that summarizes all of the conclusions and then also the October 4th ARG memo, which is… Ms. French: The ARG memo is packet page 192 through 196. That ARG memo is pulled out there, the Secretary of Interior Standards 9 and 10, I believe that’s on the screen. Vice Chair Wimmer: Does the Board have any questions for staff on the revised application? Oh, also before we get to that, I wanted to remind members of the public – I have two speaker cards right now if there’s any – we have more? (Inaudible) We have yours. I want to make sure I get them before I forget. Ok, thank you. Any questions for staff? Board Member Kohler: Maybe you can summarize what you’re expecting from the Board today in terms of recommendation, whatever, just so that we all know what we are purposing. Ms. French: Sure, Roger. Up on the screen, these are what we are recommending that the HRB provide comments on the initial study mitigated negative declaration, which has some modifications just to clarify based on that ARG memo and then recommend the project to the Architectural Review Board, who will be reviewing it next. This is the third meeting of the HRB on this formal project. We’re looking at this project; not a possible alternative, this project. And if you can give a recommendation on this project we will take that to the ARB. Board Member Kohler: The packet we have with these drawings, that’s it for… Ms. French: That’s the project that’s requested for recommendation and no other project is before you. Board Member Kohler: Alright. Vice Chair Wimmer: Without any questions for staff, shall we have the applicant come up and make a presentation? City of Palo Alto Page 4 Ms. French: Yes. Ms. Lisa Hendrickson: Good morning. I’m Lisa Hendrickson and I’m currently the capital project manager at Avenidas. We are returning today, not with a new design that replaces the shed two of you suggested last month, but rather with the three-story addition which you have seen before, with a few more modifications. I’d like to explain why we are not, respectfully, changing direction. The historical significance of the shed was questioned and thoroughly vetted two years ago. In November 2014, there was a study session at the site. We presented a two story design that eliminated both the shed and the courtyard. At that meeting, we were urged to further study the history and the value of the shed and consider a design that preserved it. We directed architectural resource group, the consulting architects that was undertaking the HRE, to do that and they returned with a report that asserted that the shed does have historic characteristics and should be retained. Sarah Hahn and Charles Chase from ARG are here today to answer any questions. In July 2015, we returned with an entirely new design featuring a three-story addition, where there now is a 1970’s dining room, and preserving the shed and much of the courtyard. This design reflected many of the comments that we received from this Board and the ARB but this Board expressed concern that the design called for the removal of some of the original eaves and asked for a design that was more compatible with the historic building. So, we returned again, in May of 2016, with a design that added a connector to preserve the eaves and with less contemporary styling more in keeping with the historical building. Your comments in May were generally complimentary and supportive and we took note of the suggestions that you made. Over the summer, the City obtained a peer review of the HRE and the CEQA document was completed. Last month we returned again, with a design that reflected additional modifications and details that addressed our questions and those of the ARB. Your discussion, however, returned to the significance of the shed and the meeting concluded with two of you reiterating support for the current design and two requesting that we bring back a design with a small addition that demolished the shed. Today we are seeking your support for this design for several reasons. The significance of the shed and this design’s compatibility with the Standards, has been supported by two historic resource experts, ARG and DUDEK. A new design demolishing the shed – a new design that demolished the shed would trigger a focused EIR, adding several more months to the entitlement process, and could put the approving authority in the position of having to approve a design that did not fully comply with the Standards. We have been advised by our counsel, that if the City were to approve such a design that demolished the shed, both Avenidas, and the City would be risking a lawsuit for having approved the demolition of the shed and the City often looks to the applicant to bear the cost of the defense of such a lawsuit. Also, a smaller addition doesn’t meet our program needs. It is very possible that the Avenidas Board of Directors would abandon the project if it can’t yield sufficient additional program space. Also, starting over would add many, many months to our project timetable and put the project at risk. Such a delay would add unaffordable expenses to the project. We’ve already spent about $500,000 on design costs and City permit fees and another $400,000 on fundraising expenses. Construction costs are rapidly escalating. There’s only so much money that we can fundraise for this project and delays add to the difficulties of funding the costs. Delays put our fundraising at risk. We have a lead donor, who will fund 20% of the project cost, up to 4 million dollars but we will not be able to meet the conditions of his gift unless we start construction next year, in 2017. Another $250,000 gift comes with the condition that the project be approved this year. Other gifts are contingent on design approval and further delays will put these pledges at risk. Our almost 90-year-old building is sorely in need of modernization. Our community seniors deserve a better community center, one that is safer and with enough space for the programs that they want. We are two years into this entitlement process and have made numerous modifications to the design at the request of this Board and the ARB. The window to get this done is closing. We urge you to support this design today. Our architect Kevin Jones is going to speak briefly about the modifications. Vice Chair Wimmer: Thank you. Mr. Kevin Jones: Good morning, I’m Kevin Jones with Kenneth Rodriques & Partners Architects. I’d like to first just be sure that I’m addressing the things that interest you. We have ARG here today who wrote the historic report and if… (Crosstalk) City of Palo Alto Page 5 Board Member Di Cicco: (Inaudible) I can’t understand a word that who’s ever talking… Ms. French: Ok, this is Kevin Jones from, the architect, he can try to speak up. Another suggestion I might make if you have a laptop. Tune into the Palo Alto or, sorry, the mid-peninsula media center. It’s a live coverage of the meeting on – so you could… Vice Chair Wimmer: I think it’s also on channel 26 or channel 29 on (Crosstalk) on television. Ms. French: Cable television. That’s another idea, but could you speak up Kevin? Mr. Jones: Can you hear me now? Ms. French: Can you hear alright? Board Member Di Cicco: I can hear you fine. Mr. Jones: It’s the distance. Ms. French. Yeah. I’m going to bring the phone over, here you go. Mr. Jones: Hello. Can you hear me now? Board Member Di Cicco: Yes, I can hear you now. Mr. Jones: Great. I would like to just ask the Board if it would be helpful to hear a little bit from ARG about the context of their findings. I think that’s been one of the key aspects that you had expressed in the past. My version of the presentation would be talking about some of the detailing that we’ve done and changes that we’ve done. I’m not necessarily sure you need any further clarification on that but I would like to offer that if you could give us some direction. I want to make this as fruitful as we can and it’s our heartfelt wish to gain your support and approval for this so I’m willing to tailor my presentation to you today on areas you have questions about or concerns about as well as Charles, as well. Vice Chair Wimmer: Maybe if you could just go through very briefly, I know that Ms. Hendrickson has already given some overview of the changes. Maybe you could briefly go over… Mr. Jones: I can walk you through that. Vice Chair Wimmer: …the main changes… Mr. Jones: Ok perfect. Vice Chair Wimmer: …since the last meeting and that would… Mr. Jones: I will skip through a bunch of the slides. I’ll stop at this one. This one is largely the appearance of the building from Bryant Street. All the work we’re doing, as you know is on the rear side of the project. Again, the three components; we have the existing Birge Clark building, the La Cominda dining area, as well as the shed building. Our concept, let me skip through the plans, basically, the existing building, the shed, create an addition here, maintaining the courtyard. Creating a connector piece that creates the separation that we talked to this Board about numerous times in the past. That translates its way all the way up through the buildings so on the second floor you basically see the same configuration, the existing Birge Clark building; connector between the two; the new addition to the second story; the shed, the one story shed. The third floor, the change you’ll see here is that we’ve pulled the area back here – this was a three story element originally, as a result of the comments that we heard from the ARB, we pulled that element back. Making an additional exterior deck and reducing the City of Palo Alto Page 6 height of the building at the courtyard. That reflected in the roof plan. One of the changes we have here, we’re using a flat clay tile in the small color palette as the existing but it would be a flat tile to help further distinguish the new from the old. You can sort of see these decks here as well. The height of the building; we’ve gone back and vetted out the height of this to be sure, absolutely sure we can make this as small as we can but also make the rooms and spaces in the building usable so you’ll see a little bit more of that in one of the next plates. The imagery you see here, there’s some additional detailing which I’ll sort of zoom too. This is what Amy had covered, but basically, this is where the deck is pulled back here and the view of this in elevation from Bryant Street. We’ve modified the glazing here to include a dotted spandrel frit to help bird-friendly design components. Modify the detailing of the railing at this level. Pulled back two feet both the roof as well as the interior space, at a loss of square footage at these second and third levels, rather all away around on that one room. Here you get to see a little bit about what we’re trying to do in section. Drop this down underneath the structure to the floor is ten feet. We’ll have mechanical systems in there as well as lighting so we’re trying to have at least the minimum of an eight foot ceiling in the lower level on the second level; rather the upper lever is a result of the pitch we’ll have an opportunity to have for a higher ceiling but we have about an eight-foot-six-inches at the window, which we feel is pretty minimal for a room of this size, but we’ve done a lot of effort to ensure that the reduction in height, that people have been concerned about, that we can accomplish but not sacrificing the comfort in these rooms. The rendering from the street again here, seeing in perspective the three-story addition in the back. Then we’ve taken a couple of plates here in details and identifying some of the detailing that is proposed for the project. This being the third floor, creating some interesting detail elements here between the window frames. Creating kind of the more decorative trim elements; this would all be made of aluminum and similar to the window frames system. You can see we modified some of the pre-cast concrete cornices and creating more elaborate shapes with greater projections. Similar pre-cast, which the main building color, the building material is a limestone. That is also accented with a variety of pre-cast concrete banding, which you see here. This is the typical ground floor. Also, another pre-cast concrete element above the recessed window at the ground floor and then putting an extrusion on the window systems to allow for additional sun shading in those rooms as well. That same vocabulary sort of translates itself through the courtyard elevation and balcony. The punched window openings on the second floor and etc. I’ll just skip this. I think one last thing that I would point out to you if this will load, is this is just a little exhibit. This is an experience of walking down Bryant Street today. You can see the large tree growth on the park side, over there to the right. I included this largely to try to put this back into perspective that we’ve been really focusing on trying to maintain the quality of the Birge Clark building and really not impeding on it. In the sense that is important to execute the Avenidas program and the special things we’ve needed, but I want to just kind of give a real time feeling for what you see. It’s about right here, where you would start to see something in the background as you’re moving by. The trees are significantly large, as you can see. There you would see something rising in the background. I think our new building is 42 feet, seven inches, the height of the parapet is 35 feet and that sort of gap right there is what you would see and with the prospect of it, the appearance of it is even reduced from what the elevational appearance would lend itself. That experience, as you walk farther down the street, obviously you don’t see it at all. On the alleyway side, its presence is reduced as well. I just wanted to spend a few moments to give everyone a refresher course on what the real physical condition here is and I’d like to answer any specific questions you would have. If there is some commentary you’d like to hear our finding on the historic side, I’d really encourage you – ARG have an opportunity to give you the background on that, if you so desire. Vice Chair Wimmer: Ok, Mr. Jones. Thank you so much. Board Member Di Cicco: I have a question. Vice Chair Wimmer: Oh, it sounds like Board Member Di Cicco has a question. Ms. French: Yes, you’re at a microphone Pat. Go ahead. Board Member Di Cicco: I just have a question. I know – I have to apologize I haven’t been at every meeting on this project. I wasn’t at the last one and this may have been discussed or never discussed. City of Palo Alto Page 7 For just further clarification and just something, I had considered that would maybe even make it more compatible with the Secretary Standards. The (Inaudible) glass entry way that’s two floors up, nine panels of glass, which you can see from A5.1 or .3, you still see that panel of glass from the front of the building and then there’s the next row on the third level, which has been pushed back and on the other side, you see all three – I don’t know if it was ever discussed and there is an issue that there isn’t enough program space. If the two stories of glass, new entry, is it primarily for aesthetics (Inaudible) purposes for the public to be able to see the first and second floor? Is it because it used to be a 12 to 15-foot entryway, or it could be cut down to the glass door entry to just the first nine panels of glass and infill that second floor with, say four smaller front windows. Rather than continued glass. I know it’s near the end of this project and maybe that’s not even a consideration but you know, is it a matter of giving up program space? If I could just get clarification on that. Also, my other question would be and then I’m – I have to also appreciate the remarkable speed at which you’ve done work (Inaudible) to make it more compatible with the Secretary Standards and more subordinate. I think these are all tremendous. The other question I had is how far back, farther has the (inaudible) patio been set back? I think I read that it was originally 400 square feet and it’s only been increased by 36 feet. It doesn’t sound like it could be set back much farther. It’s hard to tell from the rendering (Inaudible). Mr. French: Pat, this is Amy. I think the 36 square feet is a net increase over all of the square footage of the decks. I believe that the deck facing the parking lot was reduced somewhat in the area and the deck at the back is larger than 36 square feet. Is that correct Kevin? Mr. Jones: Yes. If you have a plan set in front of you, Pat. I can direct you to sheet A4.5, which is the third-floor area. What the reduction is on – if you look at the plan there’s the courtyard and at the third floor, the exterior deck that is a new feature that’s been added. That has been created by moving the exterior wall of the third floor back eight-foot-seven-inches, is what you see there on the drawing just above the roof of the shed building. That area there was created by pulling the third floor back, taking what once was interior space and making it a second exterior deck. The deck that faces the parking lot remains the same size as it was but the entire perimeter of the fitness room on three sides has been pulled back two feet all away around to help reduced the perceived mass or size of the third floor of the addition. Board Member Di Cicco: Thank you. Mr. Jones: In terms of your first question, you’re really speaking to the atrium aspect of this. At our last presentation here, I’m not sure if you were in attendance, but we had presented a number of alternatives that we had explored over that last two years and then some of them were more recent ones that explored illuminating this two story volume when you first enter into the building and infilling the floor, that effect, illuminating the glass connector. One of the things that led us away from that concept is that we thought that there was the tremendous value of having this light air-glass component serving as a transition between the Birge Clark building and the new building. That element having a high level of transparency would help to give this illusion of lightness that when we took that element and expanded from the park all the way over to the shed with the limestone material. In our review, it became much heavier in appearance and seemed a little larger and so this glass element in many ways became a way to soften that effect. Originally, the atrium concept came about from the concept of losing some of the patio courtyard area and concerns of staff as well as participants, in terms of losing some of that lightness and the fairness that came about when you entered the building currently from the rear. Although treated in a much different way using an atrium still tries to make this light and open and a taller volume entry, than just entering into a building that would have a 12 foot or so entryway. Hopefully, that addresses your comments. (Crosstalk) Board Member Di Cicco: (inaudible) Mr. Jones: Are there any further questions you have? Board Member Di Cicco: Thank you for clarification. City of Palo Alto Page 8 Mr. Jones: Ok. Vice Chair Wimmer: Does the Board have any other questions for the applicant? I just – I had a quick question. I remember in some of your earlier versions, beyond that two story glass atrium entry, there’s a two-story wall behind that’s several feet back. That was an opportunity for a display wall and I think in some of your illustrations or some of your elevations you have maybe a big tree mural or something and I thought that was really a neat feature. I hope that that’s… (Crosstalk) (Inaudible) Mr. Jones: That’s still there. That’s very important concept for us. As part of our approval process, we need to take part in the City’s art program and we’re looking to have that element serve as that programmatic function. Better than that we think this idea of coming into this two-story atrium volume – it’s a kind of experience that no one apparently has in the building right now. The plates go from building a wall, building a wall instead of having this open more contemporary feeling and having a really spectacular piece. It’ll be a two-story element. The tree was sort of emblematic of a way as a reference point but Lisa and staff are currently working with an art consultant to come up with some ideas and those ideas will be vetted to the City through their art review program. We are committed to that as well. In addition to a history wall that speaks to the legacy of Birge Clark inside and trying to do a combination on the first floor before you go out to the courtyard, where we can speak to that wealth of history that this building has had and its difference uses over time. Vice Chair Wimmer: I’m so glad that that’s still being incorporated. Any other comments or questions? Thank you for your presentation and maybe we can move on and have members of the public speak on this item and let’s invite Linda Jolley back to the microphone. We allow you three minutes’ time to speak, thank you. Ms. Linda Jolley: Members of the Board, I’m Linda Jolley and I’m with my friend Wes Marinov. We are actual users of Avenidas, so we see what’s going on there and we urge you to examine the (Inaudible) of this project and the feeling of users as opposed to statements of architects. I really don’t see why so much time and money is going into this project because this project is opposed by many board members of Avenidas, of La Comida I mean. La Comida. I’ve spoken to the Board Members, that do not approve of this, the users of La Comida, the people eat there do not approve of this and it’s going to result in tremendous disruption to these people if this project goes through. They will have to -- many elderly people will have to be moved to a different area to eat. They resent the potential destruction of the patio and dining hall. They do not want the facility disrupted. They do not want things torn down and under pending of this project are highly suspect. Members of Avenidas Staff, who I believe are supervised by Lisa Hendrickson appeared to the City Council about a year ago. There are photos of them waving signs saying that the facility is overcrowded and this is the justification supposedly for tearing up these buildings. I urge you to examine the actual facilities. The facilities are not overcrowded. The dining is only about half full most of the time. If we get new people attending Avenidas, there’s currently plenty of space for them. Why are we talking about tearing up a perfectly good building and disrupting people who eat there right now? I think you should look a little deeper before you invest more time and money into considering this project. We think that somebody is trying to make money off of tearing things up and someone body is trying to make money off of an unnecessary bureaucratic expansion. The users – I’ll wind it up. The users do not want this. Thank you. Vice Chair Wimmer: Thank you, Ms. Jolley, for your comments and next can we have Wes Marinov come and speak. The final speaker is Herb Borock. Thank you. Mr. Wes Marinov: Good morning. My name is Wes Marinov. I came to represent the users of the La Comida dining room. There is wide spread discontent about this whole project. The main objections were first looking at the dining hall, which people find quite comfortable, cozy and having the advantages of looking into the park and into the patio. Second was losing the patio and the third was being disrupted with having to go far away for temporary dining. Now, I have discussed this with the project manager, Lisa Hendrickson and she had gone out of her way to accommodate these needs and one of them has City of Palo Alto Page 9 been satisfied. Mainly the – there is a dining hall, not dining hall but a dining place close by, but of a few blocks. However, the other aspects, I mean the other complaints have not been quite satisfactorily addressed. I collected signatures and the title is lists of seniors benefiting from La Comida dining, who would like to preserve (1) the dining hall in its present form, and (2) the adjacent patio (Inaudible) the planned Avenidas renovation. Now, there are only 20 names here and I observed also many of the seniors, although they privately expressed their discontent, they’re not willing to go out and sign. It’s difficult to say what proportions of the seniors are for it or against. On my way here today I was approached by one of the dining seniors with a very interesting detail about the whole project that I think the whole Board should address. The dining hall, the La Cominda dining hall was donated to by the Kiwanis club with the specific condition to be used for dining for seniors and how this has been deeded to Avenidas is not clear. Now, we have a danger of lawsuit about the shed. Now there is another sector here looming. I don’t know any details. It was just conveyed to me today. Another detail that was conveyed, the current dining space is 140 diners and the planned one was 90, which could be increased of course but I don’t see any overcrowding being addressed. Well, I guess my time is up. Ok, thank you very much. Vice Chair Wimmer: Thank you for your comments and next we have Herb Borock. Thank you. Mr. Herb Borock: Vice Chair Wimmer and two Board Members present. There are only three Board Members legally present at this meeting. The state's opening meeting law, Ralph M. Brown Act, requires that the official posted agenda, which must be posted in this case for a special meeting. Must be posted 24 hours before the meeting to indicate whether anybody is participating in the meeting by telephone, the address… Board Member Di Cicco: (Inaudible) Ms. French: We’re going to let Herb finish speaking and then Pat I’ll let you speak to that. Ok, hold on. Mr. Borock: The person participating by telephone is not the person to tell you whether or not there’s an officially posted agenda that says she can legally participate by telephone. While Amy French was introducing this topic to you, I went outside to confirm that the officially posted agenda omits any indication that anyone is participating by telephone. The reason why it needs to be in the officially posted agenda is so that anybody, reading that agenda can decide where they want to be to attend the meeting. They could have been since 8:30 this morning at that official place. While this meeting was going on, somebody created a new piece of paper, which reports to be the agenda. That’s false. For one thing, the description of this item is not a correct description. If you take a look at the large packet that you have with a copy of the agenda, you can see that the correct agenda indicates that you will be taking actions on the project and on the environmental document. This phony agenda which appeared in the middle of the meeting doesn’t even mention that. This phony agenda indicates that it’s to be published in a newspaper by September 30th, that’s what the item at the bottom seems to indicate. I have a copy of the item that was published in the Palo Alto weekly and it looks just like the item in your large packet. That is, there’s nothing there about someone participating by telephone and it indicates that you’d be taking actions. In other words, it’s the large description that you have down here. I was surprised earlier in this meeting to hear that somebody in the City’s attorney’s office figured out that two of your members made comments about your previous – about this item prior to your action but certainly if they can figure that out, they can certainly know that you can’t create a phony agenda after the fact. Maybe while I’ve been talking, your Hilary Gitelman went out and changed the agenda outside but the one that’s there and was certainly was there at the beginning of this meeting and that was there when this agenda item started says nothing about telephonic communication on the substance of this meeting. On page 80, packet page 80, it indicates that the project would expand the Community Center in order to meet the demands of the surrounding neighborhoods. In fact, the senior center serves a much larger area for that and that is why many of us have indicated that it’s more important to have two Senior Centers in Palo Alto; one at the Cubberley Center, and one here. I support the remarks of those who referred to – I now hear is called the shed, I thought was maybe referring to the garage, that using that as an excuse to have a big project for architects and builders and people who want to make big donations and have their name on City of Palo Alto Page 10 something, is not an historic idea and that is why it’s a mistake for such a large project. Since there is only three of you and since you’re not a quorum all you can do is adjourn. Thank you. Vice Chair Wimmer: Thank you for your comments Mr. Borock. I think that’s all of the audience members who wish to speak on this item. With that, maybe we should close the public hearing and take it back to the Board if the Board would like to discuss this item amongst themselves. Ms. French: I’d like to just address something and that is that my understanding, from our City attorney, was that the ad did not need to include the fact that we were going to have telephonic participation. When we placed the ad, we had thought Mike Makinen would be participating from Cleveland but then we learned it had to be somebody in Palo Alto to participate and we made sure that Pat could participate. She’s in Palo Alto. She’s got the agenda posted and as to the agenda that came out through our minute track process, it did not state that there was going to be telephonic participation. The agenda that we prepared and put out on the table, I don’t know that it got out at the table before the meeting but it was prepared before the meeting, and then I announced it during the discussion here, the address of where Ms. Di Cicco would be participating from. It was posted at her house, it was placed out here before we began this item and the agenda was prepared – we did have a holiday yesterday, so we were not here posting the agenda outside City Hall. There may be concern but we’re conducting a hearing and ... Vice Chair Wimmer: I think it’s our task, we’re not necessarily creating a motion or voting on this project. It sounds, from our instructions we’re just providing comments to both the director of Planning and Community of Environment and then also providing a recommendation to the ARB regarding the revised project and I believe their meeting is coming up within a week or two. I think that’s why we are looking at the agenda today. Does anyone want to start with making any comments or in support of or any recommendations? Board Member Bower: I wanted to, first of all, thank people who came today to speak. Audience participation is important in making decisions. I also wanted to thank all the people at Avenidas and all of the consultants. This has been a long project and the process – change is difficult in the best of circumstances and this is a big change. I think this project has gotten better as it has gone through its evolutionary steps. I was initially and publicly opposed to removing the garage because I think in every seminar I have been to in the ten years I’ve been on this Board, that would be considered historic fabric and we simply would not have supported the Secretary of Interior Standards to remove it. I think it’s critical that it stay there and I actually think it fits with the new project. The other issue that was troubling to me initially was how large the addition was and I have actually now come around to a totally different attitude about that in part by going out to the site. Walking around and looking at the existing building and I think today's tour, that video tour in front of the building is exactly the right way to look at this. The addition is not on the front of the building, it’s in the back and I actually, when I was there last week, could imagine a two-story parking garage on that parking structure. In which case, you wouldn’t even be able to see the addition from the back. I think the focus of our evaluation of this addition has always been from the back and yet the building, the original building is approached not necessarily from the back but from the front. The historic portion of this building remains. The new addition that is now nicely differentiated from the old by the glass enclosure and so I would like to congratulate the design team. I’m not – we had a meeting earlier this year where I thought the design totally failed the client. I think in this case, the design has taken the suggestions of the many, many hearings, and really made a better project than it was. I gather, I mean understand diminished space may be diminished services but I think this is a pretty good outcome and I’m completely in support of this. I think it’s time this project moves forward through the process and got under construction. Vice Chair Wimmer: Thank you Board Member Bower. Board Member Kohler would you like to speak? Board Member Kohler: I haven’t disclosed in the past, which I don’t think is very important, but my mother went to Avenidas quite a bit and I was sometimes taking her there and everything. I’ve always been impressed with the way the program works and she was very pleased to be there... City of Palo Alto Page 11 Board Member Di Cicco: I can’t hear who is speaking. Board Member Kohler: Alright. (Crosstalk) Ms. French: Can you speak closer to the mic? Board Member Kohler: Yes, I can speak closer. What I was saying is that my mother was active in Avenidas and went there quite a bit. I was somewhat familiar with the program and I remember walking through the building at times, thinking this needs some help. As an architect, I was thinking but they do a great job and I have to agree with David quite a bit that I was never quite comfortable with the previous plans cause it just didn’t seem to – it seemed to be saying, look at me I’m a big new building. Where right now, it’s a very large project but the slight reduction and the arrangements I think are quite appropriate and will just feel comfortable walk, seeing it and walking through the structure. As from a historic standpoint, I didn’t quite understand what the ferver was to remove this garage because garages are actually fairly important in historic structures as we go work through them. I’ve done a number of homes in Professorville, and the historic garages are there and they really contribute to the feeling of the whole neighborhood. Some need some help but that’s part of the process and having the garage there, I think it is going to create a nice little cozy courtyard behind it. The good news is also the new building provides some outdoor space up above. Which I think will be quite appropriate. I’m very comfortable with the way – I agree with David that – I remember going, when this first came up, I don’t know it’s been 18 months, two years, something. We had the meeting out there and I really thought that the purpose at the time was – the concept I think was going to be very good so I’m – from a historic standpoint I think the average person going by that building will not even know there is an addition in the back when it’s done. Some day they are going to walk around and say, oh my goodness look at this wonderful glass building in the back. I’m ready to approve of this project. I guess I can say that anyway, that’s my point. Thank you. Vice Chair Wimmer: Thank you Board Member Kohler. Would Board Member Di Cicco like to speak and offer her comments? Ms. French: Patt? Board Member Di Cicco: Yes. Ms. French: Would you like to give your comments on the project? Board Member Di Cicco: I have given two comments that I thought deserved consideration and I did get a response to clarify that. I still think it’s something maybe the ARB would be interested in at least reviewing about the size of the entry and atrium. As far as the work that’s been done on lowering the height of the building and the setback and the increased open patio of the second floor, I think is compatible with the Secretary Standard. It is as it was set in from the consultant, it is more compliant with the Standard. I guess I would question is it completely subordinate, no; but to me, there has to be some give and take somewhere, and I recognize that some of the public uses the space, but there does need to be increased space. It’s a beautiful location, after all would be said and done, for the seniors of Palo Alto. It serves a lot of very important purposes. I think probably I would recommend proceeding with the project as it stands. Vice Chair Wimmer: Great. Thank you Board Member Di Cicco. I guess it’s my turn to offer my comments. I’m really pleased by… Board Member Di Cicco: I can’t hear whoever is (inaudible) now. Ms. French: Hold on. Hold on. (Inaudible) Board Member Di Cicco: (Inaudible) City of Palo Alto Page 12 Board Member Kohler: You’re getting a lot of exercise today. Vice Chair Wimmer: I’d like to offer my comments. I am very pleased with the progression of the project. I think it has greatly improved since the first time we were able to take a look. I like how the project seems, on this round of revisions, simplified, and I think it’s better organized. I think just the composition and the lines tend to relate a lot better to the existing building and I’m really happy to see that. I like the materials. I think it’s very complimentary. The mass and the scaling; I tend to agree a little bit with Board Member Di Cicco’s comment about how ideally we like to see a new addition be a little bit more subordinate to the historic building. And even though this proposal is a little bit higher, the overall height exceeds the existing building, I understand the project program and the needs of the building and the needs of the square footage, and I know that you’ve investigated ways of keeping it a two-story building and that just didn’t seem possible. I do think the glass hyphen between the historic building and the purposed building makes it really successful. I think it definitely differentiates. It protects the original building and I think this is a great project. I’m in full support of it. I do want to be sympathetic to the existing users of the facility and of the dining room. I’m sure that it’s going to be really difficult for them to have the facility taken away from them during the time of construction but I think in any project like this change isn’t so easy for some people but I think, in the long run, you’re going to have a much better facility. It's code compliant, it’s going to be earthquake safe. I think there are public safety issues that we really have to take seriously, even though it is unfortunate that the time to go through the construction phase can be painful. We all know that, but I think in the end, I think it’s a project we should celebrate. It sounds like we are all very supportive of the project. Do we need to formulate any paragraph or wording or something or should we just offer our positive – Amy I was just saying, we seem to be in agreement on how we feel about the project. In order to satisfy the requirement, do we need to formulate anything or just say we are in support of the project? Ms. French: The problem is, and I appreciate all of the comments, I guess the problem is that the agenda was not posted in the official place outside the City Hall, yesterday at this time. It was just put out today with the statement – I mean, the agenda was there about this meeting, but the participation of a quorum through Pat’s participation from home telephonically was not stated on the agenda, unfortunately. I think there’s a possibility we could continue this hearing to formalize or take votes. The problem is, I believe David is on a plane later today – Thursday? Okay. So could – yeah…the agenda itself was noticed and an ad was posted. Having a meeting today, we already conducted business on the bulletin, and we’ve heard from folks on this project, but to take any action I guess would be something we could potentially continue till tomorrow morning at this same time. The problem is, are you able to… Board Member Bower: (Inaudible) Ms. French: We can continue the hearing on this to 11 o’clock tomorrow, except that I need to have your participation again, the four who are here, one telephonically as well. I don’t know if Pat is hearing this, but would you be able to – you wouldn’t have to have the entire discussion again, it was just to get to your recommendation on the project. (Inaudible) Vice Chair Wimmer: I am available tomorrow. Roger, would you be available tomorrow at 11? Board Member Kohler: I’m not sure but I’ll just make sure that I can be here. Vice Chair Wimmer: David? Board Member Bower: I’m available. Ms. French: And then Pat? Vice Chair Wimmer: Pat would you be available tomorrow to reconvene and make official our recommendation on this project? Tomorrow at 11:00 or 11:30? City of Palo Alto Page 13 Board Member Di Cicco: I have a rather important doctor appointment at 11:20 that I cannot cancel. Vice Chair Wimmer: When would you be making your way back after that? Maybe we can make it in the afternoon. Board Member Di Cicco: I’m not sure… (Crosstalk) Ms. French: 10:30? Board Member Di Cicco: … how long I’m going to be there. Ms. French: Can we meet at 10:30 for half an hour? Vice Chair Wimmer: At 10:30 for a half an hour? Ms. French: By phone. Vice Chair Wimmer: By phone. You can be by phone. Board Member Di Cicco: OK, I could do that. The 10:30. Make it 10:15 because I would have to leave here by (Inaudible). Ms. French: Has to be 24 hours, so 10:30 it is. Vice Chair Wimmer: So we are looking at a 24-hour window that we need to abide by. It looks like it would have to be 10:30, cause that’s what time it is now. Ms. French: Thank you. Board Member Di Cicco: Ok, if we do it right at 10:30. Board Member Bower: Why don’t we all plan on coming early. (Crosstalk) (Inaudible) Vice Chair Wimmer: Ok, we’ll do it right at 10:30. Ms. French: Be in place at 10:30 (Crosstalk) Vice Chair Wimmer: Yes, right at 10:30 and it should only take a matter of minutes. MOTION Ms. French: Ok, so someone move and second that. Board Member Di Cicco: I will be available on my cell phone at 10:30, as I was this morning. Vice Chair Wimmer: I move that we reconvene tomorrow at – to be here, seated at 10:30 and have Board Member Di Cicco participate by telephone. Board Member Bower: Try to be here by 10:20, I would. Vice Chair Wimmer: We’ll all be here early but to have the actual event happen at 10:30 sharp and it should only take a few minutes. That’s a motion. City of Palo Alto Page 14 Ms. French: Yes, we will post that with the requisite participation by Pat Di Cicco at her home with (Inaudible). Vice Chair Wimmer: All in favor of doing that, say I. Everyone: I. Vice Chair Wimmer: All opposed? We’re fine about doing that tomorrow at 10:30. Board Member Di Cicco: Yes. Board Member Bower: Ok. Vice Chair Wimmer: Ok, so… Board Member Di Cicco: We’re done? Vice Chair Wimmer: I think we are finished with that item. Everyone - well done and moving on our agenda for the rest of the meeting. Board Member Bower: I think we did everything. Vice Chair Wimmer: Oh yes, because Chair Bernstein moved up the item of Approval of Minutes so, we’ve already done that. It looks like unless anyone has anything to add, the meeting is adjourned. Thank you. Adjournment 1 March 1, 2016 PROGRAM DESCRIPTION Avenidas has been the City’s provider of senior services, and the operator of its senior center, since 1976. In this role, Avenidas makes it possible for the City to meet its goal of “providing responsive, efficient, and cost-effective community services…to meet the needs of groups with special needs.”1 The City leases the former Police and Fire Station to Avenidas under a long- term lease and provides operating support in the form of an annual contract. Avenidas’ Bryant Street Center at 450 Bryant Street is a community center with activities and services for independent older adults and their family caregivers. At the Center, Avenidas offers a broad range of health and wellness services including acupuncture, massage, fitness classes, health screenings, and lectures; classes and workshops in computer learning, language, art, travel, wine appreciation, etc.; information and counseling services and geriatric care management for issues related to aging; and flexible transportation options for running errands, getting to and from appointments, and participating in social activities. Many of these services are provided directly by Avenidas while others are provided by organizations including Senior Adults Legal Assistance, AARP, Foothill Community College, Stanford Hospital and Palo Alto Medical Foundation. These activities and services are provided in multi-purpose spaces that are both large and small. In addition, lunch is served each weekday by La Comida de California (and independent not-for-profit which has a sublease) in a large dining room; the food is prepared in an adjacent kitchen. The Center is open weekdays from 9 a.m. to 5 p.m. and occasionally later to accommodate a late class or early evening event. Avenidas makes the facility, or select rooms within the Center, available for rental to organizations. It does not rent spaces for private parties. Through this rental program, which is very modest, the facility is sometimes used on weekends and evenings. In fiscal 2015 (ending June 30, 2015), Avenidas served approximately 7,500 individuals, both at the Center and by phone. Some of these individuals, such as those who volunteer in local schools as part of Avenidas’ Early Literacy Program, rarely come into the Center while others are regulars who come to lunch and/or participate in activities every day. The Center is generally busiest between the hours of 10 and 2, with the highest use over the 11:15-12:15 lunch hour when 100+ diners are in the dining room. It is very quiet in the late afternoon. Activity at the Center ebbs and flows with the quarterly calendar of classes; the Fall Quarter is the most active, the Summer Quarter the least active, and the Center is the most quiet in the interim days between quarters. The Center is accessible and ADA compliant, but the small, old elevator is not large enough for a gurney and must be replaced with a larger elevator. 1 City of Palo Alto Comprehensive Plan, Community Services and Facilities, page C-1. 2 Community Spaces The Center features a large central lobby which is largely unprogrammed. It is a place for participants to informally meet, enjoy a cup of coffee, use the public computers and retrieve information on resources for seniors throughout the community. There is a Front Desk from which staff assists participants with everything from registering for a class to scheduling a ride home. Multi-Purpose Rooms The larger multi-purpose rooms are used for classes such as French, History as Biography, Current Events, Genealogy, Life Stories, Mandarin, Movie History, Ukulele, Watercolor and Acrylic Painting. The rooms are generally set up conference style, as opposed to classroom style, to facilitate discussion and engagement. Last year Avenidas offered 29 classes of this sort, many of them in each of the four quarters. These same larger multi-purpose rooms and the dining room (when not being used for lunch service) are used for lectures and workshops on a variety of issues of interest to seniors. Some of these are one-time-only events while others recur during the year. Examples of informational and training programs in this category are AARP Drivers Safety workshop, Clutter Busters Club, Emergency Preparedness Crime Prevention, Fair Housing & Tenant Rights, Improv Workshop and Gardening Club. The number of people attending these lectures and workshops range upwards to 100 and more. Meetings of staff members and volunteers, including an active Board of Directors and various Advisory Councils, and various supports groups (for adult children, spouse caregivers and individuals with various chronic diseases) share the multi-purpose rooms with the classes, lectures and workshops. These same rooms are used for tax preparation in the winter and one-on-one appointments with health insurance counselors and elder law attorneys. Small Personal Service Rooms Avenidas offers a number of personal services such as acupuncture, massage, reflexology, podiatry, nail care and Reiki. These services are by appointment and offered by practitioners in two small rooms. Health screenings (bone density, hearing and skin cancer as examples) are also conducted in these small rooms. Basement There are two computer labs in the basement. Administrative Offices The Center also houses about two-thirds of the organization’s employees. Some, such as the transportation coordinator and social workers, meet regularly with clients and volunteers in their offices and, for the most part, run their programs from their offices Other employees are administrative (finance and accounting, fund development, marketing and general management). One space is both administrative and public: the Avenidas Village office. The Avenidas Village program (a membership program that provides high touch support to individuals who are aging in their own homes) requires both dedicated staff space and a small public space where Village members can gather and meet. It serves as its own Front Desk and lobby for those Village 3 members to come to the building for services. At present there are two small rooms with copiers and other office equipment that is shared by the employees, teachers and volunteers. There is no staff room. Special Purposes Spaces The current building has no special purpose spaces, with the exception of the kitchen. The proposed addition will include a fitness room with appropriate flooring, mirrors and barres and will, by design, not accommodate multiple uses. This fitness room will be used for such classes as Matter of Balance, Tai Chi, Pilates, Low Impact Aerobics, Light Adaptive Yoga, Hatha Yoga and Exercises for Parkinson’s. Last year, Avenidas offered 17 such classes. PROPOSED PROJECT DESCRIPTION Avenidas operates out of the existing Category 2 historic building at 450 Bryant Street in downtown Palo Alto. The building was designed by Palo Alto architect Birge Clarke and built in 1926 as the City of Palo Alto Police and Fire Station. Avenidas modified and renovated the building in 1977-1978 when its occupancy began. Over the past six years, Avenidas has been exploring how to continue to provide the highest level of services to the community and accommodate the growing demand at the existing location. The senior population is large and growing rapidly. The 55+ segment of Palo Alto’s population grew 25% between 2000 and 2010 and today represents almost one-third of the total population of the city. As indicated in the City of Palo Alto’s Comprehensive Plan, Avenidas (formerly the Senior Coordinating Council) is the sole provider of senior services on behalf of the City of Palo Alto. Consistent with the Comprehensive Plan goals for community services, Avenidas must evolve and adapt to the changing needs of the aging population. Meeting these needs starts with our programs and extends into our physical infrastructure. The expansion and remodeling of our facilities is fundamental to our abilities to continue to provide the highest level of service to the Palo Alto community. This expansion and remodeling also addresses Community Services goals of the City’s Comprehensive Plan: “Goal C-4: “Attractive, Well-maintained Community Facilities That Serve Palo Alto Residents… Reinvest in aging facilities to improve their usefulness and appearance. Avoid deferred maintenance of City infrastructure. (Policy C-24)”2 The proposed existing building and addition is +/-26,500 square feet. The first level is the largest at +/-11,000 square feet and includes the main lobby, reception, classrooms, a dining room and kitchen and the addition of an atrium lobby. The second floor is +/-9,200 square feet and includes multipurpose rooms, meeting rooms, classrooms and administrative areas. A third floor in the new wing will be +/- 3,300 square feet and will include a fitness room, a small meeting room and an outdoor deck. The circa 1925 shed at the rear (the “Garden Room”) will be renovated to house the staff and 2 City of Palo Alto Comprehensive Plan, Community Services and Facilities, page C-16. 4 members of Avenidas Village. The +/- 2,000 s/f basement below the original building will become a theater/small auditorium. Parking Part of the project’s challenge is the limited space available for development based on Avenidas’ leasehold area and the adjacent park and parking lot. The proposed addition will remain within the current leasehold boundary. With no land on which to build parking spaces, it is our plan to meet the project’s parking requirement by paying an in-lieu fee to the Downtown Parking Assessment District. The project will add 8,129 square feet of net new space. The parking requirement of one space for every 250 square feet is 33 spaces, resulting in a fee of approximately $1,980,000 (at $63,848 per space, the in lieu fee for the Downtown Parking Assessment District). Historic Preservation The City of Palo Alto’s Downtown design guideline recommends that a sense of history be preserved and historic structures be emphasized. The architectural concept of the addition is to significantly maintain the architectural features of the existing historic building by adding an addition at the back of the building, replacing the 1976 dining room with a three story wing and a two story atrium. The design aesthetic of the new addition is contemporary but with elements that relate to the historic building, including a red tile roof and punch windows. The scale and massing of the addition is such that it is in proportion to the existing historic building. The existing rear wall of the historic building will become a prominent feature of the proposed new wing. The main building entry will remain along Bryant Street. No exterior building modifications are proposed to the other three sides of the existing building. Participants will enter the rear of the building into a lobby/reception that will look out into the remaining courtyard. With the remodeling of the interior space, the circulation and way finding throughout the facility will be improved. No historic interior features remain after previous interior renovations. Existing New Renovated and New Basement 1,994 0 1,994 First Floor 9,738 3,852 13,590 Shed 818 0 818 Second Floor 5,825 3,556 9,381 Third Floor enclosed 0 2,915 2,915 Third Floor Deck 0 398 398 Total 18,375 10,721 29,096 1976 dining room addition (to be rebuilt)-2,592 -2,592 Net New Space 8,129 26,504 450 Bryant Street Square Footage to be Renovated and Constructed New 5 The renovated building will have less office space than it presently does. Except for a few staff who interact directly and daily with participants and guests, staff will be consolidated into part of the second floor in open space configured with workstations, a few private offices and shared huddle rooms. We do not expect that more staff will be required as a result of the building expansion. Interior renovations are being designed to make the space feel open and inviting. We want visitors to be able to walk through the building and see what is going on and be enticed to join in. Small spaces will be combined into larger spaces. We also want pedestrians walking by on the Bryant Street sidewalk to be able to look in and see what’s going on. Foundation landscape will be replaced with low-scale plantings and there will be larger and more active multi-purpose rooms flanking the front entrance. PROJECT IMPACT DURING CONSTRUCTION The project’s general contractor estimates that construction will take approximately 18 months. Avenidas plans to re-locate its operations during construction to a location in south Palo Alto. La Comida de California, the building’s only subtenant, has made arrangements to temporarily re-locate the lunch service to a church in downtown Palo Alto. PROJECT IMPACT ON FUTURE BUILDING USES When Avenidas resumes operations after construction, its programming will be substantially the same but it is expected that the larger, more efficient space, and double the current program space, will accommodate as many as 360 more people each day. This growth in utilization is directly related to the growth in the senior population which is expected to grow until 2020 when half of all residents will be age 55+. FINAL Initial Study Expansion at Avenidas Prepared for: City of Palo Alto 250 Hamilton Avenue Palo Alto, California 94301 Contact: Amy French, Chief Planning Official Prepared by: 853 Lincoln Way Auburn, California 95603 Contact: Katherine Waugh JULY 2016 UPDATED OCTOBER 2016 Printed on 30% post-consumer recycled material. Expansion at Avenidas Initial Study 9567 i July 2016 TABLE OF CONTENTS Section Page No. 1 INTRODUCTION..............................................................................................................1 1.1 Project Location ...................................................................................................... 1 1.2 Project Objectives ................................................................................................... 1 1.3 Project Description.................................................................................................. 1 1.4 Permits and Approvals Needed ............................................................................... 2 1.5 Public Review Process ............................................................................................ 2 2 SUMMARY OF FINDINGS .............................................................................................3 2.1 Environmental Factors Potentially Affected ........................................................... 3 2.2 Environmental Determination ................................................................................. 3 3 INITIAL STUDY CHECKLIST ......................................................................................5 3.1 Aesthetics .............................................................................................................. 11 3.2 Agriculture and Forestry Resources...................................................................... 12 3.3 Air Quality ............................................................................................................ 14 3.4 Biological Resources ........................................................................................ 1718 3.5 Cultural Resources ................................................................................................ 22 3.6 Geology and Soils ............................................................................................. 2625 3.7 Greenhouse Gas Emissions ............................................................................... 2928 3.8 Hazards and Hazardous Materials .................................................................... 3029 3.9 Hydrology and Water Quality ........................................................................... 3433 3.10 Land Use and Planning ..................................................................................... 3837 3.11 Mineral Resources ............................................................................................ 3938 3.12 Noise ................................................................................................................. 4039 3.13 Population and Housing .................................................................................... 4241 3.14 Public Services .................................................................................................. 4342 3.15 Recreation ......................................................................................................... 4443 3.16 Transportation and Traffic ................................................................................ 4645 3.17 Utilities and Service Systems............................................................................ 4948 3.18 Mandatory Findings of Significance ................................................................. 5251 4 REFERENCES AND PREPARERS ..........................................................................5453 4.1 References Cited ............................................................................................... 5453 4.2 List of Preparers ................................................................................................ 5655 Expansion at Avenidas Initial Study TABLE OF CONTENTS (CONTINUED) Page No. 9567 ii July 2016 APPENDICES A Historic Resources Evaluation B Focused Traffic Impact Study Memorandum FIGURES 1 Regional Location ..........................................................................................................5857 2 Vicinity Map ..................................................................................................................6059 3 Project Site .....................................................................................................................6261 4a Site Photos .....................................................................................................................6463 4b Site Photos .....................................................................................................................6665 TABLE 3-1 BAAQMD Screening Criteria............................................................................................16 Expansion at Avenidas Initial Study 9567 1 July 2016 1 INTRODUCTION This Initial Study evaluates the potential environmental effects that would result from the proposed expansion of the Avenidas facility (proposed project). This Initial Study has been prepared to satisfy the environmental review requirements under the California Environmental Quality Act (CEQA) applicable to the City of Palo Alto consideration of the proposed project. 1.1 Project Location The site is located on a portion of Assessor’s parcel number 120-26-095, at 450 Bryant Street. The existing facility shares the block with a public parking lot and Cogswell Plaza. The project site is located in the northwestern section of the City of Palo Alto, in the northern part of Santa Clara County and across El Camino Real (State Route 82) from Stanford University. The project site is located on the north side of El Camino Real between Middlefield Road and Alma Street, more particularly, within the block bounded by University and Lytton Avenues and Bryant and Ramona Streets. The proposed project site is currently used by the Avenidas Community Center. It is a corner lot on the block with frontages on Bryant Street and Paulsen Lane (Lane 31 E). La Comida operates within the center to serve lunch to the patrons. The site contains limited vegetation. The project’s regional location is shown in Figure 1; Figure 2 identifies the project vicinity, and Figure 3 identifies the project site and adjacent property. 1.2 Project Objectives Provide for modernization of the existing facility to ensure that it remains attractive, well-maintained, and well-suited to the existing community center and public service use Expand facilities to serve more patrons and provide more appropriate spaces for the current programs Update electrical, mechanical and plumbing facilities Meet seismic requirements for the City of Palo Alto Install an ADA-compliant elevator Preserve the exterior of the historic building 1.3 Project Description Avenidas proposes to renovate 15,783 square feet within the existing building and construct a new 10,185721-square-foot wing (inclusive of the 434-square-foot, uncovered deck on the third floor). The project would provide Avenidas with in order to obtain a total of 25,53426,504 square feet of new and modernized interior building space. The project would also provide for replacement and Expansion at Avenidas Initial Study 9567 2 July 2016 update of old mechanical, electrical, and plumbing systems, seismic upgrades and installation of an ADA-compliant elevator The proposed construction and building improvements would result in a facility that includes a ±11,000-square-foot first floor (comprised of a lobby, reception, classroom, dining room and kitchen, and an atrium in the lobby), a ±9,200-square-foot second floor within spanning both the original and new buildings (consisting of multipurpose rooms, meeting rooms, classrooms, a wellness area, and administrative facilities), a ±3,300-square-foot second floor within the new building a ±2,342-square-foot third floor within the new building (containing a fitness room, a small meeting roomrestrooms, and small lounge and leading to two an outdoor deck, uncovered, outdoor decks), a ±818-square-foot shed (used for program space) and a renovated ±2,000-square-foot basement (encompassing a small auditorium). Additional details regarding the project are provided in Section 3 Initial Study Checklist. 1.4 Permits and Approvals Needed The proposed project would not require discretionary approvals from any agency other than the City of Palo Alto. 1.5 Public Review Process This Initial Study has been prepared in support of a proposed Mitigated Negative Declaration (MND). The proposed MND is subject to a 30-day public review period. Adoption of the MND will be considered at a public hearing of the City of Palo Alto. The public is encouraged to provide written comments during the 30-day review, and/or attend and speak at the City’s public hearings. Expansion at Avenidas Initial Study 9567 3 July 2016 2 SUMMARY OF FINDINGS 2.1 Environmental Factors Potentially Affected This Initial Study considers the environmental issues identified in Appendix G of the CEQA Guidelines. Where appropriate, technical studies have been completed to evaluate potential adverse effects and recommend measures to reduce or avoid such effects. 2.2 Environmental Determination As shown in the Initial Study, the proposed project could have a significant effect on the environment. However, implementation of mitigation measures identified in the Initial Study would reduce these potential impacts to less-than-significant levels. Therefore, a mitigated negative declaration will be prepared. Expansion at Avenidas Initial Study 9567 4 July 2016 INTENTIONALLY LEFT BLANK Expansion at Avenidas Initial Study 9567 5 July 2016 3 INITIAL STUDY CHECKLIST 1. Project title: Expansion at Avenidas 2. Lead agency name and address: City of Palo Alto 250 Hamilton Avenue Palo Alto, California 94301 3. Contact person and phone number: Amy French Chief Planning Official City of Palo Alto 250 Hamilton Avenue Palo Alto, California 94301 4. Project location: Avenidas 450 Bryant Street, San Jose, California 95129 5. Project sponsor’s name and address: Lisa Hendrickson, Avenidas 450 Bryant Street, San Jose, California 95129 6. General plan designation: Regional/Community Commercial 7. Zoning: Public Facility (PF) 8. Description of project: The proposed project consists of demolition of about 2,500 square feet of the dining area in order to construct about 1110,000 square feet of in a new three-story facilitybuilding Expansion at Avenidas Initial Study 9567 6 July 2016 addition. The shed, built in 19251930, is proposed to be renovated and would continue to be used for programs and staff space. The non-protected tree in the rear of the building would be removed. In order to meet the parking requirement associated with the proposed 8,1297,158 square-foot increase in space (inclusive of outdoor deck space), Avenidas plans to pay an in-lieu fee to the Downtown Parking Assessment District. The proposed project would attempt to preserve the historic character of the building by complementing the existing architecture. Site Description At the Bryant Street Center, Avenidas provides a wide range of services to older adults, including health and wellness, independent aging, transportation, workshops and classes, legal and tax assistance, social activities, and volunteer opportunities. La Comida operates within the center to serve lunch daily. Avenidas leased the facility at 450 Bryant Street from the City beginning in 1976, completed interior improvements in 1977, and began operations at this facility in 1978. Avenidas serves approximately 350 people daily, with programs running generally between 9 am and 5 pm. The Center is closed during weekends. In 2015, Avenidas served over 7,500 people and hosted 233 classes. The original main building on site was constructed in 1927 and the small shed at the rear was constructed sometime earlier (date unknownin approximately 1930 (ARG 2016a page 17). While a dining room was constructed as an extension of the main building and renovations have been made to the original buildings, the original main building and shed have has been designated as a historic structure and the shed has been identified as a contributing feature of the main buildings. The site contains limited vegetation, consisting of small landscaped areas around the building perimeter, street trees, and trees in a small courtyard interior to the site. As shown in Figure 3, the project site is a corner lot with frontages on Bryant Street and Paulsen Lane (Lane 31 E). The Avenidas Center shares the block with Cogswell Plaza and a public parking lot (Lot C) that contains 51 parking spaces. Cogswell Plaza was originally developed in 1924 as City Hall Park. It was redesigned and renamed in 1955. It provides benches, walkways, a small area of open lawn, and informal landscaping consisting of trees and shrubs, as shown in the photographs in Figures 4a and 4b. Proposed Project In order to accommodate the fast growing senior population in Palo Alto, Avenidas plans to renovate 15,783 square feet within the existing building and construct a new 10,185721-square-foot wing in order to obtain a total of 26,50425,968 square feet of new and modernized Expansion at Avenidas Initial Study 9567 7 July 2016 space, including the proposed third-story deck. The project would also provide for replacement and update of old mechanical, electrical, and plumbing systems, seismic upgrades and installation of an ADA-compliant elevator The proposed construction and building improvements would result in a facility that includes a ±11,000-square-foot first floor (comprised of a lobby, reception, classroom, dining room and kitchen, and an atrium in the lobby), a ±9,200-square-foot second floor within spanning both the original and new buildings (consisting of multipurpose rooms, meeting rooms, classrooms, a wellness area, and administrative facilities), a ±2,780342-square-foot third floor within the new building a ±3,300-square-foot second floor within the new building (containing a fitness room, restrooms, and a small meeting roomlounge leading to and a 400-square footn outdoor decks), a ±818-square-foot shed (used for program space) and a renovated ±2,000-square-foot basement (encompassing a small auditorium). Currently, the Center offers a variety of academic classes, meeting spaces, health screenings, tax assistance, public computer labs, and senior specific fitness classes. The renovation would create a designated Fitness Room and create more areas for meetings, classes, and activities. The main entry would continue to be off of Bryant Street. The new construction at the rear would also update the entrance from Lot C in the rear of the building. Development Standards The height limit for the Commercial District is 50 feet. The height of the two story existing building is approximately 36 feet while the height of the three story addition would range from 40’9” near the courtyard tobe approximately 43 42 feet and 8 inches. Avenidas proposes to pay the City’s downtown in-lieu parking fee for additional required parking spaces that would not be provided on site, since Avenidas does not have its own parking lot. . The renovations would add 8,1297,593 square feet, 7158 square feet of which would be enclosed area; the Palo Alto Municipal code requires 1 parking space for every 250 square feet of commercial space. Therefore, the floor area added would require 3329 new parking spaces. Because the Center’s lease line is coterminous with the building, Avenidas does not have the land area to add parking spaces; therefore, the Center would pay $1,851,592980,000, or $63,848 per space at current rates, into the Downtown Parking Assessment District in-lieu of constructing new parking spaces. The proposed renovations would also add bike parking racks on Bryant Street. The project site contains eight trees, four of which are protected. One tree would be required to be removed to facilitate the proposed construction. The tree that would be removed is a Expansion at Avenidas Initial Study 9567 8 July 2016 Camphor tree (Cinnamomum camphora) and, as evaluated by a certified arborist, is in poor/fair condition likely due to the fact that its roots are restricted by concrete. The facility is directly adjacent to Cogswell Plaza; during construction, fencing would be placed alongside the border to the plaza as to protect the trees and their root systems as well as the plaza’s landscaping. Three street trees on Bryant Street maintained by the city (a fern tree and two deciduous flowering pears) would also be fenced during construction to protect them. The 4.5-inch Japanese Maple near the alley would be encompassed within the courtyard that would be created by the proposed project. Except for the Camphor tree that would be removed from the site, the remaining seven trees would be protected during construction to ensure their survival. 9. Surrounding land uses and setting (Briefly describe the project’s surroundings): The proposed project site is currently used by the Avenidas Community Center. It is a corner lot on the block with frontages on Bryant Street and Paulsen Lane (Lane 31 E). La Comida operates within the center to serve lunch to the seniors. The site contains limited vegetation and shares the block with Cogswell Plaza and a public parking lot. 10. Other public agencies whose approval is required (e.g., permits, financing approval, or participation agreement): The proposed project would not require discretionary approvals from any agency other than the City of Palo Alto. Expansion at Avenidas Initial Study 9567 9 July 2016 ENVIRONMENTAL FACTORS POTENTIALLY AFFECTED The environmental factors checked below would be potentially affected by this project, involving at least one impact that is a “Potentially Significant Impact,” as indicated by the checklist on the following pages. However, all impacts would be reduced to Less Than Significant levels with implementation of the mitigation measures identified in this Initial Study. Aesthetics Agriculture and Forestry Resources Air Quality Biological Resources Cultural Resources Geology and Soils Greenhouse Gas Emissions Hazards and Hazardous Materials Hydrology and Water Quality Land Use and Planning Mineral Resources Noise Population and Housing Public Services Recreation Transportation and Traffic Utilities and Service Systems Mandatory Findings of Significance Expansion at Avenidas Initial Study 9567 10 July 2016 DETERMINATION: (To be completed by the Lead Agency) On the basis of this initial evaluation: I find that the proposed project COULD NOT have a significant effect on the environment, and a NEGATIVE DECLARATION will be prepared. I find that although the proposed project could have a significant effect on the environment, there will not be a significant effect in this case because revisions in the project have been made by or agreed to by the project proponent. A MITIGATED NEGATIVE DECLARATION will be prepared. I find that the proposed project MAY have a significant effect on the environment, and an ENVIRONMENTAL IMPACT REPORT is required. I find that the proposed project MAY have a “potentially significant impact” or “potentially significant unless mitigated” impact on the environment, but at least one effect (1) has been adequately analyzed in an earlier document pursuant to applicable legal standards, and (2) has been addressed by mitigation measures based on the earlier analysis as described on attached sheets. An ENVIRONMENTAL IMPACT REPORT is required, but it must analyze only the effects that remain to be addressed. I find that although the proposed project could have a significant effect on the environment, because all potentially significant effects (a) have been analyzed adequately in an earlier ENVIRONMENTAL IMPACT REPORT or NEGATIVE DECLARATION pursuant to applicable standards, and (b) have been avoided or mitigated pursuant to that earlier ENVIRONMENTAL IMPACT REPORT or NEGATIVE DECLARATION, including revisions or mitigation measures that are imposed upon the proposed project, nothing further is required. Signature July 1, 2016 Date Expansion at Avenidas Initial Study 9567 11 July 2016 EVALUATION OF ENVIRONMENTAL IMPACTS: 3.1 Aesthetics Potentially Significant Impact Less Than Significant with Mitigation Incorporated Less Than Significant Impact No Impact AESTHETICS – Would the project: a) Have a substantial adverse effect on a scenic vista? b) Substantially damage scenic resources including, but not limited to, trees, rock outcroppings, and historic buildings within a state scenic highway? c) Substantially degrade the existing visual character or quality of the site and its surroundings? d) Create a new source of substantial light or glare which would adversely affect day or nighttime views in the area? a) Would the project have a substantial adverse effect on a scenic vista? The project site does not contribute to any scenic vistas. A scenic vista is defined as an expansive view of a highly valued landscape observable from a publicly accessible vantage point. The project is located in an urban environment where viewsheds are limited by buildings and trees. The proposed expansion and site improvements would not alter any scenic vistas. No impact to a scenic vista would occur as a result of the project. b) Would the project substantially damage scenic resources including, but not limited to, trees, rock outcroppings, and historic buildings within a state scenic highway? The project site is not visible from a state scenic highway, and the site does not support trees or rock outcroppings. The current building was built in 1925 and has been designated an historic site. As discussed further in Section 3.5, Cultural Resources, the proposed renovations and additions would not detract from the historical design and feel of the existing building. Therefore, no impact to scenic resources would result from the project. c) Would the project substantially degrade the existing visual character or quality of the site and its surroundings? The site is located in a neighborhood that contains a mixture of public/institutional, commercial, and multifamily land uses. The project site is currently developed as a community center with limited landscaping. The visual character of the site and its immediate surroundings is highly urban. The proposed building expansion would be Expansion at Avenidas Initial Study 9567 12 July 2016 similar in scale to the nearby commercial buildings and would not degrade the existing visual character or quality of the site since the site is completely developed. Additionally, the project is subject to design review and approval by the City through the Architectural Review process, which ensures compliance with City standards to promote high quality visual environments. Therefore, this impact would be less than significant. d) Would the project create a new source of substantial light or glare which would adversely affect day or nighttime views in the area? The project site would continue to be used as a community center and would maintain the same hours of operation. No new sources of nighttime lighting would be added to the project site. Other than windows, no reflective materials are proposed for use. Due to the orientation of the building and the mature trees at the adjacent Cogswell Plaza, windows included on the new structure would not receive substantial direct sun exposure and would not be a source of glare. The project would have no impact related to creating new sources of light and glare. Mitigation Measures No mitigation measures are necessary. 3.2 Agriculture and Forestry Resources Potentially Significant Impact Less Than Significant with Mitigation Incorporated Less Than Significant Impact No Impact AGRICULTURE AND FORESTRY RESOURCES – In determining whether impacts to agricultural resources are significant environmental effects, lead agencies may refer to the California Agricultural Land Evaluation and Site Assessment Model (1997) prepared by the California Department of Conservation as an optional model to use in assessing impacts on agriculture and farmland. In determining whether impacts to forest resources, including timberland, are significant environmental effects, lead agencies may refer to information compiled by the California Department of Forestry and Fire Protection regarding the state’s inventory of forest land, including the Forest and Range Assessment Project and the Forest Legacy Assessment project; and forest carbon measurement methodology provided in Forest Protocols adopted by the California Air Resources Board. Would the project: a) Convert Prime Farmland, Unique Farmland, or Farmland of Statewide Importance (Farmland), as shown on the maps prepared pursuant to the Farmland Mapping and Monitoring Program of the California Resources Agency, to non-agricultural use? b) Conflict with existing zoning for agricultural use, or a Williamson Act contract? Expansion at Avenidas Initial Study 9567 13 July 2016 Potentially Significant Impact Less Than Significant with Mitigation Incorporated Less Than Significant Impact No Impact c) Conflict with existing zoning for, or cause rezoning of, forest land (as defined in Public Resources Code section 12220(g)), timberland (as defined by Public Resources Code section 4526), or timberland zoned Timberland Production (as defined by Government Code section 51104(g))? d) Result in the loss of forest land or conversion of forest land to non-forest use? e) Involve other changes in the existing environment which, due to their location or nature, could result in conversion of Farmland, to non-agricultural use or conversion of forest land to non-forest use? a) Would the project convert Prime Farmland, Unique Farmland, or Farmland of Statewide Importance (Farmland), as shown on the maps prepared pursuant to the Farmland Mapping and Monitoring Program of the California Resources Agency, to non-agricultural use? b) Would the project conflict with existing zoning for agricultural use, or a Williamson Act contract? The proposed project site is located in an urban area and is currently developed. The site is not identified as prime farmland, unique farmland, or farmland of statewide importance and the project site is not under a Williamson Act contract (DOC 2014). It is designated Regional/Community Commercial in the City’s General Plan. The site is not planned for or used for any agricultural purposes and there are no agricultural uses in the vicinity. The proposed expansion of the building and landscaping would not result in the conversion of any agricultural land, conflict with any agricultural use, or conflict with a Williamson Act contract. Therefore, no impact would occur as a result of the proposed project. Expansion at Avenidas Initial Study 9567 14 July 2016 c) Would the project conflict with existing zoning for, or cause rezoning of, forest land (as defined in Public Resources Code section 12220(g)), timberland (as defined by Public Resources Code section 4526), or timberland zoned Timberland Production (as defined by Government Code section 51104(g))? d) Would the project result in the loss of forest land or conversion of forest land to non-forest use? The project site is not zoned as forest land, does not contain forest land or forest resources, and does not support any forest uses. The three story addition to the project site would not result in the conversion of any forest land to a non-forest use. Therefore, no impact would occur as a result of the proposed project. e) Would the project involve other changes in the existing environment which, due to their location or nature, could result in conversion of Farmland, to non-agricultural use or conversion of forest land to non-forest use? The site is located in an urban area and does not support any farmland, agricultural, or forest uses. The expansion of the existing facility on the project site would not result in conversion of any farm, agricultural, or forest land to non-agricultural or non-forest uses. Therefore, no impact would occur as a result of the proposed project. Mitigation Measures No mitigation measures are necessary. 3.3 Air Quality Potentially Significant Impact Less Than Significant with Mitigation Incorporated Less Than Significant Impact No Impact III. AIR QUALITY – Where available, the significance criteria established by the applicable air quality management or air pollution control district may be relied upon to make the following determinations. Would the project: a) Conflict with or obstruct implementation of the applicable air quality plan? b) Violate any air quality standard or contribute substantially to an existing or projected air quality violation? c) Result in a cumulatively considerable net increase of any criteria pollutant for which the project region is non-attainment under an applicable federal or state ambient air quality standard (including releasing emissions which exceed quantitative thresholds for ozone precursors)? Expansion at Avenidas Initial Study 9567 15 July 2016 Potentially Significant Impact Less Than Significant with Mitigation Incorporated Less Than Significant Impact No Impact d) Expose sensitive receptors to substantial pollutant concentrations? e) Create objectionable odors affecting a substantial number of people? a) Would the project conflict with or obstruct implementation of the applicable air quality plan? The project site is located within the Santa Clara Valley, which is part of the San Francisco Bay Area Air Basin. The Bay Area Air Quality Management District (BAAQMD) has the primary responsibility for ensuring that the San Francisco Bay Area Air Basin attains and maintains compliance with federal and state ambient air quality standards. The BAAQMD regulates air quality through its permit authority over most types of stationary emission sources and through its planning and review process. The BAAQMD adopted the Bay Area 2005 Ozone Strategy (BAAQMD 2006) and the Bay Area 2010 Clean Air Plan (BAAQMD 2010a), which are the applicable air quality plans for the region. These plans account for air quality emissions based on the land uses and zoning designated by the City. The uses on the project site are consistent with the designated land use and zoning and the project would not change the land use on the project site. Therefore, the project is consistent with these plans and the impact would be less than significant. b) Would the project violate any air quality standard or contribute substantially to an existing or projected air quality violation? c) Would the project result in a cumulatively considerable net increase of any criteria pollutant for which the project region is non-attainment under an applicable federal or state ambient air quality standard (including releasing emissions which exceed quantitative thresholds for ozone precursors)? The San Francisco Air Basin is designated nonattainment for the federal 8-hour ozone (O3) standard, and is attainment or unclassified for all other federal standards (BAAQMD 2015). The area is designated nonattainment for state standards for 1-hour and 8-hour O3, 24 hour coarse particulate matter (PM10), annual PM10, and annual fine particulate matter (PM2.5) (BAAQMD 2015). The BAAQMD has adopted California Environmental Quality Act (CEQA) Guidelines (BAAQMD 2010b) that establish air pollutant emissions thresholds that identify whether a project would violate any applicable air quality standard or contribute substantially to an existing or projected air quality violation. The 2010 Expansion at Avenidas Initial Study 9567 16 July 2016 BAAQMD Guidelines also establish a screening criteria based on the size of the project to determine whether detailed modeling to estimate air pollution emissions is necessary. The screening criteria reflect the typical construction and operational emissions of a project, such those from use of motorized construction equipment as well as daily vehicle traffic associated with project operation. The BAAQMD Guidelines do not include a specific screening size for a community center type of land use. Instead, the screening sizes for other uses that may have some similarities to the Avenidas center are provided in Table 3-1 for reference. For most of the commercial and retail uses included in the BAAQMD screening sizes table, the screening size for construction is 277,000 square feet. The proposed project would construct approximately 10,800185 new square feet of building space and would remodel the existing approximately 15,800 square feet. Construction would involve substantially less than 27,000 square feet and thus construction emissions would remain well-below the BAAQMD thresholds of significance. With respect to project operation, the screening sizes identified by BAAQMD range widely depending on the land use, with smaller sizes being identified for those uses with higher vehicle trip generation rates. The proposed project would expand the existing Avenidas facility by approximately 10,800185 square feet. This is less than the 17,000 square-foot screening size for a bank with drive through use and less than the 42,000 square-foot screening size for a supermarket. As discussed further in section 3.16, Avenidas generates relatively small traffic volumes. The trip generation rate for the proposed project would be substantially smaller than trip generation rates for banks and supermarkets, thus the operational emissions of the proposed project would be less than those associated with these other uses and would remain below the BAAQMD thresholds of significance as indicated by the screening size levels. Since the proposed square footage of the building is substantially below the screening criteria listed in Table 3-1, emissions associated with construction and operation of the proposed project would remain below the BAAQMD thresholds and the impact would be less than significant. Table 3-1 BAAQMD Screening Criteria Land Use Type Construction Related Screening Size Operational Criteria Air Pollutant Emissions Screening Size* General office building 277,000 sf (ROG) 346,000 sf (NOx) Quality restaurant 277,000 sf (ROG) 47,000 sf (NOx) Daycare center 277,000 sf (ROG) 53,000 sf (NOx) Expansion at Avenidas Initial Study 9567 17 July 2016 Table 3-1 BAAQMD Screening Criteria Land Use Type Construction Related Screening Size Operational Criteria Air Pollutant Emissions Screening Size* Library 277,000 sf (ROG) 78,000 (NOx) Government (civic center) 277,000 sf (ROG) 149,000 sf (NOx) Medical office building 277,000 sf (ROG) 117,000 (NOx) Supermarket 277,000 sf (ROG) 42,000 (NOx) Ban with drive-through 277,000 sf (ROG) 17,000 (NOx) Source: BAAQMD 2010b, Table 3-1. * If the project size is less than the screening size, the project would have less than significant impacts. If the project size is greater than the screening size, detailed project-specific modeling is required. sf = square feet; ROG = reactive organic gas; NOx = oxides of nitrogen; PM10 = small particulate matter; du = dwelling units d) Would the project expose sensitive receptors to substantial pollutant concentrations? The project would include emissions during construction but these are expected to be short-term and temporary. The project is below the screening criteria for construction and operation related criteria pollutants, as discussed in items b and c above, and would not emit a substantial amount of pollutants. Therefore, the project would have a less than significant impact on exposing sensitive receptors to substantial pollutant concentrations. e) Would the project create objectionable odors affecting a substantial number of people? The project is not considered an odor generating facility as described in the BAAQMD CEQA Guidelines (BAAQMD 2010b). The project would not generate odors that could affect a substantial number of people and there would be no impact. Mitigation Measures No mitigation measures are required. 3.4 Biological Resources Potentially Significant Impact Less Than Significant with Mitigation Incorporated Less Than Significant Impact No Impact IV. BIOLOGICAL RESOURCES – Would the project: a) Have a substantial adverse effect, either directly or through habitat modifications, on any species identified as a candidate, sensitive, or special status species in local or regional plans, policies, or regulations, or by the California Department of Fish and Game or U.S. Fish and Wildlife Service? Expansion at Avenidas Initial Study 9567 18 July 2016 Potentially Significant Impact Less Than Significant with Mitigation Incorporated Less Than Significant Impact No Impact b) Have a substantial adverse effect on any riparian habitat or other sensitive natural community identified in local or regional plans, policies, regulations, or by the California Department of Fish and Game or U.S. Fish and Wildlife Service? c) Have a substantial adverse effect on federally protected wetlands as defined by Section 404 of the Clean Water Act (including, but not limited to, marsh, vernal pool, coastal, etc.) through direct removal, filling, hydrological interruption, or other means? d) Interfere substantially with the movement of any native resident or migratory fish or wildlife species or with established native resident or migratory wildlife corridors, or impede the use of native wildlife nursery sites? e) Conflict with any local policies or ordinances protecting biological resources, such as a tree preservation policy or ordinance? f) Conflict with the provisions of an adopted Habitat Conservation Plan, Natural Community Conservation Plan, or other approved local, regional, or state habitat conservation plan? a) Would the project have a substantial adverse effect, either directly or through habitat modifications, on any species identified as a candidate, sensitive, or special status species in local or regional plans, policies, or regulations, or by the California Department of Fish and Game or U.S. Fish and Wildlife Service? The project site does not contain any habitats or biological resources with the potential to support any plant or wildlife species that are designated as threatened or endangered; however, there is potential for nesting birds to be present in trees on site that are proposed for removal or may be trimmed or otherwise affected by construction and there is potential for roosting bats to be present within the existing building. Many species of migratory birds are considered to have special-status under the federal Migratory Bird Treaty Act while bats are protected under the California Fish and Game Code. If the proposed tree removal results in take of any migratory bird (as defined in federal code 50 CFR 10.13.), the effect would be considered a significant impact. In conformance with the California State Fish and Game Code and the provisions of the Migratory Bird Treaty Act, the project shall implement Mitigation Measure BIO-1 to reduce the impact to Expansion at Avenidas Initial Study 9567 19 July 2016 a less-than-significant level by requiring surveys by a qualified technician to evaluate the potential presence of nesting birds prior to tree removal and requiring protection of any active bird nest during construction. If the proposed building demolition resulted in the removal or disturbance of roosting, this would be a significant impact. Mitigation Measure BIO-2 requires the project applicant to complete a bat survey prior to demolition, and identifies protocols to be followed to ensure that impacts to bats are avoided. With implementation of Mitigation Measures BIO-1 and BIO-2, the project’s potential impacts to special status species would be less than significant. b) Would the project have a substantial adverse effect on any riparian habitat or other sensitive natural community identified in local or regional plans, policies, regulations, or by the California Department of Fish and Game or U.S. Fish and Wildlife Service? c) Would the project have a substantial adverse effect on federally protected wetlands as defined by Section 404 of the Clean Water Act (including, but not limited to, marsh, vernal pool, coastal, etc.) through direct removal, filling, hydrological interruption, or other means? d) Would the project interfere substantially with the movement of any native resident or migratory fish or wildlife species or with established native resident or migratory wildlife corridors, or impede the use of native wildlife nursery sites? The project site does not contain riparian habitat, federally protected wetlands, or other sensitive natural communities, and does not provide any wildlife movement corridors or fish habitat. The addition of the proposed expansion on the site would have no impact on these resources. e) Would the project conflict with any local policies or ordinances protecting biological resources, such as a tree preservation policy or ordinance? The project site is located in an urban setting and currently supports an existing building, asphalt-paved parking lot, other asphalt and concrete pavement. The project site, which is defined by the land lease between Avenidas and the City, and includes only the areas up to and within the building limits within this property, supports one tree. There are an additional three trees within the City-owned parking lot, eight street trees, and seven trees in Cogswell Park that are immediately adjacent to the project site. The tree within the project site is proposed to be retained while one of the trees within the parking lot is proposed for removal. Construction of the project would not require removal of any other Expansion at Avenidas Initial Study 9567 20 July 2016 trees. The tree proposed for removal is not a protected tree under Chapter 8.10 Tree Preservation and Management Regulations, in the Palo Alto Municipal Code. However, the street trees located adjacent to the project site are protected under the Tree Preservation and Management Regulations. Construction of the project could impact these protected trees if the trees are not properly protected. A Tree Protection Plan was completed for the project in accordance with the requirements outlined in the Tree Technical Manual (City of Palo Alto, 2001). Mitigation Measure BIO-3 would be implemented per the Tree Protection Specifications included in the Tree Protection Program to ensure that impacts to adjacent protected street trees are less than significant. f) Would the project conflict with the provisions of an adopted Habitat Conservation Plan, Natural Community Conservation Plan, or other approved local, regional, or state habitat conservation plan? There are no adopted Habitat Conservation Plans or Natural Community Conservation Plans within the City of Palo Alto. Therefore, the project would have no impact related to conflict with the provisions of such plans. Mitigation Measures Mitigation Measure BIO-1: If feasible, vegetation on the project site shall be removed outside of the bird-nesting season. If the start of site clearing, tree removal, or building demolition occurs between February 1 and August 31, a pre-construction survey for nesting birds protected under the Migratory Bird Treaty Act shall be conducted by a qualified biologist to identify the location of nests in active use that were established prior to the start of project implementation activities. The pre-construction survey shall take place no more than 7 days prior to initiation of construction. All trees and shrubs on the site and on adjacent properties shall be surveyed, with particular attention to any trees or shrubs that would be removed or directly disturbed. If an active nest of a protected bird is found on site, the biologist shall, in consultation with the California Department of Fish and Wildlife (CDFW), determine whether construction work would affect the active nest or disrupt reproductive behavior. Criteria used for this evaluation shall include presence of visual screening between the nest and construction activities, and behavior of adult birds in response to the surveyors or other ambient human activity. If construction could affect the nest or disrupt reproductive behavior, the biologist shall, in consultation with CDFW, determine an appropriate construction-free buffer zone around the nest to remain in place until the young have fledged or other appropriate protective measures are taken to ensure no take of protected species occurs. Expansion at Avenidas Initial Study 9567 21 July 2016 If it is determined that construction will affect an active raptor nest or disrupt reproductive behavior, then avoidance is the only mitigation available. Construction shall not be permitted within 300 feet of such a nest until a qualified biologist determines that the subject nests are no longer active. Prior to issuance of a demolition permit or tree removal permit, the City of Palo Alto (City) shall verify that pre-construction surveys have been conducted within 10 days of the proposed start of demolition. If active bird nests are present, the City shall verify that CDFW has been consulted and either determined that construction will not affect an active bird nest or that appropriate construction-free buffer zones have been established or other appropriate protective measures have been taken. Mitigation Measure BIO-2: No earlier than 30 days prior to initiation of construction activities, a pre-construction survey shall be conducted by a qualified biologist (i.e., a biologist holding a California Department of Fish and Wildlife (CDFW) collection permit and a Memorandum of Understanding with CDFW allowing the biologist to handle bats) to determine if active bat roosts or maternal colonies are present on or within 300 feet of the construction area. Surveys shall include the structures proposed for demolition. Should an active maternity roost be identified, the roost shall not be disturbed and construction within 300 feet of the maternity roost shall be postponed or halted until the juveniles have fledged and the roost is vacated, as determined by a qualified biologist. Consultation with CDFW shall also be initiated. Under no circumstance shall an active roost be directly disturbed. If nonbreeding bat hibernacula are found on the project site, the individuals shall be safely evicted under the direction of a qualified bat biologist and with consultation with CDFW. These actions shall allow bats to leave during nighttime hours, thus increasing their chance of finding new roosts with a minimum of potential predation during daylight. If it is determined that construction will not affect roosting behavior or disrupt a maternal colony, construction may proceed without any restriction or mitigation measure. If it is determined that construction will affect an active bat roost or disrupt reproductive behavior, then avoidance is the only mitigation available. Under no circumstance shall an active roost be directly disturbed. Construction within 300 feet shall be postponed or halted until the roost is naturally vacated as determined by a qualified biologist. Prior to issuance of a demolition permit, the City of Palo Alto (City) shall verify that pre-construction surveys have been conducted within 30 days of the proposed start of demolition. If bats are present, the City shall verify that CDFW has been consulted and Expansion at Avenidas Initial Study 9567 22 July 2016 either determined that construction will not affect an active bat roost or disrupt a maternal colony, or that individuals in a nonbreeding bat hibernacula have been safely evicted. Due to regulations from the California Health Department, direct contact by construction workers with any bat is not allowed. Mitigation Measure BIO-3: A Tree Protection Plan shall be prepared addressing each tree that would be subject to project construction activities occurring within the tree’s dripline. Further, the tree protection measures recommended in the Arborists report for the proposed project shall be incorporated into project construction plans. Specifically, the construction plans and Tree Protection Plan shall include: All existing trees shall be numbered on the site plans to match the tree tag numbers used in the arborist report. Any trees that will be near construction or demolition disturbance shall be well-hydrated before any demolition or construction work begins and throughout construction A qualified tree service shall be used for all tree pruning, which shall include only what is required for site access, demolition, and construction Tree protection fencing must be installed around trees within or adjacent to the construction area that will not be removed. Fencing must be installed as described in the Tree Protection Plan. The fencing shall be inspected by an arborist prior to initiation of construction and all construction activities shall be conducted outside any tree protection fencing. 3.5 Cultural Resources Potentially Significant Impact Less Than Significant with Mitigation Incorporated Less Than Significant Impact No Impact V. CULTURAL RESOURCES – Would the project: a) Cause a substantial adverse change in the significance of a historical resource as defined in §15064.5? b) Cause a substantial adverse change in the significance of an archaeological resource pursuant to §15064.5? c) Directly or indirectly destroy a unique paleontological resource or site or unique geologic feature? d) Disturb any human remains, including those interred outside of formal cemeteries? Expansion at Avenidas Initial Study 9567 23 July 2016 a) Would the project cause a substantial adverse change in the significance of a historical resource as defined in §15064.5? The existing building on the project site was built in 1927 and the small shed at the rear was constructed sometime earlier (date unknownin approximately 1930). Interior improvements to the main building and construction of a dining room as an extension of the main building occurred in 1977. The original main building is designated as a historic structure and the small shed at the rear are designated as historic structureshas been identified as a contributing feature to the main building’s historic significance. The project includes demolition of the approximately 2,500 square-foot dining room added in 1977 and construction of a new 10,72110,185 square-foot three-story addition. The project also includes interior renovations of 15,800 square feet of the main building. The proposed addition would be placed at the back of the existing building. This would ensure that the architectural features of the existing historic building that are visible from Bryant Street are retained. The addition is proposed to include design elements that relate to the existing building such as a sloped red tile roof and punch windows, and is proposed with a scale and massing that would be in proportion to and subordinate to the existing historic building. Although the proposed addition is taller than the existing historic building, due to the perspective of views of the building, this additional height would not obscure views of the original roofline from Bryant Street and therefore would be consistent with the Secretary of the Interior’s standards for additions to historic buildings. In particular, Standard 9 requires that a new addition preserve the historic building’s form/envelope, significant materials and features; and that it be compatible with the historic building’s massing, size, scale, and architectural features. In evaluating the compatibility of the proposed addition with the historic building with respect to Standard 9, ARG found: “While the National Park Service notes that compatible additions are generally smaller than the historic building in both height and footprint, it does allow for additions that are slightly taller, given that other design features are incorporated to minimize the addition’s visual impact and ensure that the addition as a whole does not overpower the historic building. Though the proposed rear addition is slightly taller than the original building, the greatest height difference is less than eight feet. These new volumes also step back from the original building to break up the massing and minimize visual impacts, as recommended by the NPS above. Also in keeping with the guidance above, the proposed addition attaches to the rear wall of the historic building using a hyphen connector that is inset from the wall planes where it joins the two buildings; this serves to reinforce differentiation between old and Expansion at Avenidas Initial Study 9567 24 July 2016 new, and further minimize the visual impact of the new addition on the historic building. Though the addition is slightly taller than the historic building, its footprint is smaller in size” (ARG 2016b). In addition, Standard 10 requires that a new addition be constructed in a manner that preserves the essential form and integrity of the historic property. In evaluating compliance with this standard, ARG found “The location of the proposed addition in an area at the rear of the original building that has received the most modification over time. This limits removal of existing and unaltered historic materials, thereby maintaining the building’s essential form and physical integrity to the greatest extent possible. An alternative approach that would obscure or alter more of the historic building’s rear elevation could result in a cumulative impact to the building and further compromise to the existing form and integrity of the property” (ARG 2016b). Portions of Tthe existing rear wall of the historic building would become a prominent feature remain visible from the parking lot to the rear of the building. The rest of the rear wall of the existing building would be integrated into the of the proposed new wing. and nNo other modifications are proposed for the exterior of the remaining three walls of the original historic building. No historic features remain in the building’s interior after the 1977 renovations therefore the proposed interior renovations would have no impact on the historic significance of the building. Since the project would not modify or demolish any portion of the historic building and no historic features remain in the interior of the building, the project’s impact to the historical significance of the building would be less than significant. b) Would the project cause a substantial adverse change in the significance of an archaeological resource pursuant to §15064.5? Site disturbance associated with project construction has the potential to uncover subsurface archaeological or historical resources. The potential for this to occur is very low. However, Map L-8, Archaeological Resource Areas, in the City’s Comprehensive Plan, indicates that the project site falls within an area of “moderate to extreme sensitivity” for archeological resources (Palo Alto 2007). In compliance with the requirements of the California Public Resource Code, Mitigation Measure CUL-1 stipulates the procedures that must be followed should subsurface archaeological or historical resources be encountered during project construction. With implementation of this mitigation measure, the project would result in less than significant impacts to archeological resources. Expansion at Avenidas Initial Study 9567 25 July 2016 c) Would the project directly or indirectly destroy a unique paleontological resource or site or unique geologic feature? The project site is completely developed with the existing buildings and limited landscaping. The site is not known to support any paleontological resources or geologic features that would be directly or indirectly impacted during project construction or operation. Therefore, the project would have no impact on these resources. d) Would the project disturb any human remains, including those interred outside of formal cemeteries? The proposed project involves construction activities within a fully developed and previously disturbed site. The Comprehensive Plan indicates that the project site is located in an area identified as a moderate to extreme archaeological resource sensitivity zone. In the event any archaeological or human remains are discovered on the site, impacts would be potentially significant. However, implementation of Mitigation Measure CUL-1 would ensure that impacts remain less than significant by ensuring appropriate evaluation, recordation, and protection procedures are undertaken. Mitigation Measures: Mitigation Measure CUL-1: If artifacts or unusual amounts of shell or bone or other items indicative of buried archaeological resources or human remains are encountered during earth disturbance associated with the proposed project, the on-site contractor shall immediately notify the City of Palo Alto (City) and the Native American Heritage Commission as appropriate. All soil-disturbing work shall be halted within 100 feet of the discovery until a qualified archaeologist, as defined by the California Environmental Quality Act (CEQA) Guidelines (14 CCR 15000 et seq.) and the City, completes a significance evaluation of the finds pursuant to Section 106 of the National Historic Preservation Act. Any human remains unearthed shall be treated in accordance with California Health and Safety Code, Section 7050.5, and California Public Resources Code, Sections 5097.94, 5097.98, and 5097.99, which include requirements to notify the Santa Clara County Medical Examiner’s office and consult with Native American representatives determined to be the Most Likely Descendants, as appointed by the Native American Heritage Commission. Identified cultural resources shall be recorded on State Department of Parks and Recreation Form 523 (archaeological sites). Mitigation measures prescribed by the Native American Heritage Commission, the Santa Clara County Medical Examiner’s office, and any Native American representatives determined to be the Most Likely Descendants and required by the City shall be undertaken before construction activities are resumed. If disturbance of a project area cultural resource cannot be avoided, Expansion at Avenidas Initial Study 9567 26 July 2016 a mitigation program, including measures set forth in the City’s Cultural Resources Management Program and in compliance with Sections 15064.5 and 15126.4 of the CEQA Guidelines, shall be implemented. 3.6 Geology and Soils Potentially Significant Impact Less Than Significant with Mitigation Incorporated Less Than Significant Impact No Impact VI. GEOLOGY AND SOILS – Would the project: a) Expose people or structures to potential substantial adverse effects, including the risk of loss, injury, or death involving: i) Rupture of a known earthquake fault, as delineated on the most recent Alquist-Priolo Earthquake Fault Zoning Map issued by the State Geologist for the area or based on other substantial evidence of a known fault? Refer to Division of Mines and Geology Special Publication 42. ii) Strong seismic ground shaking? iii) Seismic-related ground failure, including liquefaction? iv) Landslides? b) Result in substantial soil erosion or the loss of topsoil? c) Be located on a geologic unit or soil that is unstable, or that would become unstable as a result of the project, and potentially result in on- or off-site landslide, lateral spreading, subsidence, liquefaction or collapse? d) Be located on expansive soil, as defined in Table 18-1-B of the Uniform Building Code (1994), creating substantial risks to life or property? e) Have soils incapable of adequately supporting the use of septic tanks or alternative waste water disposal systems where sewers are not available for the disposal of waste water? Expansion at Avenidas Initial Study 9567 27 July 2016 a) Would the project expose people or structures to potential substantial adverse effects, including the risk of loss, injury, or death involving: i) Rupture of a known earthquake fault, as delineated on the most recent Alquist-Priolo Earthquake Fault Zoning Map issued by the State Geologist for the area or based on other substantial evidence of a known fault? Refer to Division of Mines and Geology Special Publication 42. The project site is located within Santa Clara County in the Bay Area, which is historically seismically active. However, there are no active or potentially active faults that cross the project site, and the project site is not located within an Alquist-Priolo Fault Zone (DOC 1974). The closest active fault is the San Andres Fault, which is located southwest of the project site. Therefore, the project would have a less than significant impact related to exposure to people or structures to adverse effects from rupture of a known earthquake fault. ii) Strong seismic ground shaking? Given the project site is located in a seismically active region of the Bay Area, there is a potential for severe ground shaking during an earthquake. The project includes seismic retrofitting of the historic building and construction of the new building would be subject to the seismic safety standards in the California Building Code (CBC) Chapter 16, Section 1613. High intensity ground shaking during potential future earthquakes and soil conditions that may be unsuitable to support construction-related excavations and site improvements are typical issues of concern related to development in seismically active areas. These issues are routinely encountered in California and there is no evidence that unique or unusual geologic hazards are present on the site (e.g. landslides, collapsible soils, lateral spread) that would require additional mitigation beyond what is already required as part of the City’s standard development approval process. Compliance with the CBC would ensure that impacts related to strong seismic ground shaking are less than significant. iii) Seismic-related ground failure, including liquefaction? According to a Seismic Hazards Zone map released by the State of California, Department of Conservation (DOC 2006), the project site is located within a known liquefaction zone. Compliance with the CBC requirements would ensure that the building is constructed in a way that would reduce potential liquefaction impacts to a level that is less than significant. Expansion at Avenidas Initial Study 9567 28 July 2016 iv) Landslides? According to a Seismic Hazards Zone map released by the State of California, Department of Conservation (DOC 2006), the project site is not located with a known earthquake induced landslide zone. Therefore, there will be no impact. b) Would the project result in substantial soil erosion or the loss of topsoil? The project site is already developed and, therefore, there will not be a loss of topsoil or substantial soil erosion. The project will have no impact. c) Would the project be located on a geologic unit or soil that is unstable, or that would become unstable as a result of the project, and potentially result in on- or off-site landslide, lateral spreading, subsidence, liquefaction or collapse? d) Would the project be located on expansive soil, as defined in Table 18-1-B of the Uniform Building Code (1994), creating substantial risks to life or property? The project site is completely developed and soils were mapped on the Department of Agriculture Web Soil Survey (USDA 2016) as Urban land – Stevenscreek complex. Stevenscreek complex soils are typically composed of sandy loam, silt loam, silt clay loam, clay loam and sandy clay loam. The site is currently developed and the proposed project would not change the soil conditions on site. e) Would the project have soils incapable of adequately supporting the use of septic tanks or alternative waste water disposal systems where sewers are not available for the disposal of waste water? The project would utilize existing wastewater infrastructure on the project site and does not propose to add any septic tanks or alternative wastewater disposal systems. Therefore, there would be no impact. Mitigation Measures No mitigation measures are required. Expansion at Avenidas Initial Study 9567 29 July 2016 3.7 Greenhouse Gas Emissions Potentially Significant Impact Less Than Significant with Mitigation Incorporated Less Than Significant Impact No Impact VII. GREENHOUSE GAS EMISSIONS – Would the project: a) Generate greenhouse gas emissions, either directly or indirectly, that may have a significant impact on the environment? b) Conflict with an applicable plan, policy or regulation adopted for the purpose of reducing the emissions of greenhouse gases? a and b) Generate greenhouse gas emissions, either directly or indirectly, that may have a significant impact on the environment? Conflict with an applicable plan, policy or regulation adopted for the purpose of reducing the emissions of greenhouse gases? In 2006, the State of California enacted Assembly Bill (AB) 32, the Global Warming Solutions Act. AB 32 requires reducing statewide GHG emissions to 1990 levels by 2020. The state’s plan for meeting the reduction target is outlined in the California Air Resources Board (CARB) Climate Change Scoping Plan (2008 Scoping Plan; CARB 2008). As described in Section C, Air Quality, the BAAQMD adopted the BAAQMD 2010 Guidelines, which establish screening criteria based on the size of a project to determine whether detailed modeling to estimate GHG emissions is necessary (BAAQMD 2010b). Projects that are smaller than the GHG screening criteria size are considered to have less than significant GHG emissions and would not conflict with existing California legislation adopted to reduce statewide GHG emissions. Operational GHG screening sizes for various land uses range widely based on the vehicle trip generation from the land use, with a screening size of 3,000 square feet for a bank with drive-thru, 8,000 square feet for a supermarket, 15,000 square feet for a library, and 19,000 square feet for a strip mall (BAAQMD 2010b). The Focused Traffic Impact Study Memorandum prepared for the proposed project found that the proposed expansion of the community center would generate five net new vehicle trips in the AM peak hours (7:00 a.m. to 9:00 a.m.) and 14 net new vehicle trips in the PM peak hours (4:00 p.m. to 6:00 p.m.) (Fehr & Peers, 2014). As these trip generation rates for the proposed project are substantially smaller than trip generation rates for the screening sizes of each land use mentioned above, GHG emissions associated with operation of the proposed project would remain below the BAAQMD thresholds. In addition, the project would comply with the green building requirements Expansion at Avenidas Initial Study 9567 30 July 2016 identified in Chapter 16.14 of the Palo Alto Municipal Code. Project operation would not result in GHG emissions that would significantly affect the environment or conflict with applicable plans, policies or regulations adopted for the purpose of reducing GHG emissions. The project would have a less than significant impact related to GHG emissions. Mitigation Measures No mitigation measures are required. 3.8 Hazards and Hazardous Materials Potentially Significant Impact Less Than Significant with Mitigation Incorporated Less Than Significant Impact No Impact VIII. HAZARDS AND HAZARDOUS MATERIALS – Would the project: a) Create a significant hazard to the public or the environment through the routine transport, use, or disposal of hazardous materials? b) Create a significant hazard to the public or the environment through reasonably foreseeable upset and accident conditions involving the release of hazardous materials into the environment? c) Emit hazardous emissions or handle hazardous or acutely hazardous materials, substances, or waste within one-quarter mile of an existing or proposed school? d) Be located on a site that is included on a list of hazardous materials sites compiled pursuant to Government Code Section 65962.5 and, as a result, would it create a significant hazard to the public or the environment? e) For a project located within an airport land use plan or, where such a plan has not been adopted, within two miles of a public airport or public use airport, would the project result in a safety hazard for people residing or working in the project area? f) For a project within the vicinity of a private airstrip, would the project result in a safety hazard for people residing or working in the project area? g) Impair implementation of or physically interfere with an adopted emergency response plan or emergency evacuation plan? Expansion at Avenidas Initial Study 9567 31 July 2016 Potentially Significant Impact Less Than Significant with Mitigation Incorporated Less Than Significant Impact No Impact h) Expose people or structures to a significant risk of loss, injury or death involving wildland fires, including where wildlands are adjacent to urbanized areas or where residences are intermixed with wildlands? a) Would the project create a significant hazard to the public or the environment through the routine transport, use, or disposal of hazardous materials? The project involves demolition of approximately 2,500 square feet of the existing structure on site and construction of a new 10,185721 square-foot facility. During construction, there is the potential for short-term use of hazardous materials and fuels including diesel fuel, gasoline, and other oils and lubricants. These hazardous materials would be handled, transported and disposed of in compliance with all existing local, state and federal regulations. Operation of the proposed project would not require the routine, use, transport or disposal of hazardous waste other than typical household materials. The types and quantities of these common household materials would not be substantial and would not pose a health risk to those utilizing the project site or adjacent users. The original main building present on the project site was constructed in 1927 and the small shed at the rear was constructed at an unknown date sometime earlierin approximately 1930. Renovations were made to the main building’s interior in 1977 but the original character of the building was preserved. Due its early date of construction, the buildings may contain Asbestos containing materials (ACMs) and lead-based paints. Demolition of the 2,500 square feet of the existing building could result in hazards related to the release or disposal of these hazardous materials. Mitigation Measure HAZ-1 would require surveys and proper disposal methods to ensure that impacts remain less than significant. b) Would the project create a significant hazard to the public or the environment through reasonably foreseeable upset and accident conditions involving the release of hazardous materials into the environment? As discussed in item (a) above, there is a potential for ACMs, lead-based paints or other hazardous building materials to be present on the project site. Improper disposal of these hazardous materials during construction could lead to an accident causing the release of hazardous materials into the environment. Mitigation Measure HAZ-1 requires proper disposal methods, which would ensure that impacts would remain less than significant. Expansion at Avenidas Initial Study 9567 32 July 2016 c) Would the project emit hazardous emissions or handle hazardous or acutely hazardous materials, substances, or waste within one-quarter mile of an existing or proposed school? The project site is located just over a quarter-mile away from the Stanford University campus. Operation of the proposed project would not require the use of acutely hazardous materials beyond common household materials. During construction, there is a potential for hazardous building materials to be encountered, which could be released into the air and would require proper transportation and disposal off-site. Transportation and disposal of these materials would be required to comply with all local, state and federal regulations. In addition, Mitigation Measure HAZ-1 would be implemented to ensure that impacts related to release or use of hazardous materials within one-quarter mile of a school are less than significant. d) Would the project be located on a site that is included on a list of hazardous materials sites compiled pursuant to Government Code Section 65962.5 and, as a result, would it create a significant hazard to the public or the environment? The project site is not designated as a hazardous materials site on the Cortese List, and is not included on any state or federal list of potentially hazardous materials. There are no sites within 1,000 feet of the project site mapped on the Department of Toxic Substance Control’s EnviroStor database (DTSC 2016). There is one well listed on the California Water Resources Control Board’s GeoTracker GAMA database located near Lytton Avenue and Alma Street, approximately 0.18 mile southwest of the project site (California Water Resources Control Board, 2016a). The project does not require any excavating where groundwater would be disturbed and groundwater is not used as a water source for the project. Additionally, there are nine leaking underground storage tank sites and one cleanup program site shown within 1,000 feet of the project site on the California Water Resources Control Board’s Geotracker database (California Water Resources Control Board, 2016b). All ten sites have undergone remediation and are listed as closed. The project would have a less than significant impact related to location on a listed hazardous materials site. e) For a project located within an airport land use plan or, where such a plan has not been adopted, within two miles of a public airport or public use airport, would the project result in a safety hazard for people residing or working in the project area? There are no airports within two miles of the project site and the site is not identified within a safety zone in the Palo Alto Airport Land Use Compatibility Plan. The Palo Alto Airport Expansion at Avenidas Initial Study 9567 33 July 2016 is located approximately 2.7 miles east of the project site. Therefore, no impact related to safety hazards associated with aircrafts would occur. f) For a project within the vicinity of a private airstrip, would the project result in a safety hazard for people residing or working in the project area? The nearest private airstrip to the project site is a helipad on the Stanford Medical building approximately 1.10 miles southwest of the project site. The helipad is for use by emergency helicopters only and the land use is not changing from what currently exists on the project site. Therefore, impacts related to hazards from a private airstrip are less than significant. g) Would the project impair implementation of or physically interfere with an adopted emergency response plan or emergency evacuation plan? The nearest designated evacuation route to the project site is University Avenue. The project currently shares the block bounded by University and Lytton Avenues and Bryant and Ramona Streets with Cogswell Plaza and a public parking lot. The public parking lot is accessed via Ramona Street, which would not change a result of the project. The project would not result in any changes to the University Avenue or to any of the surrounding roads. The project does not have a private parking lot but under the terms of its lease has non-exclusive use of 25 of the 51 parking spaces in the public lot. The project would not increase traffic or roadway congestion in the surrounding area such that use of the evacuation route on University Avenue would be hindered, and would not otherwise impair implementation of the City’s Emergency Operations Plan. Therefore, there would be no impact related to interference with the emergency response or evacuation. h) Would the project expose people or structures to a significant risk of loss, injury or death involving wildland fires, including where wildlands are adjacent to urbanized areas or where residences are intermixed with wildlands? The project site is located in an urban area that is not identified as a high or medium fire hazard on the map in Section 18.4.2.2.3 in the Santa Clara County Hazard Mitigation Plan (Santa Clara County, 2012). Therefore, no impact related to fire risks would occur. Mitigation Measures Mitigation Measure HAZ-1: Prior to building demolition, the project applicant shall demonstrate to the satisfaction of the City of Palo Alto that a survey of the existing buildings has been conducted by a qualified environmental specialist who meets the requirements of the current U.S. Environmental Protection Agency regulations for suspected lead-containing materials (LCMs), including lead-based paint/coatings; asbestos Expansion at Avenidas Initial Study 9567 34 July 2016 containing materials (ACMs); and the presence of polychlorinated biphenyls (PCBs). Any demolition activities likely to disturb LCMs or ACMs shall be carried out by a contractor trained and qualified to conduct lead- or asbestos-related construction work. If found, LCMs and ACMs shall be disposed of properly. If PCBs are found, these materials shall be managed in accordance with the Metallic Discards Act of 1991 (California Public Resources Code, Sections 42160–42185) and other state and federal guidelines and regulations. Demolition plans and contract specifications shall incorporate any necessary abatement measures in compliance with the Metallic Discards Act, particularly Section 42175, Materials Requiring Special Handling, for the removal of mercury switches, PCB-containing ballasts, and refrigerants. 3.9 Hydrology and Water Quality Potentially Significant Impact Less Than Significant with Mitigation Incorporated Less Than Significant Impact No Impact IX. HYDROLOGY AND WATER QUALITY – Would the project: a) Violate any water quality standards or waste discharge requirements? b) Substantially deplete groundwater supplies or interfere substantially with groundwater recharge such that there would be a net deficit in aquifer volume or a lowering of the local groundwater table level (e.g., the production rate of pre-existing nearby wells would drop to a level which would not support existing land uses or planned uses for which permits have been granted)? c) Substantially alter the existing drainage pattern of the site or area, including through the alteration of the course of a stream or river, in a manner which would result in substantial erosion or siltation on- or off-site? d) Substantially alter the existing drainage pattern of the site or area, including through the alteration of the course of a stream or river, or substantially increase the rate or amount of surface runoff in a manner which would result in flooding on- or off-site? e) Create or contribute runoff water which would exceed the capacity of existing or planned stormwater drainage systems or provide substantial additional sources of polluted runoff? f) Otherwise substantially degrade water quality? Expansion at Avenidas Initial Study 9567 35 July 2016 Potentially Significant Impact Less Than Significant with Mitigation Incorporated Less Than Significant Impact No Impact g) Place housing within a 100-year flood hazard area as mapped on a federal Flood Hazard Boundary or Flood Insurance Rate Map or other flood hazard delineation map? h) Place within a 100-year flood hazard area structures which would impede or redirect flood flows? i) Expose people or structures to a significant risk of loss, injury or death involving flooding, including flooding as a result of the failure of a levee or dam? j) Inundation by seiche, tsunami, or mudflow? a) Would the project violate any water quality standards or waste discharge requirements? The project site is fully developed and the proposed project would not substantially change the amount of impervious surface area on the project site. The project site consists of a 17,557 square foot main building and an 818 square foot shed, which are adjacent to a public parking lot with 51 parking stalls and a public park. According to the Impervious Area Worksheet for Land Developments prepared for the project (available at the City of Palo Alto Development Projects webpage), the project site currently contains 14,117 square feet of impervious surface with the existing building, which represents 91.8 percent of the total project site. The project is proposing to add 4,874 square feet of impervious surface area, which would increase the total percentage of impervious area on the project site by 0.3%. The project would not alter existing grades in the area and would not change the drainage patterns on the site or lead to increased erosion or sedimentation. The National Pollution Discharge Elimination System (NPDES) program administered by the Bay Area Regional Water Quality Control Board (RWQCB) regulates Stormwater runoff water quality to control and reduce pollutants to water bodies from surface water discharge. The RWQCV worked with cities and counties throughout the region to prepare and adopt a Regional Municipal Stormwater Permit (Regional Permit). The Regional Permit for the City identifies minimum standards required for new development and redevelopment within the City limits. Additionally, the City’s standard conditions of approval include requirements for projects to develop and implement best management practices (BMPs) to control erosion during construction and permanent features to treat stormwater during project operation. The project would be required to comply with all city, state and federal standards pertaining to stormwater runoff and water quality. Therefore, impacts would be less than significant. Expansion at Avenidas Initial Study 9567 36 July 2016 b) Would the project substantially deplete groundwater supplies or interfere substantially with groundwater recharge such that there would be a net deficit in aquifer volume or a lowering of the local groundwater table level (i.e., the production rate of pre-existing nearby wells would drop to a level that would not support existing land uses or planned uses for which permits have been granted)? As stated above in item (a), the project would increase impervious surface area by 0.3%, which would not substantially reduce the area available for groundwater recharge. The project would not rely on groundwater for its water supplies and would not require excavation that would impact groundwater flow. Therefore, the project would have a less than significant impact on groundwater supplies or groundwater recharge. c and d) Would the project substantially alter the existing drainage pattern of the site or area, including through the alteration of the course of a stream or river, in a manner which would result in substantial erosion or siltation on- or off-site? Would the project substantially alter the existing drainage pattern of the site or area, including through the alteration of the course of a stream or river, or substantially increase the rate or amount of surface runoff in a manner which would result in flooding on- or off-site? The project site is completely developed and there are no streams or rivers located on the project site that would be altered during project construction. The project proposes to add a total of 4,874 square feet of impervious surface area to the project site. The project would not substantially alter the existing drainage pattern of the site since the project would only increase the total impervious surface area by 0.3%. This incremental increase in impervious surface area would not substantially increase the rate or amount of runoff resulting in flooding on- or off-site or increase erosion or siltation on or off site. The project would have a less than significant impact on alteration of the existing drainage pattern. e) Would the project create or contribute runoff water which would exceed the capacity of existing or planned stormwater drainage systems or provide substantial additional sources of polluted runoff? The project would increase impervious surface area by 4,874 square feet, a 0.3% increase over the existing conditions. This minor increase would not result in substantial additional runoff that would exceed the capacity of existing or planned stormwater drainage system and the impact would be less than significant. Expansion at Avenidas Initial Study 9567 37 July 2016 f) Would the project otherwise substantially degrade water quality? Potential impacts to water quality are addressed under item (a) above. g) Would the project place housing within a 100-year flood hazard area as mapped on a federal Flood Hazard Boundary or Flood Insurance Rate Map or other flood hazard delineation map? The project does not propose to construct housing and is not located within a 100-year flood hazard zone (FEMA 2009). There would be no impact related to placing housing within a 100-year flood hazard area. h) Would the project place within a 100-year flood hazard area structures which would impede or redirect flood flows? The project site is located within Zone X on the Flood Rate Insurance Map (FIRM) map No. 06085C0010H. Zone X is defined as an area with a 0.2% change of flood; areas with a 1% annual chance flood with average depths of less than one foot or with drainage areas less than one square mile; and areas protected by levees from 1% annual chance floods (FEMA 2009). The project is not located within a 100-year flood hazard area and would have no impact related to placing structures within a 100-year flood hazard area that would impede or redirect flood flows. i) Would the project expose people or structures to a significant risk of loss, injury or death involving flooding, including flooding as a result of the failure of a levee or dam? The nearest surface water in the vicinity of the project site is San Francisquito Creek, located approximately 0.34 mile northwest of the site. The project site is not located near a levee or dam and is not within an area identified as a dam failure inundation area on the map in Section 18.4.2.2.7 in the Santa Clara County Hazard Mitigation Plan (Santa Clara County, 2012). The project site is not subject to flooding and construction of the project would result in no impact associated with exposure of people to flood-related hazards. j) Inundation by seiche, tsunami, or mudflow? The project site is located in Downtown Palo Alto on relatively flat ground and is not near an open body of water or a hillside; therefore, there is no risk for seiche, tsunami, or mudflow hazards. No impacts related to these hazards would result from implementation of the proposed project. Expansion at Avenidas Initial Study 9567 38 July 2016 Mitigation Measures No mitigation measures are required. 3.10 Land Use and Planning Potentially Significant Impact Less Than Significant with Mitigation Incorporated Less Than Significant Impact No Impact X. LAND USE AND PLANNING – Would the project: a) Physically divide an established community? b) Conflict with any applicable land use plan, policy, or regulation of an agency with jurisdiction over the project (including, but not limited to the general plan, specific plan, local coastal program, or zoning ordinance) adopted for the purpose of avoiding or mitigating an environmental effect? c) Conflict with any applicable habitat conservation plan or natural community conservation plan? a) Would the project physically divide an established community? The project would not physically divide the existing neighborhood. The project would expand on the existing building on the project site, which is surrounded by commercial, mixed use and public service development. The proposed expansion would support the residential uses in this neighborhood. The project would have no impact related to dividing existing neighborhoods. b) Would the project conflict with any applicable land use plan, policy, or regulation of an agency with jurisdiction over the project (including, but not limited to the general plan, specific plan, local coastal program, or zoning ordinance) adopted for the purpose of avoiding or mitigating an environmental effect? The proposed project would not conflict with the City’s General Plan. The General Plan designates the site regional/community commercial while the site zoning designation is Public Facility (PF). The existing building has been in operation (without conflicting) since 1978 and the expansion will continue the same operations. The proposed project does not conflict with zoning nor general plan designations and, therefore, there will be no impact. Expansion at Avenidas Initial Study 9567 39 July 2016 c) Would the project conflict with any applicable habitat conservation plan or natural community conservation plan? There are no adopted Habitat Conservation Plans or Natural Community Conservation Plans for the City. The proposed project would result in no impact related to conflict with such plans. Mitigation Measures No mitigation measures are necessary. 3.11 Mineral Resources Potentially Significant Impact Less Than Significant with Mitigation Incorporated Less Than Significant Impact No Impact XI. MINERAL RESOURCES – Would the project: a) Result in the loss of availability of a known mineral resource that would be of value to the region and the residents of the state? b) Result in the loss of availability of a locally-important mineral resource recovery site delineated on a local general plan, specific plan, or other land use plan? a and b) Would the project result in the loss of availability of a known mineral resource that would be of value to the region and the residents of the state? Would the project result in the loss of availability of a locally important mineral resource recovery site delineated on a local general plan, specific plan, or other land use plan? The project site is designated Regional/Community Commercial by the Palo Alto General Plan and has been used as a Community Center since 1978. There are no known mineral resources within the project site and no mineral recovery activities have been known to occur on site. The three-story addition on the project site would not adversely affect any mineral resources of value to the state or region. The project would have no impact related to mineral resources. Mitigation Measures No mitigation measures are necessary. Expansion at Avenidas Initial Study 9567 40 July 2016 3.12 Noise Potentially Significant Impact Less Than Significant with Mitigation Incorporated Less Than Significant Impact No Impact XII. NOISE – Would the project result in: a) Exposure of persons to or generation of noise levels in excess of standards established in the local general plan or noise ordinance, or applicable standards of other agencies? b) Exposure of persons to or generation of excessive groundborne vibration or groundborne noise levels? c) A substantial permanent increase in ambient noise levels in the project vicinity above levels existing without the project? d) A substantial temporary or periodic increase in ambient noise levels in the project vicinity above levels existing without the project? e) For a project located within an airport land use plan or, where such a plan has not been adopted, within two miles of a public airport or public use airport, would the project expose people residing or working in the project area to excessive noise levels? f) For a project within the vicinity of a private airstrip, would the project expose people residing or working in the project area to excessive noise levels? a) Would the project result in exposure of persons to or generation of noise levels in excess of standards established in the local general plan or noise ordinance, or applicable standards of other agencies? The Palo Alto Comprehensive Plan table “Land Use Compatibility for Community Noise Environment” establishes a 70 dB exterior noise exposure limit as the normally acceptable limit and 80 dB as the conditionally acceptable limit for business commercial land uses (City of Palo Alto 2007). The current building meets the City of Palo Alto Comprehensive Plan standards. Land uses on the project site would not change with implementation of the proposed project. The project would be required to ensure that the new addition meets the same noise standards as the main building in accordance with the City of Palo Alto Comprehensive Plan. Therefore, impacts related to exposure of persons to noise levels in excess of established standards would be less than significant. Expansion at Avenidas Initial Study 9567 41 July 2016 b) Would the project result in exposure of persons to or generation of excessive groundborne vibration or groundborne noise levels? The project does not require the use of construction equipment, such as pile driving that typically generates excessive groundborne vibrations. Some level of groundborne vibration may occur during project construction but would be short-term and intermittent. Project construction would comply with all applicable standards in the City’s Noise ordinance. Land uses on the project site would not change with implementation of the project and operation of the project would not generate excessive groundborne vibration. Therefore, impacts related to exposure of persons to excessive groundborne vibration would be less than significant. c) Would the project result in a substantial permanent increase in ambient noise levels in the project vicinity above levels existing without the project? The project is not changing the land use on the project site and operation of the project would not change from activities currently occurring on the project site. The project is not expected to result in a significant increase in ambient noise levels in the project vicinity and the impact would be less than significant. d) Would the project result in a substantial temporary or periodic increase in ambient noise levels in the project vicinity above levels existing without the project? Project construction involves demolition of approximately 2,500 square feet of the existing building and construction of a new 10,185721 square-foot addition. Construction would be expected to generate short-term temporary noise in the project area. All construction activities would be required to take place between the hours of 8:00 a.m. and 8:00 p.m. Monday through Friday, 9:00 a.m. and 8:00 p.m. on Saturdays, and would not be allowed to occur on Sundays and Holidays (City of Palo Alto 2003). Additional provisions require that no individual piece of equipment produce a noise level exceeding 110 dBA at a distance of 25 feet, and the noise level at any point outside of the project property does not exceed 110 dBA. Compliance with the requirements in Section 9.10 of the City’s Municipal Code would ensure that temporary construction noise impacts are less than significant. e) Would the project be located within an airport land use plan or, where such a plan has not been adopted, within two miles of a public airport or public use airport, would the project expose people residing or working in the project area to excessive noise levels? There are no airports within two miles of the project site and the site is not identified within a safety zone in the Palo Alto Airport Land Use Compatibility Plan. The Palo Alto Airport Expansion at Avenidas Initial Study 9567 42 July 2016 is located approximately 2.7 miles east of the project site. The project would result in no impacts related to exposure of people to excessive noise levels. f) Would the project be within the vicinity of a private airstrip, would the project expose people residing or working in the project area to excessive noise levels? The nearest private airstrip to the project site is a helipad on the Stanford Medical building approximately 1.10 miles southwest of the project site. The helipad is for use by emergency helicopters only and the land use is not changing from what currently exists on the project site. The proposed project would have a less than significant impact on exposure of people to excessive noise levels. Mitigation Measures No mitigation measures are required. 3.13 Population and Housing Potentially Significant Impact Less Than Significant with Mitigation Incorporated Less Than Significant Impact No Impact XIII. POPULATION AND HOUSING – Would the project: a) Induce substantial population growth in an area, either directly (for example, by proposing new homes and businesses) or indirectly (for example, through extension of roads or other infrastructure)? b) Displace substantial numbers of existing housing, necessitating the construction of replacement housing elsewhere? c) Displace substantial numbers of people, necessitating the construction of replacement housing elsewhere? a) Would the project induce substantial population growth in an area, either directly (for example, by proposing new homes and businesses) or indirectly (for example, through extension of roads or other infrastructure)? The project would expand the Community Center in order to meet the demands of the surrounding neighborhoods. The project would not induce substantial population growth either directly or indirectly and it would have no impact related to population growth. Expansion at Avenidas Initial Study 9567 43 July 2016 b and c) Would the project displace substantial numbers of existing housing, necessitating the construction of replacement housing elsewhere? Would the project displace substantial numbers of people, necessitating the construction of replacement housing elsewhere? The site does not currently support any housing or residential use. No housing or residents would be displaced by the proposed project and the project would have no impact on housing or require construction of new housing. Mitigation Measures No mitigation measures are required. 3.14 Public Services Potentially Significant Impact Less Than Significant with Mitigation Incorporated Less Than Significant Impact No Impact XIV. PUBLIC SERVICES a) Would the project result in substantial adverse physical impacts associated with the provision of new or physically altered governmental facilities, need for new or physically altered governmental facilities, the construction of which could cause significant environmental impacts, in order to maintain acceptable service ratios, response times, or other performance objectives for any of the public services: Fire protection? Police protection? Schools? Parks? Other public facilities? a) Would the project result in substantial adverse physical impacts associated with the provision of new or physically altered governmental facilities, need for new or physically altered governmental facilities, the construction of which could cause significant environmental impacts, in order to maintain acceptable service ratios, response times, or other performance objectives for any of the public services: Fire protection? Police protection? The project site currently operates as a Community Center and receives services from the City Fire and Police Departments. The project would add approximately 7,1588,129 square feet to the project site but would not generate a new population or cause a substantial Expansion at Avenidas Initial Study 9567 44 July 2016 increase in the population that would demand additional service. The project would have a less than significant impact on the provision of fire protection and police services. Schools? The project would expand an existing Community Center but would not generate a new population that would increase the demand for local schools. The project would have no impact on schools. Parks? The project would not generate a new population that would increase the demand for local parks. Expanding the Community Center would allow the facility to serve approximately 360 additional persons per day. This would not cause a substantial increase in the population that would require parks. The City’s standard conditions of approval require fees to address any increased need for parks. Payment of the development fees for parks would ensure that the project’s impact is less than significant. Other public facilities? The project would not generate a new population that would increase the demand for other public facilities. The City’s standard conditions of approval require fees to address any increased need for community facilities, schools and housing. The project is a community facility and is not required to pay community facility fees. The project’s would have no adverse effect on other public facilities and would improve the services provided at Avenidas. Thus the project would have no impact on public facilities. Mitigation Measures No mitigation measures are required. 3.15 Recreation Potentially Significant Impact Less Than Significant with Mitigation Incorporated Less Than Significant Impact No Impact XV. RECREATION a) Would the project increase the use of existing neighborhood and regional parks or other recreational facilities such that substantial physical deterioration of the facility would occur or be accelerated? Expansion at Avenidas Initial Study 9567 45 July 2016 Potentially Significant Impact Less Than Significant with Mitigation Incorporated Less Than Significant Impact No Impact XV. RECREATION b) Does the project include recreational facilities or require the construction or expansion of recreational facilities which might have an adverse physical effect on the environment? a) Would the project increase the use of existing neighborhood and regional parks or other recreational facilities such that substantial physical deterioration of the facility would occur or be accelerated? The project would not construct residential units and would not generate a new population requiring the use of neighborhood and regional parks. The 7,1588,129 square-foot increase in floor space is not expected to have a significant effect on existing parks or recreational facilities. The project would expand the existing community center to improve services to existing and future clients. It would not increase population in the area and would not increase demands for parks and recreation facilities. The project would have no adverse impact related to recreation. b) Does the project include recreational facilities or require the construction or expansion of recreational facilities, which might have an adverse physical effect on the environment? The existing project site is a community center and includes recreational activities and classes for patrons. The project would be expanding this recreational facility to accommodate the growing demand for services provided by the community center. The project would not generate a new population requiring use of additional recreational facilities and the project would reduce the demand for use of recreational facilities by accommodating an estimated 360 additional people per day. The potential adverse impacts on the environment of the proposed project are evaluated throughout this IS; therefore, this impact is less than significant. Mitigation Measures No mitigation measures are necessary. Expansion at Avenidas Initial Study 9567 46 July 2016 3.16 Transportation and Traffic Potentially Significant Impact Less Than Significant with Mitigation Incorporated Less Than Significant Impact No Impact XVI. TRANSPORTATION/TRAFFIC – Would the project: a) Conflict with an applicable plan, ordinance or policy establishing measures of effectiveness for the performance of the circulation system, taking into account all modes of transportation including mass transit and non-motorized travel and relevant components of the circulation system, including but not limited to intersections, streets, highways and freeways, pedestrian and bicycle paths, and mass transit? b) Conflict with an applicable congestion management program, including, but not limited to level of service standards and travel demand measures, or other standards established by the county congestion management agency for designated roads or highways? c) Result in a change in air traffic patterns, including either an increase in traffic levels or a change in location that results in substantial safety risks? d) Substantially increase hazards due to a design feature (e.g., sharp curves or dangerous intersections) or incompatible uses (e.g., farm equipment)? e) Result in inadequate emergency access? f) Conflict with adopted policies, plans, or programs regarding public transit, bicycle, or pedestrian facilities, or otherwise decrease the performance or safety of such facilities? a) Would the project conflict with an applicable plan, ordinance or policy establishing measures of effectiveness for the performance of the circulation system, taking into account all modes of transportation including mass transit and non-motorized travel and relevant components of the circulation system, including but not limited to intersections, streets, highways and freeways, pedestrian and bicycle paths, and mass transit? A survey was conducted by Avenidas volunteers with training and oversight by Fehr & Peers on September 18th and September 23rd for the entire hours of operation of the facility and recorded time of arrival, mode of transportation, parking location (if applicable), and expected time of departure. According to Table 2 in the Focused Traffic Impact Study Memorandum on the day the facility was most crowded 58% of people arriving at Avenidas Expansion at Avenidas Initial Study 9567 47 July 2016 drove their car, 21% walked, 7% arrived as a passenger in a carpool, 7% used transit or shuttles, 4% were dropped off by another vehicle, and 3% biked (Fehr & Peers, 2014). According to Table 3 in the Focused Traffic Impact Study Memorandum, the expansion of the community center would generate five net new vehicle trips in the AM peak hours (7:00 a.m. to 9:00 a.m.) and 14 net new vehicle trips in the PM peak hours (4:00 p.m. to 6:00 p.m.) (Fehr & Peers, 2014). The Focused Traffic Impact Study Memorandum concluded that the expansion would not negatively impact the traffic operations of the surrounding roadway network (Fehr & Peers, 2014). Therefore, the project would have a less than significant impact on conflicting with an applicable plan, ordinance, or policy establishing measures for evaluation the effectiveness of the circulation system. b) Would the project conflict with an applicable congestion management program, including, but not limited to level of service standards and travel demand measures, or other standards established by the county congestion management agency for designated roads or highways? The Valley Transportation Authority (VTA) is the Congestion Management Agency (CMA) for Santa Clara County. The VTA administers the 2013 Congestion Management Plan (CMP), which contains five elements: traffic Levels of Service (LOS) standards, multimodal performance measures, transportation demand management and trip reduction, land use impact analysis and a Capital Improvement Program element. The CMP applies to all roadways and highways within the designated roadway network. None of the roadways surrounding the project are included in the designated roadway network highways, expressways, or principal arterials listed in Appendix B of the CMP (VTA, 2013). The nearest roadways included in this network are the Oregon-Page Mill expressway and El Camino Real/State Route 82. Since the none of the roadways immediately surrounding the project site are included in the CMP designated roadway network and the additional project generated traffic would not impact the surrounding roadway network, the project would not conflict with an applicable CMP and the impact would be less than significant. c) Would the project result in a change in air traffic patterns, including either an increase in traffic levels or a change in location that results in substantial safety risks? The proposed project would not affect air traffic. The project is not changing the land use on the project site and would not add a new population or increase traffic levels in the surrounding area. There would be no impact related to changing air traffic patterns. Expansion at Avenidas Initial Study 9567 48 July 2016 d) Would the project substantially increase hazards due to a design feature (e.g., sharp curves or dangerous intersections) or incompatible uses (e.g., farm equipment)? A majority of the project site is occupied by the existing community center building and there is no on-site parking. The project would increase the size of the community center but would not impact the parking lot located behind the building to the southwest and construction of the proposed project would not impact nearby traffic intersections. No dangerous design features or incompatible uses are expected to result from the project. The project would have no impact on increasing hazards due to design features or incompatible uses. e) Would the project result in inadequate emergency access? The project currently shares the block bounded by University and Lytton Avenues and Bryant and Ramona Streets with Cogswell Plaza and a public parking lot. The public parking lot is accessed via Ramona Street, which would not change a result of the project. The project would not result in any changes to the University Avenue or to any of the surrounding roads. Therefore, the project would have no impact on emergency access. f) Would the project conflict with adopted policies, plans, or programs regarding public transit, bicycle, or pedestrian facilities, or otherwise decrease the performance or safety of such facilities? The Palo Alto Municipal Code (PAMC) Section 18.52.040 requires one bicycle parking space per 2,500 square feet of gross floor area, with a mix of 40% for long-term parking and 60% for short-term parking, in the Downtown University Avenue parking assessment district. Based on the project’s proposed net addition of 7,158 8,129 square feet, the project would be required to provide a total of three bicycle parking spaces (1 long-term and 2 short-term). The project would add bicycle parking along Bryant Street near the main entrance of the community center. In the Downtown University Avenue parking assessment district, the project is required to provide one parking space per 250 square-feet. Based on the addition of 8,1297,158 square feet, the project is required to add 3329 automobile parking spaces. The community center’s lease line is coterminous with the building and Avenidas does not have the land area to add parking spaces. The project would pay a fee at the rate specified by the University Avenue parking assessment district in-lieu of constructing new parking spaces as allowed under Section 18.52.060 (b). Provision of the required bicycle parking spaces and payment of the in-lieu fee would ensure that project impacts related to conflict with adopted policies, plans and programs regarding public transit, bicycle and pedestrian facilities are less than significant. Expansion at Avenidas Initial Study 9567 49 July 2016 Mitigation Measures No mitigation measures are required. 3.17 Utilities and Service Systems Potentially Significant Impact Less Than Significant with Mitigation Incorporated Less Than Significant Impact No Impact XVII. UTILITIES AND SERVICE SYSTEMS – Would the project: a) Exceed wastewater treatment requirements of the applicable Regional Water Quality Control Board? b) Require or result in the construction of new water or wastewater treatment facilities or expansion of existing facilities, the construction of which could cause significant environmental effects? c) Require or result in the construction of new storm water drainage facilities or expansion of existing facilities, the construction of which could cause significant environmental effects? d) Have sufficient water supplies available to serve the project from existing entitlements and resources, or are new or expanded entitlements needed? e) Result in a determination by the wastewater treatment provider, which serves or may serve the project that it has adequate capacity to serve the project’s projected demand in addition to the provider’s existing commitments? f) Be served by a landfill with sufficient permitted capacity to accommodate the project’s solid waste disposal needs? g) Comply with federal, state, and local statutes and regulations related to solid waste? a) Would the project exceed wastewater treatment requirements of the applicable Regional Water Quality Control Board? Wastewater from the project site is treated at the Regional Water Quality Control Plant owned and operated by the City. The Regional Water Quality Control Plant is permitted under NPDES permit No. CA0037834. Wastewater flows on the project site are treated at the Regional Water Quality Control Plant in accordance with the NPDES permit. Therefore, the project would have a less than significant impact on exceeding wastewater treatment requirements. Expansion at Avenidas Initial Study 9567 50 July 2016 b) Would the project require or result in the construction of new water or wastewater treatment facilities or expansion of existing facilities, the construction of which could cause significant environmental effects? The project would expand the existing community center but would not generate an additional population. The expanded community center would connect to existing wastewater infrastructure and all flows would be directed to the Regional Water Treatment Plant. The project applicant would be required to submit calculations by a registered engineer to show that the on-site and off-site sewer systems are capable of serving the needs of the development and adjacent properties. This would ensure that sufficient wastewater infrastructure and capacity exists to serve the projected demand and this impact would be less than significant. c) Would the project require or result in the construction of new storm water drainage facilities or expansion of existing facilities, the construction of which could cause significant environmental effects? The project would not generate an additional population and the expansion of the existing community center would not require additional stormwater infrastructure. The project would increase impervious surface area on the project site by 0.3%, which would be result in substantial runoff requiring the construction or expansion of existing facilities. The project would be adequately served by existing infrastructure and the impact would be less than significant. d) Would the project have sufficient water supplies available to serve the project from existing entitlements and resources, or are new or expanded entitlements needed? Expanding the existing community center would slightly increase the project’s water demand. The project would replace older fixtures with newer water efficient fixtures, which would reduce the project’s water demand. Additionally, standard conditions of approval require the applicant to submit calculations by a registered civil engineer to show that the on-site and off-site water systems are capable of serving the needs of the development and adjacent properties during peak flow demands. This would ensure that sufficient water supply is available to serve the project site and the impact would be less than significant. Expansion at Avenidas Initial Study 9567 51 July 2016 e) Would the project result in a determination by the wastewater treatment provider, which serves or may serve the project that it has adequate capacity to serve the project’s projected demand in addition to the provider’s existing commitments? As discussed in item (b) above, the project applicant would be required to submit calculations by a registered engineer to show that the wastewater treatment provider is capable of serving the needs of the development and adjacent properties. This would ensure that adequate capacity exists to serve the project and project impacts are less than significant. f) Would the project be served by a landfill with sufficient permitted capacity to accommodate the project’s solid waste disposal needs? The expansion of the existing community center would not generate an additional population that would generate additional solid waste. Waste generated in the City is sent to the Sunnyvale Material Recovery Transfer station and ultimately the Kirby Canyon Landfill (Permit 43-AN-0008). The Kirby Canyon Landfill can accept 2,600 tons per day and has a remaining capacity of 16,191,600 cubic yards (CalRecycle 2015). The project’s current solid waste generation is adequately served by the landfill and the project’s solid waste generation is not expected to change substantially as a result of the proposed project. Therefore, the project would have a less-than-significant impact. g) Would the project comply with federal, state, and local statutes and regulations related to solid waste? The project would be required to comply with the green building requirements set forth in the California Green Building program and the City’s Build It Green Program. The project is proposed to attain a LEED Silver certification. This would ensure that water conservation and solid waste reduction measures are included in the project and that the project meets all local, state and federal regulations related to solid waste. Therefore, impacts would be less than significant. Mitigation Measures No mitigation measures are required. Expansion at Avenidas Initial Study 9567 52 July 2016 3.18 Mandatory Findings of Significance Potentially Significant Impact Less Than Significant with Mitigation Incorporated Less Than Significant Impact No Impact XVIII. MANDATORY FINDINGS OF SIGNIFICANCE a) Does the project have the potential to degrade the quality of the environment, substantially reduce the habitat of a fish or wildlife species, cause a fish or wildlife population to drop below self-sustaining levels, threaten to eliminate a plant or animal community, reduce the number or restrict the range of a rare or endangered plant or animal or eliminate important examples of the major periods of California history or prehistory? b) Does the project have impacts that are individually limited, but cumulatively considerable? (“Cumulatively considerable” means that the incremental effects of a project are considerable when viewed in connection with the effects of past projects, the effects of other current projects, and the effects of probable future projects)? c) Does the project have environmental effects which will cause substantial adverse effects on human beings, either directly or indirectly? a) Does the project have the potential to degrade the quality of the environment, substantially reduce the habitat of a fish or wildlife species, cause a fish or wildlife population to drop below self-sustaining levels, threaten to eliminate a plant or animal community, reduce the number or restrict the range of a rare or endangered plant or animal, or eliminate important examples of the major periods of California history or prehistory? The project site is developed and does not support riparian habitat, wildlife corridors, or any sensitive natural communities. There are trees on the project site that may be used for nesting by migratory birds and would be protected on site through implementation of Mitigation Measure BIO-1. The existing main building on the project site and the small shed at the rear of the building are both considered historic buildings. No changes or modifications would be made to the small shed. The demolition of the main building would include approximately 2,500 square-feet of the dining room that was added in 1977 and would not include demolition of any part of the main historic building. The internal improvements would not damage any historic features since no historic features remained after the initial internal improvements in 1977. The project would have a less than Expansion at Avenidas Initial Study 9567 53 July 2016 significant impact on degrading the quality of the environment, reducing fish and wildlife habitat or eliminating important examples of major periods of California history. b) Does the project have impacts that are individually limited, but cumulatively considerable? (“Cumulatively considerable” means that the incremental effects of a project are considerable when viewed in connection with the effects of past projects, the effects of other current projects, and the effects of probable future projects)? The project site is fully developed and expansion of the community center would not contribute to the adverse visual impacts, loss of agricultural land, an increase in traffic, or the demand for additional public services and utilities. The project would have limited GHG air quality pollutant emissions that were far below the screening criteria for the BAAQMD, as discussed in Sections III and VII. The project would result in less than significant cumulatively considerable impacts. c) Does the project have environmental effects which will cause substantial adverse effects on human beings, either directly or indirectly? There is nothing in the nature of the proposed community center expansion that would have a substantial adverse effect on human beings; therefore, there would be no impact. Expansion at Avenidas Initial Study 9567 54 July 2016 4 REFERENCES AND PREPARERS 4.1 References Cited 14 CCR 15000–15387 and Appendices A through L. Guidelines for Implementation of the California Environmental Quality Act, as amended. Bay Area Air Quality Management District (BAAQMD). 2006. Bay Area 2005 Ozone Strategy. Adopted January 4, 2006. Architectural Resources Group. 2016a. 450 Bryant Street, Palo Alto, California Historic Resource Evaluation. June 23, 2016 Architectural Resources Group. 2016b. 450 Bryant Street HRE Memorandum. October 4, 2016. BAAQMD. 2010a. Bay Area 2010 Clean Air Plan. Adopted September 15, 2010. BAAQMD. 2010b. California Environmental Quality Act Air Quality Guidelines. May 2010. BAAQMD. 2015. “Air Quality Standards and Attainment Status.” Last updated 2015. California Air Resources Board. 2008. Climate Change Scoping Plan. December 2008. California Department of Conservation (DOC), California Geological Survey. 1974. “State of California Special Studies Zones: Palo Alto Quadrangle.” Effective July 1, 1974. DOC. 2006. California Geological Survey. 2006. Seismic Hazard Zone Report for Palo Alto 7.5-Minute Quadrangle, Santa Clara County, California. 2006. DOC. 2014. Santa Clara County Important Farmland Map 2012. California Department of Conservation, Division of Land Resources Protection, Farmland Mapping and Monitoring Program. Published August 2014. California Department of Resources and Recycling (CalRecycle). 2015. “Facility/Site Summary Details: Kirby Canyon Recycling and Disposal Facility (43-AN-0008).” July 31, 2015. Accessed May 26, 2016. Available at http://www.calrecycle.ca.gov/SWFacilities/ Directory/ 43-AN-0008/Detail/. California Public Resources Code, Section 21000–21177. California Environmental Quality Act, as amended. California Water Resources Control Board. 2016a. GeoTracker GAMA: 450 Bryant Street, Palo Alto, California. Accessed May 26, 2015. Available at: http://geotracker.waterboards.ca.gov/ Expansion at Avenidas Initial Study 9567 55 July 2016 gama/gamamap/public/default.asp?CMD=runreport&myaddress=450+Bryant+st%2C+Palo+Alto%2C+CA. California Water Resources Control Board. 2016b. Geotracker: 450 Bryant Street, Palo Alto, California. Accessed May 27, 2016. Available at: http://geotracker.waterboards.ca.gov/ map/?CMD=runreport&myaddress=450+Bryant+st%2C+Palo+Alto%2C+CA. City of Palo Alto, Department of Planning and Community Environment. 2001. Tree Technical Manual Standards and Specifications. June 2001. Available at http://www.cityofpaloalto.org/ civicax/filebank/documents/6436. City of Palo Alto. 2003. City of Palo Alto Municipal Code Section 9.10 Noise. Last Amended February 10, 2003. Available at http://library.amlegal.com/nxt/gateway.dll/ California/paloalto_ca/paloaltomunicipalcode?f=templates$fn=default.htm$3.0$vid=amlegal:paloalto_ca. City of Palo Alto. 2007a. Palo Alto Comprehensive Plan. July 17, 2007. Available at http://www.cityofpaloalto.org/gov/topics/projects/landuse/compplan.asp. City of Palo Alto. 2007b. City of Palo Alto Municipal Code Section 18.52 Parking and Loading Requirements. September 10, 2007. Accessed May 26, 2016. Available at http://library.amlegal.com/nxt/gateway.dll/California/paloalto_ca/paloaltomunicipalcode?f=templates$fn=default.htm$3.0$vid=amlegal:paloalto_ca. City of Palo Alto. 2015. City of Palo Alto Municipal Code Section 16.14 California Green Building Code Standards. May 11, 2015. Accessed May 27, 2016. Available at http://library.amlegal.com/nxt/gateway.dll/California/paloalto_ca/paloaltomunicipalcode?f=templates$fn=default.htm$3.0$vid=amlegal:paloalto_ca. Department of Toxic Substances Control (DTSC). 2016. EnviroStore 450 Bryant Street, Palo Alto, California. Accessed May 26, 2016. Available at http://www.envirostor.dtsc.ca.gov/ public/mapfull.asp?global_id=&x=-119&y=37&zl=18&ms=640,480&mt=m& findaddress=True&city=450%20Bryant%20st,%20Palo%20Alto,%20CA&zip=&county=&federal_superfund=true&state_response=true&voluntary_cleanup=true&school_cleanup=true&ca_site=true&tiered_permit=true&evaluation=true&military_evaluation=true&school_investigation=true&operating=true&post_closure=true&non_operating=true. Fehr & Peers. 2014. Focused Traffic Impact Study Memorandum. March 2016. Flood Emergency Management Agency (FEMA). 2009. “Flood Insurance Rate Map No. 06085C0010H, Santa Clara County, California.” Effective May 18, 2009. Expansion at Avenidas Initial Study 9567 56 July 2016 Santa Clara County. 2012. Santa Clara County Local Hazard Mitigation Plan. May 1, 2012. U.S. Department of Agriculture, Natural Resources Conservation Service. 2016. Websoil Survey Avenidas. May 27, 2016. Available at http://websoilsurvey.sc.egov.usda.gov/. Valley Transportation Authority (VTA). 2013. 2013 Congestion Management Plan. October 2013. Available at http://www.vta.org/cmp. 4.2 List of Preparers DUDEK 853 Lincoln Way, Suite 208 Auburn, California 95603 Katherine Waugh, AICP, Senior Project Manager Samantha Murray, M.A., Senior Architectural Historian Kimberly Asbury, Planning Analyst Rachel Strowbridge, GIS Technician Devin Brookhart, Publications Specialist Lead David Mueller, Publications Specialist Expansion at Avenidas Initial Study 9567 57 July 2016 INTENTIONALLY LEFT BLANK Milpitas San Jose Mountain View Palo Alto Gilroy Campbell San Ramon BlackhawkDanville Moraga Town Alamo Discovery Bay Orinda Lafayette Walnut Creek Clayton Brentwood Pleasant Hill OakleyConcord PrunedaleElkhorn Aptos Hills-Larkin Valley Interlaken Santa Cruz Soquel Aptos Corralitos Felton Day Valley Scotts Valley Ben Lomond Boulder Creek Morgan Hill Lexington Hills San Jose Los Gatos Saratoga Cupertino Los Altos Hills Los Altos Santa ClaraSunnyvale Portola Valley Woodside Atherton San CarlosHalf Moon Bay Menlo Park BelmontEl Granada Redwood City Montara Hillsborough San Mateo Foster City Burlingame San Bruno Pacifica South San Francisco San Francisco Newark Fremont Union City Hayward PleasantonFairview Livermore DublinSan Leandro Castro Valley Alameda Oakland Berkeley Antioch Vine Hill Richmond Bethel Island Martinez Pittsburg West Pittsburg Pinole Rodeo Hercules Mill Valley San Rafael Lagunitas-Forest Knolls Lucas Valley- Marinwood Inverness Novato Benicia Vallejo Santa C r u z County San Mateo County San Francisco County Marin County Co n t r a C o s t a Co u n t y Contra Cost a C o u n t y Sacramento County Monter e y County Santa C l a r a C o u n t y S a n t a C l a r a Santa C r u z C o u n t y Santa Clara County Sa n J o a q u i n C o u n t y Santa Cruz County San Mateo County Alameda C o u n t y Alameda County Ala m e d a C o u n t y Sa n J o a q u i n C o u n t y Pacific Ocean 35 82 37 24 131 85 25 123 156 13 61 160 185 237 17 129 152 130 9 84 92 4 1 101 101 80 205 780 238 680 280 580 880 Regional Map Expansion at Avenidas Project Da t e : 4 / 1 3 / 2 0 1 6 - L a s t s a v e d b y : r s t r o b r i d g e - P a t h : Z : \ P r o j e c t s \ j 9 5 6 7 0 1 \ M A P D O C \ D O C U M E N T \ F i g u r e 1 _ R e g i o n a l M a p . m x d 0105Miles FIGURE 1 Project Site Expansion at Avenidas Initial Study 9567 59 July 2016 INTENTIONALLY LEFT BLANK 82 101 Vicinity Map Expansion at Avenidas Project SOURCE: USGS 7.5-Minute Series PaloAlto Quadrangle Da t e : 6 / 2 8 / 2 0 1 6 - L a s t s a v e d b y : r s t r o b r i d g e - P a t h : Z : \ P r o j e c t s \ j 9 5 6 7 0 1 \ M A P D O C \ D O C U M E N T \ F i g u r e 2 _ V i c i n i t y M a p . m x d 02,0001,000 Feet Project Boundary FIGURE 2 Project Site Expansion at Avenidas Initial Study 9567 61 July 2016 INTENTIONALLY LEFT BLANK Project Site Expansion at Avenidas Project SOURCE: Bing Maps (Accessed 2016); Contra Costa County GIS Da t e : 6 / 2 8 / 2 0 1 6 - L a s t s a v e d b y : r s t r o b r i d g e - P a t h : Z : \ P r o j e c t s \ j 9 5 6 7 0 1 \ M A P D O C \ D O C U M E N T \ F i g u r e 3 _ S i t e M a p . m x d 0 10050Feet Project Boundary FIGURE 3 Expansion at Avenidas Initial Study 9567 63 July 2016 INTENTIONALLY LEFT BLANK FIGURE 4A Site Photos Expansion at Avenidas Project Da t e : 6 / 2 8 / 2 0 1 6 - L a s t s a v e d b y : r s t r o b r i d g e - P a t h : Z : \ P r o j e c t s \ j 9 5 6 7 0 1 \ M A P D O C \ D O C U M E N T \ F i g u r e 4 A _ S i t e P h o t o s . m x d Expansion at Avenidas Initial Study 9567 65 July 2016 INTENTIONALLY LEFT BLANK FIGURE 4B Site Photos Expansion at Avenidas Project Da t e : 6 / 2 8 / 2 0 1 6 - L a s t s a v e d b y : r s t r o b r i d g e - P a t h : Z : \ P r o j e c t s \ j 9 5 6 7 0 1 \ M A P D O C \ D O C U M E N T \ F i g u r e 4 B _ S i t e P h o t o s . m x d Expansion at Avenidas Initial Study 9567 67 July 2016 INTENTIONALLY LEFT BLANK APPENDIX A Historic Resources Evaluation Architecture Planning Conservation Prepared for Avenidas Prepared by Architectural Resource Group, Inc. San Francisco, California FINAL 2ϯ June 2016 450 Bryant Street, Palo Alto, California ,ŝƐƚŽƌŝĐZĞƐŽƵƌĐĞ ǀĂůƵĂƟŽŶ SAN FRANCISCO Pier 9, The Embarcadero, Suite 107 San Francisco, California 94111 T: 415.421.1680 F: 415.421.0127 argsf.com PASADENA 8 Mills Place, 3rd Floor, Suite 300 Pasadena, CA 91105 T: 626.583.1401 F: 626.583.1414 arg-la.com PORTLAND ϭϭϭ^t&ŝŌŚǀĞŶƵĞ͕ϮϰƚŚ&ůŽŽƌ Portland, OR 97204 T: 971.256.5324 arg-pnw.com Historic Resource Evaluation 450 Bryant Street Palo Alto, CA 23 June 2016 TABLE OF CONTENTS 1. INTRODUCTION AND METHODOLOGY ......................................................................................................2 2. SUMMARY OF FINDINGS .......................................................................................................................3 3. SITE AND BUILDING DESCRIPTION ...........................................................................................................4 3.1 Site Description ................................................................................................................................... 4 3.2 Building Description ............................................................................................................................ 4 4. HISTORICAL BACKGROUND AND CONTEXT.................................................................................................6 4.1 Palo Alto .............................................................................................................................................. 6 4.2 Site Development ................................................................................................................................ 6 4.3 450 Bryant Street .............................................................................................................................. 10 4.4 Birge Clark ......................................................................................................................................... 16 5. BUILDING CONSTRUCTION CHRONOLOGY ............................................................................................... 17 5.1 Building Chronology .......................................................................................................................... 17 6. EVALUATIVE FRAMEWORK .................................................................................................................. 20 6.1 California Register of Historical Resources ....................................................................................... 20 6.2 Local Criteria ..................................................................................................................................... 21 7. EVALUATION OF SIGNIFICANCE ............................................................................................................. 22 7.1 Previous Evaluations ......................................................................................................................... 22 7.2 Updated Evaluation .......................................................................................................................... 23 7.3 Evaluation of Integrity ....................................................................................................................... 24 7.4 Character-Defining Features ............................................................................................................. 25 7.5 Summary Significance and Integrity ................................................................................................. 26 8. PROPOSED PROJECT DESCRIPTION & CONFORMANCE WITH THE SECRETARY’S STANDARDS ................................. 26 8.1 The Secretary of the Interior’s Standards for Rehabilitation ............................................................ 26 8.2 Project Description ............................................................................................................................ 28 8.3 Assessment for Conformance with the Secretary’s Standards ......................................................... 29 8.4 Recommendations ............................................................................................................................ 32 9. BIBLIOGRAPHY ................................................................................................................................. 33 Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 1 APPENDICES Appendix A: Existing Conditions Photographs of 450 Bryant Street Appendix B: Historic Photographs of 450 Bryant Street Appendix C: Original Plan Drawings Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 2 1. INTRODUCTION AND METHODOLOGY Architectural Resources Group, Inc. (ARG) has completed this Historic Resource Evaluation (HRE) in connection with the proposed rehabilitation and new addition to the former Police and Fire Building at 450 Bryant Street in Palo Alto. The property is listed as a Category 2 building (“Major Building” of regional importance) in Palo Alto’s Historic Inventory, and is recognized as a Point of Historical Interest by the State of California. These designations qualify the building for consideration as a “historical resource” per the California Environmental Quality Act (CEQA). In California, historical resources must be considered in the environmental review process. In general, a project involving a historical resource that has been determined to comply with the Secretary of the Interior’s Standards can be considered a project that will not cause a significant impact on the historic resource per CEQA. The first part of this report includes a physical description of the property, a summary of the building’s historical background, a chronology of use and development, a summary of previous evaluations, and identification of character-defining features. ARG has also provided an updated evaluation of the subject building and associated garage structure per the California Register of Historical Resources (CRHR) and local criteria. The second component of this report uses the above-mentioned background information to provide an assessment of the proposed project’s consistency with the Secretary of the Interior’s Standards for Rehabilitation. Figure 1. 450 Bryant Street aerial view, subject property outlined in red (Source: Google Maps aerial view, amended by author). Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 3 The building at 450 Bryant Street was designed by prominent architect Birge Clark, who was responsible for designing hundreds of buildings in Palo Alto and the surrounding area during the first half of the twentieth century. From 1927 through 1970 the building housed the City’s police and fire departments, including the Police Court and city jail facilities. As a new civic center began to develop in the mid-1960s, some of these functions were transferred to other locations. The final vacancy occurred in 1970, with the departure of the police department and the Communications Division. The building remained vacant for most of the 1970s and was converted for use as a senior center by the Senior Coordinating Council (SCC) in 1978. The SCC changed its name to Avenidas in 1996, and functions today as a community- based nonprofit organization that provides services to older adults in Palo Alto and the larger Bay Area. The proposed rehabilitation of 450 Bryant Street entails construction of a new three-story addition at the rear of the building and a full rehabilitation of the interior of the existing building. A more detailed project description is included below in Section 7.1. To complete the HRE report for 450 Bryant Street, ARG: ›Conducted a site visit to examine and photograph the project area and its surroundings on June 12, 2014; ›Reviewed existing historic evaluations of 450 Bryant Street; ›Conducted additional research as necessary to supplement the existing record, including permit research at the Palo Alto Development Center and archival research at the Palo Alto Historical Association; and ›Reviewed proposed project drawings prepared by Kenneth Rodrigues & Partners, Inc., (set dated March 16, 2016). 2. SUMMARY OF FINDINGS The former Palo Alto Police and Fire Building at 450 Bryant Street is locally significant for the quality of design in its original exterior detailing, for its association with important local architect Birge Clark, and as an important local municipal building. Built around the same time, the former garage building was also designed by Clark and served the building’s historic function as the Police and Fire building. Though the interiors of both buildings have been significantly modified over time, they retain an adequate amount of original exterior character defining features to communicate their historic significance, and the property as a whole qualifies as a historic resource per CEQA. The project applicant has significantly modified their proposed design based on comments from consultants and City Staff. ARG has reviewed the updated project proposal and finds it to be compliant with the Secretary of the Interior’s Standards for Rehabilitation. Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 4 3. SITE AND BUILDING DESCRIPTION 3.1 Site Description The building at 450 Bryant Street is located in Downtown Palo Alto, on the south side of Bryant Street between Lytton and University Avenues. It lies between Cogswell Plaza to the west and an alleyway to the east. The original building, 1950 addition, 1978 cafeteria wing, garden walls, and an auxiliary building used as an activity room define an enclosed courtyard on the south side. A parking lot occupies the south portion of the lot behind the building. The surrounding neighborhood is generally commercial in nature. 3.2 Building Description Figure 2. 450 Bryant Street, primary elevation (ARG, June 2014). The main building at 450 Bryant Street is constructed of reinforced concrete and wood framing with a with a stucco exterior finish. Stylistically, it is a Spanish Colonial Revival building with a first-floor arcade, carved rafters exposed at the eaves, and clay barrel-tile roofing. A finely detailed door surround marks the original central entrance to the building with “Police Court” carved into a panel above the door. The surround is concrete, tooled and colored to contrast with the stucco walls and to have the appearance of stone. The second story is characterized by three sets of French doors; each door opens to balcony featuring decorative ironwork. Other exterior features include decorative wrought iron details and original light fixtures. The window type found throughout the building is a steel multi-pane casement, arranged in various configurations. The interior of the building has been altered considerably from its original appearance. The present interior configuration dates primarily to the 1978 rehabilitation, when the building was converted for use as a senior center. The original exterior walls and features generally remain intact despite later additions, but the original interior configuration has been altered so that no original interior spaces and Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 5 few to no original features remain. It is possible that some original features of the building, such as the skylights and their sub-frames, have been concealed within the present finishes. Two additions were made to the original Police and Fire building: one for additional fire department facilities in 1950, and the other for a kitchen and dining room when the building was converted for use as the senior center in 1978. The 1950 addition attaches to the north end of the original building, and the 1978 addition attaches to both buildings at the southwest corner. Both additions were designed for compatibility with the original 1927 construction and feature stucco cladding and red clay tile roofs. The roofs are hipped like the original building and have open eaves with exposed rafter tails. The 1950 addition has rectangular multi-pane casement windows, and the dining room addition has arched window openings reminiscent of those on the front of the original building. Figure 3. Rear entrance into Avenidas courtyard (ARG, June 2014). The rear (south) elevation of the original building faces a courtyard flanked by the 1978 addition to the west and the former garage building (now a classroom) at the property’s south corner. The courtyard is secured at the east and south perimeter by stucco-clad privacy walls and wood and metal gated enclosures. The courtyard features a colorful tiled fountain, wood trellises, a small refuse enclosure, and wood benches, all of which were installed as part of the 1978 rehabilitation. Note: See Appendix A for additional existing conditions photographs. Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 6 4. HISTORICAL BACKGROUND AND CONTEXT 4.1 Palo Alto Although the land was once occupied by the Ohlone and later part of vast Spanish land grants, modern- day Palo Alto was formed in the late 1800s by Leland and Jane Stanford, the founders of Stanford University. The Stanfords “decided that the new university should have an accompanying college town to provide a clean-living place for student housing and other services.”1 After both the neighboring towns of Menlo Park and Mayfield refused to stop serving alcohol, Stanford decided to create his own dry town and called it University Park. In contemporary advertisements, the area was described as “a tract of beautiful oak-park land, immediately opposite and adjoining the grounds of the Leland Stanford Junior University.”2 The land was “subdivided into villa blocks, comprising about five acres each… in the most artistic manner, with broad avenues intersecting each other at picturesque angles.”3 University Park officially became Palo Alto in 1892. By the turn of the twentieth century, Palo Alto was a developing town that “had solved many of the basic problems of survival by installing an efficient water system, paving the roads, establishing schools, developing sewage management, and other municipal functions.”4 4.2 Site Development Figure 4. 1894 Sanborn Map detail, site of subject property outlined in red (map amended by author). 1 Pamela Gullard and Nancy Lund, History of Palo Alto: The Early Years (San Francisco: Scottwall Associates, 1989), 83. 2 Ibid, 85. 3 Ibid. 4 Ibid, 137. Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 7 Sanborn Maps dating to the 1890s indicate the area directly surrounding the subject block consisted of a mix of vacant lots and single-family dwellings. A large residence and associated site features including a “lawn tennis court” occupied the west half of the subject block as of 1894. The east half of the block held a collection of small sheds, a carriage house, and a corral, as well as a number of vacant lots lining University Avenue. By the 1920s, the area had developed further with a mix of single and multi-family dwellings, lodging establishments, and businesses. The residential estate that had existed on the subject block in the 1890s had been removed and replaced by a park on the western half of the block. Two dwellings sat on the subject site. Figure 5. Sanborn Map, detail, 1924, site of subject property outlined in red (amended by author). Figure 6. Palo Alto City Hall, Ramona Street, c. 1920s (Source: Palo Alto Historical Association). Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 8 Palo Alto’s first City Hall building was constructed in 1907, just south of the subject property, facing Ramona Street. This one-story building was initially intended to be a temporary facility, and a more permanent City Hall building was to be constructed at University Avenue and Waverley Street; however, these plans were never executed. To accommodate a growing need for space, the City added a second story to the 1907 building around 1922, and other plans for expansion developed.5 According to a history of the police and fire building: [For] two-and-one-half years the City of Palo Alto studied the problem of locating a jail, accommodating the fire and police departments together with the problem of relieving increasing congestion at the City Hall…Finally a plan was outlined for the construction of a permanent building to accommodate the fire department, police department and jail. It would be located on municipal property facing Bryant Street behind the City Hall.6 Figure 6. Palo Alto Police and Fire Station, 450 Bryant Street, c. 1927 (Source: Palo Alto Historical Association). On January 20, 1927, the City Council recommend a bond issue of $74,000. Construction of the Palo Alto Police and Fire Building was completed at the end of 1927, and the building was formally dedicated on December 6 of that year. To celebrate the dedication, a dinner and program were held in the new quarters. An article in the Palo Alto Times gave the following report: 5 Palo Alto: A Centennial History, 229 6 History of the Fire/Police Building, Palo Alto Historical Association archives, 2. Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 9 What with an old-time chicken dinner, music both vocal and instrumental, vaudeville entertainment and speeches bristling with wit and praise of Palo Alto as one of the best – nay, even possibly the very best town in California – a good time was had by all.7 The event, held in the club room of the Fire Department quarters, was attended by municipal officials, employees, and guests. As noted in the Palo Alto Times article, the “event was voted so successful that hopes were expressed that it could become an annual affair.”8 Figure 7. Sanborn Map, detail, 1949, site of subject property outlined in red (amended by author). The 1924 Sanborn shows two ancillary structures associated with City Hall: a garage and a storage unit, both rectangular in plan and located behind the building. These structures were later demolished to accommodate a new garage, which may be the structure that remains behind the former Police and Fire building today. A six-car garage and an office building had been constructed to the west of City Hall by 1949, but these two buildings are no longer extant. The years following World War II marked a period of growth and expansion in Palo Alto. As part of this development, the City made building a new City Hall a top priority. The relocation of City Hall to a site at Embarcadero and Newell roads in 1950 was fiercely contested, since it was located in the middle of a residential area.9 Although many voted against the proposed location, the City purchased the lot and built new city hall there despite the objections. The City’s offices moved again about twenty years later, 7 Ibid, 4. 8 History of the Fire/Police Building, Palo Alto Historical Association archives, 4. 9 Ibid. 54. Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 10 when the existing City Hall building at 250 Hamilton Avenue was constructed in 1970. The original City Hall was demolished in 1953; the adjacent six-car garage and office building were also likely demolished at this time. The open space adjacent to the subject building, presently known as Cogswell Plaza, was originally established as City Hall Park in 1924. The park offered grassy areas, a children’s playground, numerous shrubs and trees, and several benches.10 Increased vehicular traffic in the downtown area, as well as overcrowding at City Hall, led to a proposal in the early 1950s to convert the park for use as a parking lot or as the site for a new City Hall annex. Local residents supported retention of the park, and neither proposal passed. In 1955, the park was redesigned by Bay Area landscape architect Douglas Baylis, and dedicated to Elinor Cogswell, who had been a leading advocate for preservation of the park.11 Cogswell served as editor of the Palo Alto Times from 1938 to 1954.12 The park underwent a $150,000 renovation in 2012, which included new landscaping, pathways, and light fixtures. The City also removed tall shrubs and hedges from the site and replaced them with new low-growing vegetation. A key component of the new design was a circular seating area of decomposed granite.13 4.3 450 Bryant Street Police and Fire Building The Palo Alto Police and Fire Building was designed by Birge Clark in 1926, and constructed in 1927. Clark opened his architectural practice in Palo Alto in 1922, and the Police and Fire Building was his second municipal commission, following an addition to the public library designed during his first year in business.14 A written history of the building discusses the research that went into the design of the building – a unique combination of police and fire facilities at the time: In the 1920s there were many fire houses, there were fewer police stations or combined fire and police stations, and still fewer included a jail. It was desired to have a jail as it was very often inconvenient and sometimes a real problem to take an arrested person to the County Jail in San Jose. Birge Clark, Alfred Seale, Chairman of the Board of Safety, William Clemo, the Fire Chief, and Howard Zink, the Police Chief, visited several nearby jails and firehouses. They talked with the famous Police Chief of Berkeley, August Vollmer, who provided several valuable hints about constructing a small holding jail – eight cells for men and three for women and children. Since there was the possibility that they might temporarily be holding a desperate criminal, it was necessary that the steel bars of the cells be saw-proof and that locks could not be opened on the inside of the cell.15 10 City of Palo Alto, “Cogswell Plaza,” http://www.cityofpaloalto.org/news/displaynews.asp?NewsID=104&TargetID=14 (accessed 26 May 2015). 11 Ibid. 12 Ibid. 13 Jason Green, “Palo Alto’s Cogswell Plaza Gets a New Look,” Palo Alto Times, 17 December 2012. 14 Ibid, 1. 15 Ibid, 3. Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 11 Upon completion of the building, a minor scandal erupted when it was discovered that the bars on the jail cells could be easily cut. Soon thereafter, the company that had supplied the cells made the appropriate corrections and new tamper-proof jail cells were installed.16 The construction costs for the Police and Fire Building totaled $53,000, including the steel jail cells in the Police Department quarters.17 The structure was designed with reinforced concrete external walls, columns, and girders, with floor joists and interior partitions of wood. One exception to the interior wood partition walls was the jail, which was entirely enclosed with reinforced concrete internal walls.18 The following sections describe the building interior as it was originally designed and constructed. Original Building – Exterior Description As originally constructed, the “Central Police and Fire House” was a two-story, rectangular plan building with stucco-clad exterior walls and multi-pane steel casement windows. Several skylights lit the second floor interior, and a wide partial hipped roof topped the building. Spanish clay tiles covered the roof planes, and the open eaves exposed decorative rafter tails. Figure 8. Palo Alto Police and Fire building, c. 1938 (Source: Palo Alto Historical Association). The primary (Bryant Street) elevation featured six arched openings at the ground level and a series of multi-pane casement windows and three sets of wood frame French doors at the second story. A central entrance provided access to a small entry vestibule and the stairway leading to the court room on the second floor. On either side of this door were the entrances to the police department quarters on the left, and the fire department quarters on the right. On the police department side, the outer arched 16 Ibid, 3. 17 Ibid, 1. Also: “Building for Fire and Police Departments; Palo Alto, California; Birge M. Clark, Architect.” The Architectural Forum (November 1931), 580. 18 History of the Fire/Police Building, Palo Alto Historical Association archives, 1. Also: “Building for Fire and Police Departments; Palo Alto, California; Birge M. Clark, Architect.” The Architectural Forum (November 1931), 580. Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 12 openings had a tiled bulkhead wall with multi-pane steel sash windows above. The central arched opening had a similar bulkhead and windows as well as a multi-pane glazed pedestrian entry door. The original fire truck entry doors were composed of vertical wood boards with wrought iron hardware. On the second story, the French doors opened out onto shallow balconies with decorative wrought iron railings. The park-facing (north) elevation had several steel multi-pane windows, but no entry doors. The south elevation also had several windows as well as a steel entry door that led to the detention room corridor. The rear four windows on this elevation – those that lit the interior detaining rooms and holding cell areas – were secured with steel bars. On the rear (west) elevation, also in the location of the detention rooms and holding cells, were six more windows secured with steel bars. The only exit door on this elevation was a double-leaf wood plank vehicular door on the fire department side of the building. Original Building – Interior Description The original building interior was divided in half to house the functions of the fire department and the police department and court. A reinforced concrete wall with pedestrian door openings divided the interior of the building at center, and the interior spaces were further divided with wood frame interior partitions clad with metal lath and plaster. According to the original plans, notable interior features and finishes included wood paneled wainscot, chair rails, baseboards, and picture rails, as well as tiled wainscot and wood plank doors with wrought iron hardware in the main entrance lobby. The interior layouts and important spaces of both departments are described below. Figure 9. Original architectural drawings by Birge Clark, first floor. The left side of building housed the police department quarters, and the right side the fire department quarters (Source: Avenidas drawing file). Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 13 Police Department - Basement The basement of the police department contained a narrow “Target Range” along the length of the Bryant Street wall, and a boiler room set behind the stairwell. The boiler room was enclosed with a hollow tile partition wall, and was physically separate from the “Battery Room” at the rear of the basement, which was accessed by the rear stair. The space now occupied by the computer labs was used for storage. Police Department - 1st Floor On the police department side of the building, the central pedestrian entry door (in the center arched bay) accessed the main entrance lobby with tile floor and reception desk. Surrounding this lobby were offices for the chief and sergeant, a filing room, an office for the welfare worker, toilets, and an additional office space. As mentioned above, the police court entrance led to a small entry vestibule, also with a tiled floor. This vestibule provided access to the second level via the central stair, as well as interior access to both the police department and the fire department headquarters on either side. The front offices on the first floor were separated from the detention and holding areas at the rear by a long corridor leading from the exterior door at the alley. The rear spaces included six holding cells with bunks, toilets, and sinks; an identification room; and two detention rooms. A rear staircase provided secondary access to the court room level and access to the battery room on the basement level. On the main floor, the front offices had wood floors with tiled floor surfaces at the lobby and courtroom entrance vestibule. The rear detention room areas had cement floors. Figure 10. Original architectural drawings by Birge Clark, second floor. The left side of building housed the police department quarters, and the right side the fire department quarters (Source: Avenidas drawing file). Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 14 Police Department - 2nd Floor At the second story, the two stairways led to a main corridor, which provided primary access to the courtroom. The squad room, located at the front of the building, had metal lockers along the west wall and led to a bedroom at the southeast corner of the space. Shower and toilet facilities were located along the passageway leading to the squad room from the main corridor. Most of the space on the second floor was occupied by the large courtroom. This room had a wood floor and received ample natural light from two overhead skylights. A solid rail with two gated openings separated the audience space from the head of the courtroom. A jury room, toilet facilities, and a “Supplies and Records” room were located along the rear wall of the building. Most of the floor surfaces on this floor were wood, with exception of the toilet facilities, which had cement floors. Fire Department - 1st Floor Most of the ground floor fire department space was occupied by a large “Apparatus Room” with a cement floor. The front wall had three double leaf wood vehicular entry doors, and one double-leaf vehicular door was located at the rear wall. Two firemen’s poles accessed this level from the second story residential and lounging areas, and a spiral staircase was set along the north wall. An “Alarm Room,” toilet room, and a “Watch Room” were located at the rear of the space. Fire Department - 2nd Floor The second story of the fire department building contained facilities for the fire department staff. A dormitory with metal lockers occupied the front portion of the floor. This was separated from a large “Lounging Room” by a kitchen area and toilet and washroom facilities. On the original plans, one permanent office is shown in the south corner, with three “Future Offices” immediately adjacent. Development and Use The building was originally constructed to house the police department and jail, the fire department and offices, and the municipal court, and these entities operated out of the 450 Bryant Street location for nearly forty years. Research indicates that the use of the building was intensive. The “Fire Department estimated that there were about fourteen employees in the building on each shift, with one to three visitors daily. The police department had a peak number of 101 employees, and an estimated 150 visitors daily.”19 City documents did not include information on the number of employees or visitors to the municipal court.20 The City of Palo Alto grew quickly in the first half of the 20th century, and with this growth came the need for expanded police and fire department facilities. To meet this demand, a one-story addition to the building was completed in 1950 for fire administration; the addition was later used for communications dispatch.21 A new fire station at Newell and Embarcadero was also completed around this time.22 Despite the addition to the Bryant Street station, the call for additional space continued to increase, and the City began planning a new civic center to house municipal activities. This civic center, completed in 1970, would house the police department, provide quarters and administrative facilities for the fire department, and create a new office for the Fire Prevention Bureau. As the new facility 19 Elizabeth S. Crowder, “Environmental Impact Assessment for Old Police/Fire Building, Palo Alto” (19 April 1973). 20 Ibid. 21 History of the Fire/Police Building, Palo Alto Historical Association archives, 4. 22 “Ledford Says New Fire Station and Improvements are Needed,” Palo Alto Times, 8 December 1947. Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 15 neared completion, the City began to transition the departments out of the building at 450 Bryant Street. The fire department moved out in 1964 and was replaced by the Communications Division. The municipal court moved out in 1965 and the police department and Communications Division moved out in 1970. The building remained vacant for most of the 1970s with the exception of temporary occupancy of the former Fire Department quarters during the winter of 1972-1973 by a youth group making and selling handicrafts (sponsored by the Recreation Department and supported by the Youth Advisory Commission).23 In 1973 the City Council adopted a policy that dictated that the City maintain title to the property for the foreseeable future, and that the architectural character and aesthetics of the building be preserved and enhanced. Figure 11. Jail cell removal, 1974 (Source: San Jose Mercury News, Palo Alto Historical Association). Many new uses were proposed for the building during its vacancy, and two significant proposals – one for a non-profit business and one for a Mexican-themed restaurant – were considered. In 1974, Richard Nieto won the lease and intended to establish shops and a Mexican restaurant called “El Palacio de Luz de Oro” on the site, but the lease was terminated by the City of Palo Alto in June 1975 after the City determined that Nieto was in default of at least three articles in the lease agreement.24 Newspaper articles from May 1974 indicate that Nieto held a public auction during his brief tenancy to sell off the fittings and other items that remained in the building. Original features sold at the auction included the 23 Crowder, “Environmental Impact Assessment for Old Police/Fire Building, Palo Alto”. 24 George A. Sipel, City Manager, “Staff Report: Old Police/Fire Building,” 16 July 1975. Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 16 jail cells, one of the fire poles (the other was stolen the night before the auction), the spiral staircase, brass doorknobs, ceramic tiles, plumbing and light fixtures, chairs, tables, windows, doors, and many other original features.25 In 1976, the City of Palo Alto agreed to lease the building to the Senior Coordinating Council of Palo Alto, Inc. (SCC) for one dollar per year. The SCC, in turn, would be responsible for the remodeling and furnishing of the building. Volunteers raised funds for the renovation of the building, which was to include the addition of a new dining room and patio to the building, and conversion of the rear one- story garage into a crafts shop. Other planned alterations included a full interior renovation to accommodate new offices, classrooms, and spaces for community groups and county and federal programs. On May 5, 1977, the groundbreaking ceremony took place. That same year, the building was nominated as a Point of Historical Interest. 4.4 Birge Clark The son of Arthur B. Clark – a noted architect in his own right – and Grace Clark, Birge was born on April 16, 1893 in San Francisco. His parents had moved to Palo Alto the year before when Arthur began a professorship at Stanford University teaching architecture and art. Birge himself studied architecture at Stanford University and later at Columbia University. He earned a Silver Star for gallantry in World War I, after which he returned home to Palo Alto, where he enjoyed a successful career as an architect. Clark resided in Palo Alto until his death on April 30, 1989. Over the course of his prolific career, Birge Clark was considered by many to be the “man who built Palo Alto.” When he opened his practice in 1922, Birge was only one of two licensed architects between San José and San Francisco.26 His early works include the Lou Henry and Herbert Hoover House (1920) at Stanford University, for which his father Arthur was the head architect, and several cottages on the school’s campus. Birge also received the commission for the U.S. Post Office in Palo Alto, which was completed in 1933. Many of Birge’s designs are in the “Early California” style – his version of the Spanish Colonial Revival style. Birge Clark’s architectural contributions to Palo Alto cannot be understated, having designed over four hundred residential and commercial buildings in Palo Alto and the surrounding area. Birge Clark’s autobiography provides the following reminiscence of the Police and Fire Building: The Palo Alto Fire and Police Station…had as much of the ‘California Colonial’ feeling and, as a city building, had a more formal balance of arches and windows. One-half had arches for the fire engines to drive out through whereas the other half, occupied by the police, had the same arches but filed in with windows and tile work. The design of the firehouse portion of this building was far simpler, with a dormitory on the second floor and two slide-down brass poles, as well as the normal stairway. The other half of the second floor was occupied by the police court and reached only by a long stairway…[the firemen] would not let the architect practice sliding down as they said ‘you have to be especially 25 “Unusual Items for Sale Lure Crowd to Old Fire-Police Building,” Palo Alto Times, 11 May 1974. “Old Jail Cells for Sale in Palo Alto Auction,” San Jose Mercury, 10 May 1974. 26 Dave Weinstein, Signature Architects of the San Francisco Bay Area (Layton, UT: Gibbs Smith, 2006), 70. Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 17 trained or you will break your ankle.’ I never could really see that sliding down the pole after they had pulled their clothes on was going to save – at the most – more than ten seconds.27 Clark received an Honor Award from the Northern California Chapter of the American Institute of Architects in 1928 for his design of the Police and Fire Building. The decorative ironwork on the building was completed by Herman Bleiber, a craftsman who Clark retained for a number of his designs, including the National Register-listed Norris House at 1247 Cowper Street in Palo Alto. 5. BUILDING CONSTRUCTION CHRONOLOGY 5.1 Development Overview The building at 450 Bryant Street was designed by Birge Clark in 1926 and was officially dedicated in December 1927 as the Central Police and Fire Building for the City of Palo Alto. A 1950 addition at the north end of the building was designed by Clark’s firm, Clark & Stromquist. The firm – at that point Clark, Stromquist & Sandstrom – designed a full renovation of the building interior and cafeteria addition in 1977 to accommodate the Senior Coordinating Council of Palo Alto, which moved in the following year. In 1995, the building underwent structural upgrades and another round of renovations. The lobby was remodeled in 2001, and in 2003, the building’s HVAC system was modified and a fire alarm and detection system was installed. More recently, HVAC modifications to the cafeteria area were completed in 2013. No building permits have been found for the construction of the one-story activity room building at the rear lot line, but Sanborn maps indicate that building may have been part of the earlier City Hall complex. A larger building marked as “storage” appears on the 1924 Sanborn in the general location of the existing building, but by 1949, a smaller reinforced concrete garage had replaced this structure. An undated drawing entitled “Proposed Automobile Sheds” is held in the Birge Clark archives at Stanford. It shows a small rectangular plan garage in the same general location as today’s activity room, as well as a larger parking structure to the west. The larger structure also appears the 1949 Sanborn. Research indicates that the accessory building was used as a garage or carport when the building was in use as the Police and Fire Building. The north wall of the garage – that facing the Police and Fire building – was open, and the structure had room for four vehicles, two in each bay. The structure was later converted for use as a wood shop, and it underwent a second conversion into an activity room for the senior center in 1995. The building appears to retain its original form, but alterations include a full interior refinishing, new windows and doors, and infill of vehicular entrances. The building retains its rectangular plan, stucco cladding, and tile roof. The following construction chronology provides dates and descriptive information for known alterations undertaken at 450 Bryant Street since original construction. This chronology was compiled from building permit records and other information gathered at the City of Palo Alto’s Development Center, as well as from original and alteration plan drawings held onsite. The sections below the Construction Chronology table provide additional information on the more significant construction campaigns in 1950, 1978, and 1995. 27 Birge Clark, “Unpublished Autobiography of Birge Clark,” 26-28. Held in the collection of the Palo Alto Historical Association. Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 18 Construction Chronology Date Permit Issued or Year Completed Description of Work Contractor/ Architect Valuation 1927 “Central Police and Fire House for the City of Palo Alto” completed. Birge Clark, architect $53,000 c.1930 Rear carport/garage accessory structure constructed Birge Clark, architect 1950 One-story addition to Fire Station. (See details below.) 1978 Rear cafeteria/dining room addition and full interior renovation for use as senior center. (See details below.) Clark, Stromquist, & Sandstrom 1993 Minor interior alterations: new casework installed at reception area to meet ADA requirements; new partition wall 1st floor meeting room (now library); new partition walls added in 2nd story office area, previous walls demolished. City of Palo Alto 3/17/1995 Palo Alto Senior Center shop conversion to classroom – rear one-story building (originally a garage/carport) converted for classroom use: new doors and hardware, new A/C unit and water heater; install interior sink, cabinets, and drinking fountain; new closet and furnace area partitions. (See details below.) 4/6/1995 Structural Upgrades and renovations to senior center. (See details below.) Baucentrum Architects 3/2/2001 Remove and replace roof with 5-ply J.M. 5GNC terra cotta color; only where repair is needed. $60,000 9/18/2001 Lobby & coffee room modifications, new ramp, new suspended ceiling, and coffee room upgrades. Peterson Architects $10,000 9/23/2003 Ductwork, hot water reheat piping, direct digital controls for fan coil units; also fire alarm & detection system installed. Kinetics Mechanical Service, Inc. $138,700 7/20/2004 Existing classroom – add dishwasher, disposal, water heater & refrigerator. Add upper cabinets & lighting (Int. remodel to existing classroom bldg.) Oxley Works / David Oxley 7/11/2007 Install automatic fire sprinkler system. BFP Fire Protection 8/1/2007 Install partition wall in basement, relocate electrical (to be used as: two computer labs) Jeffrey Sultan, P.E. $25,000 12/22/2007 Replacement of commercial restaurant equipment (like for like) range, oven, sink, refrigeration equipment. County Restaurant Supply $40,000 2013 HVAC Modifications – La Comida 1950 Addition – Clark & Stromquist; Walter Huber, Structural Engineer A one-story addition designed by Clark and Stromquist was added to the north side of the building in 1950 to provide additional office and vehicular space. The addition contained two office spaces along the north wall and an “Apparatus Room” occupied the remainder of the floor space. Two overhead Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 19 vehicular doors were set at the rear wall, and one overhead door opened to Bryant Street on the front elevation. A single-pane glazed pedestrian door provided access from Bryant Street to the interior offices; a brick veneer bulkhead and multi-pane steel sash windows created a partial door surround at this location. 1977 - Clark, Stromquist, & Sandstrom, architects; Artunian-Kinney Associates, Inc., landscape architects x Elevator installed x Kitchen and dining room/cafeteria addition to rear of 1950 addition and southwest corner of original building x Full interior renovation: reconfiguration of all interior spaces, only front central stair remains in original location x Installation of windows at former fire truck entry doors x Rear patio/courtyard created and new enclosures installed at parking lot access and alley x Removal of several original windows on rear elevation x Installation of new second story exit door and new rear stairway x Exterior doors and hardware replaced x Basement egress on east side of building (originally a covered light well) converted to stairwell x Interior of 1950 addition reconfigured, front entry doors/windows reconfigured, two windows on west elevation infilled, and kitchen access door installed x Exterior landscape improvements: new paving along Bryant Street and alley; courtyard improvements including new wood trellis and benches, new fountain, paving 1995 – Structural Upgrades and Renovations – Baucentrum Architects Renovation project consisting of primarily interior improvements to address current seismic code and accessibility requirements. Major alterations included the following: x New plumbing, mechanical, and electrical work throughout x New cabinetry in lobby, corkboards, and other improvements in lobby x Restroom upgrades throughout x Handrail upgrades at stairs x Remove west corner stage in dining room x New signage throughout x Replacement of existing wood doors, frames, trims, and thresholds, and hardware, with new components compliant with current disabled accessibility requirements (selected locations throughout) x Replacement of existing metal handrail, pickets, and damaged galvanized metal stair tread at the exterior exit stair from basement to alley x Removal and replacement of existing clay barrel tiles at roof of 1950 addition for seismic upgrading of roof structure; upon replacement, new tiles inserted to match existing where broken or damaged x Removal and replacement of existing 4-ply built up roofing system at roof of 1950 addition for seismic upgrading x Replacement of metal gutters at roof of 1950 addition to match existing x Replacement of clear glass window at rear elevation (facing courtyard) to accommodate expansion of restroom Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 20 Other notes On the ground floor, the police station side, the central arched bay originally had a multi-pane wood door, which was infilled to match the existing windows on either side prior to 1977 alterations. All three of these window bays appear to have new bulkhead cladding to match that on the other side of the building (where the fire truck entry doors have been infilled). Cogswell Plaza Alterations The City of Palo Alto adopted an ordinance in 1974 dedicating the Cogswell Plaza extension – a strip of land immediately adjacent to the north side of the building – as park land. The service road that ran from Bryant Street to the parking area behind the building was removed and the area was provided with minimal landscaping. New walkways were installed to continue the curvilinear nature of the existing park sidewalks, and a small walkway for delivery of kitchen supplied (on foot) was provided from Bryant Street to the kitchen door.28 6. EVALUATIVE FRAMEWORK 6.1 California Register of Historical Resources The California Register of Historical Resources (CRHR) is the authoritative guide to the State’s significant historical and archeological resources. It serves to identify, evaluate, register, and protect California’s historical resources. The CRHR program encourages public recognition and protection of resources of architectural, historical, archeological and cultural significance, identifies historical resources for state and local planning purposes, determines eligibility for historic preservation grant funding and affords certain protections under the California Environmental Quality Act (CEQA). The California Register criteria are modeled on the National Register criteria established by the U.S. Department of the Interior and the National Park Service. An historical resource must be significant at the local, state, or national level under one or more of the following criteria: 1. It is associated with events or patterns of events that have made a significant contribution to the broad patterns of local or regional history, or the cultural heritage of California or the United States. 2. It is associated with the lives of persons important to local, California, or national history. 3. It embodies the distinctive characteristics of a type, period, region, or method of construction, or represents the work of a master, or possesses high artistic values. 4. It has yielded, or has the potential to yield, information important to the prehistory or history of the local area, state or the nation. For a property to qualify under the California Register’s Criteria for Evaluation, it must also retain “historic integrity of those features necessary to convey its significance.”29 While a property’s significance relates to its role within a specific historic context, its integrity refers to a property’s physical 28 Susan Strahorn, Project Manager, Senior Center. “Proposed Use of the Old Police/Fire Building, 450 Bryant Street, as a Senior Center,” 11 February 1977. 29 National Park Service, How to Apply the National Register Criteria for Evaluation, 3, 44. Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 21 features and how they relate to its significance. Evaluation for eligibility to the California Register requires an establishment of historic significance before integrity is considered. To determine if a property retains the physical characteristics corresponding to its historic context, the California Register has based its seven aspects of integrity on those established by the National Register of Historic Places: x Location is the place where the historic property was constructed or the place where the historic event occurred. x Setting is the physical environment of a historic property. x Design is the combination of elements that create the form, plan, space, structure, and style of a property. x Materials are the physical elements that were combined or deposited during a particular period of time and in a particular pattern or configuration to form a historic property. x Workmanship is the physical evidence of the crafts of a particular culture or people during any given period in history or prehistory. x Feeling is a property’s expression of the aesthetic or historic sense of a particular period of time. x Association is the direct link between an important historic event or person and a historic property.30 6.2 Local Criteria Criteria for Designation The City of Palo Alto has identified the following criteria, along with the definitions of historic categories and districts in Section 16.49.020 (see below), to be used as criteria for designating additional historic structures/sites or districts to the historic inventory: 1. The structure or site is identified with the lives of historic people or with important events in the city, state or nation; 2. The structure or site is particularly representative of an architectural style or way of life important to the city, state or nation; 3. The structure or site is an example of a type of building which was once common, but is now rare; 4. The structure or site is connected with a business or use which was once common, but is now rare; 5. The architect or building was important; 6. The structure or site contains elements demonstrating outstanding attention to architectural design, detail, materials or craftsmanship.31 30 Ibid, 44-45. 31 Palo Alto Municipal Code, Chapter 16.49 “Historic Preservation”. Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 22 Definitions The City of Palo Alto's Historic Inventory lists noteworthy examples of the work of important individual designers and architectural eras and traditions as well as structures whose background is associated with important events in the history of the city, state, or nation. The Inventory is organized under the following four Categories: Category 1: An “Exceptional Building” of pre-eminent national or state importance. These buildings are meritorious works of the best architects, outstanding examples of a specific architectural style, or illustrate stylistic development of architecture in the United States. These buildings have had either no exterior modifications or such minor ones that the overall appearance of the building is in its original character. Category 2: A “Major Building” of regional importance. These buildings are meritorious works of the best architects, outstanding examples of an architectural style, or illustrate stylistic development of architecture in the state or region. A major building may have some exterior modifications, but the original character is retained. Category 3 or 4: A “Contributing Building” which is a good local example of an architectural style and relates to the character of a neighborhood grouping in scale, materials, proportion or other factors. A contributing building may have had extensive or permanent changes made to the original design, such as inappropriate additions, extensive removal of architectural details, or wooden facades resurfaced in asbestos or stucco. Unlike the CRHR, the City of Palo Alto does not outline specific aspects of integrity for individual resources. 7. EVALUATION OF SIGNIFICANCE 7.1 Previous Evaluations The building at 450 Bryant Street has already been evaluated for its historic significance. It is recognized on Palo Alto’s Historic Inventory as a Category 2 building. The California Department of Parks and Recreation Historic Resources Inventory forms (DPR forms) for 450 Bryant Street provide the following information: Originally the Palo Alto Fire and Police Station, this building has undergone remodeling to serve as a Senior Citizen Center…The most striking feature of the building, the elegant and inventive ironwork of its second floor balconies, will be unaffected by the proposed changes. Only the two-story portion was in the original design. The one-story addition on the west side came later. Designed by the important architect Birge Clark, the building’s iron work shares workmanship with wrought iron designs of the Norris House, whose ironwork craftsman, Herman Bleiber, was a favorite of Clark. For the Senior Center, the interior was redesigned in 1978 by Walter Stromquist, one of Clark’s colleagues.32 32 440-450 Bryant Street, California Department of Parks and Recreation Historic Resources Inventory, prepared by Lydia Moran, 1978. Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 23 Though not explicitly stated in the DPR forms, the building is significant as an example of the Spanish Colonial Revival style of architecture, as a work of noted local architect Birge Clark, and for its historical use as an important municipal building. The building is also recognized as a Point of Historical Interest by the State of California. Since the building at 450 Bryant Street is listed in the Palo Alto Historic Inventory, it qualifies as a historic resource per the California Environmental Quality Act. 7.2 Updated Evaluation California Register of Historical Resources CRHR Criterion 1 [Association with Significant Events] The subject property is associated with early municipal development of Palo Alto, and is the only remaining built component of the original civic center complex in the city’s downtown. Therefore, the subject property, including the rear accessory building, appears eligible for the CRHR under Criterion 1 at the local level. CRHR Criterion 2 [Association with Significant Persons] Though the former Police and Fire Department played a notable role as an important municipal building in Palo Alto, research did not identify an important association with any particular individual. As such, the subject property does not appear eligible for listing on the CRHR under this criterion. CRHR Criterion 3 [Architectural Significance] The former Police and Fire Building at 450 Bryant Street is locally significant as an example of the Spanish Colonial Revival style of architecture, and as a work of noted local architect Birge Clark. Though altered on the interior, the exterior of the building retains many characteristic features of the style, including a first-floor arcade, carved rafters exposed at the eaves, clay barrel-tile roofing, stucco wall cladding, steel multi-pane casement windows, and decorative ironwork. Clark designed many buildings in Palo Alto during his career, and received an Honor Award from the Northern California Chapter of the American Institute of Architects in 1928 for his design of the Police and Fire Building. For these reasons, the subject property appears eligible for listing on the CRHR at the local level under this criterion. CRHR Criterion 4 [Potential to Yield Information] Criterion 4 is generally applied to archeological resources and evaluation of the property for eligibility under this criterion is beyond the scope of this evaluation. Palo Alto Historic Inventory The former Police and Fire building at 450 Bryant Street is listed as a Category 2 resource on the Palo Alto Historic Inventory. Research and evaluation have not identified any information that would negate the building’s historic status, so ARG concurs with this designation. Further, research has indicated that the former garage building behind the resource was built around the same time as the main building and was also designed by Birge Clark. It was used by the Police and Fire department as a garage and is associated with the historic function of the building. As such, it should be considered a contributing element to the building’s significance. Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 24 Period of Significance The period of significance is the length of time that a property was associated with the important events, activities, or people for which it is significant. This period usually begins with the date of construction. For properties like 450 Bryant Street that are found to be significant for association with historic patterns of development (CRHR Criteria 1), the period of significance is the span of time when the property actively contributed to that development. Likewise, properties that are significant for architectural merit (CRHR Criterion 3) the period of significance is the date of construction and/or the dates of any significant alterations and additions. The period of significance identified for the building at 450 Bryant Street is 1927-1950. The subject property is significant for association with early municipal development of Palo Alto, and is the only remaining built component of the original civic center complex in the city’s downtown. It is also locally significant as an example of the Spanish Colonial Revival style of architecture, and as a work of noted local architect Birge Clark. The 1927-1950 period of significance begins with the date of construction and ends when the building was first altered from its original configuration as a component of the City’s original civic center complex. 7.3 Evaluation of Integrity Integrity is the authenticity of a historical resource’s physical identity evidenced by the survival of characteristics that existed during the resource’s period of significance. Integrity involves several aspects including location, design, setting, materials, workmanship, feeling, and association. These aspects closely relate to the building’s significance and must be primarily intact for eligibility. Location Location is the place where the historic property was constructed or the place where the historic event occurred. The subject property remains in its original location and therefore retains integrity of location. Design Design is the combination of elements that create the form, plan, space, structure, and style of a property. Despite additions and alterations over time, the original 1927 building and associated outbuilding retain integrity of design on the exterior of the building only. Overall, they retain their original form and stylistic features from the original design, and many exterior character-defining features are extant. The Main Police and fire building displays the most detail between the two buildings. The building interiors have been extensively remodeled and no original features or design characteristics remain from the original construction. Therefore, the building interiors retain no integrity of design. Setting Setting is the physical environment of a historic property, constituting topographic features, vegetation, manmade features, and relationships between buildings or open space. Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 25 Though the City Hall building has been demolished and some nearby buildings replaced over time, the general scale and character of the surrounding built environment remains from the building’s era of construction. As such, the subject property generally retains integrity of setting. Materials Materials are the physical elements that were combined or deposited during a particular period of time and in a particular pattern or configuration to form a historic property. The interiors of the original Police and Fire Building and associated outbuilding have lost all integrity of materials due to extensive alteration over time. However, the original building exteriors retain material integrity. Workmanship Workmanship is the physical evidence of the crafts of a particular culture, people, or artisan during any given period in history or pre-history. The main Police and Fire building displays integrity of workmanship through its distinctive ironwork, stucco detailing, and tooled concrete door surround at the former Police Court entrance. To a lesser degree, the accessory building also retains integrity of workmanship through the exposed rafters and wrought iron window grille. Feeling Feeling is a property’s expression of the aesthetic or historical sense of a particular period of time. The subject property as a whole expresses its historical character through a number of extant original exterior features and materials, and therefore retains integrity of feeling. Association Association is the direct link between an important historic event or person and a historic property. The property’s association with Birge Clark can still be communicated through the Spanish Colonial design qualities that were a hallmark of his architectural style. 7.4 Character-Defining Features This section identifies the exterior character-defining features of 450 Bryant Street. A character-defining feature is an aspect of a building’s design, construction, or detail that is representative of the building’s function, type, or architectural style. Generally, character-defining features include specific building systems, architectural ornament, construction details, massing, materials, craftsmanship, site characteristics, and landscaping that were present during the historic period. In order for an important historic resource to retain its significance, its character-defining features must be retained to the greatest extent possible. An understanding of a building’s character-defining features is a crucial step in developing a rehabilitation plan that incorporates an appropriate level of restoration, rehabilitation, maintenance, and protection. Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 26 The historical significance for the Palo Alto Police and Fire Building is attributed primarily to the quality of design in its original exterior detailing and its design by an important local architect. The building is also significant as an important early municipal building. The character-defining features below correspond with the building’s period of significance (1927-1950). Exterior Character-Defining Features of 450 Bryant Street include: ›Red clay tile roof ›Open eaves with decorative rafter tails ›Two-story height and rectangular form ›Stucco finish and detailing (belt course at second floor and coves, cornices, imposts, etc.) ›Symmetrical façade on Bryant Street ›Arched openings at ground level ›Police Court signage and tooled concrete door surround ›Terra cotta floor tile at Police Court entry ›Ironwork, including balcony railings, grilles, and light fixtures ›Balconies at upper floor ›Multi-pane steel casement windows ›French doors at front balconies ›Minimal eave overhang ›One-story accessory building behind main building (gabled tile roof, stucco cladding, window grille, one-story rectangular plan form – windows/doors not original) 7.5 Summary Significance and Integrity The former Palo Alto Police and Fire Building at 450 Bryant Street is associated with early municipal development of Palo Alto, and is the only remaining built component of the original civic center complex in the city’s downtown. Therefore, the subject property, including the rear accessory building, appears eligible for the CRHR under Criterion 1 at the local level. The property is also significant for the quality of design in its original exterior detailing and for its association with important local architect Birge Clark. As such, it is eligible for listing on the CRHR under Criterion 3 at the local level. Though the building has experienced alteration over time, it retains a sufficient amount of historical integrity to communicate its significance, and the property as a whole qualifies as a historic resource per CEQA. 8. PROPOSED PROJECT DESCRIPTION & SECRETARY’S STANDARDS EVALUATION 8.1 The Secretary of the Interior’s Standards for Rehabilitation The Secretary of the Interior’s Standards (the Standards) are a series of concepts developed by the United States Department of the Interior to assist in the continued preservation of a property’s historical significance through the preservation of character-defining materials and features. They are intended to guide the appropriate maintenance, repair, and replacement of historic materials, and to direct the design of compatible new additions or alterations to historic buildings. The Standards are used by Federal, state, and local agencies to review both Federal and nonfederal rehabilitation proposals. In California, properties listed in, or formally determined eligible for listing in, the California Register of Historical Resources or a local historic register qualify as “historical resources” per the California Environmental Quality Act (CEQA) and must be considered in the environmental review process. Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 27 (Resources formally determined eligible for, or listed in, the National Register of Historic Places are automatically listed in the California Register of Historical Resources.) In general, a project involving a historical resource that has been determined to comply with the Secretary of the Interior’s Standards can be considered a project that will not cause a significant impact on the historic resource per CEQA. The Standards offer four approaches to the treatment of historic properties—preservation, rehabilitation, restoration, and reconstruction. The Standards for Rehabilitation (codified in 36 CFR 67 for use in the Federal Historic Preservation Tax Incentives program) address the most prevalent treatment. “Rehabilitation” is defined as “the process of returning a property to a state of utility, through repair or alteration, which makes possible an efficient contemporary use while preserving those portions and features of the property which are significant to its historic, architectural, and cultural values.” The ten Rehabilitation Standards are: 1. A property shall be used for its historic purpose or be placed in a new use that requires minimal change to the defining characteristics of the building and its site and environment. 2. The historic character of a property shall be retained and preserved. The removal of historic materials or alteration of features and spaces that characterize a property shall be avoided. 3. Each property shall be recognized as a physical record of its time, place, and use. Changes that create a false sense of historical development, such as adding conjectural features or architectural elements from other buildings, shall not be undertaken. 4. Most properties change over time; those changes that have acquired historic significance in their own right shall be retained and preserved. 5. Distinctive features, finishes, and construction techniques or examples of craftsmanship that characterize a property shall be preserved. 6. Deteriorated historic features shall be repaired rather than replaced. Where the severity of deterioration requires replacement of a distinctive feature, the new feature shall match the old in design, color, texture, and other visual qualities and, where possible, materials. Replacement of missing features shall be substantiated by documentary, physical, or pictorial evidence. 7. Chemical or physical treatments, such as sandblasting, that cause damage to historic materials shall not be used. The surface cleaning of structures, if appropriate, shall be undertaken using the gentlest means possible. 8. Significant archeological resources affected by a project shall be protected and preserved. If such resources must be disturbed, mitigation measures shall be undertaken. 9. New additions, exterior alterations, or related new construction shall not destroy historic materials that characterize the property. The new work shall be differentiated from the old and Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 28 shall be compatible with the massing, size, scale, and architectural features to protect the historic integrity of the property and its environment. 10. New additions and adjacent or related new construction shall be undertaken in such a manner that if removed in the future, the essential form and integrity of the historic property and its environment would be unimpaired. 8.2 Project Description The following project description was provided by Avenidas, and is dated March 1, 2016: The proposed existing building and addition is +/-26,500 square feet. The first level is the largest at +/-11,000 square feet and includes the main lobby, reception, classrooms, a dining room and kitchen and the addition of an atrium lobby. The second floor is +/-9,200 square feet and includes multipurpose rooms, meeting rooms, classrooms and administrative areas. A third floor in the new wing will be +/- 3,300 square feet and will include a fitness room, a small meeting room and an outdoor deck. The circa 1925 shed at the rear (the “Garden Room”) will be renovated to house the staff and members of Avenidas Village. The +/- 2,000 s/f basement below the original building will become a theater/small auditorium. Historic Preservation The City of Palo Alto’s Downtown design guideline recommends that a sense of history be preserved and historic structures be emphasized. The architectural concept of the addition is to significantly maintain the architectural features of the existing historic building by adding an addition at the back of the building, replacing the 1976 dining room with a three story wing and a two story atrium. The design aesthetic of the new addition is contemporary but with elements that relate to the historic building, including a red tile roof and punch windows. The scale and massing of the addition is such that it is in proportion to the existing historic building. The existing rear wall of the historic building will become a prominent feature of the proposed new wing. The main building entry will remain along Bryant Street. No exterior building modifications are proposed to the other three sides of the existing building. Participants will enter the rear of the building into a lobby/reception that will look out into the remaining courtyard. With the remodeling of the interior space, the circulation and way finding throughout the facility will be improved. No historic interior features remain after previous interior renovations. The renovated building will have less office space than it presently does. Except for a few staff who interact directly and daily with participants and guests, staff will be consolidated into part of the second floor in open space configured with workstations, a few private offices and shared huddle rooms. We do not expect that more staff will be required as a result of the building expansion. Interior renovations are being designed to make the space feel open and inviting. We want visitors to be able to walk through the building and see what is going on and be enticed to join in. Small spaces will be combined into larger spaces. We also want pedestrians walking by on the Bryant Street sidewalk to be able to look in and see what’s going on. Foundation landscape will Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 29 be replaced with low-scale plantings and there will be larger and more active multi-purpose rooms flanking the front entrance. Per the proposed plan drawings, the rear accessory building will be retained. The previously altered interior and north façade will be remodeled. On the north elevation, the existing windows will be demolished and replaced by folding doors and the existing doors will be removed and replaced. All other exterior elevations will remain unaltered and the existing stucco finish will be maintained. Interior alterations include creation of a new office area with four workstations and a reception/meeting area. 8.3 Assessment for Conformance with the Secretary’s Standards This section provides an analysis of the project drawings prepared by Kenneth Rodrigues & Partners, Inc. and dated March 16, 2016 and the proposed project’s compliance with the Secretary of the Interior’s Standards for Rehabilitation. 1. A property will be used as it was historically or be given a new use that requires minimal change to its distinctive materials, features, spaces, and spatial relationships. The proposed continued use of the building as a facility for seniors requires minimal change to the character defining features of the building. New construction is focused in areas of prior alteration thereby minimizing removal of historic windows, wall finishes, and other design details. Further, the most extensive alterations to the existing building will occur on the building interior, which no longer retains any original features, materials, or spatial relationships. As such, the proposed project is compliant with this Standard. 2. The historic character of a property will be retained and preserved. The removal of distinctive materials or alteration of features, spaces, and spatial relationships that characterize a property will be avoided. The proposed rehabilitation of the interiors of each building on site will not affect any significant interior spaces or spatial relationships. Prior building campaigns have fully removed and/or altered all interior spaces, and no original fabric remains. The proposed new addition attaches to the rear elevation of the existing Police and Fire building in an area that has been previously altered. The proposed addition will retain, to the greatest extent possible, the exterior walls of the original building, and much of this wall surface will remain exposed and visible within the new addition. The proposed project maintains the majority of the remaining multi-pane steel sash windows that remain on the rear elevation in place. Only one original window will be removed and infilled. The courtyard space behind the main building is not a character-defining feature of the complex, so new construction in this area will not affect a significant feature or spatial relationship. No alterations are proposed for the front or side elevations of the principal building that will affect historic features or materials. Further, the one-story accessory building will remain in place and will be rehabilitated for continued use by Avenidas. Overall, the proposed project retains the historic character of the original buildings and is compliant with this Standard. Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 30 3. Each property will be recognized as a physical record of its time, place, and use. Changes that create a false sense of historical development, such as adding conjectural features or elements from other historic properties, will not be undertaken. The proposed new construction is modern in design and does not attempt to create a false sense of historical development. New construction will be distinguishable from old and no architectural elements from other buildings are proposed for use in the new design. As such, the proposed project is compliant with this Standard. 4. Changes to a property that have acquired historic significance in their own right will be retained and preserved. The period of significance 1927-1950 for 450 Bryant Street begins with the date of construction and ends when the building was first altered from its original configuration as a component of the City’s original civic center complex. Research did not indicate that later changes to the building, namely the later additions, have acquired significance in their own right over time. Therefore, the demolition of the 1970s cafeteria addition for replacement with a new addition would not impact a historic portion of the building and is compliant with this Standard. 5. Distinctive materials, features, finishes, and construction techniques or examples of craftsmanship that characterize a property will be preserved. The proposed rear addition preserves the majority of the Police and Fire building’s distinctive features and finishes, the most significant of which are located on the front elevation of the building. The proposed project also maintains, in large part, the features and finishes of the rear accessory building behind the main structure. Though the previously altered primary (northeast) elevation will be reconfigured to meet programmatic needs, the remaining elevations will be unaltered, with finishes and features preserved. As such, the proposed project is compliant with this Standard. 6. Deteriorated historic features will be repaired rather than replaced. Where the severity of deterioration requires replacement of a distinctive feature, the new feature will match the old in design, color, texture, and, where possible, materials. Replacement of missing features will be substantiated by documentary and physical evidence. No deteriorated features are proposed for replacement as part of this project. As such, this Standard does not apply. 7. Chemical or physical treatments, if appropriate, will be undertaken using the gentlest means possible. Treatments that cause damage to historic materials will not be used. The proposed plan drawings do not indicate the use of chemical or physical treatments. As such, this Standard does not apply. 8. Archeological resources will be protected and preserved in place. If such resources must be disturbed, mitigation measures will be undertaken. Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 31 An archeological evaluation is beyond the scope of this analysis. However, should materials be found during the demolition or construction process, a qualified archeologist should be consulted for assessment and mitigation recommendations. 9. New additions, exterior alterations, or related new construction will not destroy historic materials, features, and spatial relationships that characterize the property. The new work will be differentiated from the old and will be compatible with the historic materials, features, size, scale and proportion, and massing to protect the integrity of the property and its environment. The new addition to the existing Police and Fire building will remove a non-historic addition and exterior stair. It will attach to the existing building in an area that has received more alteration than any other portion of the building to date, and is therefore appropriately placed. The proposed project will also remove non-historic courtyard walls, gates, and courtyard elements; these changes will not destroy historic materials, features, or spatial relationships that characterize the property. The historic materials, features, size, scale, proportion, and massing of the new addition are compatible with that of the historic Police and Fire Building. The new building attaches to the old with a glazed hyphen connector that is set back from each of the side elevations. This serves to provide a visual delineation between the original building envelope and that of the addition. Proposed materials for the new addition include flat clay roofing tiles, smooth limestone tiles for exterior cladding, precast concrete trim, aluminum glazing mullions, and decorative metal panels. These modern materials will be compatible with the color, finish, and quality of the existing stucco cladding, tile roof, and steel sash windows of the existing building, but will clearly differentiate new construction from old. The new design references the proportions and horizontal datum points of the existing building through stringcourse details and continuous floor heights. Punched window openings in the new design also serve to reference the original building, and are similar in size and scale, yet differentiated through materials and design. Though the addition is one-story taller than the original building, its varied massing and placement at the rear of the building result in an addition that does not visually or physically overpower the existing resource. No historic landscape features remain from the original design; as such, the proposed new landscape elements do not destroy historic materials or features that characterize the property. For the reasons discussed above, the project is compliant with this Standard. 10. New additions and adjacent or related new construction will be undertaken in such a manner that, if removed in the future, the essential form and integrity of the historic property and its environment would be unimpaired. As discussed previously, the new addition to the existing Police and Fire building will remove a non- historic addition and exterior stair. It will attach to the existing building in an area that has received more alteration than any other portion of the building to date, and is therefore appropriately placed. The new addition also does not attach to the one-story accessory structure at the rear of the building. IN the unlikely event that the proposed new addition is removed in the future, the essential form and integrity of the historic property and its environment would remain intact. Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 32 In summary, ARG has reviewed the proposed project and finds it to be compliant with the Secretary of the Interior’s Standards for Rehabilitation. 8.4 Recommendations x Where new construction is adjacent to or abuts historic fabric, care should be taken to protect historic materials and features from damage through careful removal, storage, and reinstallation; alternately, materials and features should be protected in place throughout the period of construction. Preparation of a construction preparation plan by a qualified preservation consultant is recommended; this would be appended to the final set of construction documents for reference in the field. x New material color selections should be verified in the field with actual material samples placed adjacent to historic fabric where they will be permanently placed. Printed materials should not be used for this purpose. Material location and sun orientation should be taken into consideration when making selections. x Modern material finishes should not attempt to emulate existing historic materials, patterns, or finishes. Rather, selections should be similar, within the same color, hue, or tonal family, but not an exact duplicate. x To ensure that the final material choices are compliant with the Secretary’s Standards, development of a materials selection guide is recommended. This guide would outline parameters for materials selection in the field and should be prepared by a qualified preservation consultant. Historic Resource Evaluation Architectural Resources Group 450 Bryant Street – Palo Alto, CA 23 June 2016 33 9. BIBLIOGRAPHY California Office of Historic Preservation. California Register and National Register: A Comparison, Technical Assistance Series 6. Sacramento, CA: California Department of Parks and Recreation, 2001. . California Register of Historical Resources: The Listing Process, Technical Assistance Series 5. Sacramento, CA: California Department of Parks and Recreation, n.d. . User’s Guide to the California Historical Resource Status Codes & Historic Resources Inventory Directory, Technical Assistance Bulletin 8. Sacramento, CA: California Department of Parks and Recreation, 2004. Clark, Birge. An Architect Grows Up in Palo Alto, Memoirs of Birge M. Clark, F.A.I.A. September 1982. Corbett, Michael and Denise Bradley. “Final Survey Report, Palo Alto Historical Survey Update, August 1997- August 2000.” February 2001. Gullard, Pamela and Nancy Lund. History of Palo Alto: The Early Years. San Francisco: Scottwall Associates, 1989. 440-450 Bryant Street, Historic Resources Inventory Form (DPR 523). Prepared by Lydia Moran. Palo Alto Historical Association. 1978. Historic Environment Consultants. “Historical and Architectural Resources of the City of Palo Alto.” Prepared by Paula Boghosian and John Beach. February 1979. Pacific Coast Architecture Database. https://digital.lib.washington.edu/architect/architects/759/ (Accessed June 17, 2014) National Park Service. How to Apply the National Register Criteria for Evaluation, National Register Bulletin 15. Washington, DC: United States Department of the Interior, 1997. National Park Service. How to Complete the National Register Registration Form, National Register Bulletin 16A. Washington, DC: United States Department of the Interior, 1997. Palo Alto Historical Association Archives – newspaper clippings files and historical photographs. Sanborn Map Company Fire Insurance Maps for the City of Palo Alto Weinstein, Dave. Signature Architects of the San Francisco Bay Area. Layton, UT: Gibbs Smith, 2006. Appendix A: Existing Conditions Photographs of 450 Bryant Street 450 Bryant Street Palo Alto, CA Historic Resource Evaluation Architectural Resources Group Historic Resource Evaluation 450 Bryant Street Palo Alto, CA Appendix A – Existing Conditions A-1 Exterior Exterior of original building, Bryant Street elevation, view looking southwest (Architectural Resources Group, May/June 2014) Bryant Street elevation with 1950 addition, view looking south (Architectural Resources Group, May/June 2014) Historic Resource Evaluation 450 Bryant Street Palo Alto, CA Appendix A – Existing Conditions A-2 Bryant Street elevation with 1950 addition, view looking southeast (Architectural Resources Group, May/June 2014) West elevation, view looking generally south (Architectural Resources Group, May/June 2014) Historic Resource Evaluation 450 Bryant Street Palo Alto, CA Appendix A – Existing Conditions A-3 1978 dining room addition from rear parking lot, view looking northeast (Architectural Resources Group, May/June 2014) View into rear courtyard from parking lot (Architectural Resources Group, May/June 2014) Historic Resource Evaluation 450 Bryant Street Palo Alto, CA Appendix A – Existing Conditions A-4 Rear view of activity room building (former garage), view looking north (Architectural Resources Group, May/June 2014) East elevations of original building and rear activity room building along alley (Architectural Resources Group, May/June 2014) Historic Resource Evaluation 450 Bryant Street Palo Alto, CA Appendix A – Existing Conditions A-5 East elevation original building, view looking generally southwest (Architectural Resources Group, May/June 2014) 450 Bryant Street main entrance at former Fire Department entry (Architectural Resources Group, May/June 2014) Historic Resource Evaluation 450 Bryant Street Palo Alto, CA Appendix A – Existing Conditions A-6 Former Fire Department entrance infill detail (Architectural Resources Group, May/June 2014) Detail of Police Court entrance (Architectural Resources Group, May/June 2014) Historic Resource Evaluation 450 Bryant Street Palo Alto, CA Appendix A – Existing Conditions A-7 Exterior, detail of balcony, wrought iron work, and eave details (Architectural Resources Group, May/June 2014) Detail of existing Bryant Street entrance to 1950 addition (Architectural Resources Group, May/June 2014) Historic Resource Evaluation 450 Bryant Street Palo Alto, CA Appendix A – Existing Conditions A-8 Exterior courtyard, view looking west (Architectural Resources Group, May/June 2014) Courtyard fountain and exterior stair, added in 1978 (Architectural Resources Group, May/June 2014) Historic Resource Evaluation 450 Bryant Street Palo Alto, CA Appendix A – Existing Conditions A-9 Courtyard trellis work and plantings (Architectural Resources Group, May/June 2014) Courtyard and activity room (former garage/carport) at right (Architectural Resources Group, May/June 2014) Historic Resource Evaluation 450 Bryant Street Palo Alto, CA Appendix A – Existing Conditions A-10 Interior Basement overview, taken from stair (Architectural Resources Group, May/June 2014) Basement stair, looking up (Architectural Resources Group, May/June 2014) Historic Resource Evaluation 450 Bryant Street Palo Alto, CA Appendix A – Existing Conditions A-11 Photo composite overview of 1st floor office area (former Police Department quarters), taken from stair (Architectural Resources Group, May/June 2014) 1st floor office area (former Police Department quarters), looking toward stair (Architectural Resources Group, May/June 2014) Historic Resource Evaluation 450 Bryant Street Palo Alto, CA Appendix A – Existing Conditions A-12 1st floor rear corridor (former Police Department quarters, detention areas), looking toward alley exit door (Architectural Resources Group, May/June 2014) 1st floor lobby area (former Fire Department quarters), taken from main entry (Architectural Resources Group, May/June 2014) Historic Resource Evaluation 450 Bryant Street Palo Alto, CA Appendix A – Existing Conditions A-13 Office areas in 1950 addition (Architectural Resources Group, May/June 2014) 1978 dining room addition interior (Architectural Resources Group, May/June 2014) Historic Resource Evaluation 450 Bryant Street Palo Alto, CA Appendix A – Existing Conditions A-14 2nd floor lobby at top of stair (Architectural Resources Group, May/June 2014) 2nd floor conference room (photo composite) in area of former Police Department squad room and bedroom (Architectural Resources Group, May/June 2014) Historic Resource Evaluation 450 Bryant Street Palo Alto, CA Appendix A – Existing Conditions A-15 2nd floor activity room, in area of former Fire Department dormitory (Architectural Resources Group, May/June 2014) 2nd floor corridor, in area of former Fire Department kitchen/toilet and washrooms (Architectural Resources Group, May/June 2014) Historic Resource Evaluation 450 Bryant Street Palo Alto, CA Appendix A – Existing Conditions A-16 2nd floor corridor, in area of former Fire Department lounge room and offices, looking toward rear of building (Architectural Resources Group, May/June 2014) 2nd floor rear corridor, in area of former Fire Department lounge room and offices, looking west (Architectural Resources Group, May/June 2014) Appendix B: Historic Photographs of 450 Bryant Street 450 Bryant Street Palo Alto, CA Historic Resource Evaluation Architectural Resources Group Historic Resource Evaluation 450 Bryant Street Palo Alto, CA Appendix B – Historic Photographs B-1 Palo Alto Fire/Police building, 450 Bryant Street, c. 1927 (Source: Palo Alto Historical Association) Police-Fire Building, date unknown (Source: Palo Alto Historical Association) Historic Resource Evaluation 450 Bryant Street Palo Alto, CA Appendix B – Historic Photographs B-2 Police Court, c. 1938 (Source: Palo Alto Historical Association) 450 Bryant Street, c. 1931 (Source: The Architectural Forum, November 1931, Palo Alto Historical Association) Historic Resource Evaluation 450 Bryant Street Palo Alto, CA Appendix B – Historic Photographs B-3 Palo Alto fire trucks in front of the Fire Department, 1933 (Source: Palo Alto Historical Association) Palo Alto Fire Department Ladies Auxiliary, c. 1930s (Source: Palo Alto Historical Association) Historic Resource Evaluation 450 Bryant Street Palo Alto, CA Appendix B – Historic Photographs B-4 A Vietnam War protest outside the Palo Alto Police Department, Bryant Street, 1968 (Source: Palo Alto Historical Association) A Vietnam War protest outside the Palo Alto Police Department, Bryant Street, 1968 (Source: Palo Alto Historical Association) Historic Resource Evaluation 450 Bryant Street Palo Alto, CA Appendix B – Historic Photographs B-5 450 Bryant preparing for construction (Source: Senior Adult News, October 1976, Palo Alto Historical Association) Appendix C: Original Plan Drawings 450 Bryant Street Palo Alto, CA Historic Resource Evaluation Architectural Resources Group APPENDIX B Focused Traffic Impact Study Memorandum City of Palo Alto (ID # 7428) City Council Staff Report Report Type: Consent Calendar Meeting Date: 12/12/2016 City of Palo Alto Page 1 Summary Title: Resolution Approving Standard Form REC and Electric Master Agreements Title: Adoption of a Resolution Approving the Standard Form Edison Electric Institute Master Power Purchase and Sale Agreement, with Special Terms and Conditions ("Standard Form Electric Master Agreement"), and the Standard Form Master Renewable Energy Certificate Purchase and Sale Agreement ("Standard Form Master REC Agreement") From: City Manager Lead Department: Utilities Recommendation Staff recommends that Council adopt the attached resolution (Attachment A) approving: 1. The standard form Edison Electric Institute (EEI) Master Power Purchase and Sale Agreement, with special terms and conditions (“Standard Form Electric Master Agreement”), and 2. The standard form Master Renewable Energy Certificate (REC) Purchase and Sale Agreement (“Standard Form Master REC Agreement”). Executive Summary An active set of counterparties is essential to ensure that the City of Palo Alto meets its electric supply portfolio objectives, load obligations, and various program needs in a competitive and efficient manner. To those ends, the Council has in the past authorized the City to enter into electric and renewable energy credit (REC) master agreements (individually, Electric Master Agreements and REC Master Agreements, respectively, and collectively, Master Agreements) with a number of counterparties to enable the City to purchase and sell electricity, RECs and related products, subject to specific delegated authorities, limits and internal risk management and purchasing controls. However, the historic process to seek and negotiate Master Agreements through formal requests for proposal has been lengthy and cumbersome. To streamline the process of establishing Master Agreements with potential suppliers, Council recently approved an ordinance modifying the Municipal Code (Ordinance No 5387). The change allows for Council to pre-approve a standard form master agreement, such as the City of Palo Alto Page 2 proposed Standard Form Electric Master Agreement and Standard Form Master REC Agreement (collectively, Standard Form Master Agreements). These agreements will be publicly available to electric and REC suppliers for execution meeting the City’s credit and financial requirements with non-substantive changes. Each Standard Form Electric Master Agreement and Standard Form Master REC Agreement that is negotiated with a specific electric and REC supplier, respectively, including maximum expenditure and transaction term limits, will be presented to Council for approval before any transactions may be completed. Background Palo Alto Municipal Code Section 2.30.340 (Contracts for Wholesale Utility Commodities) allows for the use of Master Agreements to buy and/or sell electricity, gas and related services through various preapproved (“enabled”) suppliers. Contracts or transactions executed under the Council-approved Master Agreements must be done in accordance with the City’s Energy Risk Management Policy, Guidelines and Procedures. Historically, the process for contracting with wholesale utility suppliers has been to: issue a request for proposals (RFP); select multiple suppliers; negotiate terms and conditions with the set of potential suppliers; and seek Council approval and authority to transact under the Master Agreements. This process took upwards of one year. The current set of Council-approved Electric Master Agreements (Resolution 9324) approved for use between 2013 and 2027 includes: 1. BP Energy Company 2. Cargill Power Markets, LLC 3. Exelon Generation Company, Inc. 4. Iberdrola Renewables, LLC 5. NextEra Energy Power Marketing, LLC 6. PacifiCorp 7. Powerex Corp. 8. Shell Energy North America (US), L.P. 9. Turlock Irrigation District The current set of Council-approved REC Master Agreements (Resolution 9379) approved for use between 2013 and 2018 includes: 1. 3 Degrees Group, Inc. 2. Bonneville Environmental Foundation 3. Constellation Energy Commodities Group 4. EDF Trading North America, LLC 5. Element Markets, LLC 6. Idaho Wind Partners 1, LLC 7. Lakeview Green Energy, Inc. 8. Nexant, Inc. 9. NextEra Energy Power Marketing, LLC 10. PacifiCorp City of Palo Alto Page 3 11. Powerex Corp. 12. Shell Energy North America (US), L.P. 13. Sterling Planet Holdings, Inc. Council recently approved Ordinance 5387 modifying the Municipal Code to streamline the purchase and sale of wholesale utility commodities and services and to explicitly allow for Council-approved standard form agreements. The ordinance modified Section 2.30.140 clarifying the process to enable suppliers by specifically allowing the use of a standard form agreement that contains the City’s minimum contract terms and conditions. Negotiations will be carried out with qualified suppliers on an ongoing basis without the need to issue successive formal requests for proposals or invitations for bids. Execution of, and delegation of authority to transact under, Standard Form Master Agreements with specific suppliers will remain subject to Council approval before any transactions may be completed. Discussion For suppliers wishing to be enabled for wholesale electric commodity transactions and related products, the proposed Standard Form Electric Master Agreement is based on the 2000 Edison Electric Institute (EEI) Master Power Purchase and Sale Agreement. For suppliers transacting only in RECs, the Standard Form REC Master Agreement is proposed. Both Standard Form Master Agreements are based on previously executed Master Agreements approved as to form by the City Attorney’s Office and incorporate the contract terms and conditions required in City of Palo Alto Municipal Code Section 2.30.340 (c): (1) governing law shall be the laws of the state of California; (2) choice of venue shall be the county of Santa Clara; and (3) a counterparty shall obtain and maintain during the term of the contract the minimum credit rating established as of the date of award of contract of not less than a BBB- credit rating established by Standard & Poor’s and a Baa3 credit rating established by Moody’s Investors Services. If the proposed resolution is adopted, both Standard Form Master Agreements will be available on the City’s website for all potential electric and REC suppliers to consider. If the counterparty meets the City’s requirements and agrees to either Standard Form Master Agreement with only non-substantive changes, staff will seek Council approval and execution for the applicable Standard Form Master Agreement. Such a request will be accompanied by a delegation of authority to the City Manager, or his/her designee, to transact under the Master Agreement subject to certain limits including maximum expenditure level and transaction term limits. Resource Impact While the current set of Master Agreements for electricity and RECs are sufficient to competitively and efficiently meet the City’s electric supply portfolio objectives, the wholesale market is ever changing with new suppliers entering and exiting the wholesale commodity market. Approval of the Standard Form Master Agreements will help ensure that the City continues to have an active set of suppliers in the future while reducing the amount of staff resources expended to enable suppliers. Further, any future transactions carried out under the City of Palo Alto Page 4 Standard Form Master Agreements will be subject to Council-approved electric supply budget. For Fiscal Year 2017 no budget impacts are anticipated. Policy Implications Adoption of the proposed resolution conforms to the Council-approved Energy Risk Management Policy and the Palo Alto Municipal Code. Further, the recommendation is consistent with the Council-approved Long-term Electric Acquisition Plan (LEAP) objective to manage supply cost and wholesale energy price risk by diversifying supply purchases across commitment date, start date, duration, suppliers and pricing terms in alignment with rate stability objectives and reserve guidelines and the Utilities Strategic Plan objectives to a) negotiate supply contracts to minimize financial risk; and b) reduce cost of delivering service through best management practices. Environmental Review Council’s adoption of the proposed Resolution approving a Standard Form Electric Master Agreement with special terms and conditions and a Standard Form REC Master Agreement 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 change in the environment. Attachments: Attachment A: Resolution Approving Standard Form Agreements for Electric and Renewable Energy Credits (PDF) Attachment B: Standard Form Master REC Agreement (PDF) Attachment C: Standard Form Electric Master Agreement (PDF) 11 161128 jb 999-Larson NOT YET APPROVED Resolution No. Resolution of the Council of the City of Palo Alto Approving the Standard Form Edison Electric Institute Master Power Purchase and Sale Agreement and the Standard Form Master Renewable Energy Certificate Purchase and Sale Agreement R E C I T A L S A. On March 7, 2011, the Council adopted Resolution 9152 approving the Long-term Electric Acquisition Plan Objectives, Strategies, and Implementation Plan, as subsequently modified by Council on March 19, 2012 and April 16, 2012 (LEAP). B. In accordance with LEAP, the City must actively monitor and manage operational, counterparty and wholesale energy price risk by maintaining an adequate pool of creditworthy suppliers and diversifying supply purchases across commitment date, start date, duration, suppliers and pricing terms in alignment with rate stability objectives and reserve guidelines. C. The City's Energy Risk Management Policy provides for an anti-speculation policy limiting purchases of electricity and related products to meet the City’s projected load. D. The Utilities Strategic Plan’s strategic objectives are, among other things, to a) negotiate supply contracts to minimize financial risk; and b) reduce cost of delivering service through best management practices. E. Through Resolution No. 9379, the Council authorized the City Manager, or his designee, to execute purchases (and incidental sales) of renewable energy credits (RECs) to meet the needs of the City’s PaloAltoGreen (PAG) Program, Renewable Portfolio Standard (RPS) and Carbon Neutral Plan by negotiating and executing REC Master Agreements with thirteen pre- qualified suppliers subject to transaction term and expenditure limits enumerated in that resolution. F. By Ordinance No. 5387, Council approved changes to the Municipal Code specifically streamlining the purchase and sale of wholesale utility commodities and services and explicitly allowing for standard form Master Agreements. G. The standard form electric master agreement is based on the year 2000 version of the Edison Electric Institute (EEI) Master Power Purchase and Sale Agreement, and includes special provisions in the form of a Cover Sheet (Standard Form Electric Master Agreement), which is based on previously Cover Sheets approved as to form by the City Attorney’s Office. H. The standard form REC master agreement is based on the form of REC Master Agreement previously approved by Council in Resolution No. 9379 (Standard Form REC Master Agreement), and will be for suppliers transacting only in RECs. I. Both the Standard Form Electric Master Agreement and the Standard Form Master REC Agreement incorporates the contract terms and conditions required in City of Palo Alto Municipal Code Section 2.30.340(c). Attachment A 11 161128 jb 999-Larson J. Each of the Standard Form Electric Master Agreement and Standard Form REC Master Agreement negotiated with a specific electric and REC supplier, respectively, will be recommended to Council for approval with maximum expenditure limits and transaction terms. NOW, THEREFORE, the Council of the City of Palo Alto RESOLVES as follows: SECTION 1. The Council hereby approves the attached Standard Form Electric Master Agreement. SECTION 2. The Council hereby approves the attached Standard Form REC Master Agreement. SECTION 3. The Council hereby finds and determines that the adoption of this Resolution 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. 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 120110 dm 6051656 1 MASTER RENEWABLE ENERGY CERTIFICATE PURCHASE AND SALE AGREEMENT This Master Renewable Energy Certificate Purchase and Sale Agreement (the “Master Agreement”) is made as of this _____ day of __________, 2016 (“Effective Date”), by and between the City of Palo Alto, California, a chartered California municipal corporation with its primary business address at 250 Hamilton Avenue, Palo Alto California 94301 (“City” or “Buyer”) and ___________ with its primary business address at ____________________(“Seller”). Seller and Buyer may be referred to in the Master Agreement individually, as a “Party” and/or collectively, as “the Parties”. This Master Agreement, together with Confirmation Letters, Attestation Form, and other exhibits related to REC Transaction(s) shall be referred to as “Agreement(s).” RECITALS: A. The Parties wish to buy and sell RECs (as defined herein) on the terms set forth in this Master Agreement; B. Buyer wishes to enter into this Master Agreement with Seller to facilitate future Renewable Energy Certificate (REC) purchases to manage various customer programs administered by the Buyer; C. Seller has access to RECs from Renewable Energy Facilities and wishes to enter into this Master Agreement with Buyer to participate in the future REC Transactions that the City may undertake from time to time; and D. This Master Agreement facilitates, but does not guarantee, Seller’s qualifications to competitively participate with other sellers in future REC Transactions, and it does not guarantee that the City will enter into any future REC Transactions with the Seller. NOW, THEREFORE, in consideration of the recitals and the covenants, terms and conditions of this Master Agreement, the Parties agree: AGREEMENT: 1.Term and Termination. The term of this Master Agreement shall commence on the Effective Date, as set forth above, and shall remain in effect until terminated. This Master Agreement may be terminated by either Party upon thirty (30) days’ written notice, except that any such termination shall not be effective until all payments, deliveries and other obligations of the Parties under this Master Agreement, and any Confirmation Letters executed thereunder, have been completed. 2.Definitions. As used in this Master Agreement, the following terms have the respective meanings set forth below, unless the context otherwise clearly indicates. Other capitalized terms are defined elsewhere in this Master Agreement. ATTACHMENT B 120110 dm 6051656 2 “Administrator” means a state or federal administrator, such as the Clean Air Markets Division of the Environmental Protection Agency, Applicable Tracking System, Certification Authority, if applicable, and any Governmental Authority or other body with jurisdiction over Certification under, or the transfer or transferability of Environmental Attributes in, any particular Applicable Standard. “Applicable Law” means all legally binding constitutions, treaties, statutes, laws, ordinances, rules, regulations, orders, interpretations, permits, judgments, decrees, injunctions, writs and orders of any Governmental Authority or arbitrator that apply to the Applicable Standard or any one or both of the Parties or the terms hereof. “Applicable Standard” means a domestic, international or foreign Renewable Portfolio Standard, including a California or Federal Renewable Portfolio Standard, renewable energy, emissions reduction, or Product Reporting Rights program, scheme or organization, adopted by a Governmental Authority or otherwise, other mandatory or voluntary standard or set of rules, or other similar program with respect to which exists a market, registry or reporting for particular Environmental Attributes, as specified in the Confirmation Letter. An Applicable Standard may include any legislation or regulation concerned with renewable energy, oxides of nitrogen, sulfur, or carbon, with particulate matter, soot, or mercury, or implementing the UNFCCC or crediting “early action” with a view thereto, or laws or regulations involving or administered by an Administrator, or under any present or future domestic, international or foreign RECs, Products, Environmental Attributes or emissions trading program. Applicable Standards do not include legislation providing for production tax credits or other direct third- party subsidies for generation by a Renewable Energy Source. “Applicable Tracking System” means the generation information system, generation attribute tracking system, or other system specified in the Confirmation Letter that records generation from the Renewable Energy Facility in a particular geographic region, such as WREGIS. “Attestation Form” means the Green-e Energy Renewable Attestation From Wholesale Provider of Electricity Or RECs specified in the form set forth in Exhibit B to this Master Agreement, or such other form required under the Applicable Standard, which includes a binding declaration by the Seller, which substantiates the accuracy of the RECs and will provide all information required under the Applicable Standard. “Bankrupt” means with respect to any entity, such entity (i) files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or cause of action under any bankruptcy, insolvency, reorganization or similar law, or has any such petition filed or commenced against it, (ii) makes an assignment or any general arrangement for the benefit of creditors, (iii) otherwise becomes bankrupt or insolvent (however evidenced), (iv) has a liquidator, administrator, receiver, trustee, conservator or similar official appointed with respect to it or any substantial portion of its property or assets, or (v) is generally unable to pay its debts as they fall due. “Business Day” means any day, except a Saturday, Sunday, or any day observed as a legal holiday by the City. 120110 dm 6051656 3 “Certification” means, if applicable, the certification by the Certification Authority of the Applicable Standard of (i) the creation and characteristics of a REC, (ii) the qualification of a Renewable Energy Facility or a Renewable Energy Source under an Applicable Standard, (iii) delivery of a REC, or (iv) other compliance with the requirements of an Applicable Standard. “Certification Authority” means an entity that certifies the generation, characteristics or delivery of a REC, or the qualification of a Renewable Energy Facility or Renewable Energy Source under an Applicable Standard, may include, as applicable, the Administrator, Applicable Tracking System, a Governmental Authority, the Verification Provider, one or both of the Parties, an independent auditor, or other third party, and should include (i) if no Applicable Standard is specified, the Seller, or the generator of the RECs if the Seller is not the generator, (ii) if the RECs are to be delivered pursuant to an Applicable Standard, the Administrator of the Applicable Standard, or such other person or entity specified by the Applicable Standard to perform Certification, or (iii) such other person or entity specified by the Parties. “Certified Renewable Energy Source” means any Renewable Energy Source that is recognized under an Applicable Standard as specified by the Parties. “Confidential Information” is defined in Section 12 “Confirmation Letter” or “Confirm” means the form used by the Parties to effect a REC Transaction in the form of Exhibit A, attached and incorporated by this reference, specifying the terms of such REC Transaction, including the following: (1) any Environmental Attributes not included with Product or Retained by Seller, (2) the quantity to be purchased and sold; (3) the purchase price; (4) the Delivery Deadline; (5) the Applicable Standard; and, (6) if necessary in accordance with the terms of the REC Transaction, (a) the Vintage(s); (b) the Renewable Energy Facility or Facilities from which the Product is to be generated; (c) the Renewable Energy Source and (d) the geography of the Product. The Confirmation Letter constitutes part of, and is subject to, the terms and provisions of this Master Agreement. “Costs” means, with respect to the Non-Defaulting Party, the present value of brokerage fees, commissions, attorneys’ fees, and other similar third party transaction costs and expenses reasonably incurred by such Party either in terminating or replacing any arrangement pursuant to this Master Agreement; and any charges, penalties, fines or fees imposed or assessed against the Non-Defaulting Party by an Administrator or Governmental Authority on account of delivery not occurring on the Delivery Deadline, as determined by the Non-Defaulting Party in a commercially reasonable manner. “Credit Rating” means with respect to a Party, on any date of determination, the lower of its long-term senior unsecured debt rating (not supported by third party credit enhancement) or its issuer rating by the specified rating agency. “Defaulting Party” is defined in Section 6. 120110 dm 6051656 4 “Delivery Deadline” means date specified in the Confirmation Letter by which the Seller shall deliver and Buyer shall receive RECs in accordance with an Applicable Standard. “Environmental Attribute” means an aspect, claim, characteristic, or benefit associated with the generation of a quantity of electricity by a Renewable Energy Facility, other than the Energy produced, and that is capable of being measured, verified or calculated. An Environmental Attribute may include one or more of the following identified with a particular megawatt hour of generation by a Renewable Energy Facility designated prior to Delivery: the Renewable Energy Facility’s use of a particular Renewable Energy Source, avoided Nox, Sox, CO2 or greenhouse gas emissions, avoided water use (but not water rights or other rights or credits obtained pursuant to requirements of Applicable Law in order to site and develop the Renewable Energy Facility itself) or as otherwise defined under an Applicable Standard, or as agreed by the Parties. Environmental Attributes do not include production tax credits or other direct third-party subsidies for generation of electricity by any specified Renewable Energy Facility. “Event of Default” is defined in Section 6. “Force Majeure” is defined in Section 22. “Gains” means, with respect to any Party, an amount equal to the present value of the economic benefit to it, if any (exclusive of Costs), resulting from the termination of a Terminated Transaction, determined by it in a commercially reasonable manner. “Governmental Authority” means any national, federal, provincial, state, municipal, county, regional or local government, administrative, judicial or regulatory entity operating under any Applicable Laws and includes any department, commission, bureau, board, administrative agency or regulatory body of any government. “Green-e” means an independent renewable energy certification and verification program, administered by the Center for Resource Solutions, a Section 501(c)3 nonprofit organization based in San Francisco, California. “Interest Rate” means the prime lending rate published under the heading “Money Rates” in the Wall Street Journal. “Losses” means, with respect to any Party, an amount equal to the present value of the economic loss to it, if any (exclusive of Costs), resulting from termination of a Terminated Transaction, determined by it in a commercially reasonable manner. “Party” or “Parties” means Buyer and Seller, individually or collectively, as applicable. “Product” means the RECs to be delivered in a particular Transaction, which may include Environmental Attributes, Verifications, Certifications and other characteristics as specified in a Confirmation Letter. 120110 dm 6051656 5 “Product Reporting Rights” means the exclusive right to report sole ownership of the Product to any Certification Authority, Applicable Tracking System, Administrator, Governmental Authority or other party, including under Section 1605(b) of the Energy Policy Act of 1992, or under any present or future Applicable Standard. “REC Transaction” means a particular, specific transaction to purchase RECs agreed upon between the Parties as specified in a Confirmation Letter. “REC Transaction Date” means the date specified on the Confirmation Letter. “Renewable Energy Certificates” (“REC” or “Credits”) means a certificate, credit, allowance, green tag, Tradable Renewable Certificate (“TRC”) or other transferable document, which is created by an Applicable Standard or a Certification Authority and is associated with the generation of one (1) megawatt hour (“MWh”) of electricity from one or more Renewable Energy Sources by a Renewable Energy Facility. A REC shall include all Environmental Attributes associated with the generation of such electricity, unless specified otherwise in a Confirmation Letter and in accordance with the Applicable Standard, as well as all related Product Reporting Rights, and shall be verified or certified by a Verification Provider or Certification Authority, in accordance with the Applicable Standard. Such Environmental Attributes may be disaggregated and retained, or sold separately, as the Parties agree. A REC is separate from the energy produced and may be separately transferred or conveyed. “Renewable Energy Facility” means an electric generation unit or other facility or installation that produces electric energy using a Renewable Energy Source. “Renewable Energy Source” means an energy source that is not fossil carbon- based, non-renewable or radioactive, and may include solar, wind, biomass, geothermal, landfill, gas, or wave, tidal and thermal ocean technologies. “Renewable Portfolio Standard” or “RPS” means a state or federal law, rule or regulation that requires a stated amount or minimum proportion or quantity of electricity that is sold or used by specified persons to be generated from Renewable Energy Sources. “Settlement Amount” means the Losses or Gains, and Costs which the Non- Defaulting Party incurs as a result of the liquidation of a Terminated Transaction pursuant to Section 7. “Terminated Transaction” is defined in Section 7. “Verification Provider” means an entity that could be an entity other than the Certification Authority, but could also be the Certification Authority, that verifies or audits specified aspects of Products, RECs, or one or more specified Environmental Attributes. “Vintage” means the calendar year, quarter, or other specified period of time in which the energy associated with the REC was generated. 120110 dm 6051656 6 “WECC” means Western Electricity Coordinating Council, the western regional council of the North American Electric Reliability Corporation (NERC). “WREGIS” means the Western Renewable Energy Generation Information System, an independent, renewable energy tracking system for the region covered by the Western Electricity Coordinating Council (WECC). 3. REC Transactions. (a) Purchase and Sale: On the terms and subject to the conditions set forth in this Master Agreement, Seller agrees to sell, and Buyer agrees to purchase, all of Seller's rights, title and interest in and to the RECs to be provided on the dates and otherwise as set forth on any Confirmation Letter(s) now, or hereafter, entered into between the Parties (Exhibit A, attached and incorporated by this reference). (b) Delivery Obligations: As specified in the applicable Confirmation Letter, one of the following delivery obligations (“Delivery Obligation”) shall apply to each Product quantity to be delivered under each REC Transaction: If the Confirmation Letter provides that the RECs delivery obligation is: (i) “Firm” Seller shall deliver the RECs by the Delivery Deadline, and no ground for excuse other than Force Majeure shall apply; (ii) “Unit Contingent” Seller’s obligation to deliver the RECs will be excused to the extent the Renewable Energy Facility is not able to generate Environmental Attributes in the Vintage or other agreed-to time period as specified in the Confirmation Letter, (due to the performance of the Renewable Energy Facility); or (iii) “Project Contingent” Seller’s obligation to deliver the RECs will be excused to the extent the Renewable Energy Facility is not able to generate Environmental Attributes in the Vintage or other agreed-to time period as specified in the Confirmation Letter, due to a delay or failure in constructing or obtaining necessary approvals to construct or modify and operate the new or modified Renewable Energy Facility, or due to reasons as specified in the Confirmation Letter. (c) Right to Sell and Associated Declarations. With respect to each REC Transaction, Seller hereby represents and warrants to Buyer, upon Delivery for each Product, the following: 120110 dm 6051656 7 (i) Seller has exclusive rights to, good and marketable title to, and unencumbered interest in, the Product described in each REC Transaction under Applicable Law; and (ii) Seller transfers and sells to Buyer all present and future rights, title, and unencumbered interest of Seller in and to the Environmental Attributes (as discussed in the Confirmation Letter) to the extent Seller will have such rights, title, and interest in and to such RECs under Applicable Law and such transfer and sale to Buyer is not in violation of any Applicable Law at the time of execution of the Confirmation Letter. (d) Notwithstanding whether such RECs are transferable to Seller under any Applicable Law, with respect to each REC Transaction upon Delivery for each Product, Seller covenants to Buyer that: (i) Seller has not transferred, and will not transfer, any portion of the rights, title and interest in and to the Product to a third party; (ii) Product will not be sold, marketed, or otherwise claimed by Seller; (iii) Product delivered to Buyer shall be sold by Seller once and only once; (iv) The Environmental Attributes or the electricity that was generated with the attributes were not used to meet any federal, state or local renewable energy requirement, renewable energy procurement, Renewable Portfolio Standard, or other renewable energy mandate; and (v) The electricity that was generated with the attributes was not separately sold, separately marketed or otherwise separately represented as renewable energy by Seller. Seller shall take such action as may be necessary to transfer and evidence the transfer of RECs to Buyer. (e) Confirmation. Unless otherwise agreed in writing, Seller will send Buyer a Confirmation Letter, which may be in substantially the form attached hereto as Exhibit A, or as modified, to describe the specific RECs to be purchased in the REC Transaction. Upon receipt of such Confirmation Letter, the other Party shall promptly return, in the manner described in Section 11, “Notices”, a written acceptance thereof, which shall be a signed copy of the Confirmation Letter. (f) REC Contract Price. Buyer agrees to buy and Seller agrees to sell each REC at a price in dollars per MWh as set forth in the Confirmation Letter. 120110 dm 6051656 8 (g) REC Product Quantity. Seller will provide to Buyer RECs in the quantity as set forth in the Confirmation Letter in accordance with the specified Delivery Obligation. (h) Monetary Value of REC Transactions. The monetary value of each REC Transaction, which is the REC Contract Price times the REC Product Quantity, shall be set forth in the Confirmation Letter associated with that Transaction. (i) Certification. Seller represents and warrants that it will provide to Buyer RECs that meet or exceed the Applicable Standard as set forth in the Confirmation Letter such as, for example, the requirements of the Center for Resource Solutions’ Green-e certification program, as amended from time to time and referenced in Exhibit B. (j) Reporting. (i) If required under the Applicable Standard, Seller shall be obligated to complete and provide to Buyer a signed copy of the Attestation Form, or suitable equivalent substitute no later than the Delivery Deadline, as specified in the Confirmation Letter. (ii) Buyer is not obligated to pay Seller for any RECs which have not been delivered. (k) Applicable Tracking System. If specified in the Confirmation Letter, Seller shall deliver to Buyer, and Buyer shall receive, the RECs by the Delivery Deadline via the Applicable Tracking System (or other mechanism provided for in the Confirmation Letter), such as WREGIS, such that all rights, title to and interest in the RECs shall transfer from Seller to Buyer upon such delivery and in accordance with the rules of the Applicable Tracking System. 4. Financial and Performance Assurances. (a) Material Adverse Change. A “Material Adverse Change” occurs with respect to either Party if: reasonable grounds exist to cause a Party to belief that the creditworthiness of the other Party has become unsatisfactory or that a Party’s ability to perform under this Master Agreement has been materially impaired. (b) Adequate Assurances. If a Party believes that a Material Adverse Change has occurred, the dissatisfied Party (the “First Party”) may make a written request for the other Party (the “Second Party”) to provide adequate assurance in an amount determined in a commercially reasonable manner, 120110 dm 6051656 9 and in a form acceptable to the First Party. Acceptable Performance Assurance includes (i) cash; (ii) an irrevocable, non-transferable standby letter of credit issued by a U.S. commercial bank or a foreign bank with a U.S. branch acceptable to the First Party in its sole discretion with such bank having a credit rating of at least A- from Standard & Poor’s Rating Group (a division of McGraw-Hill, Inc) (or its successor) or A3 from Inc. (or its successor), in a form acceptable to the First Party with costs of a letter of credit borne by the applicant of such letter of credit; (iii) a prepayment; or (iv) such other acceptable security acceptable to the First Party; each of (i) through (iv) in the First Party’s sole discretion. Upon receipt of the request to provide adequate assurance, the Second Party shall have two (2) Business Days to provide such assurance before an Event of Default under Section 6 of this Master Agreement will be deemed to have occurred and the First Party will be entitled to the remedies set forth in Section 7. If the Second Party provides such adequate assurance to the First Party within two (2) Business Days, it is understood that the Second Party shall not in fact have defaulted under this Master Agreement by incurring a Material Adverse Change. 5. Billing and Terms of Payment. (a) Billing. Upon each delivery of RECs, Seller shall provide an invoice to Buyer in the amount applicable to each REC Transaction executed under the Confirmation Letter. (b) Terms of Payment. The terms of payment shall be net thirty (30) days after the date Buyer receives a properly prepared and accurate invoice sent to the Buyer’s address, which shall include at a minimum: (1) Seller’s complete name and address where payment is to be remitted; (2) Buyer’s complete name and address where bill is to be sent; (3) Price and billing units consistent with the Confirmation Letter(s) executed by the Parties; (4) quantity; (5) Attestation, if required, will be delivered with invoice; (6) invoice date; (7) total monetary amount; (8) terms of payment, including any applicable discount calculations; (9) tax amount/rate information, if applicable. (c) Payment may be made by check or wire transfer. Payment by check shall be considered made when received by Seller. Buyer agrees to send its payment to: Address: _____________________ 120110 dm 6051656 10 Attention: _____________________ Wiring instructions: 6. Events of Default. A Party is in default (“Default”) hereunder if that Party (the “Defaulting Party”) does any of the following (each an “Event of Default”): (a) the failure of the Buyer to make any payment required pursuant to this Master Agreement, if such failure is not remedied within fifteen (15) Business Days after written notice, provided that if the Buyer, in good faith, disputes all or any portion of the payment, the Buyer shall pay only that portion of the payment that it does not dispute; (b) the failure of the Seller to deliver RECs when due pursuant to this Master Agreement, if such failure is not remedied within five (5) Business Days after written notice to the affected Party; (c) any representation or warranty provided by either Party herein that shall prove to have been false or misleading in any material respect when made or repeated; (d) the failure by a Party to perform any covenant or agreement set forth in this Master Agreement and applicable Confirmation Letters and incorporated exhibits (other than its obligations to make any payment or obligations which are otherwise specifically covered as a separate Event of Default), and such failure is not cured within fifteen (15) Business Days after written notice thereof to the affected Party; (e) the Party becomes Bankrupt; or (f) the failure by a Party to provide timely and satisfactory financial and/or performance assurance when requested to do so under the terms of this Master Agreement, and such failure is not cured within five (5) Business Days after written notice thereof to the affected Party. 7. Remedies for Default. (a) Declaration of Early Termination Date and Calculation of Settlement Amounts. If an Event of Default with respect to a Defaulting Party occurs and is continuing, the other Party (the “Non-Defaulting Party”) will have the right to do any or all of the following: 120110 dm 6051656 11 (i) designate a day, no earlier than the day such notice is effective and no later than 20 days after such notice is effective, as an early termination date (“Early Termination Date”) to accelerate all amounts owing between the Parties and to liquidate and terminate all, but not less than all, REC Transactions (each referred to as a “Terminated Transaction”) between the Parties; (ii) withhold any payments due to the Defaulting Party under this Master Agreement; and (iii) suspend performance. (b) Calculation of Settlement Amounts. The Non-Defaulting Party will calculate, in a commercially reasonable manner, a Settlement Amount for each such Terminated Transaction as of the Early Termination Date by aggregating its Gains, Losses and Costs with respect to each such Terminated Transaction (or, to the extent that in the reasonable opinion of the Non-Defaulting Party certain of such Terminated Transactions are commercially impracticable to liquidate and terminate or may not be liquidated and terminated under Applicable Law on the Early Termination Date, as soon thereafter as is reasonably practicable). If the Non- Defaulting Party’s aggregate Gains exceed its aggregate Losses and Costs, if any, resulting from the termination of this Master Agreement, the settlement amount shall be zero, notwithstanding any provision of this Master Agreement to the contrary. (c) Net Out of Settlement Amounts. The Non-Defaulting Party will aggregate all Settlement Amounts into a single amount by netting out the following: (i) all amounts that are due to the Defaulting Party, if the Defaulting Party is Seller, for RECs that have been delivered and not yet paid for, plus, at the option of the Non-Defaulting Party, any or all other amounts due to the Defaulting Party under this Master Agreement; against (ii) all Settlement Amounts that are due to the Non-Defaulting Party under this Master Agreement, so that all such amounts will be netted out to a single liquidated amount (the “Termination Payment”) payable by the Non-Defaulting Party. The Termination Payment, if any, is due from the Defaulting Party to the Non-Defaulting Party within five (5) Business Days following notice. (d) Calculation Disputes. If the Defaulting Party disputes the Non-Defaulting Party’s calculation of the Settlement Amount or Termination Payment, in whole or in part, the Defaulting Party will, within five (5) Business Days 120110 dm 6051656 12 of receipt of the Non-Defaulting Party’s calculation, provide the Non- Defaulting Party a detailed written explanation of the basis for such dispute. (e) Limitation on Damages. The Defaulting Party’s liability will be limited to direct, actual damages, and Costs only, and such direct, actual damages, and Costs will be the sole and exclusive remedy hereunder. In no event will either Party be liable to the other under this Master Agreement for any consequential, incidental, punitive, exemplary, or indirect damages in tort, contract, or otherwise pursuant to this Section 7, except for any claims indemnified pursuant to Section 8. (f) Exclusive Remedy. THE REMEDIES SET FORTH IN THIS SECTION ARE THE SOLE AND EXCLUSIVE REMEDIES AVAILABLE TO THE NONDEFAULTING PARTY IN THE EVENT OF A PARTY’S DEFAULT WITH RESPECT TO ITS OBLIGATIONS TO SELL OR PURCHASE RECS, AND A PARTY’S LIABILITY SHALL BE LIMITED AS SET FORTH IN THIS SECTION. ALL OTHER REMEDIES OR DAMAGES FOR FAILURE TO SELL OR PURCHASE RECS AT LAW ARE HEREBY WAIVED. 8. Indemnification. (a) Indemnification of Buyer: To the fullest extent permitted by Applicable Law, Seller agrees to protect, defend, hold harmless and indemnify Buyer, its City Council, commissioners, officers, employees, volunteers and agents from and against any claim, injury, liability, loss, cost, and/or expense or damage, including all costs and reasonable attorney’s fees in providing a defense to any claim arising therefrom, for which Buyer shall become liable arising from Seller’s acts, errors, or omissions with respect to or in any way connected with the maintenance, assistance and services performed by Seller pursuant to this Master Agreement and subsequent REC Transactions and related Confirmation Letters, except for claims, liabilities and damages caused by the Buyer’s sole negligence or willful misconduct. (b) Indemnification of Seller: To the fullest extent permitted by Applicable Law, Buyer agrees to protect, defend, hold harmless and indemnify Seller, its board of directors, officers, employees, volunteers and agents from and against any claim, injury, liability, loss, cost, and/or expense or damage, including all costs and reasonable attorney’s fees in providing a defense to any claim arising therefrom, for which Seller shall become liable arising from Buyer’s negligent, reckless or wrongful acts, errors, or omissions with respect to or in any way connected with the maintenance, assistance and services performed by Buyer pursuant to this Master Agreement and subsequent and related Confirmation Letters, except for claims, liabilities 120110 dm 6051656 13 and damages caused by the Seller’s comparative negligence or willful misconduct. 9. Relationship of the Parties. The relationship of the Parties under this Master Agreement is that of independent contractors. The Parties specifically state their intention that this Master Agreement is not intended to create a partnership or any other co-owned enterprise unless specifically agreed to by the Parties in a separate written instrument. Except as specifically provided herein, each Party shall continue to have the right to contract independent of the other Party with individuals and entities. Each Party shall be responsible for its own operating expenses and personnel expenses. 10. Taxes and Costs. Unless otherwise specified in the applicable Confirmation Letter (and to the extent not included in the purchase price), each Party shall bear the cost of any taxes imposed on such Party in relation to or arising out of such REC Transaction. Each Party shall be liable for all costs, fees, commissions or other payments due to brokers, agents or other intermediaries incurred by such Party (and shall indemnify and hold the other Party harmless from and against all such amounts) in connection with the drafting, consummation or performance of this Master Agreement or any REC Transaction hereunder. 11. Notices. All notices required or permitted to be given hereunder in writing shall, unless expressly provided otherwise, be in writing, properly addressed, postage pre-paid and delivered by hand, facsimile, certified or registered mail, courier or electronic messaging system to the appropriate address as either Party may designate from time to time by providing notice thereof to the other Party. 120110 dm 6051656 14 If to Buyer: Address: 250 Hamilton Ave. Palo Alto, CA 94301 Attention: City Clerk Phone: 650-329-2119 Fax: 650-617-3140 With a copy to: Address: 250 Hamilton Ave. Palo Alto, CA 94301 Attention: Director of Utilities Phone: 650-329-2119 Fax: 650-617-3140 If to Seller: Address: Attention: Phone: Fax: Notices delivered by facsimile or by an electronic messaging system shall require confirmation through a reply facsimile or electronic message. 12. Confidential Information. (a) “Confidential Information” shall mean and include information consisting of documents and materials of a disclosing Party and/or any other technical, financial or business information of or about a disclosing Party which is not available to the general public, as well as all information derived from such information, which is furnished or made available to the other Party and is clearly labeled, marked or otherwise identified as “confidential” or “proprietary information.” (b) The disclosing Party is the Party to whom the Confidential Information originally belongs and who shall, after appropriate notice from the receiving Party, bear the burden of pursuing any legal remedies to retain the confidential status of the Confidential Information, as set forth in Section 12(e), below. (c) Confidential Information disclosed by either Party to the other shall be held by the receiving Party in confidence, and shall not be: (i) used by the recipient to the detriment of the disclosing Party; or (ii) made available for third parties to use. (d) Each Party shall direct its employees, contractors, consultants and representatives who have access to any Confidential Information to comply with all the terms of this Section. Information received by the receiving Party shall not be Confidential Information if: 120110 dm 6051656 15 (i) it is or becomes available to the public through no wrongful act of the receiving Party; (ii) it is already in the possession of the receiving Party and not subject to any confidentially agreement between the Parties; (iii) it is received from a third party without restriction for the benefit of the disclosing Party and without breach of this Master Agreement; (iv) it is independently developed by the receiving Party; or (v) it is disclosed pursuant to a requirement of law or a duly empowered government agency or a court of competent jurisdiction after due notice and an adequate opportunity to intervene is given to the disclosing Party, unless such notice is prohibited. (e) Seller acknowledges that City is a public agency and is subject to the requirements of the California Public Records Act Cal. Gov. Code section 6250 et seq. Seller may submit Confidential Information to City pursuant to Section 12(a), above and City will maintain such identified documents as confidential to the fullest ext extent allowed by law. However, upon request or demand from any third person or entity not a party to this Master Agreement (“Requestor”) for production, inspection and/or copying of information designated by a disclosing Party as Confidential Information, the receiving Party shall notify the disclosing Party that such request has been made in accordance with Section 11 of this Master Agreement. Upon receipt of this notice, the disclosing Party shall be solely responsible for taking whatever legal steps may be necessary to protect the information deemed by it to be Confidential Information and to prevent release of information to the Requestor by the receiving Party. If within ten (10) days after receiving the foregoing notice from the receiving Party, the disclosing Party takes no such action, the receiving Party shall be permitted to comply with the Requestor’s demand and is not required to defend against it. (f) Upon termination or expiration of this Master Agreement, the receiving Party shall, at the disclosing Party’s direction, either return or destroy all of the disclosing Party’s Confidential Information and so certify in writing. The obligations of this provision will survive for one (1) year after any termination or expiration of this Master Agreement. 13. Publicity and Disclosure. Seller shall not use the name, trade name, trademarks, service marks of or owned by Buyer, or logos of Buyer, or share Confidential Information in any publicity releases, news releases, annual reports, product packaging, signage, stationery, print literature, advertising, websites or other media without securing the prior written approval of Buyer. Seller shall not, without prior written consent of Buyer, represent, directly or indirectly, that any product or service offered by Seller has been approved or endorsed by Buyer. Seller agrees that Buyer may make oral and written reports and other communications regarding this Master Agreement and subsequent REC Transactions to the Palo Alto City Manager, City Council and other 120110 dm 6051656 16 public officials as required by law, which reports and communications will be public reports and communications. 14. Nondiscrimination. As set forth in Palo Alto Municipal Code section 2.30.510, Seller agrees that in the performance of this Master Agreement, it shall not discriminate in the employment of any person because of the race, skin color, gender, gender identity, age, religion, disability, national origin, ancestry, sexual orientation, pregnancy, genetic information or condition, housing status, marital status, familial status, weight or height of such person. Seller acknowledges that it has read and understands the provisions of Chapter 2.30 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and agrees to meet all requirements of Chapter 2.30 pertaining to nondiscrimination in employment, including completing the form furnished by Buyer and set forth in Exhibit C. 15. Miscellaneous Representations and Warranties. (a) Each Party represents and warrants that the execution and performance of this Master Agreement and subsequent REC Transactions will not conflict with or result in a breach of any other agreement to which it is a party. (b) Each Party represents and warrants that it is duly organized, validly existing and in good standing under the laws of a state of the United States of America. (c) Each Party represents and warrants that it has full power and authority to make, execute, deliver and perform this Master Agreement and subsequent REC Transactions. (d) Each Party represents and warrants that it will abide by the Applicable Program as specified in each Confirmation Letter. (e) Each Party represents and warrants that it will abide by the Green-e Standard v. 1.5 or as amended when applicable. 16. Choice of Law. The laws of the State of California shall be applied and be controlling for all purposes and all matters relating to the Master Agreement. In the event that an action is brought, the Parties agree that trial of such action will be vested exclusively in the United States District Court for the Northern District of California in the County of Santa Clara, State of California. 120110 dm 6051656 17 17. Entire Agreement. This Master Agreement constitutes the entire agreement between the Parties relating to the subject matter hereof and supersedes all prior agreements, understandings, negotiations, whether oral or written, of the Parties. 18. Amendments. Except to the extent herein provided, no amendment, supplement, modification, termination or waiver of this Master Agreement shall be enforceable unless executed in writing by the Party to be bound thereby. 19. Assignment. This Master Agreement is binding on any successors and assigns of the Parties. Neither Party may otherwise transfer or assign this Master Agreement, in whole or in part, without the other Party’s written consent. Such consent shall not be unreasonably withheld. Notwithstanding any provision to the contrary in this Agreement, any direct or indirect change of control of Seller (whether voluntary or by operation of law) shall be deemed an assignment and shall require the prior written consent of Buyer, which consent shall not be unreasonably withheld. 20 Non-Waiver; No Third Party Beneficiaries. No waiver by any Party of any of its rights with respect to the other Party or with respect to this Master Agreement or any matter or default arising in connection with this Master Agreement, shall be construed as a waiver of any other right, matter or default. Any waiver shall be in writing signed by the waiving Party. No payment, partial payment, acceptance or partial acceptance by Buyer will operate as a waiver on the part of the Buyer of any of its rights under the Master Agreement. This Master Agreement and subsequent Confirmation Letters related to REC Transaction are made and entered into for the sole benefit of the Parties, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, have any rights under, or have any direct or indirect cause of action or claim in connection with this Master Agreement. 21. Severability. In the event that any provision of the Master Agreement is found to be void or unenforceable, such findings shall not be construed to render any other provision of the Master Agreement either void or unenforceable, and all other provisions shall remain in full force and effect unless the provisions which are void or unenforceable shall substantially affect the rights or obligations granted to or undertaken by either Party. 120110 dm 6051656 18 22. Force Majeure. Neither Party shall be liable in any respect for failure or delay in the fulfillment or performance of REC Transactions under this Master Agreement, if performance is hindered or prevented, directly or indirectly by an event beyond the reasonable control of either Party, including, without limitation, war, public emergency or calamity, fire, earthquake, Acts of God, strikes, labor disturbance or actions, civil disturbances or riots, litigation brought by third parties against the Parties, or any act of a superior governmental authority or court order. Force Majeure may not be based on (i) Seller’s ability to sell RECs to another at a price greater than the purchase price specified in the Confirmation Letter, (ii) Buyer’s inability economically to use or resell the RECs, or (iii) Buyer’s ability to purchase RECs at a price less than the purchase price specified in the Confirmation Letter. 23. Exhibits and Insurance. The exhibits attached hereto are incorporated into this Master Agreement by reference. The exhibits may only be revised upon mutual agreement between the Parties unless otherwise specified in the exhibits. In the event of a conflict between this Master Agreement and the Confirmation Letter, the terms of the Confirmation Letter shall prevail. During the term of this Master Agreement, Seller shall maintain the insurance levels set forth on Exhibit D. 24. Compliance with Law. Each Party will comply with all lawful federal, state and local law, ordinances, resolutions, rate schedules, rules and regulations that may affect its rights and obligations under the Master Agreement. 25. Fiscal Provisions. The REC Transactions under this Master Agreement are subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. The Master Agreement and all related Confirmation Letters and Agreements will terminate without penalty (i) at the end of any fiscal year in the event that funds are not appropriated for the following fiscal year, or (ii) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal years and funds for the City’s obligations are no longer made available. This provision will take precedence in the event of a conflict with any other term or condition of the Master Agreement. [SIGNATURES ON NEXT PAGE] 120110 dm 6051656 19 IN WITNESS WHEREOF, each of the Parties hereto acknowledge that they have read the terms and conditions contained herein, understand and agree to the same and agree to be bound thereby and have caused this Master Agreement to be executed in duplicate originals by its duly authorized representative on the respective dates entered below. CITY OF PALO ALTO (“BUYER”) __________________________ City Manager APPROVED AS TO FORM: __________________________ Senior Deputy City Attorney APPROVED: __________________________ Director of Administrative Services __________________________ Director of Utilities XXXX (“SELLER”) By: __________________________ Name: Title: Taxpayer Identification No. Page 1 of 1 161128 dm 6051582 Exhibit A Confirmation Letter #1 The following describes a REC Transaction between Buyer and Seller for the sale, purchase and delivery of Renewable Energy Certificates (“RECs”) pursuant to the terms of the Master Agreement between the City of Palo Alto and __________________ dated ___________, 2016. Initially capitalized terms used and not otherwise defined herein are defined in the Master Agreement. Basic Commercial Terms: REC Transaction Date: REC Transaction Reference: Seller: Buyer: Renewable Resource Facility: Renewable Energy Source: Geography: Vintage(s): REC Product Quantity (MWh): REC Contract Price ($/MWh): Monetary Value of REC Transaction ($): Delivery Deadline: Product Specific Terms: Applicable Standard: Environmental Attributes retained by Seller, if any: Applicable Tracking System: Attestation Form [yes, no] Delivery Obligation [Firm, Unit Contingent, Project Contingent]: This Confirmation Letter is executed pursuant to and in accordance with the Master Agreement, and constitutes part of and is subject to the terms and provisions of the Master Agreement. The Parties agree to the REC Transaction set forth herein. City of Palo Alto (“Buyer”) XXXX (“Seller”) Signature Signature Name Name Title Title Date Date Page 1 of 2 161128 dm 6051582 Exhibit B Attestation Form Green-E Renewable Attestation from Wholesale Provider of Electricity or Recs I. Wholesale Provider Information Name of Provider: ________________________________________________________ Address of Provider: _______________________________________________________________ Contact Person: ____________________________ Title: _________________________________ Telephone: _______________ Fax: _________________ Email Address:____________________ II. Declaration I, (print name and title) ___________________________________________ declare(s) that the (indicate with “x”)1 ____ electricity bundled with renewable attributes / ____ renewable attributes only 2 listed below were sold exclusively from: (name of Provider) _________________________________ (“Provider”) to: (name of REC provider, utility, or electric service provider) _________________________________ (“Purchaser”). On behalf of the Provider, I further declare that: 1) all the renewable attributes (including CO2 benefits), including any emissions offsets, reductions or claims, represented by the renewable electricity generation listed below were transferred to Purchaser; 2) to the best of my knowledge, the renewable attributes were not sold, marketed or otherwise claimed by a third party; 3) Provider sold the renewable attributes only once; 4) the renewable attributes or the electricity that was generated with the attributes was not used to meet any federal, state or local renewable energy requirement, renewable energy procurement, renewable portfolio standard, or other renewable energy mandate by Provider, nor, to the best of my knowledge, by any other entity; 5) the electrical energy that was generated with the attributes was not separately sold, separately marketed or otherwise separately represented as renewable energy by Provider, or, to the best of my knowledge, by any other entity; and 1 Use separate forms to report electricity and REC sales. 2 If Seller purchased electricity bundled with renewable attributes and has stripped off those attributes to sell in this transaction, and is selling the undifferentiated electricity to a utility or load-serving entity, see section III also. Page 2 of 2 161128 dm 6051582 6) the facilities that generated all of the renewable electricity / renewable attributes (as indicated above) sold to Purchaser are listed below by fuel type. List the renewable MWhs sold or transferred to Purchaser identified below by quarter of generation as a separate line item. Generator Name Generator ID Number (EIA or QF) Nameplate Capacity (MW) Fuel Type # MWhs RECs / Elec. Sold First Date of Generator Operation (mm/yy)3 Period of Generation (quarter#/yy or mm/yy) As an authorized agent of Provider, I attest that the above statements are true and correct. ____________________________________________ Signature Date ____________________________________________ Place of Execution III. Additional Statement required of Provider selling electricity to Purchaser (Check box if not applicable: [ ]) I declare that the electricity listed above was delivered into the following NERC region or ISO: ________________ IV. Additional Statement required if Provider is selling only RECs to Purchaser and selling the associated electricity to a utility or load-serving entity (Check box if not applicable: [ ]) Please write the name of the utility or load-serving entity here: _______________________________________ By signing below, I attest to the accuracy of all Additional Statements above (III through IV): ____________________________________________ Signature Date ____________________________________________ Place of Execution 3 For facilities that have added new renewable capacity, please indicate the amount and operational date of the new capacity and the existing capacity. Page 3 of 2 161128 dm 6051582 This Form is used by the Center for Resource Solutions to verify the accuracy of claims made by retail marketers. The information on this form is held strictly confidential and will not be shared Page 1 of 1 161128 dm 6051582 Exhibit C Certification of Nondiscrimination As suppliers of goods or services to the City of Palo Alto, the firm and individuals listed below certify that they do not and will not during the course of this contract discriminate in the employment of any person because of person because of the race, skin color, gender, gender identity, age, religion, disability, national origin, ancestry, sexual orientation, pregnancy, genetic information or condition, housing status, marital status, familial status, weight or height of such person and that they are in compliance with all Federal, State and local directives and executive orders regarding nondiscrimination in employment. THE INFORMATION HEREIN IS CERTIFIED CORRECT BY SIGNATURE(S) BELOW. Authorized Signature:____________________________________________________ Date: _____________________ Page 1 of 1 161128 dm 6051582 EXHIBIT D INSURANCE REQUIREMENTS Seller shall maintain the level of insurance set forth below: 1 CITY OF PALO ALTO V.2016 MASTER POWER PURCHASE AND SALE AGREEMENT (EEI Version 2.1, modified 4/25/00) COVER SHEET This Master Power Purchase and Sale Agreement (“Master Agreement”) is made as of the following date: _____ __, 2016 (“Effective Date”). The Master Agreement, together with the exhibits, schedules, annexes and any written supplements hereto, the Party A Tariff, if any, the Party B Tariff, if any, any designated collateral, credit support or margin agreement or similar arrangement between the Parties and all Transactions (including any confirmations accepted in accordance with Section 2.3 hereto) shall be referred to as the “Agreement.” The Parties to this Master Agreement are the following: Name: (“Counterparty ” or “Party A”) Name: City of Palo Alto (“Counterparty” or “Party B”) All Notices: Attn: ______________________________ Phone: ________________________ Facsimile: ______________________ E-mail: ____________________________ Duns _________________________ Federal Tax ID Number: ____________ All Notices: Attn: Assistant Director, Resource Management Department of Utilities City of Palo Alto 250 Hamilton Avenue, 3rd Floor Palo Alto, CA 94301 Phone: 650-329-2119 Facsimile: 650-617-3140 Duns: 17-892-8479 Federal Tax ID Number: 94-6000389 With additional Notices of an Event of Default or Potential Event of Default to: Attn: ___________________________ Phone: ____________________________ Facsimile: ______________________ With additional Notices of an Event of Default or Potential Event of Default to: Attn: Senior Assistant City, Attorney/Utilities City of Palo Alto Phone: 650-329-2171 Facsimile: 650-329-2646 Invoices: Attn: __________________________ Phone: _____________________________ Facsimile: _______________________ E-mail: _________________________ Duns __________________________ Federal Tax ID Number: ______________ Invoices: Attn: Power Accounts Administrator Northern California Power Agency 651 Commerce Drive Roseville, CA 95678-6420 Phone: (916) 781-4224/3636 Facsimile: (916) 781-4225 Day Ahead Pre-Scheduling: Attn: _______________________________ Phone: _____________________________ Facsimile: ___________________________ E-mail: _____________________________ Day Ahead Pre-Scheduling: Confirmations: Attn: Pre-Scheduler Desk Northern California Power Agency 651 Commerce Drive Roseville, CA 95678 Phone: 916-781-4240/4227/4228 Facsimile: 916-781-4239 ATTACHMENT C 2 CITY OF PALO ALTO V.2016 Real Time Scheduling: Attn: _______________________________ Phone: _____________________________ Facsimile: ___________________________ E-mail: _____________________________ Real Time Scheduling: Attn: Chief Dispatcher/Scheduler Northern California Power Agency 651 Commerce Drive Roseville, CA 95678 Phone: 916-781-4237/3636 Facsimile: 916-781-4226 Payments: Attn: ________________________________ Phone: ______________________________ Facsimile: ____________________________ E-mail: ______________________________ Payments: Attn: Accounts Payable Northern California Power Agency 651 Commerce Drive Roseville, CA 95678 Phone: 916-781-4237/3636 Facsimile: 916-781-4226 Wire Transfer: BNK _______________________________ ABA: _______________________________ ACCT: ______________________________ Confirmation _________________________ Wire Transfer: Deposit to Northern California Power Agency, “to the benefit of City of Palo Alto” BNK U.S. Bank ABA: 121122676 ACCT: 1-534-0216-2744 Attn: Cyndy Husebye U.S. Bank 555 SW Oak Street, Suite 400 Portland, OR. 97204 Phone: 877-295-2509 Facsimile: 877-324-1680 Credit and Collections: Attn: _______________________________ Phone: _____________________________ Facsimile: ___________________________ Credit and Collections: Attn: Power Accounts Analyst Northern California Power Agency 651 Commerce Drive Roseville, CA 95678 Phone: 916-781-4221/4224 Facsimile: 916-781-4255 The Parties hereby agree that the General Terms and Conditions are incorporated herein, as selected, modified and amended by the following specific provisions, as provided for in such General Terms and Conditions: Party A Tariff: FERC Electric Rate Schedule ___, dated ______________, Docket Number: ER__-___-___ Party B Tariff: N/A Article One General Definitions Section 1.4 is amended by deleting the first sentence and replacing it to read as follows: “Business Day” means any day except a Saturday, Sunday, the Friday immediately following the Thanksgiving holiday or a Federal Reserve Bank Holiday. Section 1.10 is amended by adding after “the price” in line 1 the words “, including any and all AB 32 fees” and substituting “U.S. $” for “$U.S.” in line 1. Section 1.11 is amended by adding the following after “Party” in the third line: “after using commercially reasonable efforts to mitigate costs”. 3 CITY OF PALO ALTO V.2016 Section 1.12 is amended by deleting in the fourth line the word “issues” and replacing it with the word “issuer”. Section 1.24 is amended by adding before the period at the end thereof the following: “in accordance with Section 5.2”. Section 1.27 is amended by inserting the phrase “and in an amount” in the third line after the word “form” and before the word “acceptable”. Section 1.28 is amended by adding before the period at end thereof the following: “in accordance with Section 5.2”. Section 1.45 is amended by adding the following sentence at the end of that provision: “Party B shall be deemed to have complied with any request from Party A for the provision of Performance Assurance by furnishing a copy of a resolution adopted by Party B’s City Council within a reasonable period of time after receipt of such request, determining that Party B’s retail rates are set at levels sufficiently high to recover all costs of providing electric service to Party B’s retail electric customers, including the costs incurred by Party B under all Transactions executed under this Agreement.” Section 1.46 is amended by adding before the period at the end thereof the following: “; provided that the failure to comply with any requirement of this Master Agreement or a Transaction, including the requirements of Article 8, before the expiration of the time period expressly specified for such compliance in this Master Agreement or the Transaction, if any, shall not be considered a Potential Event of Default unless and until the applicable time period has expired without compliance”. Section 1.50 is amended by deleting the reference to “Section 2.4” and replacing it with “Section 2.5”. Section 1.51 is amended by (a) inserting the phrase “for delivery” in the second line after the word “purchases” and before the phrase “at the Delivery Point”, and (b) deleting the phrase “at Buyer’s option” in the fifth line and inserting in their place the following: “absent a purchase” and (c) inserting in the seventh line after the words, “any penalties” and before “, ratched demand”, the following: “(other than penalties imposed on Buyer under the CAISO Tariff, the NCPA Metered Subsystem Agreement, or an open access transmission tariff as a result of the non-delivery)”. Section 1.53 is amended by (a) deleting the phrase “at the Delivery Point” in the second line, and (b) deleting the phrase “at Seller’s option” in the fifth line and inserting in their place the following: “absent a sale, assuming a sale could not have been made in a commercially reasonable manner.” Section 1.56 is amended by deleting the words “pursuant to Section 5.2” and by adding before the period at the end thereof the following: “, as determined in accordance with Section 5.2.” Section 1.60 is amended by inserting the words “in writing” immediately following the words “agreed to”. Article Two Transaction Terms and Conditions Section 2.1 shall be amended by deleting the second sentence thereof. 4 CITY OF PALO ALTO V.2016 For purposes of Section 2.3, Party B requires that all Transactions be confirmed in writing. Accordingly, the provision is amended by striking the word “may” from the first line thereof and replacing it with the word “shall.” For purposes of Section 2.3, all references to Seller shall be instead to Party A. X Optional provision in Section 2.4. If not checked, inapplicable. A new Section 2.6 is added to Article Two, worded as follows: “2.6 No Oral Agreements or Modifications. Notwithstanding anything to the contrary in this Master Agreement, including in this Article Two, no Transaction between the Parties shall become binding unless and until a Confirmation for such Transaction is signed by both Parties, and this Master Agreement and any and all Transactions may not be orally amended or modified, including by Recording pursuant to Section 2.5.” Article Four Remedies for Failure to Deliver or Receive X Accelerated Payment of Damages. If not checked, inapplicable. A new Section 4.3 is added to Article Four, worded as follows: “4.3 Suspension of Performance. In addition to the remedies provided pursuant to Sections 4.1, 4.2 and 5.7, if Seller or Buyer fails to schedule, deliver or receive all or part of the Product pursuant to a Transaction for a period of three (3) or more consecutive days, and such failure is not excused under the terms of the Product, by Force Majeure, by the other Party’s failure to perform or by agreement of the Parties, then upon one (1) Business Day’s prior written notice, and for so long as the non-performing Party fails to perform, the performing Party shall have the right to suspend its performance under such Transaction. In the event the performing Party suspends performance pursuant to this Section 4.3, it shall not be obligated to resume performance until it has received notice from the non-performing Party at least one (1) Business Day prior to the date upon which the non-performing Party intends to resume its performance; provided that, if the performing Party has entered into a replacement contract with a term of 31 days or less, the performing Party may resume performance at the end of the term of such replacement contract. Remedies available under this provision to the performing Party are in addition to, not in replacement of, other remedies specified in this Agreement.” Article Five Events of Default; Remedies X Cross Default provision of Section 5.1(g) shall apply for both Party A and Party B. Cross Default amount for each shall be $20,000,000. Section 5.1(g) is amended by inserting, “or any Affiliate of such Party” after the first appearance of the word “Party” in subsections (i) and (ii). 5 CITY OF PALO ALTO V.2016 Section 5.1 is further amended by replacing the period at the end of subsection (h) with a semi- colon, and adding new subsections “(i),” “(j)" , “(k)” and “(l)”, which read as follows: “(i) during any consecutive ninety (90) day period, there have occurred five (5) or more “Seller Failures” as that term is used in Section 4.1, under any or all Transactions, regarding which the Seller shall be deemed to be the Defaulting Party, and Buyer shall also be entitled to its remedies under Section 4.1; (j) during any consecutive ninety (90) day period, there have occurred five (5) or more “Buyer Failures” as that term is used in Section 4.2 under any or all Transactions, regarding which the Buyer shall be deemed to be the Defaulting Party, and Seller shall also be entitled to its remedies under Section 4.2; (k) a representation or warranty with respect to the Defaulting Party's financial statement or position that is false or materially misleading; or (l) revocation by the Federal Energy Regulatory Commission of Party A’s authorization to make sales and market-based rates.” Section 5.2 is amended in line 3 by changing “right (i) to” to “right to (i)” and by adding the following sentence to the end of that provision: “If the Non-Defaulting Party’s aggregate Gains exceed its aggregate Losses and Costs, if any, resulting from the termination of this Agreement, the Settlement Amount shall be zero, notwithstanding any provision of this Agreement to the contrary.” Section 5.3 is amended byinserting the phrase “plus, at the option of the Non-Defaulting Party, any cash or other form of security then available to the Defaulting Party pursuant to Article Eight”, between the words “that are due to the Non-Defaulting Party,”, and “plus any and all other amounts” in the sixth line thereof Section 5.6 Closeout Setoff ___ Option A (Applicable if no other selection is made.) X Option B - Affiliates shall have the meaning set forth in the Master Agreement unless otherwise specified as follows: Option B is amended as set forth in Article 10 below. ___ Option C (No Setoff) Section 5.6 is further amended by inserting before the last sentence in Option B: “At the election of the Non-Defaulting Party, all obligations owing by or to an Affiliate of a Party shall be treated as if they were owing by or to the Party itself for purposes of set- off.” Article Six Section 6.4 is amended by deleting “and owing to each other on the same date”. Section 6.8 is amended by deleting the words, “may by agreement of the Parties,” in line 3 and inserting in their place the word “shall”. 6 CITY OF PALO ALTO V.2016 Article Seven Section 7.1 is amended by (i) deleting in the fifteenth line the words, “UNLESS EXPRESSLY HEREIN PROVIDED,”, (ii) adding in the nineteenth line the words, “; PROVIDED, HOWEVER, NOTHING IN THIS SECTION SHALL AFFECT THE ENFORCEABILITY OF THE PROVISIONS OF SECTIONS 4.1 AND 4.2 OF THIS AGREEMENT RELATING TO REMEDIES FOR FAILURE TO DELIVER/RECEIVE AND OF SECTIONS 5.2 AND 5.3 OF THIS AGREEMENT RELATING TO THE CALCULATION AND PAYMENT OF THE TERMINATION PAYMENT” immediately after the words “ANY INDEMNITY PROVISION OR OTHERWISE”, and (iii) adding at the end of the last sentence the words, “AND ARE NOT PENALTIES”. Article Eight 8.1 Party A Credit Protection Credit and Collateral Requirements Financial Information from Party B, Section 8.1(a) ___ Option A X Option B Specify: Audited financial statements for City of Palo Alto and for City of Palo Alto Enterprise Fund ___ Option C Credit Assurances from Party B, Section 8.1(b) X Not Applicable ___ Applicable Collateral Threshold for Party B, Section 8.1(c) X Not Applicable ___ Applicable Party B Independent Amount: N/A Party B Rounding Amount: N/A Party B Minimum Transfer Amount: N/A Downgrade Event, Section 8.1(d): __ Not Applicable X Applicable If applicable, complete the following: X It shall be a Downgrade Event for Party B only if (a) Party B’s underlying rating, determined without reference to third party credit enhancement, on its utility revenue bond ("Debt") by S&P or Moody's is respectively below BBB- or Baa3, (b) (ii) both S&P and Moody's refuse to rate Party B's Debt, or and (c) Party B’s City Council no longer has the legal authority under the Act, as defined by Schedule M, to adjust electric rates as necessary to recover Party B’s costs of providing retail electric service to its customers. Guarantor for Party B, Section 8.1(e): N/A Guarantee Amount: N/A 8.2 Party B Credit Protection: 7 CITY OF PALO ALTO V.2016 Financial Information from Party A, Section 8.2(a): __ Option A X Option B Specify: Audited financial statements to be provided by Party A as described in Section 8.2(a) shall be for Party A or parent entity, if any, providing credit support. ___ Option C Credit Assurances from Party A, Section 8.2(b): ___ Not Applicable X Applicable Collateral Threshold for Party A, Section 8.2(c ): ___ Not Applicable X Applicable If applicable, complete the following: Party A Collateral Threshold: means with respect to Party A, at any time the amount specified in the table below under the relevant heading opposite the lower of the ratings at that time assigned by Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc. (“S&P”) or Moody’s Investors Service, Inc., a subsidiary of Moody’s Corporation (“Moody’s”) to the long term, senior, unenhanced, unsecured debt securities or obligations of Party A’s Guarantor; provided, that (a) if the long term, senior, unenhanced, unsecured debt securities of Party A’s Guarantor is no longer rated by one of S&P or Moody’s, the Threshold with respect to Party A will be zero dollars and (b) if an Event of Default or Potential Event of Default with respect to Party A has occurred and is continuing, the Threshold with respect to such party shall be zero dollars. S&P Rating Moody’s Rating Threshold A- or above A3 or above $25,000,000 BBB+ Baa1 $15,000,000 BBB Baa2 $10,000,000 BBB- Baa3 $ 5,000,000 Below BBB- (or rating Below Baa3 (or rating $ 0 (zero) suspended or withdrawn suspended or withdrawn by both S&P and by both S&P and Moody’s) Moody’s) Party A Independent Amount: $0 Party A Rounding Amount: $100,000 Party A Minimum Transfer Amount: $250,000 8 CITY OF PALO ALTO V.2016 Downgrade Event, Section 8.2(d): ___ Not Applicable X Applicable If applicable, complete the following: X It shall be a Downgrade Event for Party A only if the Credit Rating of Party A or Party A’s Guarantor falls below BBB- from S&P or Baa3 from Moody's or if the unenhanced, unsecured senior long-term debt securities or obligations of Party A or Party A’s Guarantor ceases to be rated by either S&P or Moody's. Guarantor for Party A, Section 8.2(e): X Guarantor for Party A: ______________________ [Name of investment grade parent guarantor] Guarantee Amount: _______________________ [Unlimited Guarantee amount preferred] Article Ten Section 10.1 is amended by replacing “upon (thirty) 30 days’ prior written notice” in lines 2 and 3, with “, which termination shall be effective immediately upon receipt of written notice thereof”. Section 10.2 (ix) is amended to read in its entirety as follows: “(ix) (1) it is an “eligible contract participant” as such term is defined in the Commodity Exchange Act, as amended 7 U.S.C. § 1 (a) (12); and (2) it is an “eligible commercial entity” as such term is defined in the Commodity Exchange Act, as amended 7 U.S.C. § 1 (a) (11). Section 10.2 shall be amended by deleting the “and” at the end of sub-section 10.2(xi), replacing the period at the end of subsection 10.2(xii) with a semi-colon, and adding a new sub-section (xiii) as follows: “Notwithstanding any provision in this Agreement to the contrary, all information, statements, reports and similar materials, conveyed by Party A orally or in writing to Party B to demonstrate Party A’s financial condition, are true and accurate in all material respects. Any representation made by Party A regarding its financial performance or condition or that of its corporate parent (“Financial Representation”) as an inducement to Party B during the solicitation, bidding or negotiation of any Transaction entered into under this Master Agreement shall be deemed to be repeated and reaffirmed as of the date of the applicable Transaction and incorporated as a representation of Party A or a related party, if any, who makes the Financial Representation in that Transaction, without the need for any further action by either Party; and” Section 10.4 shall be amended by inserting the phrase "To the extent permitted by law," at the beginning of each of the first two sentences, and substituting the word, “each” for “Each” after the insertion of each such phrase. 9 CITY OF PALO ALTO V.2016 Section 10.5 shall be amended by deleting clause (ii) and the portion of clause (iii) prior to the words “provided, however”, and replacing them with the following: “(ii) transfer or assign this Agreement to an Affiliate of such Party so long as (x) such Affiliate’s creditworthiness is equal to or higher than that of such Party or the Guarantor as of the Effective Date and the date of entering into each Transaction under this Agreement, if any, for such Party, or (y) the obligations of such Affiliate are guaranteed by such Party or its Guarantor, if any, in accordance with a guaranty agreement in form and substance satisfactory to the other Party, and (iii) transfer or assign this Agreement to any person or entity succeeding to all or substantially all of the assets of such Party whose creditworthiness is equal to or higher than that of such Party or its Guarantor, if any, as of the Effective Date and the effective date of any such transfer or assignment. Section 10.6 is amended by deleting the words “New York” from the fourth line thereof and replacing it with the word “California.” Further, Section 10.6 is amended by deleting the last sentence thereof and replacing it with the following sentence: “With respect to any proceeding in connection with any claim, counterclaim, demand, cause of action, dispute and controversy arising out of or relating to this Agreement, the parties hereby consent to the exclusive jurisdiction of the federal courts sitting in the Northern District of the State of California; provided, however, that if the federal courts sitting in the Northern District of the State of California refuse jurisdiction, the Parties agree to the exclusive jurisdiction of the state courts sitting in the County of Santa Clara, State of California.” Section 10.8 is modified by adding before the word “constitute” in line four of Section 10.8, “, and all financial and other information, explanations, statements, reports provided by one party to the other in connection therewith”. Section 10.8 shall be amended by deleting its penultimate sentence in its entirety and replacing it with the following sentences: “The indemnity provisions of this Agreement shall survive the termination of this Agreement for the period of the applicable statute of limitations. The audit provisions of this Agreement shall survive the termination of this Agreement for a period of twelve (12) months.” Section 10.10 is deleted in its entirety and replaced with the following new section: “Bankruptcy. The Parties acknowledge and agree that (i) any Transaction with a maturity date more than two days after the date the Transaction is entered into constitutes a "forward contract" within the meaning of the United States Bankruptcy Code“, as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 and from time to time (the “Bankruptcy Code”); (ii) each believes that it is or intends that it shall be deemed for all purposes to be a “forward contract merchant” within the meaning of the Bankruptcy Code; (iii) all payments made or to be made by one Party to the other Party pursuant to this Agreement are "settlement payments" within the meaning of the Bankruptcy Code; and (iv) all transfers of Performance Assurance by one Party to the other Party under this Agreement are "margin payments" within the meaning of the Bankruptcy Code. Each Party further agrees that, for purposes of this Agreement, the other Party is not a "utility" as such term is used in 11 U.S.C. Section 366, and each Party agrees to waive and not to assert the applicability of the provisions of 11 U.S.C. Section 366 in any bankruptcy proceeding wherein such Party is a debtor. In any such proceeding, each Party further agrees to waive the right to assert that the other Party is a provider of last resort." Confidentiality X Confidentiality Applicable, subject to Section 10.11 as amended. If not checked, inapplicable. 10 CITY OF PALO ALTO V.2016 Section 10.11 shall be replaced in its entirety with the following: “Party A acknowledges that Party B is subject to California Constitution Article 1, Section 3, and the California Public Records Act, Cal. Gov. Code § 6250 et seq. (“Public Records Act”) in regard to the documents comprising this Master Agreement and the Transactions, which items may constitute public records subject to inspection and copying by the public under the authority of the California Constitution and the Public Records Act. Party B shall, consistent with those laws, use reasonable efforts to provide Party A with notice of any third party request to inspect and copy any of the documents that comprise this Master Agreement and the Transactions, which Party A might deem confidential and exempt from disclosure, in order that Party A may timely seek to protect those documents from disclosure to the third party. Party A acknowledges and agrees that Party B shall not be liable to Party A if Party B makes disclosure in accordance with the California Constitution and/or the Public Records Act before Party A has timely obtained an order to prevent Party B from making the requested disclosure to the third party.” A new Section 10.12 shall be added to Article 10 as follows: "10.12. No Agency. In performing their respective obligations hereunder, neither Party is acting, or is authorized to act, as the agent of the other Party.” A new Section 10.13 shall be added to Article 10 as follows: 10.13 Dispute Resolution. In the event of any controversy or claim, whether based in contract, tort, or otherwise, arising out of or based upon, or relating to this Agreement or the scope, breach, termination or validity of each of them (a “Dispute”), the Parties will resolve such Dispute in the following manner: 10.13.1 Negotiation. The Parties will attempt in good faith to resolve the Dispute promptly by negotiations between duly authorized representatives of the Parties who have authority to settle the Dispute. When a Party believes there is a Dispute, that Party will give the other Party written notice describing the Dispute with reasonable particularity. Within thirty (30) days after receipt of such notice, the receiving Party will submit a written response to the other Party. 10.13.2 Mediation. If the Dispute is not resolved within forty-five (45) days of the date of the response given pursuant to Section 10.13.1, or such additional time, if any, that the Parties mutually agree to in writing, the Parties shall try in good faith to settle the Dispute by mediation. The form of mediation and the mediator(s) selected to resolve the Dispute shall be acceptable to both Parties. 10.13.3 Additional Rights. If the Dispute is not resolved through mediation within ninety (90) days after the first meeting of the Parties and mediator(s), or such additional time, if any, that the Parties mutually agree to in writing, either Party shall be free to pursue any and all legal actions and remedies as it may deem necessary. 11 CITY OF PALO ALTO V.2016 A new Section 10.14 shall be added to Article 10 as follows: 10.14: “The Parties acknowledge and agree that any purchase of power made under this Agreement and any Transaction shall be executed and delivered in compliance with applicable laws and regulations in effect at the time this Agreement is signed by the Parties and at the time of entering into any particular Transaction, including, but not limited to, Senate Bill 1368 (California Public Utilities Code section 8340 et seq.) and related regulations (Title 20, Sections 2900 – 2930 of the California Code of Regulations), as amended, to the extent such laws and regulations, including SB 1368 and related regulations, apply or are deemed to apply to this Agreement and any Transaction. To the extent SB 1368 and related regulations require Party B as a local publicly owned electric utility to submit a compliance filing in accordance with such laws, Party A, upon the request of Party B, shall in good faith provide promptly to Party B (to the extent Party B lacks such information) the information to the extent Party A has knowledge of or access to such information, and shall work cooperatively with and provide commercially reasonable assistance to Party B in Party B’s compliance with such laws. A failure by Party A to provide such information which is within its possession or knowledge shall constitute a default under this Agreement.” A new Section 10.15 shall be added to Article 10 as follows: 10.15: “The Parties intend that the standard of review for changes to any rate, charge, classification, term or condition of this Agreement at FERC shall be the most stringent standard permissible under applicable law. As to the Parties, it is understood and agreed that the standard shall solely be the “public interest” application of the “just and reasonable” standard of review, as stated by the United States Supreme Court in Morgan Stanley Capital Group Inc. v. Public Utility District No. 1 of Snohomish County, Nos. 06-1457, 128 S.Ct. 2733 (2008), and consistent with the order of the Supreme Court in NRG Power Marketing, LLC, et al., v. Maine Public Utilities Commission et al., No. 08-674, 130 S.Ct. 693 (2010) (“NRG Order”). As to all other persons, the Parties intend and agree that the same standard, to the maximum degree as may be made applicable to other than the Parties, apply, to the maximum degree permitted under the NRG Order.” A new Section 10.16 shall be added to Article 10 as follows: 10.16 ““AB 32 fees” means the regulatory assessments, charges, fees imposts and/or taxes imposed upon and required to be paid by suppliers of energy in accordance with the Global Warming Solutions Act of 2006, Chapter 488, Statutes 2006, including, without limitation, the Compliance Offset Protocols, which shall be included (or be deemed included to the extent they are not expressly included) in the Contract Price, defined in Section 1.10 of the General Terms and Conditions, and that are in effect as of the Effective Date of this Agreement and/or the date the Parties enter into each Transaction hereunder.” A new Section 10.17 shall be added to Article 10 as follows: 10.17 “The Parties understand and agree that the Transactions under this Agreement are physical transactions for deferred delivery, and that the Parties contemplate making or taking physical delivery of electric energy. Party B is a commercial entity engaged in the business of delivering electric energy to its retail load and routinely makes or takes delivery of electric energy in order to provide service to its retail electric customers.” 12 CITY OF PALO ALTO V.2016 A new Section 10.18 shall be added to Article 10 as follows: 10.18 “Nondiscrimination. As set forth in Palo Alto Municipal Code section 2.30.510, Party A agrees that in the performance of this Agreement, it shall not discriminate in the employment of any person because of the race, skin color, gender, gender identity, age, religion, disability, national origin, ancestry, sexual orientation, pregnancy, genetic information or condition, housing status, marital status, familial status, weight or height of such person. Party A acknowledges that it has read and understands the provisions of Chapter 2.30 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and agrees to meet all requirements of Chapter 2.30 pertaining to nondiscrimination in employment, including completing the form furnished by Party B and set forth in Exhibit D.” A new Section 10.19 shall be added to Article 10 as follows: 10.19 “Imaged Agreement. Any original executed Agreement, Confirmation or other related document may be photocopied and stored on computer tapes and disks (the “Imaged Agreement”). The Imaged Agreement, if introduced as evidence on paper, the Confirmation, if introduced as evidence in automated facsimile form, the Recording, if introduced as evidence in its original form and as transcribed onto paper, and all computer records of the foregoing, if introduced as evidence in printed format, in any judicial, arbitration, mediation or administrative proceedings, will be admissible as between the Parties to the same extent and under the same conditions as other business records originated and maintained in documentary form. Neither Party shall object to the admissibility of the Recording, the Confirmation or the Imaged Agreement (or photocopies of the transcription of the Recording, the Confirmation or the Imaged Agreement) on the basis that such were not originated or maintained in documentary form under either the hearsay rule, the best evidence rule or other rule of evidence.” 13 CITY OF PALO ALTO V.2016 A new Section 10.19 shall be added to Article 10 as follows: Index Transactions. If the Contract Price for a Transaction is determined by reference to a Price Source, then: a) Market Disruption Event. If a Market Disruption Event occurs on any one or more days during a Determination Period (each day, a “Disrupted Day”), then: i) The fallback Floating Price, if any, specified by the Parties in the relevant Confirmation shall be the Floating Price for each Disrupted Day. ii) If the Parties have not specified a fallback Floating Price, then the Parties will endeavor, in good faith and using commercially reasonable efforts, to agree on a substitute Floating Price, taking into consideration, without limitation, guidance, protocols or other recommendations or conventions issued or employed by trade organizations or industry groups in response to the Market Disruption Event and other prices published by the Price Source or alternative price sources with respect to the Delivery Point or comparable Delivery Points that may permit the Parties to derive the Floating Price based on historical differentials. iii) If the Price Source retrospectively issues a Floating Price in respect of a Disrupted Day (a “Delayed Floating Price”) before the parties agree on a substitute Floating Price for such day, then the Delayed Floating Price shall be the Floating Price for such Disrupted Day. If a Delayed Price is issued by the Price Source in respect of a Disrupted Day after the Parties agree on a substitute Floating Price for such day, the substitute Floating Price agreed upon by the Parties will remain the Floating Price without adjustment unless the Parties expressly agree otherwise. iv) If the Parties cannot agree on a substitute Floating Price and the Price Source does not retrospectively publish or announce a Floating Price, in each case, on or before the fifth Business Day following the first Trading Day on which the Market Disruption Event first occurred or existed, then the Floating Price for each Disrupted Day shall be determined by taking the arithmetic mean of quotations requested from four leading dealers in the relevant market that are unaffiliated with either Party and mutually agreed upon by the Parties (“Specified Dealers”), without regard to the quotations with the highest and lowest values, subject to the following qualifications: 1. If exactly three quotations are obtained, the Floating Price for each such Disrupted Day will be the quotation that remains after disregarding the quotations having the highest and lowest values. 2. If fewer than three quotations are obtained, the Floating Price for each such Disrupted Day will be the average of the quotations obtained. 3. If the Parties cannot agree upon four Specified Dealers, then each of the Parties will, acting in good faith and in a commercially reasonable manner, select up to two Specified Dealers separately, and those selected dealers shall be the Specified Dealers. 14 CITY OF PALO ALTO V.2016 v) Unless otherwise agreed, if at any time the Parties agree on a substitute Floating Price for any Disrupted Day, then such substitute Floating Price shall be the Floating Price for such Disrupted Day, notwithstanding the subsequent publication or announcement of a Delayed Floating Price by the relevant Price Source or any quotations obtained from Specified Dealers. "Determination Period" means each calendar month a part or all of which is within the Delivery Period of a Transaction. "Exchange" means, in respect of a Transaction, the exchange or principal trading market specified as applicable to the relevant Transaction. "Floating Price" means a Contract Price specified in a Transaction that is based upon a Price Source. "Market Disruption Event" means, with respect to any Price Source, any of the following events: (a) the failure of the Price Source to announce, publish or make available the specified Floating Price or information necessary for determining the Floating Price for a particular day; (b) the failure of trading to commence on a particular day or the permanent discontinuation or material suspension of trading in the relevant options contract or commodity on the Exchange, RTO or in the market specified for determining a Floating Price; (c) the temporary or permanent discontinuance or unavailability of the Price Source; (d) the temporary or permanent closing of any Exchange or RTO specified for determining a Floating Price; or (e) a material change in the formula for or the method of determining the Floating Price by the Price Source or a material change in the composition of the Product. "Price Source" means, in respect of a Transaction, a publication or such other origin of reference, including an Exchange or RTO, containing or reporting or making generally available to market participants (including by electronic means) a price, or prices or information from which a price is determined, as specified in the relevant Transaction. “RTO” means any regional transmission operator or independent system operator. 15 CITY OF PALO ALTO V.2016 "Trading Day" means a day in respect of which the relevant Price Source ordinarily would announce, publish or make available the Floating Price. (b) Corrections to Published Prices. If the Floating Price published, announced or made available on a given day and used or to be used to determine a relevant price is subsequently corrected by the relevant Price Source (i) within 30 days of the original publication, announcement or availability, or (ii) in the case of RTO Transactions only, within such longer time period as is consistent with the RTO’s procedures and guidelines, then either Party may notify the other Party of that correction and the amount (if any) that is payable as a result of that correction. If, not later than thirty (30) days after publication or announcement of that correction, a Party gives notice that an amount is so payable, the Party that originally either received or retained such amount will, not later than three (3) Business Days after such notice is effective, pay, subject to any applicable conditions precedent, to the other Party that amount, together with interest at the Interest Rate for the period from and including the day on which payment originally was (or was not) made to but excluding the day of payment of the refund or payment resulting from that correction. Notwithstanding the foregoing, corrections shall not be made to any Floating Prices agreed upon by the Parties or determined based on quotations from Specified Dealers pursuant to paragraph (a) above unless the Parties expressly agree otherwise. (c) Rounding. When calculating a Floating Price, all numbers shall be rounded to four (4) decimal places. If the fifth (5th) decimal number is five (5) or greater, then the fourth (4th) decimal number shall be increased by one (1), and if the fifth (5th) decimal number is less than five (5), then the fourth (4th) decimal number shall remain unchanged. Schedule M ___ Party A is a Governmental Entity or Public Power System X Party B is a Governmental Entity, Schedule M Applicable Part A Part A of Schedule M is amended by including the following definition for the term “Act”: “Act” means the Constitution of the State of California, the California statute(s), charter and municipal ordinances under which Party B was created, organized and authorized to enter into this Master Agreement and each Transaction thereunder Part A is further amended by adding the following sentence at the end of the definition of the term “Special Fund”: “Party A has conducted such investigation as it deems necessary of the City of Palo Alto Enterprise Fund and the Act under which such Fund was established to determine, for its purposes under this Agreement, that such Fund meets this definition of Special Fund.” Part C Part C of Schedule M is amended by adding the phrase in line 7 “and to the extent applicable,” immediately following the word “limitation” in clause (i). Part D Section 3.4 is modified by inserting a period after “Master Agreement” in line 7 and deleting the rest of the sentence. 16 CITY OF PALO ALTO V.2016 Part E X Section 3.6 under Part E of Schedule M applies; however, the portion of that provision following the semicolon on the eighth line thereof is replaced in its entirety with the following: “any breach of clause (ii) of this provision shall be deemed to have arisen during a fiscal period of Governmental Entity or Public Power System for which such budgetary approval or certification of its obligations under this Master Agreement is required to be in effect and an Event of Default shall be deemed to have occurred for purposes of Section 5.1 under which Governmental Entity or Public Power System shall be treated as the Defaulting Party.” Part F ___ Add Section 8.4. If not checked, inapplicable. Part G Part G does not apply. 17 CITY OF PALO ALTO V.2016 Schedule P The following defined terms are added to Schedule P: “CAISO” means the California Independent System Operator Corporation, or its successor. “CAISO Tariff” means the Federal Energy Regulatory Commission approved tariff of CAISO, including all CAISO protocols, as the same may be amended from time to time. “CAISO Energy” means a Transaction in which the Seller shall sell and the Buyer shall purchase a quantity of Energy equal to the hourly quantity without Ancillary Services (as defined in the CAISO Tariff) that is or will be scheduled as a schedule coordinator to schedule coordinator transaction pursuant to the CAISO Tariff as amended from time to time for which the only excuse for failure to deliver or receive is an “Uncontrollable Force” (as defined in the CAISO Tariff) called by the CAISO in accordance with the CAISO Tariff. “HLH (Heavy Load Hour)” is defined as energy delivered from hours ending (HE) 0700- 2200 Monday-Saturday, excluding NERC holidays, PPT. “IST” means Inter-Scheduling Coordinator Trade shall mean a trade between Scheduling Coordinators of Energy or Ancillary Services in accordance with the CAISO Tariff. “LLH (Light Load Hour)” is defined as energy delivered from hours ending (HE) 0100- 0600 and 2300-2400 Monday-Saturday, all day Sunday and NERC holidays, PPT. “NP15 Zone Delivery Point” means the NP15 Zone; provided, however, if CAISO implements trading hubs under a locational marginal pricing design during the Delivery Period, the Delivery Point shall be the Existing Zone Generation NP15 Trading Hub (“NP15 EZ Gen Hub”), as such trading hub is contemplated by the CAISO in its filing made to the FERC dated March 15, 2005 (“Comprehensive Design Proposal for Inter- Scheduling Coordinator Trades Under the California Independent System Operator Corporation’s Market Redesign and Technology Upgrade, Docket No. ER02-1656-025”); provided further, if the NP15 EZ Gen Hub (under any name) is not established as part of a market redesign that is implemented during the Delivery Period, the parties agree to promptly work together in good faith to designate an alternate Delivery Point to reasonably approximate the characteristics of the NP-15 Zone. "West Firm", or “WSPP Schedule C” or “Schedule C” or “WSPPC-Firm” or any similar description means with respect to a Transaction, a Product that is or will be scheduled as firm energy consistent with the most recent rules adopted by the WECC for which the only excuses for failure to deliver or receive are if an interruption is (i) due to an Uncontrollable Force as provided in Section 10 of the WSPP Agreement; or (ii) where applicable, to meet Seller's public utility or statutory obligations to its customers. Notwithstanding any other provision in this Agreement, if Seller exercises its right to interrupt to meet its public utility or statutory obligations, Seller shall be responsible for payment of damages for failure to deliver firm energy as provided in Article 4 of this Agreement. "WECC" means the Western Electricity Coordinating Council. "WSPP Agreement" means the Western Systems Power Pool Agreement as amended from time to time. 18 CITY OF PALO ALTO V.2016 EXHIBIT A MASTER POWER PURCHASE AND SALE AGREEMENT CONFIRMATION LETTER EXHIBIT B RESOURCE ADEQUACY (“RA”) CAPACITY The Parties acknowledge and agree that after the execution of this Master Agreement, they may enter into one or more contracts or confirmations concerning Resource Adequacy, which products, terms, conditions and definitions shall be documented in an Resource Adequacy Confirmation (“RA Confirm”), the terms and conditions of which the Parties agree to negotiate in good faith at the time such Transactions are contemplated. EXHIBIT C RENEWABLE ENERGY CREDIT (“REC”) The Parties acknowledge and agree that after the execution of this Master Agreement, they may enter into one or more contracts or confirmations concerning RECs, which terms and conditions shall be documented in a REC Confirmation and which the Parties agree to negotiate in good faith at the time such Transactions are contemplated. EXHIBIT D CERTIFICATION OF NONDISCRIMINATION 19 CITY OF PALO ALTO V.2016 IN WITNESS WHEREOF, the Parties have caused this Master Agreement to be duly executed as of the date first above written. Party B: City of Palo Alto Approval as to Form: By: …………………………….. Name: _____________________ Title: Sr. Asst. City Attorney Date: _________, 20 Party A: By: …………………………….. Name: …………………………….. Title: …………………………….. Date: ________, 20 Party B: City of Palo Alto Approval by City Manager’s Office: By: …………………………….. Name: __________________ Title: City Manager Date: ________, 20 Party B: City of Palo Alto Approval by Administrative Services Department: By: …………………………….. Name: __________________ Title: Administrative Services Director Date: _________, 20 Party B: City of Palo Alto Approval by Utilities Department: By: …………………………….. Name: __________________ Title: __________________ Date: _______, 20 DISCLAIMER: This Master Power Purchase and Sale Agreement was prepared by a committee of representatives of Edison Electric Institute (“EEI”) and National Energy Marketers Association (“NEM”) member companies to facilitate orderly trading in and development of wholesale power markets. Neither EEI nor NEM nor any member company nor any of their agents, representatives or attorneys shall be responsible for its use, or any damages resulting therefrom. By providing this Agreement EEI and NEM do not offer legal advice and all users are urged to consult their own legal counsel to ensure that their commercial objectives will be achieved and their legal interests are adequately protected. 20 CITY OF PALO ALTO V.2016 Exhibit D Certification of Nondiscrimination As suppliers of goods or services to the City of Palo Alto, the firm and individuals listed below certify that they do not and will not during the course of this contract discriminate in the employment of any person because of the race, skin color, gender, gender identity, age, religion, disability, national origin, ancestry, sexual orientation, pregnancy, genetic information or condition, housing status, marital status, familial status, weight or height of such person and that they are in compliance with all Federal, State and local directives and executive orders regarding nondiscrimination in employment. THE INFORMATION HEREIN IS CERTIFIED CORRECT BY SIGNATURE(S) BELOW. Authorized Signature:____________________________________________________ Date: _____________________ City of Palo Alto (ID # 7532) City Council Staff Report Report Type: Consent Calendar Meeting Date: 12/12/2016 City of Palo Alto Page 1 Summary Title: Transportation Funding Stakeholder Advisory Committee Title: Review and Approve Process to Solicit Applications for a Stakeholder Committee to Advise the Council Regarding a Potential Tax and Other Funding Options for Transportation Programs and Projects From: City Manager Lead Department: City Manager Recommendation: Staff recommends that the City Council approve the process outlined in this staff report to solicit applications for a Transportation Funding Stakeholder Committee. Once appointed, the Committee’s charter would be to advise the Council regarding a potential future ballot measure seeking voter approval of a general tax on businesses, as well as other potential funding sources that the City could use to fund transportation programs and projects. To complete their work, the Committee would be asked to explore transportation needs, identify funding requirements, and assist staff with development of a timeline for a potential future ballot measure. Executive Summary: At their meeting on October 24, 2016, the City Council reviewed the options, timeline and potential membership of a stakeholder committee to explore priority transportation needs, identify funding, requirements and develop a funding plan. Council had previously expressed the desire to have a balance of business and resident interests, as well as specific organizations including Stanford, Palo Alto Unified School District and several already-formed Transportation Management Associations. Council discussed the process used to form several stakeholder groups including the Infrastructure Blue Ribbon Committee, as well as the SOFA Working Group associated with the Comprehensive Plan as possible models to follow. The Council directed staff to move forward with the process to form a 16-member committee with specific membership representation outlined in the discussion section below. As part of their direction, Council also tasked the stakeholder committee with both identifying priority transportation projects and also a variety of funding sources including a potential business tax, grants, funding from the VTA tax measures and parking revenues. In addition, the stakeholder committee will be asked to address the City of Palo Alto Page 2 issue of companies such as those in the Stanford Research Park who are already funding programs to reduce commute trips by their employees and how they might be impacted. Council indicated that some specified organizations would appoint their own representative to the Committee and that the 11 other members would go through an application process similar to the City’s other boards and commissions. While Council has expressed the desire to interview each applicant, this may be prohibitively time consuming if there is a large pool of applications and Council may wish to revisit this part of the process following the application period. The process outlined in this report suggests soliciting applications for 30 days beginning in early December, and broadly publicizing the opportunity to apply. Staff would review and transmit the applications received for the Council’s consideration at its January 30, 2017 meeting. At that meeting, Council may decide to interview candidates or use some other procedure to appoint applicants to the Committee.,The first stakeholder meeting anticipated to occur within a few weeks after the membership of the Committee is finalized. Background: At its meeting on June 27, 2016, the City Council reviewed the results from a second round of polling conducted by Fairbank, Maslin, Maulin, Metz & Associates (FM3) to inform Council’s decision about whether to place a local business tax on the ballot for November 2016 or an alternate election timeframe. In addition, the Council reviewed a set of framing issues developed by the Council’s Local Transportation Tax Ad Hoc Committee that included: Formation of an oversight committee Sunset of tax or not Estimated revenue generated by measure Structure and form of tax Relationship among timeframe for election, implementation and collection of revenues Potential projects that could be funded by tax proceeds Enforcement and other administrative elements and costs Impact on traffic congestion of no action/putting measure in place Regardless of the type and timing of a potential local tax to fund transportation projects, the Ad Hoc Committee was unanimous in its recommendation to the full Council on both the need for a stakeholder committee, as well as having representation from both the business and residential communities. As part of the motion passed by Council on June 27th, they directed staff to: City of Palo Alto Page 3 A) Consider placing a special tax measure requiring a two-thirds vote on a special election ballot in 2017 and utilize the additional time to refine the proposal, build consensus and address potential concerns about a tax; and B) If necessary, consider placing a general tax measure requiring a simple majority vote on the November 2018 ballot and utilize the additional time to refine the proposal and build consensus and address potential concerns about a tax; and C) Create a stakeholder committee to explore priority transportation needs, identify funding requirements and explore various funding options and develop a funding plan. Committee members would include a balance of business and resident interest, ideally include but not limited to Stanford, the Transportation Management Association, Palo Alto Unified School District, residents, Stanford Research Park, Transportation Demand Management Work Group and D) Direct staff to return with a timeline with activities to plan for a ballot measure and options for structure of the stakeholder committee. This staff report puts forward the recommended process pertaining to C) and D) above and the formation of a stakeholder advisory committee. Discussion: As its October 24, 2016 meeting, the City Council discussed the membership of a stakeholder committee to explore priority transportation needs, funding requirements and a potential business tax ballot measure. A key part of this discussion was the need to balance stakeholders between business and resident interests. Council discussed several previous stakeholder groups as possible models including the Infrastructure Blue Ribbon Committee and the SOFA Working Group. Each of these committees was appointed by Council after a review process. The IBRC stakeholder committee included four Board and Commission members and 15 other members of the community (no alternates). One third of the applicants had been interviewed by each of three separate three-member Council subcommittees. The 15 community members chosen were those who received the most Council votes. Ultimately, two of the 15 did not participate on the IBRC, resulting in the total 17-member committee. For the SOFA Working Group, 14 members and 4 alternates including neighborhood residents, business owners, and representatives of a broad range of Citywide and regional planning interests were appointed to the committee. Under the SOFA process, the Council identified different stakeholder representative groups and applicants applied based on these stakeholder categories. As part of their discussion, Council agreed to follow a similar process for the transportation stakeholder committee. They agreed on a 16- member structure with several specified organizations to be included as outlined below, and to have those organizations appoint their own representative. The stakeholder committee will also include two Ex Officio members from the Planning and Transportation Commission and the City of East Palo Alto. City of Palo Alto Page 4 Membership The Council directed that the Committee membership criteria be comprised of the following (including at least one representative to be a member of the Chamber of Commerce): i. Stanford Research Park Transportation Management Association (organization selection) ii. Palo Alto Downtown Transportation Management Association (organization selection) iii. Stanford Healthcare (organization selection) iv. Stanford Shopping Center (organization selection) v. Commercial Property Owner vi. Small Business Owner from other than the organizations listed above vii. Small Business Owner from Downtown viii. Medium or Large Sized Business Owner from other than the organizations listed above ix. Transit advocate or Expert (preferably a Palo Alto Resident) x. Bicycling advocate or Expert (preferably a Palo Alto Resident) xi. Non-Profit (preferably a Palo Alto Resident) xii. Affordable Housing (preferably a Palo Alto Resident) xiii. Palo Alto Unified School District (organization selection) xiv. North or South Downtown Resident xv. Resident One (not representing other criteria groups) xvi. Resident Two (not representing other criteria groups) Ex Officio Membership xvii. Planning and Transportation Commission xviii. City of East Palo Alto Application Process The Council asked that the stakeholder representatives not appointed directly by an organization follow a similar process to the City’s existing boards and commissions. There are 11 positions on the stakeholder committee that would be subject to this process, each with particular expertise or representation criteria. Attachment A is the application form that will be used to solicit applications for each stakeholder category. Staff will work with business, transportation, nonprofit and community organizations to encourage applications to fill stakeholder positions. Council has initially indicated they would like to interview all of the applicants within each group, similar to the process for boards and commissions. However, with 11 membership positions open, there is the potential that the total applicant pool could be quite large, and individually interviewing each applicant may be prohibitively time consuming. Council may wish to consider reviewing applications and resumes for each stakeholder position and making its membership selection without an individual in-person interview, or using another procedure identified by Council at the January 2017 meeting. City of Palo Alto Page 5 Timeline If the City Council approves the staff recommendation, application forms will be disseminated starting on December 13, 2016 and accepted until close of business on January 13, 2017. Staff anticipates that Council could review and make their selections for the Committee at the January 30, 2017 Council meeting, or some time thereafter. It is anticipated that the Committee would have its first meeting in the February/March 2017 time period. Council has indicated they would like the Committee to conclude its work and bring back their recommendations to the Council by November 2017. Resource Impact This transportation initiative will require substantial City staff time and resources to support the work of the stakeholder committee. Staff resources have not been allocated to this effort as yet, and will likely consist of currently vacant staff positions in the City Manager’s office (once filled) and existing staff that would need to be reassigned from other (to be determined) ongoing projects. Attachments: Attachment A: Stakeholder Application (DOCX) Attachment A Transportation Initiative and Funding Stakeholder Advisory Committee Application Name: Address: Cell Phone: ____ Home / ____ Office Phone: E-mail: Are you a Palo Alto Resident? ____ Yes ____ No Do you have any relatives or members of your household who are employed by the City of Palo Alto, who are currently serving on the City Council, or who are Commissioners or Board Members? ____ Yes ____ No Would you be able to attend an initial stakeholder committee meeting in February 2017 and are you available to attend monthly or more frequent meetings throughout 2017? ____ Yes ____ No Please check the stakeholder representative category you are applying for (only apply for one): Commercial Property Owner ____ Small Business Owner (10 employees or less) ____ Small Business Owner in Downtown ____ Medium or Large sized Business Owner ____ Bicycling advocate or expert ____ Transit advocate or expert ____ Nonprofit experience ____ Affordable housing experience ____ Resident – North or South Downtown ____ Resident One (not member of other category) ____ Resident Two (not member of other category) ____ Please describe your involvement/experience in community activities, business ownership or subject matter expertise relevant to the stakeholder category you are applying for: Why are you interested in serving on the Transportation Initiative/Funding Stakeholder Advisory Committee? How did you learn about the stakeholder committee solicitation? Email from the City ___ Website _____ Social Media _____ Outside organization ____ Other community member ____ Other: _____ City of Palo Alto (ID # 7477) City Council Staff Report Report Type: Consent Calendar Meeting Date: 12/12/2016 City of Palo Alto Page 1 Summary Title: Contract for Purchase of Type III Fire Engine & Budget Amendments Title: Approval of a Contract With Pierce Manufacturing Inc. in the Amount of $399,915 for the Purchase of a Type III Wildland Fire Engine and Approval of Budget Appropriation Amendments in the General Fund and the Vehicle Replacement and Maintenance Fund From: City Manager Lead Department: Public Works Recommendation Staff recommends that Council: 1. Approve and authorize the City Manager to execute a purchase order with Pierce Manufacturing Inc. in the amount of $399,915 for the purchase of a Type III Wildland Fire Engine; and 2. Amend the Fiscal Year 2017 Budget for: a. the General Fund by: i. Increasing the transfer to the Vehicle Replacement and Maintenance Fund in the amount of $79,915; and ii. Decreasing the General Fund Budget Stabilization Reserve in the amount of $79,915; and b. the Vehicle Replacement and Maintenance Fund by: i. Increasing the transfer from the General Fund by $79,915; and ii. Increasing the Scheduled Vehicle and Equipment Replacement Fiscal Year 2016 project VR-16000 in the amount of $79,915. Background The Vehicle and Equipment Use, Maintenance, and Replacement Policy section 4-1 provides for the on-going replacement of City fleet vehicles and equipment. Replacements are scheduled using guidelines based on age, mileage accumulation and obsolescence. The policy prescribes a replacement interval for fire engines of twenty years or 85,000 miles. Council approved this City of Palo Alto Page 2 replacement in the Fiscal Year 2016 Adopted Budget as part of the Scheduled Vehicle and Equipment Replacement Fiscal Year 2016 CIP (VR-16000). The approval was based on: An examination of each vehicle’s current usage; An analysis of each vehicle’s operating and replacement costs; A comparison of the age, mileage, operating cost and performance of each vehicle with others in the class; and An analysis of alternatives to ownership, such as mileage reimbursement; pooling/sharing; the reassignment of another underutilized vehicle, or renting. Staff recommends replacing vehicle 6120, a 1992 Type III Fire Engine designated for off-road wildland firefighting activity, as the vehicle has a long and documented history of relief valve and pump failures during fire incidents. Despite staff’s great efforts to keep this vehicle operational, the old technology and unreliable design of this unit makes it prone to failure. Each failure results in extended downtimes as parts have become increasingly difficult to procure. The Fire Department’s state of readiness, and ability for crews to serve the community at maximum capacity, is negatively affected during these downtimes. Discussion The City fleet must comply with many state and federal regulations. The proposed replacement Type III engine will comply with 2017 California Air Resources Board standards; implement National Fire Protection Agency 1912-2014 Annex D, which states apparatus’ older than 25 years shall be removed from service and retired; and lower the City’s carbon footprint, eliminating an engine from the fleet that is not compliant with state and federal emissions regulations. The unique fire potential of the Stanford foothills and Palo Alto Wildland Urban Interface area creates a need for the special characteristics of a Type III fire apparatus, including four wheel drive, shorter wheel base, higher ground clearance, and “pump and roll” capabilities. Traditional Type I fire apparatus’ are not capable of leaving the roadway, therefore not useful in remote or unpaved locations. The Palo Alto Fire Department is a partner in the California Disaster and Civil Defense Master Mutual Aid Agreement between the State of California, each of its counties and their incorporated cities and fire protection districts. In a typical fire season, partners are dispatched via the Governor’s Office of Emergency Services to incidents outside a partner’s county, but within the state. An engine can be utilized by the state for several weeks of the summer. For example, in 2016 the City sent two fire engines to the Clayton fire in Lake County, the Blue Cut fire in San Bernadino, the Soberanes fire in Big Sur, the Cedar fire in Bakersfield, and the Loma fire in Santa Cruz. Each deployment lasted several days. While these fire engines are deployed elsewhere, it is imperative that the fire engines utlizied in the City in their absence are reliable City of Palo Alto Page 3 and can provide an exceptional level of service to our community. The new engine will benefit the community’s all risk emergency needs by: Exceeding the capabilities of the engine to be replaced Providing reliable emergency response equipment Staff identified a current contract between the Town of Corte Madera and Pierce Manufacturing, Inc. for an engine that meets the City’s specifications. The City’s municipal code allows for cooperative purchases of this type under Section 2.30.360(k), and it is estimated that a separate bid from Palo Alto would cost more than the contract price agreed to by the Town of Corte Madera. City Manager and Administrative Services Department’s Purchasing Division review determined that this purchase qualifies for exemption from competitive solicitation requirements (Attachment A). Bid Process This is a cooperative purchase, exempt from competitive bidding under Palo Alto Municipal Code, Section 2.30.360(k). After reviewing the proposal and associated documentation submitted by Pierce, staff recommends Pierce be accepted and awarded the purchase order. Two payment options were offered by Pierce, (Attachment B). Staff recommends Payment Option B, 100% prepayment at contract signing, for a savings of over $18,000. Resource Impact The Scheduled Vehicle and Equipment Replacement Fiscal Year 2016 CIP (VR-16000) does not have sufficient funding to purchase the Type III fire engine. Traditionally, vehicle procurements are funded through annual charges to the department/fund that will benefit from the vehicle. In the Fiscal Year 2016 budget for VR-16000, $320,000 was appropriated for the replacement of this vehicle. To support this purchase, an appropriation of $79,915 to the Scheduled Vehicle and Equipment Replacement Fiscal Year 2016 CIP project (VR-16000) in the Vehicle Replacement and Maintenance Fund, offset by a transfer of $79,915 from the General Fund is recommended. With the recent vehicle replacements an aerial ladder truck is being decommissioned with an estimated resale value of $85,000. Therefore, it is anticipated that staff will make every effort to reach this resale value, and recommend that all proceeds of the sale reimburse the General Fund BSR for the additional funds recommended in this report. It is anticipated that this aerial ladder truck will be resold early in calendar year 2017. Policy Implications Authorization of the purchase order does not represent any change to the existing policy. Environmental Review This vehicle will meet 2017 EPA Emissions standards and the latest version of National Fire Protection Agency standards. City of Palo Alto Page 4 Attachments: Attachment A-Letter from Corte Madera (PDF) Attachment B-Pricing Options (PDF) Pierce Manufacturing Inc. AN OSHKOSH CORPORATION COMPANY • ISO 9001:2000 CERTIFIED 2600 AMERICAN DRIVE POST OFFICE BOX 2017 APPLETON, WISCONSIN 54912-2017 920-832-3000 • FAX 920-832-3208 www.piercemfg.com 1 PROPOSAL FOR PIERCE® FIRE APPARATUS Town of Corte Madera DATE November 20, 2015 342 Tamalpais Drive QUOTE NO. 71120-15 Corte Madera, CA 94925-1418 EXPIRES December 20, 2015 SALES REP. Daron M. Wright The undersigned is prepared to manufacture for you, upon an order being placed by you, for final acceptance by Pierce Manufacturing, Inc., at its home office in Appleton, Wisconsin, the apparatus and equipment herein named and for the following prices: OPTION A: FULL PAYMENT AT DELIVERY # Description Each A One (1) Type III Engine $374,202.40 B Factory Inspection Trips (1 trips for 2 CMFD representatives) $3,000.00 C Delivery to Corte Madera, CA $5,550.00 D Performance Bond $949.23 E APPARATUS COST $383,701.63 F California State Sales Tax @ 9.00% $34,533.15 G California Tire Tax Fee @ $1.75 per tire $10.50 H TOTAL PURCHASE PRICE $418,245.28 TERMS AND CONDITIONS of OPTION A: I. The Town of Corte Madera shall pay the purchase price of $418,245.28 for the Product within fifteen (15) calendar days of the units departing the manufacturing facility. 2 OPTION B: 100% PREPAYMENT AT CONTRACT SIGNING # Description Each A One (1) Type III Engine $374,202.40 B Factory Inspection Trips (1 trips for 2 CMFD representatives) $3,000.00 C Delivery to Corte Madera, CA $5,550.00 D Performance Bond $949.23 E 100% Prepayment Discount -$16,817.20 F APPARATUS COST $366,884.43 G California State Sales Tax @ 9.00% $33,019.60 H California Tire Tax Fee @ $1.75 per tire $10.50 I TOTAL PURCHASE PRICE $399,914.53 TERMS AND CONDITIONS of OPTION B: I. The Town of Corte Madera shall pay the purchase price of $399,914.53 for the Product within fifteen (15) calendar days of contract signing directly to Pierce Manufacturing Inc. II. The proposed delivery timeframe for the Product will not begin until Pierce Manufacturing Inc. approves the contract and receives full payment of the purchase price of $399,914.53. III. If payment of $399,914.53 is late and if the Town of Corte Madera elects not to have the delivery extended, $125.00 per calendar day will be added to the final invoice. Said apparatus and equipment are to be built and shipped in accordance with the specifications hereto attached, delays due to strikes, war, or intentional conflict, failures to obtain chassis, materials, or other causes beyond our control not preventing, within about 330 TO 360 calendar days after receipt of this order and the acceptance thereof at our office at Appleton, Wisconsin, and to be delivered to you at CORTE MADERA, CALIFORNIA. The specifications herein contained shall form a part of the final contract, and are subject to changes desired by the purchaser, provided such alterations are interlined prior to the acceptance by the company of the order to purchase, and provided such alterations do not materially affect the cost of the construction of the apparatus. The proposal for fire apparatus conforms with all Federal Department of Transportation (DOT) rules and regulations in effect at the time of bid, and with all National Fire Protection Association (NFPA) Guidelines for Automotive Fire Apparatus as published at the time of bid, except as modified by customer specifications. Any increased costs incurred by first party because of future changes in or additions to said DOT or NFPA standards will be passed along to the customers as an addition to the price set forth above. Any Purchase Order (PO) issued as a result of this proposal should be made out to Pierce Manufacturing Inc. Unless accepted by December 20, 2015, the right is reserved to withdraw this proposition. Respectfully Submitted, Daron M. Wright Authorized Pierce Sales Representative City of Palo Alto (ID # 7478) City Council Staff Report Report Type: Consent Calendar Meeting Date: 12/12/2016 City of Palo Alto Page 1 Summary Title: Approval of Contract for Purchase of Triple Combination Fire Pumper Title: Approval of a Contract With Pierce Manufacturing Inc. in the Amount of $680,666 for the Purchase of a Triple Combination 1500 GPM Fire Pumper From: City Manager Lead Department: Public Works Recommendation Staff recommends that Council approve and authorize the City Manager to execute a purchase order with Pierce Manufacturing Inc. in the amount of $680,666 for the purchase of a Triple Combination 1500 GPM Fire Pumper. Background The Vehicle and Equipment Use, Maintenance, and Replacement Policy section 4- 1 provides for the on-going replacement of City fleet vehicles and equipment. Replacements are scheduled using guidelines based on age, mileage accumulation and obsolescence. The policy prescribes a replacement interval for Class 13 Fire Apparatus Pumper Engines of twenty years or 85,000 miles. The Fleet Review Committee (FRC) reviews all vehicles proposed for replacement and authorized this replacement during the Fiscal Year 2017 budget process. The approval was based on: An examination of each vehicle’s current usage; An analysis of each vehicle’s operating and replacement costs; A comparison of the age, mileage, operating cost and performance of each vehicle with others in the class; and An analysis of alternatives to ownership, such as mileage reimbursement; pooling/sharing; the reassignment of another underutilized vehicle, or renting. City of Palo Alto Page 2 Staff recommends replacing vehicle 6117, a 1991 Pierce Arrow XT Pumper with over 139,000 miles, due to the vehicle exceeding policy on age and mileage; year- to-date repair/maintenance costs being over $12,000; and being out of service six times since January 2016 (typical being three days for maintenance in one year). Furthermore, this vehicle is not able to accommodate the necessary tools and equipment needed. The City fleet must comply with many state and federal regulations, including National Fire Protection Agency 1912-2014 Annex D, which states apparatus’ older than 25 years shall be removed from service and retired. The City of Palo Alto’s Equipment Maintenance section is familiar with the Pierce Triple Combination 1500 GPM Arrow XT, and regularly stocks parts to repair and maintain this apparatus. This purchase supports fleet standardization which lowers maintenance costs and increases efficiency. Discussion The Palo Alto Fire Department is a partner in the California Disaster and Civil Defense Master Mutual Aid Agreement between the State of California, each of its counties and their incorporated cities and fire protection districts. In a typical fire season, partners are dispatched via the Governor’s Office of Emergency Services to incidents outside a partner’s county, but within the state. An engine can be utilized by the state for several weeks of the summer. For example, in 2016 the City sent two fire engines to the Clayton fire in Lake County, the Blue Cut fire in San Bernadino, the Soberanes fire in Big Sur, the Cedar fire in Bakersfield, and the Loma fire in Santa Cruz; each deployment lasting several days. While these fire engines are deployed elsewhere, it is imperative that the fire engines utlizied in their absence are reliable and can provide an exceptional level of service to our community. The new engine will benefit the community’s all risk emergency needs by: Exceeding the capabilities of the engine to be replaced; Providing an updated apparatus with additional safety features for firefighters to utilize; Providing consistent training and application of engine company City of Palo Alto Page 3 operations; and Comply with the latest federal emissions standards (EPA 2017) and reduce the City’s carbon footprint. Bid Process A Request for Quotation (RFQ) for a 1500 GPM Fire Pumper was sent to six vendors on October 13, 2016. Only one bid was received on November 8, 2016, as listed on the attached bid summary (Attachment A & B). Staff has reviewed the bids received and recommends that the bid submitted by Pierce Manufacturing Inc. be accepted and Pierce Manufacturing Inc. be declared the lowest responsible bidder. Resource Impact Funds for this vehicle are available in the Vehicle Replacement Fund, Scheduled Vehicle and Equipment Replacement Fiscal Year 2017 Capital Improvement Program project (VR-17000). Policy Implications Authorization of the contract does not represent any change to the existing policy. Environmental Review This vehicle will meet the EPA 2017 Emissions standards, and will meet the latest version of National Fire Protection Agency standards. Attachments: Attachment A - Bidder Representation (DOCX) Attachment B - Bid Summary (DOCX) City of Palo Alto (ID # 7480) City Council Staff Report Report Type: Consent Calendar Meeting Date: 12/12/2016 City of Palo Alto Page 1 Summary Title: Amendment to Council Appointed Officers' Employment Agreements Title: Adoption of Annual Amendments to the Employment Agreements Between the City of Palo Alto and Council Appointed Officers' (City Manager, City Attorney, City Auditor and City Clerk) From: City Manager Lead Department: Human Resources Recommended Motion Staff recommends that Council consider the following motion: Approve and authorize the Mayor to execute the following contract amendments for Council Approved Officers: 1) Amendment No. Six to Employment Agreement between the City of Palo Alto and James R. Keene; 2) Amendment No. Four to Employment Agreement between the City of Palo Alto and Molly S. Stump; 3) Amendment No. 2 to Employment Agreement between the City of Palo Alto and Harriet M. Richardson and, 4) Amendment No. 2 to Employment Agreement between the City of Palo Alto and Beth D. Minor. Recommendation The City Council has completed annual merit reviews for Council Appointed Officers (CAOs) for the prior fiscal year’s performance (FY2015/16). Staff has been directed by City Council to forward amendments to employment agreements to implement merit-based increases to the CAO’s annual salaries, effective July 1, 2016, as follows: City Manager James R. Keene, Jr., merit increase of 4.75% from $285,002.00 to $298,542.40 (Attachment A); City Attorney Molly S. Stump, merit increase of 4.75% from $258,419.00 to $270,712.00 (Attachment B); City Auditor Harriet Richardson, merit increase of 4.0% from $173,368.00 to $180,315.20 (Attachment C); and City Clerk Beth Minor, merit increase of 3.5% from $136,365.00 to $141,148.80 (Attachment D). Discussion City of Palo Alto Page 2 In accordance with the CAO employment agreements, the City Council evaluates performance and determines any merit-based salary increases at the conclusion of each fiscal year, with an effective date of July 1. The evaluation process begins in approximately May of each year but often takes several months to complete, as it is an extensive process with multiple steps. Since 2014, City Council has obtained facilitation services from the Municipal Resources Group (MRG) to assist with the annual process. MRG’s role includes conducting interviews and surveys, collecting data and facilitating closed session discussions. The CAO employment agreements do not include provisions for general wage or other adjustments provided to other management employees. Thus, the merit-based pay increase for each CAO described in this memo is the only annual increase to be provided. All other terms and conditions of the employment agreements remain the same. Resource Impact Funding is availble for the additional cost in the FY2017 approved budget. Environmental Review Approval of this amended employment agreements will not result in any environmental impacts. Attachments: Attachment A: Amendment No. Six to Jim Keene Employment Agt (PDF) Attachment B: Amendment No. Four to Molly Stump Employment Agt (PDF) Attachment C: Amendment No. Two to Harriet Richardson Employment Agt (PDF) Attachment D: Amendment No. Two to Beth Minor Employment Agt (PDF) Attachment E: 2017 Council and CAO Salary Schedule (PDF) Job Code FLSA Status Group Classifications Hourly Rate Monthly Annual Salary Effective the Pay Period including 1 Exempt Council Council Person $5.77 $1,000.13 12,001.60$ 1/1/2017 2 Exempt CAO City Manager $143.53 $24,878.53 298,542.40$ 7/1/2016 3 Exempt CAO City Attorney $130.15 $22,559.33 270,712.00$ 7/1/2016 4 Exempt CAO City Auditor $86.69 $15,026.27 180,315.20$ 7/1/2016 5 Exempt CAO City Clerk $67.86 $11,762.40 141,148.80$ 7/1/2016 City of Palo Alto Councilperson and Council Appointed Offical Salary Schedule City of Palo Alto (ID # 7527) City Council Staff Report Report Type: Consent Calendar Meeting Date: 12/12/2016 City of Palo Alto Page 1 Summary Title: Amendment to County Weed Abatement Agreement Title: Approval of Amendment Number Nine to the Agreement With the County of Santa Clara for Abatement of Weeds to Change the Method for Setting Abatement Fees and Costs From: City Manager Lead Department: Fire Recommendation Staff recommends that the Council approve and authorize the City Manager to execute Amendment Nine to the Agreement between the County of Santa Clara and the City of Palo Alto for the abatement of weeds to change the method by which weed abatement charges are collected. Executive Summary If approved, the attached amendment (Attachment A) would require the City to pay the County for any shortfall for weed abatement in its jurisdiction within sixty days of demand by the County. Background The Santa Clara County Department provides weed abatement services to a number of cities in the County, including Palo Alto. Through the program, the County Department of Agriculture identifies properties in Palo Alto with hazardous vegetation that represent a fire and/or health hazard. Following notice to property owners and public hearings as required in Chapter 8.08 of the Palo Alto Municipal Code, the hazardous vegetation on these properties is abated by the County if property owners fail to do it themselves. The cost for County abatement is then considered a special assessment on each property. Discussion The current agreement for weed abatement between the County of Santa Clara and the City of Palo Alto was adopted in April 1977. Since then, the agreement has been amended several times to modify the charge for the County’s program costs to administer the Hazardous Vegetation Management Program. These charges pay for the full cost of the Hazardous Vegetation Management Program and are paid for by the owners of properties where City of Palo Alto Page 2 hazardous vegetation has been identified. Abatement costs under the current agreement are 150% of the weed abatement contractor’s fees, which covers the cost of abatement and the County’s administrative costs. Amendment Nine will require the City to pay the County for any shortfall for weed abatement in the City’s jurisdiction within sixty days of demand by County. Shortfalls are infrequent, and occur primarily when the majority of properties inspected choose to comply in response to their abatement warnings. The County’s recently amended fee schedule, which includes an inspection fee, should significantly reduce the risk of shortfall. The County weed abatement contract is a standard agreement governing several jurisdictions. Covering shortfalls will ensure the County’s ability to continue to provide weed abatement services for the City in the future. Resource Impact The Santa Clara County Department of Agriculture expenses are recovered through the Weed Abatement Program administrative fees charged to property owners. Fees for weed abatement services are included as a special assessment on bills for property taxes levied against the respective lots and parcels of land, which are considered liens on these properties. The only fiscal impact to the City of Palo Alto would be in the event that the amount recovered by County was inadequate to cover its operational costs. In this event the City would pay the County for any shortfall for weed abatement in its jurisdiction within sixty days of demand by County. These shortfalls are typically on the order of hundreds to thousands of dollars. Policy Implications This procedure is consistent with existing City policies and Municipal Code Chapter 8.08. Environmental Review Santa Clara County has determined the Weed Abatement Program to be Categorically Exempt from the California Environmental Quality Act (CEQA) pursuant to CEQA guidelines Sections 15308. Attachments: Attachment A: 9th Amendment (DOCX) Attachment B: 1977 Agreement (PDF) NINTH AMENDMENT TO THE AGREEMENT BETWEEN THE COUNTY OF SANTA CLARA AND THE CITY OF PALO ALTO FOR ABATEMENT OF WEEDS The Agreement for the Abatement of Weeds (AGREEMENT) between the County of Santa Clara (COUNTY) and the City of Palo Alto (CITY) previously entered into on April 18, 1977, as amended on November 5, 1979, November 20, 1981, February 15, 1983, January 14, 1997, August 18, 1998, October 12, 1999, January 12, 2001 and March 2, 2010 is hereby amended to modify the charge for the COUNTY’s program costs to administer the Hazardous Vegetation Management Program. IT IS AGREED between the parties as follows: 1. Statement of Costs Section 6 of the AGREEMENT shall be amended to read as follows: A. In December of each calendar year, COUNTY shall deliver to CITY a list of all reasonable and necessary fees and costs approved and adopted by County's Board of Supervisors for all administrative, enforcement, and abatement services to be provided under this AGREEMENT. All fees and costs in said list shall be recovered by COUNTY pursuant to Section 7 of this AGREEMENT unless at a public hearing held within sixty (60) days of COUNTY’s delivery of said itemized statement to the CITY’s governing body expressly declines to accept any fee or cost in said list. In the event CITY’s governing body does decline to accept any fee or cost in said list, COUNTY shall be relieved of any and all obligations to provide any services under this AGREEMENT for the weed abatement season for which said itemized statement is submitted to CITY. If the amount recovered by COUNTY is inadequate to cover its operational costs, CITY agrees to pay COUNTY for any shortfall for weed abatement in its jurisdiction within sixty (60) days of demand by COUNTY, which will be accompanied by a statement of COUNTY’s weed-abatement costs. Thereafter, on or before the 10th day of August of each year, COUNTY shall render to CITY an itemized statement or report of the reasonable and necessary fees and cost of the administrative, enforcement, and abatement services performed for the respective parcels of land in the CITY. The itemized statement or report shall include a description of the lots and parcels of land for which services were performed, and verification by signature of the COUNTY official administering the Hazardous Vegetation Management Program. / / / / / / / / / / / / 2. Except as modified herein, all other terms and conditions of the AGREEMENT remain the same. COUNTY OF SANTA CLARA CITY OF PALO ALTO ______________________________ ________________________________ Amy Brown, Director James Keene, City Manager Consumer and Environmental City of Palo Alto Protection Agency ________________________________ ________________________________ Date Date Approved as to form and legality: ________________________________ ________________________________ Michael L. Rossi Senior Deputy City Attorney Lead Deputy County Counsel ________________________________ Sylvia Gallegos Deputy County Executive ' a < u n J ) ) C,.:.;-.';::.-d t.c:-::::..c'; ~: s AGREEMENT FOR THE ABATEMENT OF WEEDS BY COUNTY OF SANTA CLARA FOR THE CITY OF PALO ALTO THE FOLLOWING is an Agreement betwee~ COUNTY OF SANTA CLARA, State of California, hereinafter called "County, 11 and CITY OF PALO ALTO, Santa Clara County, California, hereinafter called 11City, 11 both of whom understand and agree as follows: WHEREAS, City has the power to conduct weed abatement under Government Code of the State of California §39500, et seq,; and WHEREAS, City has home rule authority to adopt ordinances for public health, safety and welfare, including weed abatement procedures; and WHEREAS, City has exercised this power by adoption of Chapters 8.08 and 9.56 of the Palo Alto Municipal Code for the Abatement of Weeds; and WHEREAS, County, Under provisions of the Health and Safety Code of the state of California and under its ordinances has the power to enforce the abatement of hazardous weeds; and WHEREAS, the Board of Supervisors of Santa Clara County, by resolution has exercised the power granted to County pursuant to the Health and Safety Code of the State of California, conunencing at §14875, and WHEREAS, the parties hereto have the power to enforce weed abatement within their corporate limits; and WHEREAS, County and City are desirous of contracting for the services of the County Fire Marshal to perform the actual services of abatement of weeds; and WHEREAS-, __ County is agreeable to rendering such services and City is· agre:eable to have such services rendered under the terms and conditi6ns-hereinafter set forth for the reason of efficiency and mutual.,· benefit of both parties; NOW, THEREFORE, it is hereby agreed as follows: 1. Purpose of Agreement. The purpose of this Agreement is to promote the efficiency and economy of operations in the abate- ment of weeds by City _and County. This Agreement shall piovide for the performance by County of functions relating to weed abate- ment in territory within the City at the same time that County is working in the Urban Service Area of City, The functions to be performed by County for City shall be hereinafter set forth. 2. Joint Cooperation. County shall prepare Assessor's parcel n1aps and lists of parcels owned by the City and of vacant privately owned parcels within the City of Palo Alto requiring abatement of weeds and transmit said maps and lists to the City for review and approval of processing. County shall further provide to City proposed annual schedules for the performance of weed abatement functions by the County in the Urban Service Area of the City. Upon receipt of the final lists of parcels requiring abatement of weeds and Assessor's parcel maps thereof, the City shall commence and expeditiously proceed with procedures for ordering abatement of weeds on said properties pursuant to Chapter 8.08 and/or 9o56 of the Palo Alto Municipal Code. 3. Notice. County shall prepare all notices and other documents relating to the weed abatement proceedings required by Chapters 8.08 and 9.56 of the Palo Alto Municipal Code, in- cluding but not limited to Notice To Destroy Weeds and Notice Of Hearing On Report And Assessment For Weed Abatement, in form required by the Palo Alto Municipal Code or state law, and shall cause the posting and/or publishing of said notices and documents as required by said Code or state law. County shall also cause such notices to be mailed to the record owners of affected parcels. Any failure to mail such notice, or any failure on the property owner to receive it, shall not affect the validity of the weed abatement proceedings, or any lien for the cost of such abatement. 4. Hearin9 by council. The Council of the City. shall con- duct public hearings on the proposed removal of weeds pursuant to the provisions of the Palo Alto Municipal Code at such times as the County Fire Marshal shall notify the City of the County1s intention to proceed with weed abatement activities. The Fire Marshal shall at that time present the City such _appropriate resolutions or orde_rs as may be necessary for adoption by the Council in order to commence abatement proceedings. Such resolutions and orders shall be presented to City staff for review and recommendation to City Council. Upon adoption by the Council of a resolution or order declaring the weeds on the respective parcels of land to be nuisances as provided by Chapter 8.08 and/or 9.56 of the Palo Alto Municipal Code and the determination to proceed with the abatement of weeds, such resolution and deter- mination shall be deemed to authorize the performance of the service of removal of weeds by the County in accordance with this Agreement unless otherwise specified. 5, County Responsibilities. After action is taken at each stage by the Council, County, through the Fire Marshal, shall cause the abatement of weeds :i,n the following matter, to-wit: Upon proper authorization by city to County, the Fire Marshal shall remove the weeds on the designated properties, where the need for weed ab~tement still exists because owners have failed to so re- move said· weeds· through voluntary abatement or by contract with the Countyc_ fbr such abatemento 6. Statement of Costsc The Fire Marshal shall render to the City an-itemized statement or report of the cost of the weed abatement services performed for the respective parcels of land in the City on or before the twentieth of July of each year, which shall include the County's administrative cost of 25% of the cost for parcels in the City of weed abatement services of the weed abatement contractor for the respective parcels. The statement shall include the description of the lots and parcels of land for which weed abatement services were performed, and verification by signature of the County Fire Marshal. County shall, at least 30 days prior to the hearing provided for in Section 8.08.080 of the Palo Alto n.1unicipal Code, bill each affected record property owner for his weed abatement cost (including the County's adminis- trative cost}. The failure to send such bill, or the failure of any property owner to receive it, shall not affect the validity of the weed abatement proceedings or any lien for the cost of such abatement. 7. Inclusion of Assessment on County Tax Bill. Subsequent to the performance of services specified in Paragraph 5 hereof, Council of the City shall commence and expeditiously proceed with the actions specified and required py Chapter 8.08 and/or 9.56 of -2- the Palo Alto Municipal Code to assess the costs of the weed abatement services performed for the City upon the respective property owners. Subsequent to appropriate notice and public hearing, if the same be determined proper and warran~ed, the City shall require the County Tax Collector to include said costs for the current year as a special assessment .on bills for taxes levied against the respective lots and parcels of land. Such special assessments shall be liens on the respective properties, 8. Time and Manner of Collection. The amounts of the assessments shall be collected at the same time and in the same manner as county taxes are collected, and.are subject to the same penalties and the same procedure and sale in c"ase of delinquency as provided for ordinary county taxes. 9. Remittance of Costs. The cost of weed abatement shall be advanced by County and reimbursed to County as and when col- lected by County Tax Collector. 10. Liability. City shall assume no liability for the pay- ment of salary, wages, or other compensation to officers, agents, employees, or contractors of County in performing services here- under. City shall not be liable for compensation or indemnity to county officers, agents, employees, contractors, or to third persons for injury, sickness, or damages arising out of the weed abatement operations under this Agreement excluding any damages or injury arising out of any dangerous or defective condition of public property owned by the City. County agrees to and shall indemnify and hold City harrnleSs from all damages, liabilities, obligations, or claims thereof of whatsoever nature ar~sing in any manner out of the performance of or failure to perform any services or obligations pursuant to this agreement by the County, its agents, officers, employees, or contractors:.-- 11. Records". Each officer or department of County perform- ing any Service pursuant to this Agreement shall keep itemized and detailed--work or job records covering the cost of all services . performed--. 12, Independent Contractors. It is agreed that this Agree- ment is by and between independent contractors, and it is not intended nor shall it be construed to create the relationship of agent, servant, employee, partnership, joint venture or associa- tion between County and City~ 13. Duration of Agreement. This Agreement shall become effective on date of execution and shall run until the governing body of City or County shall exercise the right to terminate this Agreement as of the first day of September of any year, by giving notice to the other party not less than ten ( 10) days prior to the date of termination~ 14. Tiffie of Com~liance. All services or actions required to be performed or ta en by the parties hereto shall be performed or taken in an expeditious and timely manner. In particular, any actions shall be performed in such manner as to allow compliance with any deadlines or schedules set +oith by applicable provisions of state, county, or city codes, ordinances, resolutions or regu- lations. Each party shall notify the other of any such deadlines or schedules of which it is aware and of any other schedules pro- posed to be followed by said parties. 15. Use of Herbicides. Neither County nor clny of its con- tractors shall use any herbicides in the performance of services hereunder. 16. Project Coordination~ The City Manager shall be repre- sentative of City for all purposes under this agreement. ROBERT ARCULARIUS is designated as the Project Manager for the City Manager, and he shall supervise the progress and execution of this agreement. ALAN B. CARDER, Fire Marshal, is hereby desig- nated as the Project Director for County. IN WITNESS WHEREOF, m~o\ DONALD M, RAINS, Board of Supervisors AS TO FO tant-City Attorney cp1 Maager1 ~dG~ Director of Public Works the parties hereto have executed this Al'R l 8 19i/ -4- City of Palo Alto (ID # 7396) City Council Staff Report Report Type: Consent Calendar Meeting Date: 12/12/2016 City of Palo Alto Page 1 Summary Title: Parks, Trails, Natural Open Space and Recreation Master Plan Contract and Budget Amendment Title: Approve and Authorize the City Manager to Execute Contract Amendment Number One to Contract Number C14150749 in the Amount of $138,719 for Project Consultant MIG for Additional Services; and Approve a Budget Amendment in the Capital Improvement Fund (Project PE-13003) From: City Manager Lead Department: Public Works Recommendations Staff recommends that the City Council 1. Approve and authorize the City Manager or his designee to execute Amendment No. 1 to Contract No. 14150749 with MIG (Attachment A) for $138,719 for Design Services Including $20,000 in Additional Services for a total contract amount not to exceed $515,384 for the Parks, Trails, Open Space and Recreation Master Plan Project (PE-13003). 2. Amend the Fiscal Year 2017 Budget Appropriation Ordinance for the Capital Improvement Fund budget by a. Increasing the Parks, Trails, Open Space and Recreation Master Plan Project (PE-13003) appropriation by $94,732; and b. Decreasing the Infrastructure Reserve by $94,732. Background The Council approval in 2014 of the Parks, Trails, Natural Open Space and Recreation Master Plan (Master Plan) Capital Improvement Project (PE-13003) initiated the analysis and review of Palo Alto’s parks and recreation system for future renovations and capital improvement needs. The Master Plan City of Palo Alto Page 2 recommendations include changing needs and the evolving demands for future recreation, programming, environmental and maintenance investments. The planning process to develop the Master Plan consists of three phases. Phase 1: Specific Site and Program Analysis and Community Engagement Development of a comprehensive inventory and analysis of all Palo Alto parks, trails, developed natural open space areas (picnic areas, parking lots), and recreational facilities and programs; analysis of current and forecasted demographic and recreation trends; and analysis of community recreation needs. Identification of community and stakeholder needs, interests, and preferences for system enhancements using a proactive community engagement process with a broad range of activities. Phase 2: Developing and Prioritizing Project and Program Opportunities Preparation of goals, policies and programs, identification of capital projects, needed renovations and other improvements, and prioritization of projects into an implementation timeline of short (5-year), medium (10- year), and long-term (20-year) ranges. Phase 3: Drafting of the Master Plan, Review and Adoption Public, Parks and Recreation Commission (PRC) and Council review, and Council approval process to adopt the Master Plan. A master planning services contract with MIG, a planning consulting firm, was approved in December 2013. Discussion The Master Plan completion requires additional time and effort to analyze and develop recommendations for this city-wide study. Based on requests from the Parks and Recreation Commission, additional work is needed, exceeding the authorized Additional Services budget and requiring a contract amendment. In addition, the Master Plan’s new policies, programs, and park concepts require an environmental assessment to allow the final master plan document to be incorporated by reference into the City’s updated Comprehensive Plan. The environmental assessment was not included in the project’s original scope. The new project schedule shows adoption of the Master Plan in spring of 2017. City of Palo Alto Page 3 Staff asked the consultant to perform additional tasks, beyond the original scope and together negotiated the amendment scope and terms. These tasks include additional analysis of the park and recreation system as requested by the Parks and Recreation Commission, meetings and project coordination totaling $47,084; preparation of an environmental assessment totaling $71,635; and additional services (future) totaling $20,000. Resource Impact The available unencumbered budget in the project equals $43,987. The remaining work to complete the Master Plan exceeds the authorized contract amount by $138,719, resulting in the need for an adjustment to the FY 2017 budget to increase the Master Plan CIP project by $94,732 and decrease the Infrastructure Reserve by $94,732. Including Amendment No. 1, the contract with MIG totals $515,384 (summary below). The Master Plan process has been ongoing for three years. The total cost to complete the Master Plan, including $559,000 in staff time, $515,384 for the MIG contract, and $28,588 in other contract expenses for the three year process to date, is approximately $1.1 million. MIG Contract Amendment No. 1 $138,719 MIG Original Contract $376,665 Total MIG Contract: $515,384 Policy Implications Approval of the design services for this contract is consistent with City policies. Environmental Review Pursuant to the California Environmental Quality Act (CEQA), the preparation of a draft Mitigated Negative Declaration will analyze the proposed project, including the Master Plan park concepts. Park concept plans do not constitute approval of City of Palo Alto Page 4 the project and a separate environmental assessment will be performed once the community provides specific input when the project is funded. Next Steps December 2016 - February 2017: Environmental assessment and circulation January 2017 Council Study Session: Draft Master Plan review Spring 2017: Master Plan Adoption Attachments: Attachment A: Contract Amendment C14150749 (PDF) 1 Revision April 28, 2014 AMENDMENT NO. 1 TO CONTRACT NO. C14150749 BETWEEN THE CITY OF PALO ALTO AND MIG, INC. This Amendment No. 1 to Contract No. C14150749 (“Contract”) is entered into on December 5, 2016,by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and MOORE IACOFANO GOLTSMAN, INC. dba MIG, INC., a California corporation, located at 800 Hearst Ave., Berkeley, CA 94710 (“CONSULTANT”). R E C I T A L S A. The Contract was entered into between the parties for the development and drafting of the Parks, Trails, Natural Open Space and Recreation Master Plan (“Project”). B. The parties wish to amend the Contract by increasing the compensation by $138,719 and to extend the term through June 30, 2017 for additional scope of design services and an environmental assessment in accordance with the California Environmental Quality Act (CEQA) NOW, THEREFORE, in consideration of the covenants, terms, conditions, and provisions of this Amendment, the parties agree: SECTION 1. Section 1, SCOPE OF SERVICES is hereby amended to read as follows: Consultant shall perform the services described in Exhibit “A-1” as an addition to the Scope of Services described in Exhibit “A” of the original contract in accordance with the terms and conditions contained in this Agreement and this Amendment No.1. The performance of all Services shall be to the reasonable satisfaction of the CITY. SECTION 2. Section 2, TERM is hereby amended to read as follows: The term of this Agreement shall be from the date of its full execution through June 30, 2017 unless terminated earlier pursuant to Section 19 of this Agreement. SECTION 3, Section 3, SCHEDULE OF PERFROMANCE is hereby amended as follows: 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” and Exhibit B-1”, 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. DocuSign Envelope ID: FABBD4B4-94F1-4DDB-97DB-932E7D108979 2 Revision April 28, 2014 SECTION 4. Section 4, NOT TO EXCEED COMPENSATION is hereby amended to read as follows: The total compensation to be paid to CONSULTANT for performance of the Services described in Exhibit “A” and Exhibit A-1”, including both payment for professional services and reimbursable expenses, shall not exceed Four Hundred Forty Seven Thousand Two Hundred Fifty Four Dollars ($447,254). In the event Additional Services are authorized, the total compensation for Services, Additional Services and reimbursable expenses shall not exceed Five Hundred Fifteen Thousand Three hundred Eighty Four dollars ($515,384). The applicable rates and schedule of payment are set out in Exhibit “C-1”, entitled “HOURLY RATE SCHEDULE,” which is attached to and made a part of this Agreement. Additional Services, if any, shall be authorized in accordance with and subject to the provisions of Exhibit “C” and “C-2”. 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 in Exhibit “A” and Exhibit “A-1”. SECTION 5. The following exhibit(s) to the Contract is/are hereby added to read as set forth in the attachment(s) to this Amendment, which are incorporated in full by this reference: a. Exhibit “A-1” entitled “SCOPE OF SERVICES”. b. EXHIBIT “B-1 entitled “SCHEDULE OF PERFORMANCE”. c. Exhibit “C-2” entitled “COMPENSATION”. DocuSign Envelope ID: FABBD4B4-94F1-4DDB-97DB-932E7D108979 3 Revision April 28, 2014 SECTION 6. Except as herein modified, all other provisions of the Contract, including any exhibits and subsequent amendments thereto, shall remain in full force and effect. IN WITNESS WHEREOF, the parties have by their duly authorized representatives executed this Amendment 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) MIG, INC. Officer 1 By: Name: Title: Officer 2 (Required for Corp. or LLC) By: Name: Title: Attachments (If applicable): a. Exhibit “A-1” entitled “SCOPE OF SERVICES”. b. EXHIBIT “B-1 entitled “SCHEDULE OF PERFORMANCE”. c. Exhibit “C-2” entitled “COMPENSATION”. DocuSign Envelope ID: FABBD4B4-94F1-4DDB-97DB-932E7D108979 Principal Lauren Schmitt Secretary Carolyn Verheyen 4 Revision April 28, 2014 EXHIBIT A-1 SCOPE OF SERVICES AMENDMENT NO. 1 BACKGROUND CONSULTANT is under current contract to provide the necessary analysis and community outreach work required to drat the Parks, Trails, Natural Open Space and Recreation Master Plan for the City of Palo Alto. Due to the expanded analysis work, extended project schedule and coordination, including preparation of an environmental assessment in accordance with the California Environmental Quality Act (CEQA), additional funding is required to complete the Master Plan. The purpose of this amendment is to provide funding for design services and to perform an Environmental assessment. Task 1: Additional Analysis, Meetings and Coordination The Consultant provided additional analysis for the completion of the Parks, Trails, Natural Open Space and Recreation Master Plan as follows: 1. Develop a potential project and program matrix. 2. Additional meetings resulting from the projects extended schedule. 3. Additional project coordination resulting from the project extended schedule. Task 2: Environmental Assessment The Consultant shall prepare an environmental assessment in accordance with the requirements of the California Environmental Quality Act (CEQA ) for the completion of the Parks, Trails, Natural Open Space and Recreation Master Plan.. CONSULTANT shall complete the following steps associated with completing the environmental assessment of the project: 1. Initial Project Review 2. Preparation of Project Description 3. Preparation of Administrative Draft of the Initial Study 4. Preparation of the Public Review of the Initial Study 5. Response to Public Comment 6. Draft a Mitigated Negative Declaration (MND) 7. Revisions necessary to gain Council Adoption of the Document 8. Necessary Meetings/Hearings 9. Project Management DocuSign Envelope ID: FABBD4B4-94F1-4DDB-97DB-932E7D108979 5 Revision April 28, 2014 EXHIBIT “B-1” SCHEDULE OF PERFORMANCE AMENDMENT NO. 1 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 Weeks from NTP Task 1: Additional Analysis, Meetings and Project Coordination 28 Task 2: Environmental Assessment 28 DocuSign Envelope ID: FABBD4B4-94F1-4DDB-97DB-932E7D108979 6 Revision April 28, 2014 EXHIBIT C-2 COMPENSATION AMENDMENT NO. 1 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 of the original contract 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 $47,084 (Additional Analysis) Task 2 $71,635 (Environmental Assessment) Sub-total Basic Services $118,719 Additional Services (Not to Exceed) $20,000 Maximum Total Compensation for Amendment No.1 $138,719 DocuSign Envelope ID: FABBD4B4-94F1-4DDB-97DB-932E7D108979 7 Revision April 28, 2014 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. C. Presentation boards and mounting. All requests for payment of expenses shall be accompanied by appropriate backup information. Any expense anticipated to be more than $500.00 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-1of the original contract. The additional services scope, schedule and maximum compensation shall be negotiated and agreed to in writing by the CITY’s Project Manager and CONSULTANT prior to commencement of the services. Payment for additional services is subject to all requirements and restrictions in this Agreement DocuSign Envelope ID: FABBD4B4-94F1-4DDB-97DB-932E7D108979 City of Palo Alto (ID # 7493) City Council Staff Report Report Type: Consent Calendar Meeting Date: 12/12/2016 City of Palo Alto Page 1 Summary Title: Public Art Contract Approval Title: Approval of Contract Number C17166591 With Artist Susan Zoccola, LLC in the Not-to-Exceed Amount of $90,000 for the Design Development, Fabrication and Installation of Artwork Associated With the Charleston- Arastradero Corridor Project From: City Manager Lead Department: Community Services Recommendation Staff recommends that Council authorize the City Manager, or his designee, to execute contract number C17166591 (Attachment A) with Susan Zoccola, LLC for the design, fabrication and installation of artwork associated with the Charleston-Arastradero Corridor Project. Executive Summary The City of Palo Alto’s Public Art Program manages the public art in municipal project funds transferred annually as part of the budget cycle in accordance with Ordinance Number 5301, Municipal Code 2.26.070 (Public Art for Municipal Projects). Due to the high visibility of the Charleston-Arastradero Corridor Project and multiple opportunities to incorporate artwork, staff initiated the artist selection process in March of 2016. After reviewing the qualified artists in the Public Art pre-qualified pool, staff presented the work of twenty different artists to a selection panel composed of the project Landscape Architect Linda Gates, Cubberley artist Charles Coates, community member Lynda Lumish, Assistant Director of Community Services Rhyena Halpern who oversees the Arts & Science Division, and Public Art Commission Chair Jim Migdal. From that selection panel, five artists were selected for an interview. Once the interviews were completed, Susan Zoccola was selected as the artist for the project. The Public Art Commission approved Susan Zoccola as the project artist at its September 15, 2016 meeting. Background The Charleston-Arastradero Corridor is a high volume, 2.3 mile roadway serving 11 schools, several parks, shopping centers, commercial uses, a library, day care centers, City of Palo Alto Page 2 non-profit organizations, and two community centers. The corridor extends from East Charleston Road at Fabian Way to Arastradero Road at Gunn High School. Trial striping plans were previously implemented on Charleston Road in 2006 and on Arastradero Road in 2010 and were approved for permanent retention in 2008 and 2012 respectively. The final phase of the project will install new landscaped medians, corner bulb-outs, green bike lanes, and other enhanced bicycle and pedestrian improvements consistent with the existing striping/roadway configuration. The final phase will also identify opportunities for potential “green infrastructure” features to remove pollutants from storm water and reduce storm water runoff. Extensive public outreach was done to develop the preferred concept plan line to add the landscaping and pedestrian/bicycle improvements to the corridor. The City hosted four community workshops and presented the plan twice to the Palo Alto Pedestrian and Bicycle Advisory Committee while developing a preferred plan line concept that was unanimously approved by both the Planning and Transportation Commission and the City Council. Following the approval of the concept plan line by City Council in September 2015, the design team began working on the final design for implementation in the spring of 2017. A community workshop was hosted in March 2016 to gain public input on the proposed landscaping plans and planting palette. The landscaping plans presented for comment at the meeting can be can be accessed here:http://www.cityofpaloalto.org/civicax/filebank/documents/51412. Comments received at this most recent meeting mostly were to focus on the plants as the aesthetic part of the project and to not clutter the corridor with unnecessary signage, or other streetscape elements. Residents also expressed concern about sight triangles that need to be improved at key intersections and the desire for consistency in in signage throughout the corridor. Discussion: The estimated construction budget is $9 Million, with construction forecast for fiscal years FY 2017- FY 2019, creating an estimated public art budget of $90,000. Although the construction is planned to be phased, the final design for the entire corridor will be completed soon. With this in mind, it is essential to get the project artist on board as soon as possible so that the artwork can be seamlessly integrated into the design and construction of the project. Timeline, Resource Impact, and Policy Implications The project is expecting 65% design plans at the end of January, and getting the artist integrated into the design team early is essential for a smooth process as well as to allow for opportunities to leverage items in the construction budget for artwork. The artist will plan to begin work on the project as soon as the contract is approved. The artwork(s) will be installed in coordination with the overall construction project. City of Palo Alto Page 3 The funds in the amount of $90,000 for the contract will come from the pooled percent for art funds allocated to the Public Art Program associated with the Public Art for Municipal Projects Ordinance. The Ordinance Number 5301, Municipal Code 2.26.070 (Public Art for Municipal Projects) requires that 1% of the CIP budget for municipal projects is allocated for the commission of public art. Attachments: Attachment A: Susan Zoccola Contract (PDF) CITY OF PALO ALTO CONTRACT NO: C17166591 AGREEMENT BETWEEN THE CITY OF PALO ALTO AND ARTIST SUSAN ZOCCOLA, LLC FOR PROFESSIONAL SERVICES (CONCEPT AND DESIGN DEVELOPMENT, FABRICATION AND INSTALLATION) This Agreement is entered into on this 15th of November, 2016, (“Agreement”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and Susan Zoccola LLC, located at 4136 Meridian Ave N, Seattle, WA 98103 ("ARTIST"). RECITALS The following recitals are a substantive portion of this Agreement. A. CITY intends to place and provide a work of art on site on the Charleston-Arastradero Corridor from Fabian Way to Arastradero Road (“Art Work”) and desires to engage an ARTIST to provide research, concept and design development, fabrication and installation in connection with the Art Work (the “Services”). B. ARTIST has represented that it has the necessary professional expertise, qualifications, and capability, and all required licenses and/or certifications to provide the Art Work and Services. C. ARTIST was selected by a panel of art professionals and stakeholders from a pool of applicants, as the most qualified to design and fabricate the Art Work. D. The source of funds for the Art Work and Services derives from funds made available from the City of Palo Alto’s CIP funds identified through the Municipal Percent for Art Ordinance #5301. E. CITY in reliance on these representations desires to engage ARTIST to provide the Art Work and Services as more fully described in Exhibit “A”, attached to and made a part of this Agreement. F. The Art Work is considered a permanent installation. “Permanent Installation” means a work of art in a public place intended to remain or remaining for one year or more after its completion by ARTIST, provided, however, CITY may remove the Art Work in a accordance with CITY’s De-Accessioning Policy or as described in Section 16 of this Agreement. Should any damage or impairment occur, CITY will attempt to contact ARTIST before taking further action. G. CITY, through City’s Public Art Program will accession the Art Work into the City’s Collection of Public Art and own all right, title and interest in the Art Work. NOW, THEREFORE, in consideration of the recitals, covenants, terms, and conditions, in this Agreement, the parties agree: AGREEMENT SECTION 1. SCOPE OF SERVICES. ARTIST shall perform the Services and provide the Art Work as described in Exhibit “A” in accordance with the terms and conditions contained in this Agreement. The performance of all Services and provision of the Art Work shall be to the reasonable satisfaction of CITY. SECTION 2. TERM. The term of this Agreement shall be from the date of its full execution through December 30, 2018 unless terminated earlier pursuant to Section 23 of this Agreement. SECTION 3. SCHEDULE OF PERFORMANCE. Time is of the essence in the performance of Services and provision of the Art Work under this Agreement. ARTIST shall complete the Services and provide the Art Work 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 ARTIST in a reasonably prompt and timely manner based upon the circumstances and direction communicated to the ARTIST. 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 ARTIST. SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be paid to ARTIST for performance of the Services and provision of the Art Work described in Exhibit “A”, including both payment for professional services and reimbursable expenses, shall not exceed Ninety Thousand Dollars ($90,000.00). The applicable rates and schedule of payment are set out in Exhibit “C”, entitled “COMPENSATION”, which is attached to and made a part of this Agreement. ARTIST acknowledges that CITY desires that the Art Work, including its conceptual design and content be unique. ARTIST agrees to not duplicate the Art Work without the express written consent of CITY. SECTION 5. INVOICES. In order to request payment, ARTIST shall submit 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 ARTIST’s payment schedule (set forth in Exhibit “C-1”). If applicable, the invoice shall also describe the percentage of completion of each task. The information in ARTIST’s payment requests shall be subject to verification by CITY. ARTIST 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 and the provision of Art Work shall be performed by ARTIST or under ARTIST’s supervision. ARTIST represents that it possesses the professional and technical personnel necessary to perform the Services and provide the Art Work required by this Agreement and that the personnel have sufficient skill and experience to perform the Services assigned to them. ARTIST represents that it, its employees and subcontractors, if permitted, have and shall maintain during the term of this Agreement all licenses, permits, qualifications, insurance and approvals of whatever nature that are legally required to perform the Services. All of the Services and the Art Work to be furnished by ARTIST 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. ARTIST 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 performance of the Services and the provision of Art Work or those engaged to perform Services under this Agreement. ARTIST shall procure all permits and licenses, pay all charges and fees, and give all notices required by law in the performance of the Services and provision of the Art Work. SECTION 8. ERRORS/OMISSIONS. ARTIST shall correct, at no cost to CITY, any and all errors, omissions, or ambiguities in the work product submitted to CITY, provided CITY gives notice to ARTIST. If ARTIST has prepared plans and specifications or other design documents to construct and install the Art Work, ARTIST shall be obligated to correct any and all errors, omissions or ambiguities discovered prior to and during the course of construction and installation of the Art Work. This obligation shall survive termination of the Agreement. SECTION 9. Left blank by agreement of the parties. SECTION 10. INDEPENDENT CONTRACTOR. It is understood and agreed that in performing the Services under this Agreement ARTIST, and any person employed by or contracted with ARTIST to furnish labor and/or materials under this Agreement, shall act as and be an independent contractor and not an agent or employee of the CITY. SECTION 11. ASSIGNMENT. The parties agree that the expertise and experience of ARTIST are material considerations for this Agreement. ARTIST shall not assign or transfer any interest in this Agreement nor the performance of any of ARTIST’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 ARTIST 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. ARTIST shall be responsible for directing the work of any sub-CONTRACTORs and for any compensation due to sub-CONTRACTORs. CITY assumes no responsibility whatsoever concerning compensation. ARTIST shall be fully responsible to CITY for all acts and omissions of a sub-CONTRACTOR. ARTIST shall change or add sub-CONTRACTORs only with the prior approval of the city manager or his designee. SECTION 13. PROJECT MANAGEMENT. ARTIST will serve as the project manager with supervisory responsibility for the performance, progress, and execution of the Services and provision of the Art Work. If circumstances cause the substitution of key personnel for any reason, the appointment of substitute personnel will be subject to the prior written approval of the CITY’s project manager. ARTIST, 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. The City’s Project Manager is Elise DeMarzo, Public Art Program Director, Division of Arts & Sciences, Community Services Department, 1313 Newell Road, Palo Alto, CA 94303, phone: 650-617-3517. The CITY may designate an alternate project manager from time to time. SECTION 14. PROPERTY RIGHTS IN ART WORK; VARA WAIVER. 14.1. CITY commissions ARTIST to design and create a work of art (the “Art Work”) to be displayed at a location in Palo Alto, as determined by CITY, acting in its sole discretion. Subject to the rights granted by ARTIST to CITY, as described below, and in consideration of the substantial compensation that CITY will pay to ARTIST for the Art Work, CITY acquires all right, title an interest in the Art Work, and ARTIST retains all copyrights in the Art Work that ARTIST will deliver to CITY under this Agreement. 14.2. ARTIST grants to CITY a non-exclusive, royalty-free, irrevocable license to do the following with respect to the Art Work, in whatever media, including, without limitation, digital and electronic media, that now or hereafter are known: (A) use and display the Art Work; (B) make and distribute, and authorize the making and distribution of, two-dimensional images and reproductions of the Art Work; (C) use any images and reproductions for City-related purposes, including, without limitation, advertising-, branding-, education-, information-, promotion- and publicity-related materials; and (D) sublicense the rights granted herein to third parties to fulfill the public art purposes of the City’s commissioning of the Art Work. 14.3. With respect to the Art Work, ARTIST waives any and all claims, arising at any time against CITY, its elected and appointed officials, officers, employees, agents and representatives, that may be grounded in any federal law, including, without limitation, the Visual Artists Rights Act (17 U.S.C. §106A). California law, including, without limitation, the California Art Preservation Act (Cal. Civil Code §987 et seq.), or local law that may relate to the moral rights of ARTIST or protection of the integrity of the Art Work. SECTION 15. ARTIST’S WARRANTY ARTIST represents and warrants that: 15.1. Prior to transfer of title of the Art Work to the City, ARTIST is the sole and absolute owner of the Art Work, the copyrights pertaining to the Art Work, and all the rights associated or relating to it. 15.2. ARTIST has not previously sold, assigned, licensed, granted, encumbered, or utilized the Art Work or any element thereof, in any manner which may affect or impair the rights granted pursuant to this Agreement including without limited to, inhibiting the CITY’s ability to show the work, reproduce the Art Work as defined in Section 22, or maintain/conserve the work into the future. 15.3. All Art Work created by ARTIST under this Agreement, whether created by ARTIST alone or in collaboration with others, is wholly original and does not infringe upon or violate the rights of any third party. 15.4. ARTIST has acquired all rights to any third party software or other component of the Art Work necessary for the operation and display of the Art Work. 15.5. ARTIST has the full power to enter into and perform this Agreement and to grant the rights contained in this Agreement. 15.6. ARTIST warrants that the Art Work is the result of the artistic efforts of ARTIST and that it will be delivered full and clear of any liens, claims and encumbrances of any type. 15.7. These representations and warranties shall survive the termination or other extinction of this Agreement. SECTION 16. FUTURE MODIFICATION OR RELOCATION 16.1. CITY has the right to remove the Art Work from the Site at any time. In addition, in the event that any element of the Art Work constitutes a public safety hazard, CITY has the right to remove the element posing the public safety hazard. 16.2. Except to the extent permitted by subsection A above, CITY agrees not to intentionally modify the Art Work without first obtaining ARTIST’s written consent. 16.3. CITY shall have the right to donate or sell the Art Work at any time. Before exercising this right, CITY, by written notice to ARTIST at ARTIST’s last known address, agrees to give ARTIST the opportunity to purchase the Art Work for the greater of the Total Not to Exceed Compensation in Section 4 above or the amount of any offer which CITY has received for the purchase of the Art Work, plus all costs associated with the removal of the Art Work from the Site, clean-up of the Site and delivery to ARTIST. ARTIST shall have thirty (30) days from the date of CITY’s notice to exercise the option to purchase the Art Work. 16.4. Without limitation of CITY’s rights under Section 16 it is CITY’s practice to notify and consult with the ARTIST before intentionally moving, relocating or removing artwork. If, after the initial discussion, ARTIST and CITY do not reach a mutually agreeable decision regarding relocation or modification of the Art Work, or do not agree upon compensation to ARTIST for providing ARTIST’s input on proposed relocation or modification, CITY may take such actions as CITY deems necessary in management of the Art Work, and no further agreement or compensation is due to ARTIST. 16.5. Notwithstanding the foregoing, whether or not CITY notified or consulted with ARTIST, if CITY removes, relocates, or modifies the Art Work without ARTIST’s prior written consent, CITY shall not be liable to ARTIST for damages. Under such circumstances, if ARTIST objects to the modification or new location, then (i) CITY may restore the Art Work or replace the Art Work to its original location, or (ii) if the CITY does not restore the Art Work or to relocate the Art Work to the original location, ARTIST may request that ARTIST’s association with Art Work be severed. In either event, CITY shall have no further obligation or liability to ARTIST. 16.6. If CITY moves the Art Work from its originally installed location without ARTIST’s oversight, ARTIST shall not be held responsible for the structural integrity or safety of the Art Work to the extent that CITY’s action impaired the structural integrity or safety of the Art Work, nor shall ARTIST be held responsible for code compliance of the Art Work in the new location. 16.7. ARTIST’s rights under this Agreement cease with ARTIST’s death and do not extend to ARTIST’s heirs, successors or assigns. SECTION17. MAINTENANCE 17.1. MAINTENANCE, REPAIRS AND RESTORATION As a condition of and prior to final acceptance of the Art Work, ARTIST shall supply CITY with written maintenance instructions. During ARTIST’s lifetime, ARTIST shall supply, at no charge, advice as to problems arising in relation to maintenance of the Art Work. CITY shall have the right to determine, after consultation with ARTIST and a professional conservator, when and if repairs and restorations to the Art Work will be made. It is the policy of CITY to consult with ARTIST regarding repairs and restoration which are undertaken during ARTIST’s lifetime when that is practicable. CITY shall make every reasonable effort to consult with ARTIST and a professional conservator in all matters concerning repairs and restoration of the work. In the event that CITY makes repairs or restoration not approved by ARTIST, ARTIST shall have the right, at ARTIST’s sole option, to have ARTIST’s association with Art Work severed. 17.2. STANDARDS OF REPAIRS AND RESTORATION All repairs and restorations, whether performed by ARTIST, CITY, or by third parties responsible to ARTIST or CITY, shall be made in accordance with professionally recognized principles of conservation of artworks and in accordance with the maintenance instructions provided to CITY by ARTIST. SECTION 18. OWNERSHIP OF MATERIALS. Upon delivery, all work products, including without limitation, all writings, drawings, plans, reports, specifications, calculations, documents, other materials developed under this Agreement shall be and remain the exclusive property of CITY without restriction or limitation upon their use. SECTION 19. AUDITS. ARTIST will permit CITY to audit, at any reasonable time during the term of this Agreement and for three (3) years thereafter, ARTIST’s records pertaining to matters covered by this Agreement. ARTIST further agrees to maintain and retain such records for at least three (3) years after the expiration or earlier termination of this Agreement. SECTION 20. INDEMNITY. 20.1. To the fullest extent permitted by law, ARTIST 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 ARTIST, its officers, employees, agents or contractors under this Agreement, regardless of whether or not it is caused in part by an Indemnified Party. 20.2. Notwithstanding the above, nothing in this Section 20 shall be construed to require ARTIST to indemnify an Indemnified Party from Claims arising from the active negligence, sole negligence or willful misconduct of an Indemnified Party. 20.3. The acceptance of ARTIST’s services and duties by CITY shall not operate as a waiver of the right of indemnification. The provisions of this Section 20 shall survive the expiration or early termination of this Agreement. SECTION 21. 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 22. INSURANCE. 22.1. ARTIST, 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". ARTIST 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. 22.2. 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 ARTIST 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 CITY as an additional insured under such policies as required above. 22.3. 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 ARTIST, ARTIST shall provide the Purchasing Manager written notice of the cancellation or modification within two (2) business days of the ARTIST’s receipt of such notice. ARTIST shall be responsible for ensuring that current certificates evidencing the insurance are provided to CITY’s Purchasing Manager during the entire term of this Agreement. 22.4. The procuring of such required policy or policies of insurance will not be construed to limit ARTIST's liability hereunder nor to fulfill the indemnification provisions of this Agreement. Notwithstanding the policy or policies of insurance, ARTIST 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 23. TERMINATION OR SUSPENSION OF AGREEMENT OR SERVICES. 23.1. The City Manager may suspend the performance of the Agreement, in whole or in part, or terminate this Agreement, with or without cause, by giving ten (10) days prior written notice thereof to ARTIST. Upon receipt of such notice, ARTIST will immediately discontinue its performance of the Agreement. 23.2. ARTIST may terminate this Agreement or suspend its performance by giving thirty (30) days prior written notice thereof to CITY, but only in the event of a substantial failure of performance by CITY. 23.3. Upon such suspension or termination, ARTIST 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 ARTIST or its contractors, if any, or given to ARTIST or its contractors, if any, in connection with this Agreement. Such materials will become the property of CITY. 23.4. Upon such suspension or termination by CITY, ARTIST 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 ARTIST, CITY will be obligated to compensate ARTIST only for that portion of ARTIST’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. 23.5. 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 24. 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 Public Art Program Manager Public Art Program City of Palo Alto 1313 Newell Road Palo Alto, CA 94303 To ARTIST: Attention of the project director at the address of ARTIST recited above SECTION 25. CONFLICT OF INTEREST. 25.1. In accepting this Agreement, ARTIST 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. 25.2. ARTIST further covenants that, in the performance of this Agreement, it will not employ sub-ARTISTs, contractors or persons having such an interest. ARTIST 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. SECTION 26. NONDISCRIMINATION. As set forth in Palo Alto Municipal Code section 2.30.510, ARTIST 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. ARTIST 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 27. ENVIRONMENTALLY PREFERRED PURCHASING AND ZERO WASTE REQUIREMENTS. ARTIST shall comply with the City’s Environmentally Preferred Purchasing policies which are available at the City’s Purchasing Department, incorporated by reference and may be amended from time to time. ARTIST shall comply with waste reduction, reuse, recycling and disposal requirements of the 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, ARTIST shall comply with the following zero waste requirements: • All printed materials provided by ARTIST 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 the 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. • Goods purchased by ARTIST on behalf of the City shall be purchased in accordance with the 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 Office. • Reusable/returnable pallets shall be taken back by the ARTIST, at no additional cost to the City, for reuse or recycling. ARTIST shall provide documentation from the facility accepting the pallets to verify that pallets are not being disposed. SECTION 28. NON-APPROPRIATION 28.1. 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 29. MISCELLANEOUS PROVISIONS. 29.1. This Agreement will be governed by the laws of the State of California. 29.2. 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. 29.3. 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. 29.4. 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. 29.5. The covenants, terms, conditions and provisions of this Agreement will apply to, and will bind, ARTIST’s heirs, successors, executors, administrators, and assignees. 29.6. 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. 29.7. 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. 29.8 If, pursuant to this contract with ARTIST, City shares with ARTIST personal information as defined in California Civil Code section 1798.81.5(d) about a California resident (“Personal Information”), ARTIST 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. ARTIST shall not use Personal Information for direct marketing purposes without City’s express written consent. 29.10 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. 29.11 This Agreement may be signed in multiple counterparts, which shall, when executed by all the parties, constitute a single binding agreement 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 ____________________________ City Attorney SUSAN ZOCCOLA, LLC By:___________________________ Name:_________________________ Title:__________________________ Attachments: EXHIBIT “A”: SCOPE OF SERVICES EXHIBIT “B”: SCHEDULE OF PERFORMANCE EXHIBIT “C”: COMPENSATION EXHIBIT “D”: INSURANCE REQUIREMENTS EXHIBIT “A” SCOPE OF SERVICES BACKGROUND The purpose of this agreement is to outline the scope of work for the design, fabrication, and installation of original artwork(s) integrated into the Charleston-Arastradero Corridor from Fabian Way to Arastradero Road near Gunn High School. This artwork will be responsive to the usage and specifications of pedestrian, bike and vehicle traffic on the high-volume 2.3 mile roadway. PROJECT DESCRIPTION The permanent artwork(s) will enhance pedestrian and bike safety, calm traffic and compliment green features of streetscape. SCOPE OF WORK Artist Susan Zoccola will create original artwork(s) for the Charleston-Arastradero Corridor, located from Fabian Way to Arastradero near Foothill Expressway. The permanent artwork(s) will enhance pedestrian and bike safety, calm traffic and compliment green features of streetscape on the 2.3 mile streetscape project that is a major transportation corridor through the city of Palo Alto. The project will include three phases: concept and design development (I), fabrication (II), and installation on site (III). The Artist will work in collaboration with the City staff and design team through all three phases. Phases II and III will commence only upon the final approval of artwork design and budget by the Public Art Commission. Artist Scope of Work I. Concept Development Phase 1. Begin meetings with City staff and project architects to develop a concept proposal and identify onsite needs to support the artwork installation and continued use. 2. The artist may be asked to work with City staff to plan and conduct a community meeting to gather public input to facilitate concept development. 3. Identify fabrication and installation needs on-site in order to leverage the existing infrastructure and maximize the impact of the identified project budget. Provide final estimates, material samples and revised timeline. 4. Provide Construction Documentation of finalized detailed budget and stamped S.E. drawings to the City Staff. 5. Final approval of artwork design by the Public Art Commission and revision of design if needed. II. Fabrication Phase 1. Oversee fabrication, painting & finishing, and final inspection. III. Installation Phase 1. Transportation to site, site preparation and clean-up, installation and testing on site. Professional Services Rev. Nov. 1, 2011 2. Provide digital file & As-Built drawings maintenance and care instructions for staff. Responsibilities of City of Palo Alto 1. Facilitate meeting arrangements with stakeholder groups, relevant staff and the Public Art Commission. 2. Provide access to construction drawings and plans as necessary for the development of the Public Art design development. 3. Produce and install an identification plaque for the artwork. 4. Provide electrical stubs if artwork requires lighting. Professional Services Rev. Nov. 1, 2011 EXHIBIT “B” SCHEDULE OF PERFORMANCE ARTIST 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 ARTIST and CITY so long as all work is completed within the term of the Agreement. ARTIST shall provide a detailed schedule of work consistent with the schedule below within 2 weeks of receipt of the notice to proceed. TIMELINE - TASK : November, 2016 - Contract signed December 2016 – Contract goes to City Council for approval December - January 2016 – Travel to Palo Alto to meet with the design team, tour the site, and gather input. December 2016- March 2017 – Concept development March – April 2017- Concept approval through PAC Design development, Fabrication and Installation to be coordinated with the construction schedule EXHIBIT “C” COMPENSATION The compensation to be paid to ARTIST under this Agreement for all services described in Exhibit “A” (“Services”) and reimbursable expenses shall not exceed $90,000. ARTIST agrees to complete all Services, including reimbursable expenses, within this amount. In the event Additional Services are authorized, the total compensation for services and reimbursable expenses shall come out of contingency fund and not exceed $10,000. 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. BUDGET $90,000 inclusive of all artist fees, and exclusive of 10% contingency. COMPENSATION SCHEDULE: 20% upon signing the contract by the ARTIST and CITY 30% upon final approval of artwork design and fabrication plans by the Public Art Commission 30% after fabrication and testing at artist’s studio is complete, artwork is scheduled to be installed 20% after completion of delivery, installation, and submission of documentation 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 ARTIST for the following reimbursable expenses at cost. Expenses for which ARTIST shall be reimbursed are: N/A 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 $0 shall be approved in advance by the CITY’s project manager. 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: REQUIRE D 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 SUBARTISTS, 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. 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 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 ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. 2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON- PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. NOTICES SHALL BE MAILED TO: PUBLIC ART PROGRAM CITY OF PALO ALTO 1305 MIDDLEFILED RD PALO ALTO, CA 94303 City of Palo Alto (ID # 7513) City Council Staff Report Report Type: Consent Calendar Meeting Date: 12/12/2016 City of Palo Alto Page 1 Summary Title: Second Reading Architectural Review Findings Ordinance Title: SECOND READING: Adoption of an Ordinance Approving Revisions to the Architectural Review Findings in Palo Alto Municipal Code Chapter 18.76 and Approval of an Exemption Under Sections 15061 and 15305 of the California Environmental Quality Act (CEQA) Guidelines. From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that the Council conduct a second reading and adopt the attached ordinance (Attachment A). Background On November 14, 2016, the City Council reviewed and adopted (on “first” reading, a draft ordinance revised following Council prior readings on April 11 and September 12, 2016) a draft ordinance modifying the 16 architectural review findings into six findings. The findings approved by the City Council on November 14, 2016 are: 1. The design is consistent with applicable provisions of the Palo Alto Comprehensive Plan; Zoning Code including context-based design criteria, as applicable), coordinated area plans, and any relevant design guides. 2. The project has a unified and coherent design, that: a. creates an internal sense of order and desirable environment for occupants, visitors, and the general community, b. preserves, respects and integrates existing natural features that contribute positively to the site and the historic character including historic resources of the area when relevant, c. is consistent with the context based design criteria of the applicable zone district, d. provides harmonious transitions in scale, mass, and character to adjacent land uses and land use designations, and City of Palo Alto Page 2 e. enhances living conditions on the site (if it includes residential uses) and in adjacent residential areas. 3. The design is of high aesthetic quality, using high quality, integrated materials and appropriate construction techniques, and incorporating textures, colors, and other details that are compatible with and enhance the surrounding area. 4. The design is functional, allowing for ease and safety of pedestrian and bicycle traffic and providing for elements that support the building’s necessary operations (e.g. convenient vehicle access to property and utilities, appropriate arrangement and amount of open space and integrated signage, if applicable, etc.). 5. The landscape design complements and enhances the building design and its surroundings, is appropriate to the site’s functions, and utilizes regional indigenous drought-resistant plant material capable of providing desirable habitat, and that can be appropriately maintained. 6. The project incorporates design principles that achieve sustainability in areas related to energy efficiency, water conservation, building materials, landscaping, and site planning. Attachments: Attachment A: AR findings approved 11 14 16 (PDF) Not Yet Approved 161121 jb 0131537 1 Rev. Nov. 21 2016 Ordinance No. _______ Ordinance of the Council of the City of Palo Alto Amending Palo Alto Municipal Code (PAMC) Title 18 (Zoning Regulations), Section 18.76.020 (Architectural Review) The Council of the City of Palo Alto does ORDAIN as follows: SECTION 1. Findings and Declarations. The City Council finds and declares as follows: A. As part of the City’s annual Zoning Code update, the City desires to improve its Architectural Review findings to ensure robust design review, to eliminate repetitive findings and to remove outmoded and unnecessary findings. B. On September 3 and October 1, 2015, the Architectural Review Board (ARB) reviewed the draft updated architectural review findings and provided input. Subsequently, the Planning and Transportation Commission (PTC) reviewed the AR findings and recommended that Council approve them without any changes. C. On April 11, 2016, the Council reviewed the draft findings, suggested revisions and directed staff and the ARB to review the updated language and offer approval, feedback or changes. D. On June 16, 2016, the ARB reviewed the updated findings and provided additional comments. E. On August 10, 2016, the Planning and Transportation Commission reviewed the updated findings and concurred with the ARB and Staff’s comments. F. On September 12, and November 14, 2016, the City Council conducted a public hearing on the current draft of the updated architectural review findings. SECTION 2. Subdivision (d) of Section 18.76.020 of the Palo Alto Municipal Code is amended to read as follows: 18.76.020 Architectural Review. *** (d) Findings Neither the director, nor the city council on appeal, shall grant architectural review approval, unless it is found that each of the following applicable findings is met: (1) The design is consistent with applicable provisions of the Palo Alto Comprehensive Plan, Zoning Code, coordinated area plans (including compatibility requirements), and any relevant design guides. (2) The project has a unified and coherent design, that: Not Yet Approved 161121 jb 0131537 2 Rev. Nov. 21 2016 (a) creates an internal sense of order and desirable environment for occupants, visitors, and the general community, (b) preserves, respects and integrates existing natural features that contribute positively to the site and the historic character including historic resources of the area when relevant, (c) is consistent with the context-based design criteria of the applicable zone district, (d) provides harmonious transitions in scale, mass and character to adjacent land uses and land use designations, (e) enhances living conditions on the site (if it includes residential uses) and in adjacent residential areas. (3) The design is of high aesthetic quality, using high quality, integrated materials and appropriate construction techniques, and incorporating textures, colors, and other details that are compatible with and enhance the surrounding area. (4) The design is functional, allowing for ease and safety of pedestrian and bicycle traffic and providing for elements that support the building’s necessary operations (e.g. convenient vehicle access to property and utilities, appropriate arrangement and amount of open space and integrated signage, if applicable, etc.). (5) The landscape design complements and enhances the building design and its surroundings, is appropriate to the site’s functions, and utilizes to the extent practical, regional indigenous drought resistant plant material capable of providing desirable habitat that can be appropriately maintained. (6) The project incorporates design principles that achieve sustainability in areas related to energy efficiency, water conservation, building materials, landscaping, and site planning. Neither the director, nor the city council on appeal, shall grant architectural review approval, unless it is found that: (1) The design is consistent and compatible with applicable elements of the Palo Alto Comprehensive Plan; (2) The design is compatible with the immediate environment of the site; (3) The design is appropriate to the function of the project; (4) In areas considered by the board as having a unified design character or historical character, the design is compatible with such character; (5) The design promotes harmonious transitions in scale and character in areas between different designated land uses; (6) The design is compatible with approved improvements both on and off the site; (7) The planning and siting of the various functions and buildings on the site create an internal sense of order and provide a desirable environment for occupants, visitors and the general community; (8) The amount and arrangement of open space are appropriate to the design and the function of the structures; (9) Sufficient ancillary functions are provided to support the main functions of the project and the same are compatible with the project's design concept; Not Yet Approved 161121 jb 0131537 3 Rev. Nov. 21 2016 (10) Access to the property and circulation thereon are safe and convenient for pedestrians, cyclists and vehicles; (11) Natural features are appropriately preserved and integrated with the project; (12) The materials, textures, colors and details of construction and plant material are appropriate expression to the design and function and whether the same are compatible with the adjacent and neighboring structures, landscape elements and functions; (13) The landscape design concept for the site, as shown by the relationship of plant masses, open space, scale, plant forms and foliage textures and colors create a desirable and functional environment and whether the landscape concept depicts an appropriate unity with the various buildings on the site; (14) Plant material is suitable and adaptable to the site, capable of being properly maintained on the site, and is of a variety which would tend to be drought-resistant and to reduce consumption of water in its installation and maintenance; (15) ITie project exhibits green building and sustainable design that is energy efficient, water conserving, durable and nontoxic, with high-quality spaces and high recycled content materials. The following considerations should be utilized in determining sustainable site and building design: (A) Optimize building orientation for heat gain, shading, daylighting, and natural ventilation; (B) Design of landscaping to create comfortable micro-climates and reduce heat island effects; (C) Design for easy pedestrian, bicycle and transit access; (D) Maximize on site stormwater management through landscaping and permeable paving; (E) Use sustainable building materials; (F) Design lighting, plumbing and equipment for efficient energy and water use; (G) Create healthy indoor environments; and (H) Use creativity and innovation to build more sustainable environments. (16) The design is consistent and compatible with the purpose of architectural review as set forth in subsection (a). SECTION 3. Adoption of this ordinance is found to be categorically exempt from the California Environmental Quality Act under CEQA Guideline sections 15061(b)(3) (Common Sense Exemption) and 15305 (Minor Alterations in Land Use Limitations)because: (1) the activity (rewording of Architectural Review findings) is covered by the general rule that CEQA applies only to projects which have the potential for causing a significant effect on the environment, and it can be seen with certainty that there is no possibility that the activity in question may have a significantly effect on the environment, and (2) this ‘minor alteration in land use limitations’ does not result in any changes in land use or density. SECTION 4. If any section, subsection, sentence, clause or phrase of the ordinance is for any reason held to be invalid, such decision shall not affect the validity of the remaining portions of this ordinance. The City Council hereby declares that it should have adopted the ordinance and Not Yet Approved 161121 jb 0131537 4 Rev. Nov. 21 2016 each section, subsection, sentence, clause or phrase thereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses or phrases be declared unconstitutional. SECTION 5. This ordinance shall be effective upon the thirty-first day after its passage and adoption. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: __________________________ _____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ _____________________________ Senior Asst. City Attorney City Manager _____________________________ Director of Planning and Community Environment City of Palo Alto (ID # 7449) City Council Staff Report Report Type: Consent Calendar Meeting Date: 12/12/2016 City of Palo Alto Page 1 Summary Title: Matadero Creek Storm Water Pump Station Improvement Project Title: Approval of a Contract With Anderson Pacific Engineering Construction, Inc. in the Amount of $5,992,000 for the Matadero Storm Water Pump Station Upgrade Project, Capital Improvement Program Project SD-13003, and Adoption of a Categorical Exemption Under Sections 15302 and 15303 of the California Environmental Quality Act Guidelines From: City Manager Lead Department: Public Works Recommendation Staff recommends that Council: 1. Approve and authorize the City Manager or his designee to execute the attached contract with Anderson Pacific Engineering Construction, Inc. (Attachment A) in the amount of $5,992,000 for the Matadero Storm Water Pump Station Upgrade Project, Capital Improvement Program Project SD- 13003; 2. Authorize the City Manager or his designee to negotiate and execute one or more change orders to the contract with Anderson Pacific Engineering Construction, Inc. for related, additional but unforeseen work which may develop during the project, the total value of which shall not exceed $599,200; and 3. Adopt a categorical exemption under Sections 15302 and 15303 of the California Environmental Quality Act Guidelines. Background City of Palo Alto Page 2 In 2005, Palo Alto property owners passed a ballot measure to increase the storm drainage fee in order to implement various projects to upgrade and improve the storm drain system in the City. The Matadero Creek Storm Water Pump Station Improvement Project is the last of the seven high-priority storm drain projects identified in the ballot measure. A 1,250-acre area of southeastern Palo Alto, including the Midtown and Palo Verde neighborhoods, drains to Matadero Creek via the Matadero Creek Storm Water Pump Station. Much of the land within this watershed, particularly the eastern portion near Highway 101, is lower than the creek water level during storm events. Without the pump station, the storm drains that collect and convey storm water runoff from this area would be unable to drain during moderate storm events until the creek recedes several hours after the rainfall stops. The Matadero Creek Storm Water Pump Station was constructed in 1968 to pump and discharge storm water into Matadero Creek and thereby enable the neighborhood streets to drain regardless of the water level in the creek (see Location Map – Attachment B). The 1993 Storm Drain Master Plan determined, and the 2015 Storm Drain Master Plan Update confirmed, that the Matadero Creek Storm Water Pump Station does not have the capacity to convey all of the projected storm runoff generated by a 10-year storm event. The 10-year storm is the nationally recognized design standard for a modern municipal storm drain system that the City has adopted as its benchmark for evaluating drainage system performance. During large storm events, the lack of adequate pumping capacity results in storm drain backups that cause street flooding at low-lying locations in the watershed. The analysis performed for the 2015 Storm Drain Master Plan Update projects a peak flow rate of 380 cubic feet per second of storm water entering the pump station, while the existing station has a pumping capacity of only 285 cubic feet per second. The Master Plan identifies a pump station capacity upgrade as a high-priority improvement to the City’s storm drain system. Discussion On April 15th, 2015, Council awarded a contract with Schaaf & Wheeler, Inc. to design improvements to the Matadero Creek Storm Water Pump Station. The scope of work specified under the contract involves professional services, including preliminary engineering design, detailed design, construction bid City of Palo Alto Page 3 document preparation, and assistance with construction administration. Elements of the project design included selection of upsized pumps and motors, design of new electrical controls within a small building, and design of a new standby power generator and above-ground fuel tank. The scope of work also included the design of modifications to the pump controls at the Adobe Creek and Airport Storm Water Pump Stations and some minor storm drain pipeline improvements along Colorado Avenue. The consultant worked cooperatively with staff to conduct public outreach to the neighborhood, including community meetings to solicit input on the proposed improvements at the pump station from the residents of the neighboring multi-family residential complex. Comments received during the public outreach have been incorporated into the detailed design of the project. Bid Process On October 14, 2016, a notice inviting formal bids (IFB) for the Matadero Creek Storm Water Pump Station Project was posted on Planet Bids and sent to twelve builder's exchanges and fifteen contractors. The bidding period was thirty-four days. Bids were received from three contractors on November 17, 2016, as listed on the attached Bid Summary (Attachment C). Bid Name/Number Matadero Creek Storm Water Pump Station Project SD-13003/IFB # 166267 Proposed Length of Project 285 calendar days Number of Bids Mailed to Contractors 15 Number of Bids Mailed to Builders’ Exchanges 12 Total Days to Respond to Bid 34 Pre-Bid Meeting? Yes Number of Company Attendees at Pre- Bid Meeting 7 Number of Bids Received 3 Bid Price Range $5,992,000 to $6,462,500 Staff has reviewed all bids submitted and recommends that the bid of $5,992,000 submitted by Anderson Pacific Engineering Construction, Inc. be accepted and City of Palo Alto Page 4 that Anderson Pacific Engineering Construction, Inc. be declared the lowest responsible bidder. The low bid is six percent above the engineer’s estimate of $5,641,750. The change order amount of $599,200 (which equals ten percent of the total contract) is requested for related, additional but unforeseen work which may develop during the project. Staff confirmed with the Contractor's State License Board that Anderson Pacific Engineering Construction, Inc. has an active license on file and contacted their listed references to find they have performed satisfactorily on past construction projects for other clients. Project Coordination The Matadero Creek Storm Water Pump Station Project was coordinated with neighborhood residents during the design phase of the project. Staff held two public outreach meetings with the residents of the neighboring residential complex. During the meetings, City staff and the consultant presented the proposed project design and solicited the recommendations and concerns of the residents. The final design of the project incorporated all of the residents’ recommendations, including siting and design of the new electrical building and the addition of screening landscaping along the site perimeter. In addition, this project has been closely coordinated with the City’s Landscape Architect, Urban Forester, and Utilities and Fire Departments. This project consists of a new electrical building, a new standby generator, an above-ground fuel tank, replacement of pumps and motors, and a new motor control center at the Matadero Creek Storm Water Pump Station, and new pump controls at the Adobe Creek Storm Water Pump Station and Airport Storm Water Pump Station. The construction of the project is scheduled to commence in January 2017 and be completed by October 15, 2017, prior to the onset of next winter’s rains. The construction of offline project elements will be completed during the remainder of the current wet season. The existing pump station will remain in operation throughout this period. A temporary bypass pump will be installed during the 2017 dry season while the existing pump equipment is replaced. The switchover from the existing pumps to the new pumps will be completed prior to October 15, 2017. Prior to construction, staff will notify nearby residents about the proposed construction schedule. Flyers and door hangers will be distributed to residents around the project area before commencement of work, and project information City of Palo Alto Page 5 will be added to the City’s web site. Resource Impact Funding for the Matadero Creek Storm Water Pump Station improvements is available in Storm Drain Capital Improvement Program Project SD-13003. Funding for the improvements at the Adobe Creek and Airport Storm Water Pump Stations and the storm drain pipeline improvements is available in Storm Drain Capital Improvement Program Project SD-06101. Policy Implications The award of this contract is consistent with Comprehensive Plan Policy N-24, which promotes improvements to storm drainage performance by constructing new system improvements where necessary and replacing undersized or otherwise inadequate lines with larger lines or parallel lines. Environmental Review This project was reviewed as a minor staff-level Architectural Review application, and the project was conditionally approved by Planning Division staff on August 17, 2016. This project is categorically exempt from the provisions of the California Environmental Quality Act (CEQA) under Sections 15302 and 15303 of the CEQA guidelines. Courtesy Copies Storm Drain Oversight Committee Colorado Park Homeowners Association Attachments: Attachment A: Matadero Creek Storm Water Pump Station Improvement Project Construction Contract (DOCX) Attachment B: Location Map (PDF) Attachment C: Bid Summary (PDF) Invitation for Bid (IFB) Package 1 Rev. April 27, 2016 CONSTRUCTION CONTRACT CONSTRUCTION CONTRACT Contract No. C17166267 City of Palo Alto Matadero Creek Storm Water Pump Station Improvement Project Attachment A Invitation for Bid (IFB) Package 2 Rev. April 27, 2016 CONSTRUCTION CONTRACT CONSTRUCTION CONTRACT TABLE OF CONTENTS SECTION 1 INCORPORATION OF RECITALS AND DEFINITIONS…………………………………….…………..6 1.1 Recitals…………………………………………………………………………………………………………………….6 1.2 Definitions……………………………………………………………………………………………………………….6 SECTION 2 THE PROJECT………………………………………………………………………………………………………...6 SECTION 3 THE CONTRACT DOCUMENTS………………………………………………………………………………..7 3.1 List of Documents…………………………………………………………………………………………….........7 3.2 Order of Precedence……………………………………………………………………………………………......7 SECTION 4 CONTRACTOR’S DUTY…………………………………………………………………………………………..8 4.1 Contractor's Duties…………………………………………………………………………………………………..8 SECTION 5 PROJECT TEAM……………………………………………………………………………………………………..8 5.1 Contractor's Co-operation………………………………………………………………………………………..8 SECTION 6 TIME OF COMPLETION…………………………………………………………………………………….......8 6.1 Time Is of Essence…………………………………………………………………………………………………….8 6.2 Commencement of Work…………………………………………………………………………………………8 6.3 Contract Time…………………………………………………………………………………………………………..8 6.4 Liquidated Damages…………………………………………………………………………………………………8 6.4.1 Other Remedies……………………………………………………………………………………………………..9 6.5 Adjustments to Contract Time………………………………………………………………………………….9 SECTION 7 COMPENSATION TO CONTRACTOR……………………………………………………………………….9 7.1 Contract Sum……………………………………………………………………………………………………………9 7.2 Full Compensation……………………………………………………………………………………………………9 SECTION 8 STANDARD OF CARE……………………………………………………………………………………………..9 8.1 Standard of Care…………………………………………………………………………………..…………………9 SECTION 9 INDEMNIFICATION…………………………………………………………………………………………..…10 9.1 Hold Harmless……………………………………………………………………………………………………….10 9.2 Survival…………………………………………………………………………………………………………………10 SECTION 10 NON-DISCRIMINATION……..………………………………………………………………………………10 10.1 Municipal Code Requirement…………….………………………………..……………………………….10 SECTION 11 INSURANCE AND BONDS.…………………………………………………………………………………10 Invitation for Bid (IFB) Package 3 Rev. April 27, 2016 CONSTRUCTION CONTRACT 11.1 Evidence of Coverage…………………………………………………………………………………………..10 SECTION 12 PROHIBITION AGAINST TRANSFERS…………………………………………………………….…11 12.1 Assignment………………………………………………………………………………………………………….11 12.2 Assignment by Law.………………………………………………………………………………………………11 SECTION 13 NOTICES …………………………………………………………………………………………………………….11 13.1 Method of Notice …………………………………………………………………………………………………11 13.2 Notice Recipents ………………………………………………………………………………………………….11 13.3 Change of Address……………………………………………………………………………………………….12 SECTION 14 DEFAULT…………………………………………………………………………………………………………...12 14.1 Notice of Default………………………………………………………………………………………………….12 14.2 Opportunity to Cure Default…………………………………………………………………………………12 SECTION 15 CITY'S RIGHTS AND REMEDIES…………………………………………………………………………..13 15.1 Remedies Upon Default……………………………………………………………………………………….13 15.1.1 Delete Certain Services…………………………………………………………………………………….13 15.1.2 Perform and Withhold……………………………………………………………………………………..13 15.1.3 Suspend The Construction Contract…………………………………………………………………13 15.1.4 Terminate the Construction Contract for Default………………………………………………13 15.1.5 Invoke the Performance Bond………………………………………………………………………….13 15.1.6 Additional Provisions……………………………………………………………………………………….13 15.2 Delays by Sureties……………………………………………………………………………………………….13 15.3 Damages to City…………………………………………………………………………………………………..14 15.3.1 For Contractor's Default…………………………………………………………………………………..14 15.3.2 Compensation for Losses…………………………………………………………………………………14 15.4 Suspension by City……………………………………………………………………………………………….14 15.4.1 Suspension for Convenience……………………………………………………………………………..14 15.4.2 Suspension for Cause………………………………………………………………………………………..14 15.5 Termination Without Cause…………………………………………………………………………………14 15.5.1 Compensation………………………………………………………………………………………………….15 15.5.2 Subcontractors………………………………………………………………………………………………..15 15.6 Contractor’s Duties Upon Termination………………………………………………………………...15 SECTION 16 CONTRACTOR'S RIGHTS AND REMEDIES……………………………………………………………16 16.1 Contractor’s Remedies……………………………………..………………………………..………………….16 Invitation for Bid (IFB) Package 4 Rev. April 27, 2016 CONSTRUCTION CONTRACT 16.1.1 For Work Stoppage……………………………………………………………………………………………16 16.1.2 For City's Non-Payment…………………………………………………………………………………….16 16.2 Damages to Contractor………………………………………………………………………………………..16 SECTION 17 ACCOUNTING RECORDS………………………………………………………………………………….…16 17.1 Financial Management and City Access………………………………………………………………..16 17.2 Compliance with City Requests…………………………………………………………………………….17 SECTION 18 INDEPENDENT PARTIES……………………………………………………………………………………..17 18.1 Status of Parties……………………………………………………………………………………………………17 SECTION 19 NUISANCE……………………………………………………………………………………………………….…17 19.1 Nuisance Prohibited……………………………………………………………………………………………..17 SECTION 20 PERMITS AND LICENSES…………………………………………………………………………………….17 20.1 Payment of Fees…………………………………………………………………………………………………..17 SECTION 21 WAIVER…………………………………………………………………………………………………………….17 21.1 Waiver………………………………………………………………………………………………………………….17 SECTION 22 GOVERNING LAW AND VENUE; COMPLIANCE WITH LAWS……………………………….18 22.1 Governing Law…………………………………………………………………………………………………….18 22.2 Compliance with Laws…………………………………………………………………………………………18 22.2.1 Palo Alto Minimum Wage Ordinance…………….………………………………………………….18 SECTION 23 COMPLETE AGREEMENT……………………………………………………………………………………18 23.1 Integration………………………………………………………………………………………………………….18 SECTION 24 SURVIVAL OF CONTRACT…………………………………………………………………………………..18 24.1 Survival of Provisions……………………………………………………………………………………………18 SECTION 25 PREVAILING WAGES………………………………………………………………………………………….18 SECTION 26 NON-APPROPRIATION……………………………………………………………………………………….19 26.1 Appropriation………………………………………………………………………………………………………19 SECTION 27 AUTHORITY……………………………………………………………………………………………………….19 27.1 Representation of Parties…………………………………………………………………………………….19 SECTION 28 COUNTERPARTS………………………………………………………………………………………………..19 28.1 Multiple Counterparts………………………………………………………………………………………….19 SECTION 29 SEVERABILITY……………………………………………………………………………………………………19 29.1 Severability………………………………………………………………………………………………………….19 SECTION 30 STATUTORY AND REGULATORY REFERENCES …………………………………………………..19 Invitation for Bid (IFB) Package 5 Rev. April 27, 2016 CONSTRUCTION CONTRACT 30.1 Amendments of Laws…………………………………………………………………………………………..19 SECTION 31 WORKERS’ COMPENSATION CERTIFICATION………………………………………………….….19 31.1 Workers Compensation…………………………………………………………………………………….19 SECTION 32 DIR REGISTRATION AND OTHER SB 854 REQUIREMENTS………………………………..…20 32.1 General Notice to Contractor…………………………………………………………………………….20 32.2 Labor Code section 1771.1(a)…………………………………………………………………………….20 32.3 DIR Registration Required…………………………………………………………………………………20 32.4 Posting of Job Site Notices…………………………………………………………………………………20 32.5 Payroll Records…………………………………………………………………………………………………20 Invitation for Bid (IFB) Package 6 Rev. April 27, 2016 CONSTRUCTION CONTRACT CONSTRUCTION CONTRACT THIS CONSTRUCTION CONTRACT entered into on December 5th,2016 (“Execution Date”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation ("City"), and Anderson Pacific Engineering Construction, Inc. ("Contractor"), is made with reference to the following: R E C I T A L S: A. City is a municipal corporation duly organized and validly existing under the laws of the State of California with the power to carry on its business as it is now being conducted under the statutes of the State of California and the Charter of City. B. Contractor is a Corporation duly organized and in good standing in the State of California, Contractor’s License Number 245215 and Department of Industrial Relations Registration Number 1000000061. Contractor represents that it is duly licensed by the State of California and has the background, knowledge, experience and expertise to perform the obligations set forth in this Construction Contract. C. On October 14th, 2016, City issued an Invitation for Bids (IFB) to contractors for the Matadero Creek Storm Water Pump Improvement (“Project”). In response to the IFB, Contractor submitted a Bid. D. City and Contractor desire to enter into this Construction Contract for the Project, and other services as identified in the Contract Documents for the Project upon the following terms and conditions. NOW THEREFORE, in consideration of the mutual promises and undertakings hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is mutually agreed by and between the undersigned parties as follows: SECTION 1 INCORPORATION OF RECITALS AND DEFINITIONS. 1.1 Recitals. All of the recitals are incorporated herein by reference. 1.2 Definitions. Capitalized terms shall have the meanings set forth in this Construction Contract and/or in the General Conditions. If there is a conflict between the definitions in this Construction Contract and in the General Conditions, the definitions in this Construction Contract shall prevail. SECTION 2 THE PROJECT. The Project is the Matadero Creek Storm Water Pump Station Improvement Project, located at 1080 Colorado Avenue , Palo Alto, CA. 94301 ("Project"). Invitation for Bid (IFB) Package 7 Rev. April 27, 2016 CONSTRUCTION CONTRACT SECTION 3 THE CONTRACT DOCUMENTS. 3.1 List of Documents. The Contract Documents (sometimes collectively referred to as “Agreement” or “Bid Documents”) consist of the following documents which are on file with the Purchasing Division and are hereby incorporated by reference. 1) Change Orders 2) Field Orders 3) Contract 4) Bidding Addenda 5) Special Provisions 6) General Conditions 7) Project Plans and Drawings 8) Technical Specifications 9) Instructions to Bidders 10) Invitation for Bids 11) Contractor's Bid/Non-Collusion Declaration 12) Reports listed in the Contract Documents 13) Public Works Department’s Standard Drawings and Specifications (most current version at time of Bid) 14) Utilities Department’s Water, Gas, Wastewater, Electric Utilities Standards (most current version at time of Bid) 15) City of Palo Alto Traffic Control Requirements 16) City of Palo Alto Truck Route Map and Regulations 17) Notice Inviting Pre-Qualification Statements, Pre-Qualification Statement, and Pre- Qualification Checklist (if applicable) 18) Performance and Payment Bonds 3.2 Order of Precedence. For the purposes of construing, interpreting and resolving inconsistencies between and among the provisions of this Contract, the Contract Documents shall have the order of precedence as set forth in the preceding section. If a claimed inconsistency cannot be resolved through the order of precedence, the City shall have the sole power to decide which document or provision shall govern as may be in the best interests of the City. Invitation for Bid (IFB) Package 8 Rev. April 27, 2016 CONSTRUCTION CONTRACT SECTION 4 CONTRACTOR’S DUTY. 4.1 Contractor’s Duties Contractor agrees to perform all of the Work required for the Project, as specified in the Contract Documents, all of which are fully incorporated herein. Contractor shall provide, furnish, and supply all things necessary and incidental for the timely performance and completion of the Work, including, but not limited to, provision of all necessary labor, materials, equipment, transportation, and utilities, unless otherwise specified in the Contract Documents. Contractor also agrees to use its best efforts to complete the Work in a professional and expeditious manner and to meet or exceed the performance standards required by the Contract Documents. SECTION 5 PROJECT TEAM. 5.1 Contractor’s Co-operation. In addition to Contractor, City has retained, or may retain, consultants and contractors to provide professional and technical consultation for the design and construction of the Project. The Contract requires that Contractor operate efficiently, effectively and cooperatively with City as well as all other members of the Project Team and other contractors retained by City to construct other portions of the Project. SECTION 6 TIME OF COMPLETION. 6.1 Time Is of Essence. Time is of the essence with respect to all time limits set forth in the Contract Documents. 6.2 Commencement of Work. Contractor shall commence the Work on the date specified in City’s Notice to Proceed. 6.3 Contract Time. Work hereunder shall begin on the date specified on the City’s Notice to Proceed and shall be completed not later than October 15th,2017. within calendar days () after the commencement date specified in City’s Notice to Proceed. By executing this Construction Contract, Contractor expressly waives any claim for delayed early completion. 6.4 Liquidated Damages. Pursuant to Government Code Section 53069.85, if Contractor fails to achieve Substantial Completion of the entire Work within the Contract Time, including any approved extensions thereto, City may assess liquidated damages on a daily basis for each day of Unexcused Delay in achieving Substantial Completion, based on the amount of One Thousand dollars ($1000) per day, or as otherwise specified in the Special Provisions. Liquidated damages may also be separately assessed for failure to meet milestones specified elsewhere in the Contract Documents, regardless of impact on the time for achieving Substantial Completion. The assessment of liquidated damages is not a penalty but considered to be a reasonable Invitation for Bid (IFB) Package 9 Rev. April 27, 2016 CONSTRUCTION CONTRACT estimate of the amount of damages City will suffer by delay in completion of the Work. The City is entitled to setoff the amount of liquidated damages assessed against any payments otherwise due to Contractor, including, but not limited to, setoff against release of retention. If the total amount of liquidated damages assessed exceeds the amount of unreleased retention, City is entitled to recover the balance from Contractor or its sureties. Occupancy or use of the Project in whole or in part prior to Substantial Completion, shall not operate as a waiver of City’s right to assess liquidated damages. 6.4.1 Other Remedies. City is entitled to any and all available legal and equitable remedies City may have where City’s Losses are caused by any reason other than Contractor’s failure to achieve Substantial Completion of the entire Work within the Contract Time. 6.5 Adjustments to Contract Time. The Contract Time may only be adjusted for time extensions approved by City and memorialized in a Change Order approved in accordance with the requirements of the Contract Documents. SECTION 7 COMPENSATION TO CONTRACTOR. 7.1 Contract Sum. Contractor shall be compensated for satisfactory completion of the Work in compliance with the Contract Documents the Contract Sum of Five Million Nine Hundred And Ninety Two Thousand Dollars ($5,992,000). [This amount includes the Base Bid and Additive Alternates .] 7.2 Full Compensation. The Contract Sum shall be full compensation to Contractor for all Work provided by Contractor and, except as otherwise expressly permitted by the terms of the Contract Documents, shall cover all Losses arising out of the nature of the Work or from the acts of the elements or any unforeseen difficulties or obstructions which may arise or be encountered in performance of the Work until its Acceptance by City, all risks connected with the Work, and any and all expenses incurred due to suspension or discontinuance of the Work, except as expressly provided herein. The Contract Sum may only be adjusted for Change Orders approved in accordance with the requirements of the Contract Documents. SECTION 8 STANDARD OF CARE. 8.1 Standard of Care. Contractor agrees that the Work shall be performed by qualified, experienced and well-supervised personnel. All services performed in connection with this Construction Contract shall be performed in a manner consistent with the standard of care under California law applicable to those who specialize in providing such services for projects of the type, scope and complexity of the Project. Invitation for Bid (IFB) Package 10 Rev. April 27, 2016 CONSTRUCTION CONTRACT SECTION 9 INDEMNIFICATION. 9.1 Hold Harmless. To the fullest extent allowed by law, Contractor will defend, indemnify, and hold harmless City, its City Council, boards and commissions, officers, agents, employees, representatives and volunteers (hereinafter individually referred to as an “Indemnitee” and collectively referred to as "Indemnitees"), through legal counsel acceptable to City, from and against any and liability, loss, damage, claims, expenses (including, without limitation, attorney fees, expert witness fees, paralegal fees, and fees and costs of litigation or arbitration) (collectively, “Liability”) of every nature arising out of or in connection with the acts or omissions of Contractor, its employees, Subcontractors, representatives, or agents, in performing the Work or its failure to comply with any of its obligations under the Contract, except such Liability caused by the active negligence, sole negligence, or willful misconduct of an Indemnitee. Contractor shall pay City for any costs City incurs to enforce this provision. Except as provided in Section 9.2 below, nothing in the Contract Documents shall be construed to give rise to any implied right of indemnity in favor of Contractor against City or any other Indemnitee. Pursuant to Public Contract Code Section 9201, City shall timely notify Contractor upon receipt of any third-party claim relating to the Contract. 9.2 Survival. The provisions of Section 9 shall survive the termination of this Construction Contract. SECTION 10 NON-DISCRIMINATION. 10.1 Municipal Code Requirement. As set forth in Palo Alto Municipal Code section 2.30.510, Contractor certifies that in the performance of this Agreement, it shall not discriminate in the employment of any person because of the race, skin color, gender, age, religion, disability, national origin, ancestry, sexual orientation, housing status, marital status, familial status, weight or height of such person. Contractor acknowledges that it has read and understands the provisions of Section 2.30.510 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and will comply with all requirements of Section 2.30.510 pertaining to nondiscrimination in employment. SECTION 11 INSURANCE AND BONDS. 11.1 Evidence of coverage. Within ten (10) business days following issuance of the Notice of Award, Contractor shall provide City with evidence that it has obtained insurance and shall submit Performance and Payment Bonds satisfying all requirements in Article 11 of the General Conditions. Invitation for Bid (IFB) Package 11 Rev. April 27, 2016 CONSTRUCTION CONTRACT SECTION 12 PROHIBITION AGAINST TRANSFERS. 12.1 Assignment. City is entering into this Construction Contract in reliance upon the stated experience and qualifications of the Contractor and its Subcontractors set forth in Contractor’s Bid. Accordingly, Contractor shall not assign, hypothecate or transfer this Construction Contract or any interest therein directly or indirectly, by operation of law or otherwise without the prior written consent of City. Any assignment, hypothecation or transfer without said consent shall be null and void, and shall be deemed a substantial breach of contract and grounds for default in addition to any other legal or equitable remedy available to the City. 12.2 Assignment by Law. The sale, assignment, transfer or other disposition of any of the issued and outstanding capital stock of Contractor or of any general partner or joint venturer or syndicate member of Contractor, if the Contractor is a partnership or joint venture or syndicate or co-tenancy shall result in changing the control of Contractor, shall be construed as an assignment of this Construction Contract. Control means more than fifty percent (50%) of the voting power of the corporation or other entity. SECTION 13 NOTICES. 13.1 Method of Notice. All notices, demands, requests or approvals to be given under this Construction Contract shall be given in writing and shall be deemed served on the earlier of the following: (i) On the date delivered if delivered personally; (ii) On the third business day after the deposit thereof in the United States mail, postage prepaid, and addressed as hereinafter provided; (iii) On the date sent if sent by facsimile transmission; (iv) On the date sent if delivered by electronic mail; or (v) On the date it is accepted or rejected if sent by certified mail. 13.2 Notice to Recipients. All notices, demands or requests (including, without limitation, Change Order Requests and Claims) from Contractor to City shall include the Project name and the number of this Construction Contract and shall be addressed to City at: To City: City of Palo Alto City Clerk 250 Hamilton Avenue P.O. Box 10250 Palo Alto, CA 94303 Copy to: City of Palo Alto Public Works Administration 250 Hamilton Avenue Palo Alto, CA 94301 Attn: Michel Jeremias AND [Include Construction Manager, If Applicable.] Invitation for Bid (IFB) Package 12 Rev. April 27, 2016 CONSTRUCTION CONTRACT City of Palo Alto Utilities Engineering 250 Hamilton Avenue Palo Alto, CA 94301 Attn: In addition, copies of all Claims by Contractor under this Construction Contract shall be provided to the following: Palo Alto City Attorney’s Office 250 Hamilton Avenue P.O. Box 10250 Palo Alto, California 94303 All Claims shall be delivered personally or sent by certified mail. All notices, demands, requests or approvals from City to Contractor shall be addressed to: Anderson Pacific Engineering Construction,Inc. 1390 Norman Avenue Santa Clara Ca 95054 Attn: Peter E. Anderson 13.3 Change of Address. In advance of any change of address, Contractor shall notify City of the change of address in writing. Each party may, by written notice only, add, delete or replace any individuals to whom and addresses to which notice shall be provided. SECTION 14 DEFAULT. 14.1 Notice of Default. In the event that City determines, in its sole discretion, that Contractor has failed or refused to perform any of the obligations set forth in the Contract Documents, or is in breach of any provision of the Contract Documents, City may give written notice of default to Contractor in the manner specified for the giving of notices in the Construction Contract, with a copy to Contractor’s performance bond surety. 14.2 Opportunity to Cure Default. Except for emergencies, Contractor shall cure any default in performance of its obligations under the Contract Documents within two (2) Days (or such shorter time as City may reasonably require) after receipt of written notice. However, if the breach cannot be reasonably cured within such time, Contractor will commence to cure the breach within two (2) Days (or such shorter time as City may reasonably require) and will diligently and continuously prosecute such cure to completion within a reasonable time, which shall in no event be later than ten (10) Days after receipt of such written notice. Invitation for Bid (IFB) Package 13 Rev. April 27, 2016 CONSTRUCTION CONTRACT SECTION 15 CITY'S RIGHTS AND REMEDIES. 15.1 Remedies Upon Default. If Contractor fails to cure any default of this Construction Contract within the time period set forth above in Section 14, then City may pursue any remedies available under law or equity, including, without limitation, the following: 15.1.1 Delete Certain Services. City may, without terminating the Construction Contract, delete certain portions of the Work, reserving to itself all rights to Losses related thereto. 15.1.2 Perform and Withhold. City may, without terminating the Construction Contract, engage others to perform the Work or portion of the Work that has not been adequately performed by Contractor and withhold the cost thereof to City from future payments to Contractor, reserving to itself all rights to Losses related thereto. 15.1.3 Suspend The Construction Contract. City may, without terminating the Construction Contract and reserving to itself all rights to Losses related thereto, suspend all or any portion of this Construction Contract for as long a period of time as City determines, in its sole discretion, appropriate, in which event City shall have no obligation to adjust the Contract Sum or Contract Time, and shall have no liability to Contractor for damages if City directs Contractor to resume Work. 15.1.4 Terminate the Construction Contract for Default. City shall have the right to terminate this Construction Contract, in whole or in part, upon the failure of Contractor to promptly cure any default as required by Section 14. City’s election to terminate the Construction Contract for default shall be communicated by giving Contractor a written notice of termination in the manner specified for the giving of notices in the Construction Contract. Any notice of termination given to Contractor by City shall be effective immediately, unless otherwise provided therein. 15.1.5 Invoke the Performance Bond. City may, with or without terminating the Construction Contract and reserving to itself all rights to Losses related thereto, exercise its rights under the Performance Bond. 15.1.6 Additional Provisions. All of City’s rights and remedies under this Construction Contract are cumulative, and shall be in addition to those rights and remedies available in law or in equity. Designation in the Contract Documents of certain breaches as material shall not waive the City’s authority to designate other breaches as material nor limit City’s right to terminate the Construction Contract, or prevent the City from terminating the Agreement for breaches that are not material. City’s determination of whether there has been noncompliance with the Construction Contract so as to warrant exercise by City of its rights and remedies for default under the Construction Contract, shall be binding on all parties. No termination or action taken by City after such termination shall prejudice any other rights or remedies of City provided by law or equity or by the Contract Documents upon such termination; and City may proceed against Contractor to recover all liquidated damages and Losses suffered by City. 15.2 Delays by Sureties. Time being of the essence in the performance of the Work, if Contractor’s surety fails to arrange for completion of the Work in accordance with the Performance Bond, within seven (7) calendar days from the date of the notice of termination, Contractor’s surety shall be deemed to have waived its right to complete the Work under the Contract, and City may immediately make arrangements for the completion of the Work through use of its own forces, by hiring a replacement contractor, or by any other means that City determines advisable under the circumstances. Contractor and its surety shall be jointly and severally Invitation for Bid (IFB) Package 14 Rev. April 27, 2016 CONSTRUCTION CONTRACT liable for any additional cost incurred by City to complete the Work following termination. In addition, City shall have the right to use any materials, supplies, and equipment belonging to Contractor and located at the Worksite for the purposes of completing the remaining Work. 15.3 Damages to City. 15.3.1 For Contractor's Default. City will be entitled to recovery of all Losses under law or equity in the event of Contractor’s default under the Contract Documents. 15.3.2 Compensation for Losses. In the event that City's Losses arise from Contractor’s default under the Contract Documents, City shall be entitled to deduct the cost of such Losses from monies otherwise payable to Contractor. If the Losses incurred by City exceed the amount payable, Contractor shall be liable to City for the difference and shall promptly remit same to City. 15.4 Suspension by City 15.4.1 Suspension for Convenience. City may, at any time and from time to time, without cause, order Contractor, in writing, to suspend, delay, or interrupt the Work in whole or in part for such period of time, up to an aggregate of fifty percent (50%) of the Contract Time. The order shall be specifically identified as a Suspension Order by City. Upon receipt of a Suspension Order, Contractor shall, at City’s expense, comply with the order and take all reasonable steps to minimize costs allocable to the Work covered by the Suspension Order. During the Suspension or extension of the Suspension, if any, City shall either cancel the Suspension Order or, by Change Order, delete the Work covered by the Suspension Order. If a Suspension Order is canceled or expires, Contractor shall resume and continue with the Work. A Change Order will be issued to cover any adjustments of the Contract Sum or the Contract Time necessarily caused by such suspension. A Suspension Order shall not be the exclusive method for City to stop the Work. 15.4.2 Suspension for Cause. In addition to all other remedies available to City, if Contractor fails to perform or correct work in accordance with the Contract Documents, City may immediately order the Work, or any portion thereof, suspended until the cause for the suspension has been eliminated to City’s satisfaction. Contractor shall not be entitled to an increase in Contract Time or Contract Price for a suspension occasioned by Contractor’s failure to comply with the Contract Documents. City’s right to suspend the Work shall not give rise to a duty to suspend the Work, and City’s failure to suspend the Work shall not constitute a defense to Contractor’s failure to comply with the requirements of the Contract Documents. 15.5 Termination Without Cause. City may, at its sole discretion and without cause, terminate this Construction Contract in part or in whole upon written notice to Contractor. Upon receipt of such notice, Contractor shall, at City’s expense, comply with the notice and take all reasonable steps to minimize costs to close out and demobilize. The compensation allowed under this Paragraph 15.5 shall be the Contractor’s sole and exclusive compensation for such termination and Contractor waives any claim for other compensation or Losses, including, but not limited to, loss of anticipated profits, loss of revenue, lost opportunity, or other consequential, direct, indirect or incidental damages of any kind resulting from termination without cause. Termination pursuant to this provision does not relieve Contractor or its sureties from any of their obligations for Losses arising from or related to the Work performed by Contractor. Invitation for Bid (IFB) Package 15 Rev. April 27, 2016 CONSTRUCTION CONTRACT 15.5.1 Compensation. Following such termination and within forty-five (45) Days after receipt of a billing from Contractor seeking payment of sums authorized by this Paragraph 15.5.1, City shall pay the following to Contractor as Contractor’s sole compensation for performance of the Work : .1 For Work Performed. The amount of the Contract Sum allocable to the portion of the Work properly performed by Contractor as of the date of termination, less sums previously paid to Contractor. .2 For Close-out Costs. Reasonable costs of Contractor and its Subcontractors: (i) Demobilizing and (ii) Administering the close-out of its participation in the Project (including, without limitation, all billing and accounting functions, not including attorney or expert fees) for a period of no longer than thirty (30) Days after receipt of the notice of termination. .3 For Fabricated Items. Previously unpaid cost of any items delivered to the Project Site which were fabricated for subsequent incorporation in the Work. .4 Profit Allowance. An allowance for profit calculated as four percent (4%) of the sum of the above items, provided Contractor can prove a likelihood that it would have made a profit if the Construction Contract had not been terminated. 15.5.2 Subcontractors. Contractor shall include provisions in all of its subcontracts, purchase orders and other contracts permitting termination for convenience by Contractor on terms that are consistent with this Construction Contract and that afford no greater rights of recovery against Contractor than are afforded to Contractor against City under this Section. 15.6 Contractor’s Duties Upon Termination. Upon receipt of a notice of termination for default or for convenience, Contractor shall, unless the notice directs otherwise, do the following: (i) Immediately discontinue the Work to the extent specified in the notice; (ii) Place no further orders or subcontracts for materials, equipment, services or facilities, except as may be necessary for completion of such portion of the Work that is not discontinued; (iii) Provide to City a description in writing, no later than fifteen (15) days after receipt of the notice of termination, of all subcontracts, purchase orders and contracts that are outstanding, including, without limitation, the terms of the original price, any changes, payments, balance owing, the status of the portion of the Work covered and a copy of the subcontract, purchase order or contract and any written changes, amendments or modifications thereto, together with such other information as City may determine necessary in order to decide whether to accept assignment of or request Contractor to terminate the subcontract, purchase order or contract; (iv) Promptly assign to City those subcontracts, purchase orders or contracts, or portions thereof, that City elects to accept by assignment and cancel, on the most favorable terms reasonably possible, all subcontracts, purchase orders or contracts, or portions thereof, that City does not elect to accept by assignment; and (v) Thereafter do only such Work as may be necessary to preserve and protect Work already in progress and to protect materials, plants, and equipment on the Project Site or in transit thereto. Upon termination, whether for cause or for convenience, the provisions of the Contract Documents remain in effect as to any Claim, indemnity obligation, warranties, guarantees, Invitation for Bid (IFB) Package 16 Rev. April 27, 2016 CONSTRUCTION CONTRACT submittals of as-built drawings, instructions, or manuals, or other such rights and obligations arising prior to the termination date. SECTION 16 CONTRACTOR'S RIGHTS AND REMEDIES. 16.1 Contractor’s Remedies. Contractor may terminate this Construction Contract only upon the occurrence of one of the following: 16.1.1 For Work Stoppage. The Work is stopped for sixty (60) consecutive Days, through no act or fault of Contractor, any Subcontractor, or any employee or agent of Contractor or any Subcontractor, due to issuance of an order of a court or other public authority other than City having jurisdiction or due to an act of government, such as a declaration of a national emergency making material unavailable. This provision shall not apply to any work stoppage resulting from the City’s issuance of a suspension notice issued either for cause or for convenience. 16.1.2 For City's Non-Payment. If City does not make pay Contractor undisputed sums within ninety (90) Days after receipt of notice from Contractor, Contractor may terminate the Construction Contract (30) days following a second notice to City of Contractor’s intention to terminate the Construction Contract. 16.2 Damages to Contractor. In the event of termination for cause by Contractor, City shall pay Contractor the sums provided for in Paragraph 15.5.1 above. Contractor agrees to accept such sums as its sole and exclusive compensation and agrees to waive any claim for other compensation or Losses, including, but not limited to, loss of anticipated profits, loss of revenue, lost opportunity, or other consequential, direct, indirect and incidental damages, of any kind. SECTION 17 ACCOUNTING RECORDS. 17.1 Financial Management and City Access. Contractor shall keep full and detailed accounts and exercise such controls as may be necessary for proper financial management under this Construction Contract in accordance with generally accepted accounting principles and practices. City and City's accountants during normal business hours, may inspect, audit and copy Contractor's records, books, estimates, take-offs, cost reports, ledgers, schedules, correspondence, instructions, drawings, receipts, subcontracts, purchase orders, vouchers, memoranda and other data relating to this Project. Contractor shall retain these documents for a period of three (3) years after the later of (i) Final Payment or (ii) final resolution of all Contract Disputes and other disputes, or (iii) for such longer period as may be required by law. Invitation for Bid (IFB) Package 17 Rev. April 27, 2016 CONSTRUCTION CONTRACT 17.2 Compliance with City Requests. Contractor's compliance with any request by City pursuant to this Section 17 shall be a condition precedent to filing or maintenance of any legal action or proceeding by Contractor against City and to Contractor's right to receive further payments under the Contract Documents. City many enforce Contractor’s obligation to provide access to City of its business and other records referred to in Section 17.1 for inspection or copying by issuance of a writ or a provisional or permanent mandatory injunction by a court of competent jurisdiction based on affidavits submitted to such court, without the necessity of oral testimony. SECTION 18 INDEPENDENT PARTIES. 18.1 Status of parties. Each party is acting in its independent capacity and not as agents, employees, partners, or joint ventures’ of the other party. City, its officers or employees shall have no control over the conduct of Contractor or its respective agents, employees, subconsultants, or subcontractors, except as herein set forth. SECTION 19 NUISANCE. 19.1 Nuisance Prohibited. Contractor shall not maintain, commit, nor permit the maintenance or commission of any nuisance in connection in the performance of services under this Construction Contract. SECTION 20 PERMITS AND LICENSES. 20.1 Payment of Fees. Except as otherwise provided in the Special Provisions and Technical Specifications, The Contractor shall provide, procure and pay for all licenses, permits, and fees, required by the City or other government jurisdictions or agencies necessary to carry out and complete the Work. Payment of all costs and expenses for such licenses, permits, and fees shall be included in one or more Bid items. No other compensation shall be paid to the Contractor for these items or for delays caused by non-City inspectors or conditions set forth in the licenses or permits issued by other agencies. SECTION 21 WAIVER. 21.1 Waiver. A waiver by either party of any breach of any term, covenant, or condition contained herein shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant, or condition contained herein, whether of the same or a different character. Invitation for Bid (IFB) Package 18 Rev. April 27, 2016 CONSTRUCTION CONTRACT SECTION 22 GOVERNING LAW AND VENUE; COMPLIANCE WITH LAWS. 22.1 Governing Law. This Construction Contract shall be construed in accordance with and governed by the laws of the State of California, and venue shall be in a court of competent jurisdiction in the County of Santa Clara, and no other place. 22.2 Compliance with Laws. Contractor shall comply with all applicable federal and California laws and city laws, including, without limitation, ordinances and resolutions, in the performance of work under this Construction Contract. 22.2.1 Palo Alto Minimum Wage Ordinance. Contractor 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, Contractor 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, Contractor shall post notices regarding the Palo Alto Minimum Wage Ordinance in accordance with Palo Alto Municipal Code section 4.62.060. SECTION 23 COMPLETE AGREEMENT. 23.1 Integration. This Agreement represents the entire and integrated agreement between the parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This Agreement may be amended only by a written instrument, which is signed by the parties. SECTION 24 SURVIVAL OF CONTRACT. 24.1 Survival of Provisions. The provisions of the Construction Contract which by their nature survive termination of the Construction Contract or Final Completion, including, without limitation, all warranties, indemnities, payment obligations, and City’s right to audit Contractor’s books and records, shall remain in full force and effect after Final Completion or any termination of the Construction Contract. SECTION 25 PREVAILING WAGES. This Project is not subject to prevailing wages. Contractor is not required to pay prevailing wages in the performance and implementation of the Project in accordance with SB 7, if the public works contract does not include a project of $25,000 or less, when the project is for construction work, or the contract does not include a project of $15,000 or less, when the project is for alteration, demolition, repair, or maintenance (collectively, ‘improvement’) work. Or Contractor is required to pay general prevailing wages as defined in Subchapter 3, Title 8 of the California Code of Regulations and Section 16000 et seq. and Section 1773.1 of the California Labor Code. Pursuant to the provisions of Section 1773 of the Labor Code of the State of California, the City Council has obtained the general prevailing rate of per diem wages and the general rate for holiday and overtime work in this locality for each craft, classification, or type of worker needed to execute the contract for this Project from the Director of the Department of Industrial Relations (“DIR”). Copies of these rates may be Invitation for Bid (IFB) Package 19 Rev. April 27, 2016 CONSTRUCTION CONTRACT obtained at the Purchasing Division’s office of the City of Palo Alto. Contractor shall provide a copy of prevailing wage rates to any staff or subcontractor hired, and shall pay the adopted prevailing wage rates as a minimum. Contractor shall comply with the provisions of all sections, including, but not limited to, Sections 1775, 1776, 1777.5, 1782, 1810, and 1813, of the Labor Code pertaining to prevailing wages. SECTION 26 NON-APPROPRIATION. 26.1 Appropriations. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that the City does not appropriate funds for the following fiscal year for this event, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds for this Construction Contract are no longer available. This section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Agreement. SECTION 27 AUTHORITY. 27.1 Representation of Parties. The individuals executing this Agreement represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities. SECTION 28 COUNTERPARTS 28.1 Multiple Counterparts. This Agreement may be signed in multiple counterparts, which shall, when executed by all the parties, constitute a single binding agreement. SECTION 29 SEVERABILITY. 29.1 Severability. In case a provision of this Construction Contract is held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not be affected. SECTION 30 STATUTORY AND REGULATORY REFERENCES. 30.1 Amendments to Laws. With respect to any amendments to any statutes or regulations referenced in these Contract Documents, the reference is deemed to be the version in effect on the date that the Contract was awarded by City, unless otherwise required by law. SECTION 31 WORKERS’ COMPENSATION CERTIFICATION. 31.1 Workers Compensation. Pursuant to Labor Code Section 1861, by signing this Contract, Contractor certifies as follows: “I am aware of the provisions of Section 3700 of the Labor Code which require every employer to be insured against liability for workers’ compensation or to undertake self-insurance in accordance with the Invitation for Bid (IFB) Package 20 Rev. April 27, 2016 CONSTRUCTION CONTRACT provisions of that code, and I will comply with such provisions before commencing the performance of the Work on this Contract.” SECTION 32 DIR REGISTRATION AND OTHER SB 854 REQUIREMENTS. 32.1 General Notice to Contractor. City requires Contractor and its listed subcontractors to comply with the requirements of SB 854. 32.2 Labor Code section 1771.1(a) City provides notice to Contractor of the requirements of California Labor Code section 1771.1(a), which reads: “A contractor or subcontractor shall not be qualified to bid on, be listed in a bid proposal, subject to the requirements of Section 4104 of the Public Contract Code, or engage in the performance of any contract for public work, as defined in this chapter, unless currently registered and qualified to perform public work pursuant to Section 1725.5. It is not a violation of this section for an unregistered contractor to submit a bid that is authorized by Section 7029.1 of the Business and Professions Code or Section 10164 or 20103.5 of the Public Contract Code, provided the contactor is registered to perform public work pursuant to Section 1725.5 at the time the contract is awarded.” 32.3 DIR Registration Required. City will not accept a bid proposal from or enter into this Construction Contract with Contractor without proof that Contractor and its listed subcontractors are registered with the California Department of Industrial Relations (“DIR”) to perform public work, subject to limited exceptions. 32.4 Posting of Job Site Notices. City gives notice to Contractor and its listed subcontractors that Contractor is required to post all job site notices prescribed by law or regulation and Contractor is subject to SB 854-compliance monitoring and enforcement by DIR. 32.5 Payroll Records. City requires Contractor and its listed subcontractors to comply with the requirements of Labor Code section 1776, including: (i) Keep accurate payroll records, showing the name, address, social security number, work classification, straight time and overtime hours worked each day and week, and the actual per diem wages paid to each journeyman, apprentice, worker, or other employee employed by, respectively, Contractor and its listed subcontractors, in connection with the Project. (ii) The payroll records shall be verified as true and correct and shall be certified and made available for inspection at all reasonable hours at the principal office of Contractor and its listed subcontractors, respectively. (iii) At the request of City, acting by its project manager, Contractor and its listed subcontractors shall make the certified payroll records available for inspection Invitation for Bid (IFB) Package 21 Rev. April 27, 2016 CONSTRUCTION CONTRACT or furnished upon request to the project manager within ten (10) days of receipt of City’s request. City requests Contractor and its listed subcontractors to submit the certified payroll records to the project manager at the end of each week during the Project. (iv) If the certified payroll records are not produced to the project manager within the 10-day period, then Contractor and its listed subcontractors shall be subject to a penalty of one hundred dollars ($100.00) per calendar day, or portion thereof, for each worker, and City shall withhold the sum total of penalties from the progress payment(s) then due and payable to Contractor. This provision supplements the provisions of Section 15 hereof. (v) Inform the project manager of the location of contractor’s and its listed subcontractors’ payroll records (street address, city and county) at the commencement of the Project, and also provide notice to the project manager within five (5) business days of any change of location of those payroll records. IN WITNESS WHEREOF, the parties 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 $25k) Contracts Administrator (Checklist Approval) PWD APPROVED: Public Works Director Officer 1 By: Name: Title: Officer 2 (Required for Corp. or LLC) By: Name: Title: Invitation for Bid (IFB) Package 22 Rev. April 27, 2016 CONSTRUCTION CONTRACT ATTACHMENT B LOCATION MAP Figure 1: Matadero Creek Storm Water Pump Station and Colorado Ave Storm Drain Improvement Location Map. APPENDIX B LOCATION MAP Figure 2: Adobe Creek Storm Water Pump Station Location Map. APPENDIX B LOCATION MAP Figure 3: Airport Storm Water Pump Station Location Map. 11/18/2016 Page 1 of 1 MATADERO CREEK STORM WATER PUMP STATION Bid Opening: November 17th, 2016 Matadero Pump Station and Colorado Ave SD Improvements Base Bid Construction,Inc. Item Description Bid Quantity Unit Unit Price Total Unit Price Total Unit Price Total Unit Price Total 1 Mobilization / Demobilization 1 LS 267,000.00$ 267,000.00$ 400,000.00$ 400,000.00$ 300,000.00$ 300,000.00$ 300,000.00$ 300,000.00$ Matadero Pump Station & Colorado Ave Storm Drain 2 Site Preparation, Clearing and Grubbing 1 LS 5,500.00$ 5,500.00$ 4,000.00$ 4,000.00$ 9,400.00$ 9,400.00$ 5,000.00$ 5,000.00$ 3 Site Demolition 1 LS 56,000.00$ 56,000.00$ 100,000.00$ 100,000.00$ 97,000.00$ 97,000.00$ 180,000.00$ 180,000.00$ 4 Structure Demolition 1 LS 88,300.00$ 88,300.00$ 200,000.00$ 200,000.00$ 153,000.00$ 153,000.00$ 100,000.00$ 100,000.00$ 5 Pollution Prevention and Erosion Control 1 LS 40,000.00$ 40,000.00$ 12,000.00$ 12,000.00$ 11,000.00$ 11,000.00$ 2,000.00$ 2,000.00$ 6 Traffic Control 1 LS 30,000.00$ 30,000.00$ 24,000.00$ 24,000.00$ 43,000.00$ 43,000.00$ 10,000.00$ 10,000.00$ 7 Sheeting, Shoring, and Bracing 1 LS 192,000.00$ 192,000.00$ 80,000.00$ 80,000.00$ 112,000.00$ 112,000.00$ 225,000.00$ 225,000.00$ 8 Grading, Fill, and Retaining Walls 1 LS 125,450.00$ 125,450.00$ 40,000.00$ 40,000.00$ 60,000.00$ 60,000.00$ 170,000.00$ 170,000.00$ 9 Wetwell Modifications 1 LS 95,700.00$ 95,700.00$ 200,000.00$ 200,000.00$ 207,000.00$ 207,000.00$ 250,000.00$ 250,000.00$ 10 Pump Station Structures 1 LS 600,600.00$ 600,600.00$ 670,000.00$ 670,000.00$ 612,000.00$ 612,000.00$ 826,000.00$ 826,000.00$ 11 Conventional Axial Flow Pumps, Motors, RAGD, Drive Shafts 1 EA 808,500.00$ 808,500.00$ 1,200,000.00$ 1,200,000.00$ 1,217,000.00$ 1,217,000.00$ 1,360,000.00$ 1,360,000.00$ 12 Low Flow Submersible Pump and Piping 1 LS 125,400.00$ 125,400.00$ 230,000.00$ 230,000.00$ 266,000.00$ 266,000.00$ 242,000.00$ 242,000.00$ 13 Low Flow Wetwell Structure 1 LS 85,900.00$ 85,900.00$ 200,000.00$ 200,000.00$ 246,000.00$ 246,000.00$ 202,000.00$ 202,000.00$ 14 Flap Gates 1 LS 93,500.00$ 93,500.00$ 62,000.00$ 62,000.00$ 65,000.00$ 65,000.00$ 7,000.00$ 7,000.00$ 15 Main Switchboard and Motor Control Center 1 LS 770,000.00$ 770,000.00$ 230,000.00$ 230,000.00$ 315,000.00$ 315,000.00$ 266,000.00$ 266,000.00$ 16 1 MW Standby Engine-Generator and Appurtenances 1 LS 605,000.00$ 605,000.00$ 450,000.00$ 450,000.00$ 470,000.00$ 470,000.00$ 442,000.00$ 442,000.00$ 17 Electrical Utility Connection and Fiber Conduit Runs 1 LS 40,000.00$ 40,000.00$ 180,000.00$ 180,000.00$ 148,000.00$ 148,000.00$ 220,000.00$ 220,000.00$ 18 Miscellaneous Electrical Work 1 LS 486,400.00$ 486,400.00$ 555,000.00$ 555,000.00$ 430,000.00$ 430,000.00$ 364,000.00$ 364,000.00$ 19 Trash Racks, Grates, Access Hatches 1 LS 220,000.00$ 220,000.00$ 160,000.00$ 160,000.00$ 172,000.00$ 172,000.00$ 400,000.00$ 400,000.00$ 20 Replace (E) Crane Hoist/Accessories 1 LS 33,000.00$ 33,000.00$ 28,000.00$ 28,000.00$ 49,000.00$ 49,000.00$ 91,000.00$ 91,000.00$ 21 Colorado Ave SD Pipe (18")350 LF 63.00$ 22,050.00$ 500.00$ 175,000.00$ 370.00$ 129,500.00$ 250.00$ 87,500.00$ 22 Storm Drain Structures and Connections 1 LS 110,000.00$ 110,000.00$ 48,000.00$ 48,000.00$ 131,000.00$ 131,000.00$ 97,000.00$ 97,000.00$ 23 Landscaping 1 LS 66,000.00$ 66,000.00$ 45,000.00$ 45,000.00$ 38,000.00$ 38,000.00$ 35,000.00$ 35,000.00$ 24 Paving, Fencing, and Site Restoration 1 LS 164,450.00$ 164,450.00$ 210,000.00$ 210,000.00$ 203,000.00$ 203,000.00$ 70,000.00$ 70,000.00$ Adobe Pump Station 25 Electrical Demolition 1 LS 15,000.00$ 15,000.00$ 5,000.00$ 5,000.00$ 14,000.00$ 14,000.00$ -$ 26 MSB Shelter Structure 1 LS 22,000.00$ 22,000.00$ 24,000.00$ 24,000.00$ 17,000.00$ 17,000.00$ 20,000.00$ 20,000.00$ 27 Main Switchboard, Auto Transfer Switch and Motor Control Center 1 LS 182,000.00$ 182,000.00$ 137,000.00$ 137,000.00$ 161,000.00$ 161,000.00$ 140,000.00$ 140,000.00$ 28 Miscellaneous Electrical Work 1 LS 223,000.00$ 223,000.00$ 248,000.00$ 248,000.00$ 283,000.00$ 283,000.00$ 240,000.00$ 240,000.00$ Airport Pump Station 29 Electrical Demolition 1 LS 3,000.00$ 3,000.00$ 9,000.00$ 9,000.00$ 14,000.00$ 14,000.00$ 11,000.00$ 11,000.00$ 30 Control Panel Electrical Upgrades 1 LS 54,000.00$ 54,000.00$ 41,000.00$ 41,000.00$ 56,000.00$ 56,000.00$ 45,000.00$ 45,000.00$ 31 Instrumentation Upgrades 1 LS 12,000.00$ 12,000.00$ 25,000.00$ 25,000.00$ 70,877.00$ 70,877.00$ 55,000.00$ 55,000.00$ Base Bid Total:5,641,750.00$ Base Bid Total:5,992,000.00$ Base Bid Total:6,099,777.00$ Base Bid Total:6,462,500.00$ Alternate Bid Item: 32 Replace One Low Flow Axial Pump/Motor In-Kind (Alt. to Items 12/13, Reduced Structure Demolition, Modified Electrical)1 LS 45,000.00$ 45,000.00$ 90,000.00$ 90,000.00$ 86,536.00$ 86,536.00$ 100,000.00$ 100,000.00$ 33 Remove Base Bid Item 12 (Submersible Pump and Piping)1 LS (125,400.00)$ (125,400.00)$ (220,000.00)$ (220,000.00)$ (150,000.00)$ (150,000.00)$ (242,000.00)$ (242,000.00)$ 34 Remove Base Bid Item 13 (Low Flow Concrete Wetwell Structure)1 LS (75,900.00)$ (75,900.00)$ (190,000.00)$ (190,000.00)$ (175,000.00)$ (175,000.00)$ (202,000.00)$ (202,000.00)$ 35 Reduce Demolition required scope related to low flow concrete wetwell structure and removal of one existing low flow pump 1 LS (10,000.00)$ (10,000.00)$ (10,000.00)$ (10,000.00)$ (2,000.00)$ (2,000.00)$ (4,000.00)$ (4,000.00)$ 36 Modify electrical scope related to removing submersible low flow pump and adding conventional axial low flow pump and motor 1 LS (5,000.00)$ (5,000.00)$ (5,000.00)$ (5,000.00)$ 20,000.00$ 20,000.00$ (10,000.00)$ (10,000.00)$ Alt Total:(171,300.00)$ Add Alt. (335,000.00)$ (220,464.00)$ (220,464.00)$ (358,000.00)$ (358,000.00)$ Alternate Total:5,470,450.00$ Alternate Total:5,657,000.00$ Alternate Total:5,879,313.00$ Alternate Total:6,104,500.00$ McGuire and HesterEngineer's Opinion Anderson Pacific Engineering Proven Management, Inc. Attachment C CITY OF PALO ALTO OFFICE OF THE CITY ATTORNEY December 12, 2016 The Honorable City Council Palo Alto, California Approval of Amendment Number Four to the Palo Alto-Stanford Fire Protection Agreement With the Board of Trustees of the Leland Stanford Junior University Extending the Term to June 30, 2017 for an Additional Fee of $4,841,415, and Approval of a Budget Amendment in the General Fund Recommendation Staff recommends the City Council 1) Approve the attached Fourth Amendment to the Palo Alto-Stanford Fire Protection Agreement with the Board of Trustees of the Leland Stanford Junior University (“Stanford”) in the amount of $4,841,415 for the extended term of nine months through June 30, 2017; and 2) Amend the Fiscal Year 2017 Budget Appropriation Ordinance for the General Fund by: a. Decreasing the Fire Department revenue estimate for Charges for Services by $1,856,110; and b. Decreasing the Non-Departmental Budget Uncertainty Reserve appropriation in the amount of $1,856,110. Background The City of Palo Alto has provided fire protection services to Stanford University since 1976, when the City’s fire department and Stanford’s private fire protection company were consolidated. The City and Stanford entered into a fire services Agreement for a term of 50 years, providing however that either party may terminate the Agreement by providing written notice to the other party. The Agreement was amended in 1981 and restated in 2006 related to services provided to the Stanford Linear Accelerator (SLAC). In 2012, fire protection services to SLAC were transitioned from the City of Palo Alto to the Menlo Park Fire Protection District. On October 8, 2013, Stanford notified the City that it was exercising its option to terminate the Agreement effective at least one year, and no more than two years, from the date of notice. Stanford subsequently solicited proposals from other fire protection service providers, but to date has not selected an alternative provider. In January 2016, Stanford and Palo Alto agreed that Palo Alto would continue to provide fire services to Stanford through October 8, 2016, and would continue to negotiate for a new long term agreement to be effective thereafter. Page 2 Discussion In 2016, representatives from the City and Stanford have met periodically to discuss alternative service and cost allocation models for current and future service requirements. While progress has been made, the parties have not yet reached agreement on a full set of terms and the proposed alternative service and cost models have not been implemented. The recommended Fourth Amendment (Exhibit A) will provide the time needed to complete negotiation of terms for a new Agreement. The amount recommended for this extension is based on this potential new cost allocation and staffing model. Resource Impact City and Stanford negotiators have agreed that the City will continue to provide fire protection services during the nine month extension for the fee of $4,841,415. In agreeing to this fee, the parties have acknowledged that a new negotiated agreement could result in a different annual cost allocation to Stanford, and may involve reconciliation of payments made by Stanford since discontinuance of the City of Palo Alto providing fire protection services to SLAC. The current fiscal year 2017 budget anticipates a higher revenue from Stanford equal to $8.1 million. Since the contract extension is effective Oct. 9, 2016, the revenue loss for Fiscal Year 2017 is approximately $1.9 million for a revised estimate of $6.2 million. This estimate reflects the final quarter payment of the prior amendment #3 contract extension as well as this 9 month contract extension for the full July 1, 2016 through June 30, 2017 fiscal year. In order to reflect the lower revenues during the nine months that the Fourth Amendment will be effective, the Fire Department is developing an alternative staffing strategy that is expected to maintain response performance while reducing expenses. The City is meeting and conferring with the International Association of Fire Fighters, Local 1319 regarding impacts of the alternative staffing strategy. Staff anticipates bringing forward for City Council consideration staffing reductions to offset the revenue loss as part of the Fiscal Year 2018 budget process. In the meantime, the Fire Department will continue holding a number of sworn positions vacant. To address the revenue loss for Fiscal Year 2017, staff recommends a reduction in revenue of $1,856,110 offset with a reduction to the Budget Uncertainty Reserve reducing the reserve from $2.0 million to $143,890. This one-time reserve was set aside to provide transition time for known uncertainties during the development of the FY2017 budget in the anticipation that ongoing solutions be identified and brought forward during the FY 2018 budget process as noted above. Policy Implications The recommended Fourth Amendment will provide time for the City and Stanford to reach mutually agreeable terms for the continued provision of fire protection services into the future. The current Agreement has demonstrated the efficiency and mutual benefit to both agencies gained by integrated services on campus and throughout the City; therefore, approval of the Amendment is in the City’s best interest to complete negotiations and establish a new long term agreement. Page 3 ATTACHMENTS: Exhibit A: Fire Contract Amendment No 4 (PDF) Department Head: Molly Stump, City Attorney Page 4 FOURTH AMENDMENT TO PALO ALTO-STANFORD FIRE PROTECTION AGREEMENT This Fourth Amendment to the Palo Alto-Stanford Fire Protection Agreement is entered into this_________________, 2016, between the BOARD OF TRUSTEES OF THE LELAND STANFORD JUNIOR UNIVERSITY ("Stanford"), a body having corporate powers under the laws of the State of California, and the CITY OF PALO ALTO ("Palo Alto"), a municipal corporation duly organized and existing under and by virtue of the laws of the State of California. R E C I T A L S A. Stanford and Palo Alto agreed for Palo Alto to provide fire protection services for the Stanford Campus for a term of fifty years and entered into the "Palo Alto- Stanford Fire Protection Agreement" dated October 1, 1976, as amended on September 1, 1980 and June 26, 2006 ("Agreement"). B. In 2012, the parties agreed that Palo Alto would no longer provide fire protection service to the Stanford Linear Accelerator Center (“SLAC”). C. In 2013, Stanford notified Palo Alto that it intended to terminate the Agreement. Under the terms of the Agreement and the notice of termination, the effective termination date was October 8, 2015. D. In January 2016, Stanford and Palo Alto further amended the Agreement to provide that Palo Alto would continue to provide fire services to Stanford continuously through and including October 8, 2016, for a fixed fee (“Third Amendment”). The parties acknowledged that “Section 2: Services” and Exhibit B of the Agreement contain terms that may be inconsistent with the parties’ interpretation and performance of the contract, including but not limited to: Palo Alto does not operate and Stanford does not maintain a fire station at SLAC; staffing, equipment configurations, response times and response resources have been updated consistent with service levels provided within the City of Palo Alto; and fire prevention services are no longer provided. The parties acknowledged that they were negotiating for a new agreement to be effective beginning October 9, 2016, and intended to update these and other terms as part of that process. The parties confirmed their intention to maintain the status quo of services at Stanford that are substantially equivalent to those provided within the City of Palo Alto. E. The parties now wish to further amend the Agreement through this Fourth Amendment to provide for an additional temporary extension of services under terms described herein. During the extension period, it is the parties intention to negotiate the terms of a long term agreement to provide fire services. NOW, THEREFORE, in consideration of the covenants, terms, conditions, and provisions of this Fourth Amendment, the parties agree to amend the Agreement, as modified by the Third Amendment, as follows. Except as amended, the Agreement, as modified by the Third Amendment, shall remain in full force and effect: SECTION 1. Article 1 is amended by adding Section 1.2.2 to read as follows: “Article 1: Operative Date and Termination 1.2.2 October 9, 2016 through June 30, 2017. Notwithstanding any notices of termination issued under the Agreement, the parties agree that the Agreement shall remain in force and effect through and including June 30, 2017. Unless extended by mutual agreement of the parties, the Agreement shall terminate at the close of business on June 30, 2017. SECTION 2. Article 3 is amended by adding Section 3.13 to read as follows: “Article 3: Funding 3.13 Fees for Fire Services from October 9, 2016 through June 30, 2017. (a) Notwithstanding the terms of any other Section of this Article, including but not limited to Sections 3.2, 3.3, 3.4, 3.5, 3.6, and 3.8, the parties agree that Stanford will pay Palo Alto a fixed fee of $4,841,415 (four million eight hundred forty-one thousand four hundred fifteen dollars) for the services described in this Agreement for the period October 9, 2016 through June 30, 2017, less revenue received for medical transport generated from calls for service on the Stanford campus. This fee includes all costs and revenues for the identified period, including but not limited to personnel, vehicles, capital costs, IT and revenue credits. (b) For the extension period beginning October 9, 2016 and ending June 30, 2017, Stanford shall pay Palo Alto the fee for fire service in three equal installments, each installment to be paid by the 10th day following the payment date below or by the 10th day following Stanford's receipt of an invoice for the payment, whichever is later. The payment dates shall be as follows, unless revised in writing by Palo Alto and Stanford: First payment January 1, 2017 Second payment March 31, 2017 Third payment June 30, 2017 Payments shall be delivered to: Administrative Services Director 250 Hamilton Avenue Palo Alto, California 94301 (c) If Stanford shall fail to pay any sum to Palo Alto when due, then such late payment shall accrue interest on a daily basis at the rate equal to the current annualized yield earned by the City's investment Portfolio for the prior fiscal quarter, until fully paid. (d) This Fourth Amendment is based on the actual cost of providing services under a staffing model designed and intended to reduce the costs of providing services while maintaining service standards. Stanford and Palo Alto have agreed that the reduced-cost staffing model is appropriate at Station 6. As of the date of approval of this Fourth Amendment, however, the proposed staffing model has not yet been implemented pending procedural prerequisites imposed by the Meyers Milias Brown Act. Stanford and Palo Alto have agreed to the fixed fee in Section 3.13(a) for the period October 9, 2016 through June 30, 2017, provided that if the parties later agree or a judge or other adjudicative official orders that Palo Alto should pay Stanford money to resolve Stanford’s claim for over charges in prior years, the parties agree to credit against any funds due the difference between Palo Alto’s costs during the period of this Fourth Amendment, based on actual staffing and apparatus compliments, and the contract payments in Section 3.13(a). Palo Alto will track and report, on each invoice, the difference between its costs and the contract payments in Section 3.13(a). SECTION 3. Except as herein modified, all other provisions of the Agreement, including any exhibits and the Third Amendment, shall remain in full force and effect. IN WITNESS WHEREOF, the parties have by their duly authorized representatives executed this Amendment on the date first above written. CITY OF PALO ALTO ____________________________ James R. Keene, Jr. City Manager ____________________________ Eric Nickel Palo Alto Fire Chief APPROVED AS TO FORM: _____________________________ Molly S. Stump City Attorney THE BOARD OF TRUSTEES OF THE LELAND STANFORD JR. UNIVERSITY By:___________________________ Debra Zumwalt Vice President and General Counsel City of Palo Alto (ID # 7024) City Council Staff Report Report Type: Consent Calendar Meeting Date: 12/12/2016 City of Palo Alto Page 1 Summary Title: Approve Recycled Water Strategic Plan and Agreement with SCVWD Title: Approval of: 1) A Professional Services Agreement With RMC Water and Environment for Development of a Recycled Water Strategic Plan in a Total Amount Not-to-Exceed $2,000,000; and 2) A Cost Sharing Agreement With the Santa Clara Valley Water District Under Which the District Will Fund 90 Percent of Strategic Plan Consultant Costs; and 3) An Amendment to the Fiscal Year 2017 Budget Appropriation for the Wastewater Treatment Fund From: City Manager Lead Department: Public Works Recommendation Staff recommends that Council: 1)Approve and authorize the City Manager or his designee to execute the attached contract with RMC Water and Environment (RMC)(Attachment A) in the amount not to exceed $2,000,000 for the RWQCP Recycled Water Strategic Plan;and 2)Approve the attached cost sharing agreement with the Santa Clara Valley Water District (Attachment B)under which the District will fund 90% (not to exceed $1,800,000) of the cost of a consultant for the development of a RWQCP Recycled Water Strategic Plan. 3)Amend Fiscal Year 2017 budget appropriation for the Wastewater Treatment Fund by: a.Increasing the recycled water operations appropriation in the amount of $1,100,000; and b.Increasing the revenue estimate from the Santa Clara Valley Water District by 1,100,000. City of Palo Alto Page 2 Executive Summary The City of Palo Alto (Palo Alto or City)operates the Regional Water Quality Control Plant (RWQCP) for six partner agencies and currently supplies tertiary- treated recycled water to several City-owned parks and facilities, truck-fill standpipes, Caltrans, and the City of Mountain View’s North of Bayshore distribution system.The City is collaborating with the Santa Clara Valley Water District (Water District) to expand the regional use of recycled water as an alternative local water supply. The proposed contract with RMC Water and Environment will result in a Strategic Plan to update the 1992 Recycled Water Master Plan and include recommendations for expansion opportunities given projected demands, an evaluation of recycled water used for indirect potable reuse within Palo Alto, as well as a business plan and preliminary design for the Phase III Recycled Water Pipeline Expansion through South Palo Alto and Stanford Research Park. The Water District will reimburse 90 percent of the cost for the new consultant contract and provide review, feedback and technical support to the City as it manages the consultant’s work. Background RWQCP produces high quality recycled water (a drought-proof, locally controlled, non-potable supply)in excess of current demand;therefore staff is working to expand demand and the distribution system. Recycled water helps reduce Palo Alto’s reliance on imported water supplies. The City certified an Environmental Impact Report on September 28, 2015 to expand recycled water through South Palo Alto and Stanford Research Park (CMR# 5962). This proposed expansion project is Phase III of the 1992 Recycled Water Master Plan. Additionally, the Water District is seeking alternative water supplies from local wastewater treatment plants. There are three wastewater treatment plants that discharge into San Francisco Bay within Santa Clara County,including,San Jose/Santa Clara Regional Wastewater Facility, City of Sunnyvale, and RWQCP. The Water District already has partner agreements with the City of San Jose and the City of Sunnyvale. Recently the Water District approved a partner agreement with the City of Palo Alto to fund eighty percent of the Advanced Water Purification System Feasibility Study that was approved by Council May 16, 2016 (CMR# 6458). Council received an update on recycled water planning efforts and groundwater studies in partnership with the Santa Clara Valley Water District on April 11, 2016 (CMR# 6700). City of Palo Alto Page 3 Discussion Staff is working to promote and expand the use of recycled water as an alternative, locally available water supply for the region. As such, staff requires a consultant to conduct numerous evaluations to be compiled into a Strategic Plan for the entire RWQCP Recycled Water Program. The Strategic Plan has the following main components: ·Task 2.0 Recycled Water Phase III Expansion Project which includes business plan and preliminary design for the Phase III recycled water pipeline expansion through South Palo Alto to Stanford Park; ·Task 3.0 Northwest County Indirect Potable Reuse Feasibility Study which includes feasibility evaluation of utilizing RWQCP’s recycled water for indirect potable reuse, including a baseline study of Palo Alto’s groundwater and groundwater use assessment; ·Task 4.0 Recycled Water Strategic Plan which includes strategic plan for expansion of the Recycled Water Program throughout the region including updated demand projections and potential customer identification; ·Task 5.0 Funding Identification and Assistance which includes assistance in external funding applications for recycled water projects; ·Task 6.0 Regulatory Support and Regional Coordination which includes assistance with coordinating with regulatory agencies; and ·Task 7.0 Public Outreach which includes assistance with public outreach efforts on current recycled water projects and evaluations. The City released the Request for Proposals (RFP) for the RWQCP Recycled Water Strategic Plan in March 2016 and received 2 proposals. Summary of Bid Process Bid Name/Number RWQCP Recycled Water Strategic Plan Proposed End Date of Project July 31, 2020 Number of Prospective Bidders on PlanetBids 41 Total Days to Respond to Bid 51 City of Palo Alto Page 4 Date of Pre-Bid Meeting April 12, 2016 Number of Bids Received:2 Bid Price Range $2,911,310 to $4,221,448 An evaluation committee consisting of staff from RWQCP and Santa Clara Valley Water District reviewed the proposals. Two firms were invited to participate in oral interviews on June 2, 2016. The proposals were judged on the following criteria: o Quality and completeness of the proposal o Customer service and experience o Financial stability o Quality control/quality assurance o Innovative/creative approach to system design and communication skills o Compliance with regulatory requirements o Cost to the City RMC Water and Environment was selected as the preferred consultant team due to their demonstrated strong technical knowledge and ability to meet program budget needs. Staff negotiated with RMC Water and Environment and mutually agreed upon core tasks and optional tasks costs not to exceed $2 million dollars. Timeline Immediately upon execution of the contract, RMC Water and Environment will begin work on the project and collecting information. All tasks under the Strategic Plan will be completed by July 31, 2020 including the following deliverables ·Task 2. Phase III Recycled Water Expansion Business Plan, Preliminary Design, and Secured Funding Effort Report; ·Task 3. Indirect Potable Reuse Screening Evaluation; ·Task 3. Northwest Santa Clara County Indirect Potable Reuse Feasibility Study Report; ·Task 3. Conceptual Groundwater Model; ·Task 3. Groundwater Use Assessment Report; City of Palo Alto Page 5 ·Task 4. Recycled Water Strategic Plan Report; ·Task 5. Funding Identification & Application Tracking Sheet; ·Task 6. Regulatory Support and Regional Coordination; and ·Task 7. Public Outreach Tracking Sheet. Resource Impact The multi-year contract with RMC Water and Environment will be in the amount not to exceed $2,000,000 and includes $660,886 for optional tasks listed in the scope of work,which may or may not be conducted based on the results of the core tasks and will be completed if directed by the City’s project manager in concurrance with the District. Reimbursement funding for up to $1.8 million will be provided via the cost sharing agreement with the Santa Clara Valley Water Distict. The first year of the contract is estimated to cost $1.3 million, so a budget amendment is necessary to amend Fiscal Year 2017 budget appropriation for the Wastewater Treatment Fund, increasing the recycled water operations appropriation in the amount of $1,100,000 with a matching increase to estimated revenue from other agencies in the amount of $1,100,000, based on the funding agreement with the Santa Clara Water District.The remaining cost of $200,000 is already budgeted in source control programs in the Wastewater Treatment Fund and will be moved to recycled water operations after Council approval of the contract through a budget change request.Appropriation of the remaining $700,000 for this contract and the associated revenue will be evaluated and recommended to Council as part of subsequent annual budget processes, beginning with the Fiscal Year 2018 Budget. Policy Implications Continuing the exploration of expanding recycled water is consistent with Council policy. The Recycled Water Program is consistent with Council-adopted Water Integrated Resource Plan Guideline 3: “Actively participate in development of cost effective regional recycled water plans.” The project is consistent with Council direction to reduce imported water supplies and limit or reduce diversions from the Tuolomne River. Council’s Sustainability Policy supports the development of recycled water, specifically in the policy’s statement to “reduce resource use and pollution in a City of Palo Alto Page 6 cost-effective manner while striving to protect and enhance the quality of the air, water, land and other natural resources.” The City’s Comprehensive Plan contains Natural Environment Goal N-4: Water resources are prudently managed to sustain plant and animal life, support urban activities and protect public health and safety. Specifically, Program N-26 addresses the use of recycled water: implement incentives for the use of drought- tolerant landscaping and recycled water for landscape irrigation. Environmental Review Council’s approval of the professional services agreement with RMC and cost sharing agreement with the District does not require CEQA review under Public Recouces Code Sections 21065 and 21080(b)(8), and CEQA Guidelines Section 15378(b)(5), because these actions are not projects; they are administrative governmental activities which will not cause a direct or indirect physical change in the environment. An Environmental Impact Report for Phase III of the Recycled Water Pipeline Project was approved in September 2015. Future environmental review as an addendum to the Environmental Impact Report for Phase III of the Recycled Water Pipeline Project will be required if the pipeline is constructed. Next Steps Upon completion of the business plan (Task #2.0), staff will develop recommendations for proceeding with construction of the Phase III Recycled Water Pipeline Expansion to South Palo Alto and Stanford Research Park in addition to the best locations and methods for expansion elsewhere in the region. The recommendations will be forwarded to Council for action following stakeholder involvement. Attachments: ·Attachment A: 6053868 AGREEMENT RMC Contract C17163525 Recycled Water Plan- Final (PDF) ·Attachment B: DRAFT 6053857 AGREEMENT Recycled Water Strategic Plan Cost Share FINAL Not signed 11-15-16 (DOCX) CITY OF PALO ALTO CONTRACT NO. C17163525 AGREEMENT BETWEEN THE CITY OF PALO ALTO AND RMC WATER AND ENVIRONMENT FOR PROFESSIONAL SERVICES This Agreement is entered into on this 5th day of December, 2016, (“Agreement”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and RMC WATER AND ENVIRONMENT, a California corporation, located at 100 West San Fernando, Suite 320, San Jose, CA 95113 ("CONSULTANT"). RECITALS The following recitals are a substantive portion of this Agreement. A. CITY intends to conduct the Northwest County Recycled Water Strategic Plan (“Project”) and desires to engage a consultant to provide professional 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. SECTION 2. TERM. The term of this Agreement shall be from the date of its full execution through December 31, 2020 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 DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Attachment A Professional Services Rev. April 27, 2016 2 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”), including both payment for professional services and reimbursable expenses, shall not exceed two million dollars ($2,000,000). CONSULTANT agrees to complete all Basic Services, including reimbursable expenses, within this amount. 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. 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 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 DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Professional Services Rev. April 27, 2016 3 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. Cost estimates and construction schedule estimates are based on CONSULTANT’s opinion based on experience and judgment. CONSULTANT cannot and does not guarantee that proposals, bids or actual Project construction costs and/or schedules will not vary from cost estimates and construction schedule estimates prepared by CONSULTANT. 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. Subcontracts Authorized: Notwithstanding Section 11 above, CITY agrees that subconsultants may be used to complete the Services. The subconsultants authorized by CITY to perform work on this Project are: TODD GROUNDWATER, Located at 2490 Mariner Square Loop, Suite 215, Alameda, CA 94501 RHAA, Located at 225 Miller Avenue, Mill Valley, CA 94941 JDH CORROSION CONSULTANTS, INC., Located at 1100 Willow Pass Court, Concord, CA 94520 MARK THOMAS & COMPANY, INC., Located at 20833 Stevens Creek Blvd #104, Cupertino, CA 95014 GEI CONSULTANTS, Located at 180 Grand Ave #1410, Oakland, CA 94612 DCM CONSULTING, INC., Located at P.O. Box 225, Lafayette, CA 94549 CAL ENGINEERING & GEOLOGY, Located at 6455 Aldmaden Expwy Suite 100, San Jose, CA 95120 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 DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Professional Services Rev. April 27, 2016 4 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 Randy Raines as the Project Manger to have supervisory responsibility for the performance, progress, and execution of the Services and Sarah Rhodes as the project’s Deputy Project Manager 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 Samantha Engelage, Public Works Department, Environmental Compliance Division, 2501 Embarcadero Way, Palo Alto, CA 94303, Telephone: (650) 329- 2123, email: Samantha.Engelage@CityofPaloAlto.org. 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 and such designation shall be made in writing to CONSULTANT. 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 may retain copies of all its work products for completion of its files, 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 in this Agreement. 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 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, DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Professional Services Rev. April 27, 2016 5 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. 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 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 DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Professional Services Rev. April 27, 2016 6 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. Prior to giving notice of termination or suspension for cause, City will provide CONSULTANT two weeks to remedy the cause to the City’s satisfaction. 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. 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: DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Professional Services Rev. April 27, 2016 7 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 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, DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Professional Services Rev. April 27, 2016 8 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 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. SECTION 27. MISCELLANEOUS PROVISIONS. 27.1. This Agreement will be governed by the laws of the State of California. DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Professional Services Rev. April 27, 2016 9 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. 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. DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Professional Services Rev. April 27, 2016 10 CONTRACT No. C17163525 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) RMC WATER AND ENVIRONMENT 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 DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Sr. Program Manager Randy Raines President Alyson Watson Professional Services Rev. April 27, 2016 11 EXHIBIT “A” SCOPE OF SERVICES The City of Palo Alto (Palo Alto or City) currently supplies tertiary-treated recycled water to several City-owned parks and facilities, Caltrans, a commercial fill truck standpipe at the City of Palo Alto Regional Water Quality Control Plant (RWQCP), and the City of Mountain View. Part of the project under consideration entails business plan development and preliminary design of a pipeline that would expand the use of tertiary recycled water to large landscape areas and potential dual plumbing systems in South Palo Alto including the Stanford Research Park. The Palo Alto City Council (Council) certified the Program Environmental Impact Report (EIR) on September 28, 2015. http://www.cityofpaloalto.org/civicax/filebank/documents/49079 The City, as lead, in collaboration with the Santa Clara Valley Water District (District) now seeks a CONSULTANT to conduct numerous recycled water preliminary planning studies as well as to usher Phase III of the recycled water system expansion through financial planning, preliminary design and funding, culminating in a Recycled Water Strategic Plan. GENERAL The CONSULTANT shall act as the project manager for Phase III of the recycled water delivery system, an expansion to the Stanford Research Park. The CONSULTANT shall also support the City and District’s efforts to produce a Recycled Water Strategic Plan. The project requires the CONSULTANT to have a breadth of knowledge and experience to provide various services as described below. The CONSULTANT team should have experience in grant-writing for state and federal funds and possess a full spectrum of engineering and financial planning expertise. The CONSULTANT must be knowledgeable of laws and regulations related to recycled water and water rate-making including California Proposition 218. The CONSULTANT shall put together a flexible team with flexible time allocation to accommodate the needs of the project. The CONSULTANT’s project manager will report to Samantha Engelage, City of Palo Alto Engineer. The CONSULTANT is not expected to navigate the projects through City processes, but is expected to provide all needed support documents. The CONSULTANT team shall keep its work properly organized at all times. As much as possible, records shall be in electronic format compatible with the RWQCP’s software. Records of work will be available to the RWQCP and District at all times, and the City will have ownership rights of all records and documents. The CONSULTANT will not share City and District documents or information with anyone outside of the organizations, except the CONSULTANT program team, without the City and District’s written approvals. Any preliminary design performed by CONSULTANT under this Agreement will be the property of the City and District and they have the right to allow the design engineer to use the preliminary design documents to complete the final design. TASK DESCRIPTIONS Task 1.0 Project Coordination & Administration CONSULTANT shall provide management of all task activities under this Agreement, including project team assignments; meeting preparation and attendance; maintenance DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Professional Services Rev. April 27, 2016 12 and monitoring of the budget and schedule; quality assurance and quality control of all deliverables; and coordination of all sub-consultants. Consultant shall develop a work flow diagram with key decision points noted. CONSULTANT shall make Task 2.0 a priority for completion and meet the following deadlines: o Task 2.3 and 2.4 to be completed no later than 6 months from approval of Task 2.1 o Research and identification of near-term funding sources as defined under Task 2.5 shall be completed within 3 months from completion of Task 2.1 o Task 3.1 completed no later than 3 months from issuance of the Notice to Proceed o Task 3 subtasks (optional tasks excluded) completed no later than 18 months from issuance of Notice to Proceed. o Task 3 optional subtasks completed no later than 9 months of written authorization to proceed from the City and District o All other tasks shall be completed by December 31, 2020. CONSULTANT shall set deadlines for funding, permitting, and preliminary design. CONSULTANT shall attend and coordinate routine update meetings with the City, District, and other stakeholders to occur no less than quarterly throughout the project. CONSULTANT shall develop and maintain a comprehensive overall project budget tracking system for the project. Task 1.1 Project Coordination & Administration Deliverables CONSULTANT shall produce a master schedule for the project including phasing of work, critical paths, and milestones. CONSULTANT shall provide the City and District with summary minutes and supplemental materials used during the update meetings no later than five (5) working days from the update meeting. CONSULTANT shall provide progress, schedule, and budget updates to City and District staff on a monthly basis and as requested by the City and District. Task 1.2 Optional Tasks CONSULTANT shall conduct the Optional tasks only at City and District discretion and upon written notification by the City. Optional Task 1.2 Stakeholder Meetings o A Stakeholder meeting shall be held at 80 and 95 percent project completion. o CONSULTANT shall present project progress results to stakeholders at 80 and 95 percent project completion. CONSULTANT shall incorporate feedback provided by the City, District, and other stakeholders at the progress presentations. Stakeholders include, but are not limited to, residents, nongovernmental organizations, the RWQCP partner agencies, and the San Francisco Bay Regional Water Quality Control Board. Task 2.0 Recycled Water Phase III Expansion Project Task 2.1: Phase III Expansion Work Plan Prior to conducting any work on this task, CONSULTANT shall produce a draft work DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Professional Services Rev. April 27, 2016 13 plan detailing the proposed course of action to meet the task requirements for City and District approval. CONSULTANT shall present the work plan to the City and District during a meeting to be held within ten (10) working days of draft submittal. The City and District will provide comments within fourteen (14) working days of draft submittal. CONSULTANT shall provide revised work plan to the City and District within five (5) working days of receiving comments. City and District will approve/disapprove of the revised work plan within five (5) working days of receiving the finalized work plan and CONSULTANT shall then commence work on the tasks or commence work on a revised work plan that addresses the reasons for the City and/or District’s disapproval, as applicable. Task 2.2: Phase III Expansion Project Coordination and Planning CONSULTANT shall produce a master schedule for Task 2.0 including the phasing of work, critical paths, and milestones specific to the Phase III Expansion Project. CONSULTANT shall set deadlines for business plan, design, permitting, and securing outside funding specific to the Phase III Expansion Project. CONSULTANT shall develop and maintain a comprehensive overall task budget tracking system specific to the Phase III Expansion Project. CONSULTANT shall provide progress, schedule, and budget updates to City and District staff on a monthly basis, for the duration of Task 2.0 and no later than 6 months from the issuance of the Notice to Proceed. Task 2.3 Phase III Expansion Business Plan Development CONSULTANT shall produce a 20-year annual recycled water demand projection for the project area (refer to other attachment for Phase III Background & Map) taking into account potential changes in landscaping, land use, new dual-piped buildings coming online, groundwater recharge, indirect potable reuse, direct potable reuse, and other future potential changes in demand with the possibility of advanced treatment options. CONSULTANT shall perform risk assessment of the Phase III Expansion cost- effectiveness taking into account all the potential changes in demand, the potential changes in current water source costs and availability, as well as several scenarios for secured external funding. CONSULTANT shall identify and calculate a value for other potential uses for the pipeline if the risk assessment finds that there is a nontrivial possibility that the Phase III Expansion could prove not cost-effective in the future. o In coordination with Task 3.3, CONSULTANT shall include in Task 2.3 a high- level, feasibility evaluation of utilizing the Phase III expansion for IPR/DPR within Palo Alto and focused on Palo Alto utilization. As part of this, CONSULTANT shall include a high-level feasibility evaluation of the routing of a dedicated IPR pipeline in Palo Alto that would benefit potential future groundwater production in Palo Alto. In addition, CONSULTANT shall evaluate the potential challenges of siting a DPR treatment plant at the RWQCP site including but not limited to: space requirements for additional treatment steps and minimum likely storage requirements for DPR-treated water before entering the drinking water distribution system. CONSULTANT shall integrate the factors of the risk assessment to develop cost-based DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Professional Services Rev. April 27, 2016 14 recycled water rates and fees given several scenarios and subject to Proposition 218 requirements. CONSULTANT shall integrate the factors of the risk assessment to provide a business plan for the Phase III Pipeline Expansion. Task 2.4 Phase III Expansion Preliminary Design CONSULTANT shall produce a preliminary (15 percent) engineering design that will focus on defining concepts for trenchless crossings and pump station development with the City identifying up to two alternative supply pump station and booster pump station sites and two Zone 2 sites for evaluation. CONSULANT shall include minor updates to the 2008 Facilities Plan for other Phase III elements, as requested by City. CONSULTANT shall utilize the 2008 Recycled Water Facility Plan (found at: http://www.cityofpaloalto.org/civicax/filebank/documents/15103), the 2015 EIR (found at: http://www.cityofpaloalto.org/gov/depts/utl/residents/resources/water_resources/recycle d_water.asp) and Dec 2014 South Bay Water Recycling –Strategic and Master Planning Report (found at: http://www.valleywater.org/EkContent.aspx?id=184&terms=recycled+water. CONSULTANT shall coordinate and provide information needed for environmental documents. CONSULTANT shall produce a Class 4 project cost estimate given preliminary design per AACE International Classification System. The cost estimate shall be appropriate for a project definition of 15 percent and an expected accuracy of -15 to +20 percent. Task 2.5 Phase III Expansion Securing of Outside Funding CONSULTANT shall research and identify near-term funding sources for the Phase III Expansion Project as outlined in the 2008 City of Palo Alto Recycled Water Facility Plan. CONSULTANT shall complete all necessary work to apply for funding on behalf of the City and District leveraging past successful grant funding received. CONSULTANT shall track all applications and provide additional information or materials as needed. CONSULTANT shall maintain and submit all reports necessary to claim any secured funding. CONSULTANT shall maintain a clear, organized record of all applications and all secured funding specific to the Phase III Expansion Project. CONSULTANT shall coordinate and strategize applications for funding the Phase III Expansion Project in light of other tasks under this Agreement and potential collaborative funding opportunities. Task 2.6 Phase III Expansion Deliverables CONSULTANT shall produce a Task 2.0 Work Plan per Task 2.1. CONSULTANT shall produce & update a Task 2.0 Schedule per Task 2.2. CONSULTANT shall consolidate results from Tasks 2.3 – 2.4 into a standalone Phase III Expansion Business Plan, Preliminary Design, & Secured Funding Effort Report, including a summary of the efforts undertaken in Task 2.5 to date. DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Professional Services Rev. April 27, 2016 15 CONSULTANT shall provide the City and District with draft reports at 80 and 95 percent completion for review. CONSULTANT shall incorporate feedback from City and District for each of the above reports into subsequent draft and final reports. Task 2.7 Optional Tasks CONSULTANT shall conduct optional tasks only at the City’s discretion, with District concurrence, and upon written notification by the City and District. Optional Task 2.7.a Phase III Expansion Extended Design for Project Definition of 30 to 40 percent CONSULTANT shall produce an engineering design consistent with 30 to 40 percent project definition that will focus on the pipeline, including tree reconnaissance and alignment refinement. CONSULTANT shall provide recommendations of key points and specifications for full construction bid package. CONSULTANT shall produce a Class 3 cost estimate according to AACE International Classification System with an accuracy of ± 10 percent. CONSULTANT shall provide City and District with construction draft design documents at 80, and 95 percent completion for review. CONSULTANT shall incorporate feedback from City and District for each of the above items into subsequent draft designs no later than ten (10) working days after submittal. CONSULTANT shall identify and evaluate any CEQA and other potential regulatory requirements that may apply to the future construction and operation of the proposed pipeline expansion using the EIR completed in 2015. CONSULTANT shall include a CEQA checklist, if needed, and a list of permits required for construction. CONSULTANT shall provide recommendations of key points for full design bid package. Task 3.0 Northwest County Indirect Potable Reuse Feasibility Study The purpose of the Indirect Potable Reuse (IPR) Feasibility Study is to compile baseline information on the current condition of aquifers in northwestern Santa Clara County and adjacent areas, including sources and quantities of recharge, groundwater pumping, and water quality. This information will be used to evaluate whether increased groundwater utilization by the City is viable, and if so, to evaluate the feasibility of indirect potable reuse of advanced treated recycled water. This study will also evaluate impacts to groundwater resources from potential pumping or recharge projects to ensure continued sustainable groundwater management. Task 3.1 Work Plan & Schedule Prior to conducting any work on this task, the CONSULTANT shall produce a draft work plan detailing the proposed course of action and schedule to meet the task requirements and incorporating stakeholder feedback and comments for City and District approval. CONSULTANT shall include in the work plan, amongst other details, an outline of the needed elements for the assessment under Task 3.2. DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Professional Services Rev. April 27, 2016 16 CONSULTANT shall present the work plan to the City, District, & stakeholders during a meeting to be held within ten (10) working days of draft submittal. The City, District, & stakeholders will provide comments within fourteen (14) working days of draft submittal. CONSULTANT shall provide revised work plan to the City & District within five (5) working days of receiving comments. City & District will approve/disapprove of the revised work plan within ten (10) working days of receiving the finalized work plan and CONSULTANT shall then commence work on the tasks or commence work on a revised work plan that addresses the reasons for the City and/or District’s disapproval, as applicable. Task 3.2 Groundwater Use Assessment CONSULTANT shall review and analyze currently available information and data on the Santa Clara and San Mateo Plain Subbasins (California Department of Water Resources Basins 2-9.02 and 2-9.03, respectively) in the RWQCP service area (Palo Alto, Stanford, Mountain View, Los Altos, Los Altos Hills, and East Palo Alto). The review and analysis topics will include groundwater and surface water divides, recharge areas, water quality, and the general structure of the aquifers, aquitards, and other geologic units, general groundwater quality, as well as other relevant information. o This assumes that data will be available from San Mateo County and that the City will provide available data on its potable supply wells. o This assumes that data is available in electronic formats (i.e., Excel, Access) and that this evaluation will rely on existing data and reports. CONSULTANT shall evaluate the hydrogeology and groundwater conditions in the RWQCP service area and surrounds, including defining the aerial extent, thickness and hydraulic properties of subsurface layers, surface water/groundwater interaction, quantifying seasonal fluctuations in upper and lower aquifer groundwater levels, inflows and outflows, basin storage, and evaluating hydraulic connectivity between the upper and lower aquifers and between adjacent subbasins. CONSULTANT shall provide a groundwater balance analysis focusing on the City in addition to the analyses above for the RWQCP service area. The groundwater system is comprised of multiple water-bearing zones, and the analysis shall include the identification and estimate of inflows and outflows in the different zones (e.g., in the shallow aquifer and deeper production aquifer).The groundwater balance analysis shall also include a schematic diagram showing the conceptual aquifer system, and uncertainty analysis. The analysis shall identify significant sources of groundwater inflows and outflows, including, but not limited to, natural and managed recharge, private and municipal wells, groundwater remediation systems, temporary and on-going dewatering sites, and surface water/groundwater interactions, as well as an evaluation of the extent which shallow groundwater recharges the deeper aquifer(s). CONSULTANT shall include geologic cross sections using existing data (e.g., well boring logs) that delineate water-bearing zones, aquitards, and depth to bedrock. CONSULTANT shall evaluate the feasibility of increased pumping to meet 25, 50, or 100 percent of the City’s water demands and identify additional infrastructure needed to meet demands at each level. CONSULTANT shall evaluate whether increased pumping at these levels would result in adverse impacts, including excessive drawdown in adjacent wells, regional land DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Professional Services Rev. April 27, 2016 17 subsidence, salt water intrusion, significant depletions of surface water, or drawing contaminants from known contaminant release sites into municipal wells (e.g. Superfund sites, dry cleaners, fuel leaks, and other toxic release sites). CONSULTANT shall evaluate different water year (hydrologic) scenarios and potential increased pumping in adjacent cities in conjunction with evaluating the feasibility of increased pumping to meet the City’s future water demands. CONSULTANT shall identify data gaps and recommendations for further study as it relates to increased groundwater use. Task 3.3 Indirect Potable Reuse (IPR) Feasibility Evaluation CONSULTANT shall identify current natural groundwater recharge areas in the northwestern Santa Clara Subbasin, and identify potential areas for artificial recharge based on favorable geological conditions within the RWQCP’s service area. CONSULTANT shall identify areas within the RWQCP’s service area that fall within the northwest Santa Clara Subbasin on the scale of acres (versus parcel) of highest recharge, quantify recharge rates, identify current and near-term groundwater demand, and assess potential for IPR. CONSULTANT shall evaluate IPR from the perspective of the City as a utility as well as that of the RWQCP as a wholesaler. In the IPR utility evaluation, the CONSULTANT shall evaluate based on the City of Palo Alto borders and projected uses. In the IPR wholesaler evaluation, the CONSULTANT shall evaluate based on the RWQCP as a regional plant with multiple partners. The wholesaler evaluation will include a look at the potential intertie with Sunnyvale and East Palo Alto IPR opportunities. CONSULTANT shall provide schematics (e.g., maps and cross sections) indicating identified locations. CONSULTANT shall perform screening level calculations using Darcy’s law or similar approach to evaluate the movement and underground retention time of IPR water. CONSULTANT shall review the potential for IPR projects to create nuisance conditions by raising the water table into basements, elevator shafts, underground parking, street undercrossings, or flooding storm drains and sanitary sewers. CONSULTANT shall determine water quality parameter guidelines for IPR recycled water that would not adversely affect groundwater quality in the basin and ensure consistency with basin management objectives as defined in the 2012 Groundwater Management Plan prepared by the District, or subsequent versions. CONSULTANT shall evaluate the potential for IPR to introduce contaminants into the aquifer as well as evaluate the potential to increase mobilization and/or dissolution of contaminants. Contaminants of concern include salts, emerging contaminants, petroleum hydrocarbons and chlorinated hydrocarbons. Naturally-occurring compounds of potential concern may include arsenic, selenium and chromium and other metals. CONSULTANT shall evaluate the potential for injected or percolated water to discharge into creeks. CONSULTANT shall utilize existing data including that from the City emergency groundwater wells, the District well monitoring, the State Water Resources Control Board’s GeoTracker database, and other existing databases. This assumes that the District will provide assistance in acquiring District data in electronic format (i.e., Excel, Access) and will agree to share the data developed to date for the District’s IPR Study (model refinements are ongoing and subject to change during the course of this project). DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Professional Services Rev. April 27, 2016 18 CONSULTANT shall identify possible IPR scenarios (e.g., injection wells, percolation ponds, etc.) that should be evaluated in more detail in subsequent studies for potential application in the identified potential IPR areas. If IPR is determined to be feasible, CONSULTANT shall produce a recommended implementation strategy for IPR within the portions of the RWQCP service area that fall within the northwest Santa Clara Subbasin. CONSULTANT shall include in the implementation strategy an overview of required permits and a CEQA checklist, other IPR regulatory constraints, monitoring requirements, on-going maintenance requirements, and associated cost estimates. CONSULTANT shall provide Class 5 cost estimates per AACE International Classification System. The cost estimate shall be appropriate for a feasibility study for a project definition of 0 – 2 percent and an expected accuracy of -50 to + 100 percent. CONSULTANT shall identify data gaps and recommendations for further study. Task 3.4 Groundwater Study Deliverables CONSULTANT shall produce a Task 3 Work Plan & Schedule per Task 3.1. CONSULTANT shall produce a Groundwater Use Assessment Report per Task 3.2. CONSULTANT shall consolidate results from Tasks 3.2 – 3.6 into a standalone Northwestern Santa Clara County Indirect Potable Reuse Feasibility Study Report. o CONSULTANT shall provide the City, District, & stakeholders with draft reports at 80 and 95 percent completion for review. o CONSULTANT shall incorporate feedback from the City, District, & stakeholders into each of the Reports above and into subsequent draft and final reports. Task 3.5 Refined Numerical Groundwater Model The model elements and format shall be proposed by the CONSULTANT via a work plan incorporating stakeholder feedback and comments, to be approved by the City and District prior to beginning this task. CONSULTANT shall use the hydrogeologic evaluation completed under Task 3.2 to develop a numerical groundwater model or refine an existing numerical groundwater model for use in forecasting future impacts to the aquifers, and for making calculations to satisfy regulations related to groundwater replenishment reuse projects (e.g. travel times). Future impacts could include those due to increased groundwater development, groundwater replenishment, wet and dry year extremes, or a combination thereof. Adequate model calibration to measured data (e.g., water levels) per industry standards (e.g. ASTM 5981-96) must be demonstrated to the satisfaction of the District and City. CONSULTANT shall propose and evaluate up to five (5) potential groundwater use scenarios, in addition to a baseline scenario reflecting current groundwater demand under dry, average and wet water years. CONSULTANT shall determine artificial recharge rates sufficient to maintain the system in balance under each scenario in the event natural recharge is not sufficient. Task 3.6 IPR Modeling Scenarios & Parcel Identification The model scenarios and identification format/procedure shall be proposed by the DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Professional Services Rev. April 27, 2016 19 CONSULTANT via a work plan incorporating stakeholder feedback and comments to be approved by the City and District prior to beginning this task. CONSULTANT shall use the Refined Numerical Groundwater Model produced under Task 3.5 to run different IPR scenarios to ultimately identify ideal IPR opportunities (e.g., salt water intrusion mitigation, injection wells, percolation basins, etc.) and consider regulatory constraints to identify potential parcels for IPR projects. Task 3.7 Optional Tasks CONSULTANT shall conduct optional tasks only at the City’s discretion, with District concurrence, and upon written notification by the City and District. Optional Task 3.7.a Fulfilling Data Gaps in Numerical Groundwater Model CONSULTANT will identify data needed to complete the numerical groundwater model in Task 3.5 and prepare a work plan for a field investigation to satisfy the data requirements. The work plan shall incorporate stakeholder feedback and comments and be approved by the City and District prior to beginning this task. CONSULTANT shall conduct the field investigation identified in the work plan and document the results in a standalone report. Optional Task 3.7.b IPR Strategic Plan The exact content and format of the plan shall be proposed by the CONSULTANT via a work plan incorporating stakeholder feedback to be approved by the City and District prior to beginning this task. Task 4.0 Recycled Water Strategic Plan The ultimate goal of this study component is to produce a guideline for an alternative reliable water supply for the RWQCP service area and adjacent cities, to augment supplies with recycled water during droughts or other hydrologic events, and to increase the reliance on locally available water supplies such as recycled water. Task 4.1: Recycled Water Strategic Plan Work Plan & Schedule Prior to conducting any work on this task, the CONSULTANT shall produce a draft work plan detailing the proposed course of action and schedule to meet the task requirements, and incorporating stakeholder feedback and comments, for City and District approval.. CONSULTANT shall present the work plan to the City, District, & stakeholders during a meeting to be held within five (5) working days of draft submittal. The City, District, & stakeholders will provide comments within fourteen (14) working days of draft submittal. CONSULTANT shall provide revised work plan to the City & District within five (5) working days of receiving comments. City & District will approve/disapprove of the revised work plan within ten (10) working days of receiving the finalized work plan and CONSULTANT shall then commence work on the tasks or commence work on a revised work plan that addresses the reasons for the City and/or District’s disapproval, as applicable. DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Professional Services Rev. April 27, 2016 20 Task 4.2: Recycled Water Strategic Plan Evaluations CONSULTANT shall develop a comprehensive Recycled Water Strategic Plan, including feasibility report that meets the requirements of WTR11-01, Reclamation Manual; Directives and Standards. CONSULTANT shall review the 1992 Recycled Water Master Plan and identify potential new water recycling customers within the RWQCP service area and adjacent areas. CONSULTANT shall incorporate key findings from Tasks 2.0 – 3.0, the Advanced Water Purification System Feasibility Study, the Mountain View Recycled Water Expansion & Sunnyvale Intertie Projects, the District’s previous studies of stream augmentation, the City’s previous studies of contaminants of emerging concern, and other relevant studies conducted by the City, District, and other agencies into the Recycled Water Strategic Plan. CONSULTANT shall evaluate and develop rate structures to address cost recovery and encourage recycled water use, in compliance with the requirements of Proposition 218, as applicable. CONSULTANT shall also evaluate the long-term financial viability of the RWQCP Recycled Water Program given various scenarios of potable and non-potable recycled water demand, partnerships, and rates. CONSULTANT shall include at a minimum the following evaluations: o Existing recycled water demand (as defined as that projected through 2020) in the RWQCP service area and adjacent areas. o Future recycled water demands (as defined as that projected through 2030 and divided up into 5-year increments) within the RWQCP service area and adjacent areas (e.g., Sunnyvale intertie, etc.). o Recycled water use for potable reuse, non-potable reuse, and stream-flow augmentation within the RWQCP service area and adjacent areas and incorporate a ranking/ evaluation system to help prioritize future commitments and projects. o Identifying and recommending technologies that may further improve recycled water quality by incorporating the Advanced Water Purification System Feasibility Study and how these projects could be linked to the RWQCP’s Long Range Facilities Plan. o Developing revenue and market projections based on current (2020) conditions and an expanded distribution system (2030) throughout the RWQCP service area and adjacent areas o Summary of funding opportunities discovered under Task 5.0 and a summary of the statewide regulatory constraints tracked by the District. o Identification of opportunities for regional coordination and interconnections including an analysis of efficiencies realized by using interconnections. o Summary of the agreements that would be required to achieve recommended regional interconnections and additional expansion taking into account local policies in addition to agreements to support recycled water and interconnections. Task 4.3 Recycled Water Strategic Plan Deliverables CONSULTANT shall produce a Task 4 Work Plan & Schedule per Task 4.1. CONSULTANT shall consolidate results from Tasks 4.2 into a standalone Recycled Water Strategic Plan report. DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Professional Services Rev. April 27, 2016 21 o CONSULTANT shall provide a report that can be used as a feasibility report that could be sent by the City to the Bureau of Reclamation for review and approval. o CONSULTANT shall incorporate any comments from the Bureau of Reclamation and issue a Project Feasibility Report. o CONSULTANT shall provide the City, District, & stakeholders with draft reports at 80 and 95 percent completion for review. o CONSULTANT shall incorporate feedback from the City, District, & stakeholders into each of these reports and into subsequent draft reports. Task 4.4 Optional Tasks CONSULTANT shall conduct optional tasks only at the City’s discretion, with District concurrence, and upon written notification by the City and District. Optional Task 4.4.a Mountain View Project Alignment o CONSULTANT shall conduct additional analyses as needed to incorporate work conducted separately by Mountain View on recycled water expansion into Task 4.2. Optional Task 4.4.b RWQCP Wholesaler Business Plan o The business plan elements and approach shall be proposed by the CONSULTANT via a work plan which shall incorporate stakeholder feedback and comments and be approved by the City and District prior to beginning this task. o CONSULTANT shall develop a business plan for RWQCP being a wholesaler of recycled water within South San Mateo County. Optional Task 4.4.c Assistance in Partner Agreements o CONSULTANT shall, as needed, draft partner agreements between different agencies on recycled water pipeline expansion projects. Optional Task 4.4.d Facility Assessment Plans o The plan elements and approach shall be proposed by the CONSULTANT via a work plan which shall incorporate stakeholder feedback and comments and to be approved by the City and District prior to beginning this task. o CONSULTANT shall develop facility assessment plans for expanding recycled water within East Palo Alto, Stanford, Los Altos Hills, and Los Altos. Optional Task 4.4.e Business Plan – East Palo Alto and East Menlo Park o The business plan elements and approach shall be proposed by the CONSULTANT via a work plan which shall incorporate stakeholder feedback and comments and be approved by the City and District prior to beginning this task. o CONSULTANT shall develop a business plan for expanding recycled water within East Palo Alto and East Menlo Park. Optional Task 4.4.f Business Plan – Los Altos o The business plan elements and approach shall be proposed by the DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Professional Services Rev. April 27, 2016 22 CONSULTANT via a work plan which shall incorporate stakeholder feedback and comments and be approved by the City and District prior to beginning this task. o CONSULTANT shall develop a business plan for expanding recycled water within Los Altos. Optional Task 4.4.g Business Plan – Los Altos Hills o The business plan elements and approach shall be proposed by the CONSULTANT via a work plan which shall incorporate stakeholder feedback and comments and be approved by the City and District prior to beginning this task. o CONSULTANT shall develop a business plan for expanding recycled water within Los Altos Hills. Optional Task 4.4.h Business Plan – Stanford o The business plan elements and approach shall be proposed by the CONSULTANT via a work plan which shall incorporate stakeholder feedback and comments to be approved by the City and District, prior to beginning this task. o CONSULTANT shall develop a business plan for expanding recycled water to Stanford. Task 5.0 Funding Identification & Assistance CONSULTANT shall research and identify possible funding sources for the numerous recycled water projects under this scope of work, with funding for Phase III design and construction the priority. CONSULTANT, at the direction of the City and District, shall complete all necessary work to apply for funding on behalf of the City, District, and/or RWQCP partner agencies. The City and District will be responsible for compilation and submittal of subsequent administrative reports from any granted funding. CONSULTANT shall track all applications and provide additional information or materials as needed. CONSULTANT shall maintain and submit all reports necessary to claim any secured funding. CONSULTANT shall coordinate and strategize applications for funding in light of all tasks under this Agreement, City and District projects occurring simultaneously outside of this Agreement, as well as potential collaborative funding opportunities with other agencies. Task 5.1 Funding Identification & Assistance Deliverables CONSULANT shall produce and update a tracking sheet/record of funding opportunities, pending applications, & schedules under Task 5.0. CONSULTANT shall provide the City and District with copies of all submitted applications produced under Task 5.0. o CONSULTANT shall provide the City and District with draft applications for review and approval prior to submission. DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Professional Services Rev. April 27, 2016 23 Task 6.0 Regulatory Support & Regional Coordination CONSULTANT shall develop an overarching regulatory strategy for coordination with key regulatory agencies (e.g., Regional Water Quality Control Board and the State Board Division of Drinking Water). The goal of which will be to assess the regulatory agencies’ comfort level with the proposed reuse plans and also to understand the technical data the agencies will expect to see during the permitting phase. CONSULTANT shall prepare applications and regulatory documents as needed and assist with permitting process. CONSULTANT shall update the City and District with respect to any relevant compliance requirements. CONSULTANT shall, upon City and District direction, aid in drafting of new ordinances or amending existing ordinances to encourage recycled water use. CONSULTANT shall evaluate regional opportunities to promote the use of recycled water within Santa Clara and South San Mateo Counties. Task 7.0 Public Outreach CONSULTANT shall, at the discretion of the City and District, prepare informational material in collaboration with City & District Outreach Staff and assist staff with reports, presentations, and workshops for City management, District Board of Directors, City Commissions and Committees, City Council and RWQCP partner agencies as needed. CONSULTANT shall, as needed, provide administrative and/or technical support at public outreach events. CONSULTANT shall assist, as needed, in educational campaigns and stakeholder meetings on the benefits of recycled water to increase public perception and awareness of the potential expansion opportunities. Task 7.1 Public Outreach Deliverables CONSULTANT shall produce and update a tracking sheet of outreach conducted throughout the year under Task 7.0 and provide the record to the City & District each year of the contract by December 31 of that year. o Tracking sheet shall include at a minimum the location, date, name, number of people, event theme, and any provided materials for each outreach event. CONSULTANT shall provide the City & District with electronic copies of all produced outreach materials. DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Professional Services Rev. April 27, 2016 24 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 From NTP (No. of Months/ Date) Task 1.0 December 31, 2020 Task 2.0 Tasks 2.3 & 2.4 Task 2.5 December 31, 2020 6 months from Task 2.1 3 months from Task 2.1 Task 3.0 18 months from NTP Task 4.0 December 31, 2020 Task 5.0 December 31, 2020 Task 6.0 December 31, 2020 Task 7.0 December 31, 2020 DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Professional Services Rev. April 27, 2016 25 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, do not exceed the amounts set forth in Section 4 of this Agreement. BUDGET SCHEDULE NOT TO EXCEED AMOUNT Task 1 $145,302 (Project Coordination and Administration) Task 2 $721,389 (Recycled Water Phase III Expansion Project) Task 3 $358,218 (Northwest County IPR Feasibility Study) Task 4 $418,589 (Recycled Water Strategic Plan) Task 5 $64,342 (Regulatory Support and Regional Coordination) Task 6 $72,126 (Regulatory Support and Regional Coordination) Task 7 $220,034 (Regulatory Support and Regional Coordination) Sub-total Basic Services $2,000,000 Reimbursable Expenses $0 Total Basic Services and Reimbursable expenses $2,000,000 DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Professional Services Rev. April 27, 2016 26 Maximum Total Compensation $2,000,000 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: delivery, mileage (as allowed by IRS guidelines, and travel expenses as described in section A below. 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 $100 shall be approved in advance by the CITY’s project manager. DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Billing Classifications 2016 Rates Associate EPS 125.00$ EPS-1 148.00$ EPS-2 166.00$ EPS-3 178.00$ EPS-4 195.00$ EPS-5 199.00$ EPS-6 216.00$ EPS-7 230.00$ EPS-8 242.00$ EPS-9 249.00$ EPS-10 266.00$ EPS-11 282.00$ EPS-12 295.00$ EPS-13 299.00$ EPS-14 308.00$ Intern 55.00$ TECH-1 132.00$ TECH-2 136.00$ TECH-3 141.00$ TECH-4 147.00$ TECH-5 153.00$ TECH-6 161.00$ TECH-7 163.00$ AD-1 96.00$ AD-2 100.00$ AD-3 110.00$ AD-4 120.00$ AD-5 132.00$ AD-6 144.00$ AD-7 150.00$ Engineer-Planner-Scientist Technician Administrative RMC Water and Environment 2016 Standard Billing Rates EXHIBIT “C-1”HOURLY RATE SCHEDULE Rates shall be adjusted by a percentage equal to the change in the Consumer Price Index for Urban Wage Earners and Clerical Workers for the San Francisco-Oakland- San Jose area, published by the United States Department of Labor Statistics (CPI) which is published most immediately preceding the commencement of the applicable Additional Term, which shall be compared with the CPI published most immediately preceding the commencement date of the then expiring term. Notwithstanding the foregoing, in no event shall CONTRACTOR’s compensation rates be increased by an amount exceeding five percent of the rates effective during the immediately preceding term, and in no event shall CPI rate adjustments cause the contract price to exceed the amount described in Section 4, "Not to Exceed Compensation". 27 DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A PLANNING • DEVELOPMENT • MANAGEMENT • PROTECTION 2490 Mariner Square Loop, Suite 215 | Alameda, CA 94501 | 510 747 6920 | toddgroundwater.com A 2016 SCHEDULE OF CHARGES January 2016 Title Name Hourly Rate Principal Consultant Iris Priestaf $ 220 Principal Geologist Phyllis Stanin $ 220 Principal Hydrogeologist Sally McCraven $ 220 Senior Hydrogeologist Dan Craig $ 215 Senior Hydrogeologist Mike Maley $ 215 Senior Geochemist William Motzer $ 210 Senior Engineer Katherine White $ 210 Senior Hydrologist Gus Yates $ 210 Senior Engineer Maureen Reilly $ 200 Senior Hydrogeologist Liz Elliott $ 200 Senior Hydrogeologist Edwin Lin $ 200 Senior Hydrogeologist Chad Taylor $ 200 Staff Geologist Amber Ritchie $ 150 CAD/GIS/Graphics Alain Boutefeu $ 110 GIS/Drafting Support Support Staff $ 100 Clerical Sheila Gould $ 100 28 DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Schedule of Hourly Rates and Costs - 2016 TJC AND ASSOCIATES, INC. Labor Engineer Level 10 (E10) $229.00/hour Level 9 (E9) $219.00/hour Level 8 (E8) $209.00/hour Level 7 (E7) $199.00/hour Level 6 (E6) $189.00/hour Level 5 (E5) $179.00/hour Level 4 (E4) $167.00/hour Level 3 (E3) $150.00/hour Level 2 (E2) $133.00/hour Level 1 (E1) $116.00/hour Drafting Level 7 (C7) $164.00/hour Level 6 (C6) $142.00/hour Level 5 (C5) $128.00/hour Level 4 (C4) $119.00/hour Level 3 (C3) $103.00/hour Level 2 (C2) $85.00/hour Level 1 (C1) $68.00/hour Administrative Level 10 (A10) $206.00/hour Level 9 (A9) $173.00/hour Level 8 (A8) $142.00/hour Level 7 (A7) $122.00/hour Level 6 (A6) $102.00/hour Level 5 (A5) $87.00/hour Level 4 (A4) $71.00/hour Level 3 (A3) $60.00/hour Level 2 (A2) $48.00/hour Level 1 (A1) $37.00/hour 29 DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A , 2016 Terms of Agreement CHARGES FOR SERVICES Charges for Basic and Extra Services shall be based on hourly rates not to exceed the following schedule: Principal $185.00 to $210.00 Senior Associate 160.00 to 190.00 Senior Project Manager 140.00 to 155.00 Associate 130.00 to 145.00 Designer 100.00 to 125.00 Principal Emeritus 185.00 to 250.00 Consultant 30 DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Protecting the infrastructure through innovative Corrosion Engineering Solutions CORROSION ENGINEERING SERVICES 2016 Fee Schedule Personnel Charges Rate Per Hour Principal Corrosion Engineer $220.00 Senior Corrosion Engineer $205.00 Corrosion Design Specialist $185.00 Corrosion Project Supervisor $175.00 Project Engineer $165.00 Corrosion Technician $135.00 Field Technician $115.00 Drafting/AutoCad $ 88.00 Word Processing/Computer $ 70.00 Notes: Effective Date: Jan, 1, 2016 thru Dec. 31, 2016 Office Address: 1100 Willow Pass Court, Concord, CA 94520 Tel. No.: 925.927.6630 Fax No.: 925.927.6634 31 DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A MARK THOMAS & COMPANY, INC. CHARGE RATE SCHEDULE “J-1” Expires June 30, 2016* HOURLY CHARGE RATES PROFESSIONAL AND OFFICE Principal $ 325.00 per hour Senior Engineering Manager 310.00 per hour Engineering Manager 252.00 per hour Structural Manager 278.00 per hour Senior Project Manager 226.00 per hour Senior Survey Manager 210.00 per hour Project Manager 200.00 per hour Survey Manager 200.00 per hour Senior Project Engineer 178.00 per hour Project Engineer 168.00 per hour Senior Design Engineer 158.00 per hour Design Engineer 118.00 per hour Project Surveyor 145.00 per hour Sr. Engineering/Survey/CADD Technician 126.00 per hour Engineering/Survey/CADD Technician 110.00 per hour Inspector 121.00 per hour Technical Writer 105.00 per hour Design (Tech Assistant) 68.00 per hour Survey (Tech Assistant) 68.00 per hour Senior Project Coordinator 108.00 per hour Project Coordinator 100.00 per hour Senior Administrative 85.00 per hour Administrative 80.00 per hour FIELD Single Chief without Equipment $ 119.00 per hour Single Chief with Equipment 170.00 per hour Single Chainman 96.00 per hour 2 Person Field Party and Vehicle 270.00 per hour 3 Person Field Party and Vehicle 345.00 per hour LANDSCAPE ARCHITECT SERVICES Landscape Architect II $ 200.00 per hour Landscape Architect I $ 178.00 per hour 32 DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Fee Schedule 2016 FEE SCHEDULE Hourly Billing Rate Personnel Category $ per hour Staff Professional – Grade 1 $ 107 Staff Professional – Grade 2 $ 117 Project Professional – Grade 3 $ 129 Project Professional – Grade 4 $ 145 Senior Professional – Grade 5 $ 171 Senior Professional – Grade 6 $ 195 Senior Professional – Grade 7 $ 231 Senior Consultant – Grade 8 $ 259 Senior Consultant – Grade 9 $ 320 Senior Principal – Grade 10 $ 320 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Senior CADD Drafter and Designer $ 129 CADD Drafter / Designer and Senior Technician $ 117 Technician, Word Processor, Administrative Staff $ 96 Office Aide $ 75 33 DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A DCM CONSULTING, INC. 2016 FEE SCHEDULE PROFESSIONAL STAFF Principal Engineer, David C. Mathy ...................................................................................$ 210.00/hr. Clerical/Administrative, Lita E. Mathy ..............................................................................$ 90.00/hr. 34 DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A SCHEDULE OF CHARGES FOR 2016 They shall remain in effect through December 31, 2016. Personnel Rate Principal Engineer/Geologist $220 per hour Associate Engineer/Geologist $195 per hour Senior Engineer/Geologist $179 per hour Project Engineer/Geologist $144 per hour Staff Engineer/Geologist $128 per hour Technician (Straight rate prevailing wage) $115 per hour Project Assistant $ 82 per hour Administration/Clerical $ 77 per hour Special Inspector (Straight rate prevailing wage) $118 per hour Deposition/Court Testimony (minimum 4 hours) $360 per hour Laboratory Tests Fee Concrete Compressive Strength Testing $ 35 per test Moisture Content (ASTM D 2216) $ 20 per test Moisture & Density (ASTM D 4318) $ 28 per test Atterberg Limits (ASTM D 4318) $180 per test Compaction Curve, 4" mold (ASTM D 1557) $230 per test Compaction Curve, 6" mold (ASTM D 1557) $280 per test Wash over #200 Sieve (ASTM D 1140) $ 65 per test Sieve Analysis with #200 Wash (ASTM D 422) $130 per test Sieve & Hydrometer (ASTM D 422) $205 per test CAL ENGINEERING & GEOLOGY 35 DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Professional Services Rev. April 27, 2016 36 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. DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Professional Services Rev. April 27, 2016 37 B. CROSS LIABILITY 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 DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A ANY PROPRIETOR/PARTNER/EXECUTIVEOFFICER/MEMBER EXCLUDED? INSR ADDL SUBRLTRINSDWVD PRODUCER CONTACTNAME: FAXPHONE(A/C, No):(A/C, No, Ext): E-MAILADDRESS: INSURER A : INSURED INSURER B : INSURER C : INSURER D : INSURER E : INSURER F : POLICY NUMBER POLICY EFF POLICY EXPTYPE OF INSURANCE LIMITS(MM/DD/YYYY)(MM/DD/YYYY) AUTOMOBILE LIABILITY UMBRELLA LIAB EXCESS LIAB WORKERS COMPENSATION AND EMPLOYERS' LIABILITY DESCRIPTION OF OPERATIONS / LOCATIONS / VEHICLES (ACORD 101, Additional Remarks Schedule, may be attached if more space is required) AUTHORIZED REPRESENTATIVE EACH OCCURRENCE $ DAMAGE TO RENTEDCLAIMS-MADE OCCUR $PREMISES (Ea occurrence) MED EXP (Any one person)$ PERSONAL & ADV INJURY $ GEN'L AGGREGATE LIMIT APPLIES PER:GENERAL AGGREGATE $ PRO-POLICY LOC PRODUCTS - COMP/OP AGGJECT OTHER:$ COMBINED SINGLE LIMIT $(Ea accident) ANY AUTO BODILY INJURY (Per person)$ OWNED SCHEDULED BODILY INJURY (Per accident)$AUTOS ONLY AUTOS HIRED NON-OWNED PROPERTY DAMAGE $AUTOS ONLY AUTOS ONLY (Per accident) $ OCCUR EACH OCCURRENCE CLAIMS-MADE AGGREGATE $ DED RETENTION$ PER OTH-STATUTE ER E.L. EACH ACCIDENT E.L. DISEASE - EA EMPLOYEE $ If yes, describe under E.L. DISEASE - POLICY LIMITDESCRIPTION OF OPERATIONS below INSURER(S) AFFORDING COVERAGE NAIC # COMMERCIAL GENERAL LIABILITY Y / N N / A (Mandatory in NH) SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, NOTICE WILL BE DELIVERED IN ACCORDANCE WITH THE POLICY PROVISIONS. THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AFFIRMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUING INSURER(S), AUTHORIZED REPRESENTATIVE OR PRODUCER, AND THE CERTIFICATE HOLDER. IMPORTANT: If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must have ADDITIONAL INSURED provisions or be endorsed. If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endorsement. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). COVERAGES CERTIFICATE NUMBER:REVISION NUMBER: CERTIFICATE HOLDER CANCELLATION © 1988-2015 ACORD CORPORATION. All rights reserved.ACORD 25 (2016/03) CERTIFICATE OF LIABILITY INSURANCE DATE (MM/DD/YYYY) $ $ $ $ $ The ACORD name and logo are registered marks of ACORD 11/14/2016 (617) 328-6555 (617) 328-6888 35289 RMC Water and Environment 2175 North California Blvd., Suite 315 Walnut Creek, CA 94596 20443 A 1,000,000 X 6014561812 02/23/2016 02/23/2017 300,000 10,000 1,000,000 2,000,000 2,000,000 1,000,000B X 6014561843 02/23/2016 02/23/2017 B 6017075447 02/23/2016 02/23/2017 1,000,000 N 1,000,000 1,000,000 B Prof. Liability 114135520 02/23/2016 Per Claim 1,000,000 B 114135520 02/23/2016 02/23/2017 Aggregate 1,000,000 All Coverages are in accordance with the policy terms and conditions. City of Palo Alto, its Council Members, Officers, Agents, and Employees are listed as additional insured with respect to General Liability and Auto Liability, where required by written contract. 30 day notice of cancellation is provided in accordance with policy terms and conditions and 10 day notice of cancellation for non-payment of premium. City of Palo Alto Attn: Purchasing and Contract Administration P.O. Box 10250 Palo Alto, CA 94303 WOOD&CU-01 MPARENT Ames & Gough 859 Willard Street Suite 320 Quincy, MA 02169 boston@amesgough.com Continental Insurance Co A(XV) Continental Casualty Company (CNA) A, XV X 02/23/2017 X X X X X X X DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A G-140331-D (Ed. 01/13) G-140331-D (Ed. 01/13) Page 1 of 2 Copyright, CNA All Rights Reserved. BLANKET ADDITIONAL INSURED - OWNERS, LESSEES OR CONTRACTORS – WITH PRODUCTS-COMPLETED OPERATIONS COVERAGE It is understood and agreed that this endorsement amends the COMMERCIAL GENERAL LIABILITY COVERAGE PART as follows: SCHEDULE (OPTIONAL) Name of Additional Insured Persons Or Organizations (As required by "written contract" per Paragraph A. below.) Locations of Covered Operations (As per the "written contract," provided the location is within the "coverage territory" of this Coverage Part.) A. Section II - Who Is An Insured is amended to include as an additional insured: 1.Any person or organization whom you are required by "written contract" to add as an additional insured on this Coverage Part; and 2.The particular person or organization, if any, scheduled above. B.The insurance provided to the additional insured is limited as follows: 1.The person or organization is an additional insured only with respect to liability for "bodily injury," "property damage," or "personal and advertising injury" caused in whole or in part by: a.Your acts or omissions, or the acts or omissions of those acting on your behalf, in the performance of your ongoing operations specified in the "written contract"; or b."Your work" that is specified in the "written contract" but only for "bodily injury" or "property damage" included in the "products-completed operations hazard," and only if: (1)The "written contract" requires you to provide the additional insured such coverage; and (2)This Coverage Part provides such coverage. 2.If the "written contract" specifically requires you to provide additional insurance coverage via the 10/01 edition of CG2010 (aka CG 20 10 10 01), or via the 10/01 edition of CG2037 (aka CG 20 37 10 01), or via the 11/85 edition of CG2010 (aka CG 20 10 11 85), then in paragraph B.1.above, the words 'caused in whole or in part by' are replaced by the words 'arising out of'. 3.We will not provide the additional insured any broader coverage or any higher limit of insurance than: a.The maximum permitted by law; b.That required by the "written contract"; c.That described in B.1.above; or d.That afforded to you under this policy, whichever is less. 4.Notwithstanding anything to the contrary in Condition 4. Other Insurance (Section IV), this insurance is excess of all other insurance available to the additional insured whether on a primary, excess, contingent or RMC Water & Environment Package Policy # 6014561812, Eff. 02/23/16-02/23/17 DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A G-140331-D (Ed. 01/13) G-140331-D (Ed. 01/13) Page 2 of 2 Copyright, CNA All Rights Reserved. any other basis. But if required by the "written contract" to be primary and non-contributory, this insurance will be primary and non-contributory relative to insurance on which the additional insured is a Named Insured. 5.The insurance provided to the additional insured does not apply to "bodily injury," "property damage," or "personal and advertising injury" arising out of: a.The rendering of, or the failure to render, any professional architectural, engineering, or surveying services, including: (1)The preparing, approving, or failing to prepare or approve maps, shop drawings, opinions, reports, surveys, field orders, change orders or drawings and specifications; and (2)Supervisory, inspection, architectural or engineering activities; or b.Any premises or work for which the additional insured is specifically listed as an additional insured on another endorsement attached to this Coverage Part. C. SECTION IV – COMMERCIAL GENERAL LIABILITY CONDITIONS is amended as follows: 1.The Duties In The Event of Occurrence, Offense, Claim or Suit condition is amended to add the following additional conditions applicable to the additional insured: An additional insured under this endorsement will as soon as practicable: (1)Give us written notice of an "occurrence" or an offense which may result in a claim or "suit" under this insurance, and of any claim or "suit" that does result; (2)Except as provided in Paragraph B.4.of this endorsement, agree to make available any other insurance the additional insured has for a loss we cover under this Coverage Part; (3)Send us copies of all legal papers received, and otherwise cooperate with us in the investigation, defense, or settlement of the claim or "suit"; and (4)Tender the defense and indemnity of any claim or "suit" to any other insurer or self insurer whose policy or program applies to a loss we cover under this Coverage Part. But if the "written contract" requires this insurance to be primary and non-contributory, this provision (4)does not apply to insurance on which the additional insured is a Named Insured. We have no duty to defend or indemnify an additional insured under this endorsement until we receive from the additional insured written notice of a claim or "suit." D.Only for the purpose of the insurance provided by this endorsement, SECTION V – DEFINITIONS is amended to add the following definition: "Written contract" means a written contract or written agreement that requires you to make a person or organization an additional insured on this Coverage Part, provided the contract or agreement: 1.Is currently in effect or becomes effective during the term of this policy; and 2.Was executed prior to: a.The "bodily injury" or "property damage"; or b.The offense that caused the "personal and advertising injury," for which the additional insured seeks coverage under this Coverage Part. All other terms and conditions of the Policy remain unchanged. Material used with permission of ISO Properties, Inc. DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A SCA 23 500D (Ed.10/11) THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY. EXTENDED COVERAGE ENDORSEMENT –BA PLUS This endorsement modifies insurance provided under the following: BUSINESS AUTO COVERAGE FORM I.LIABILTY COVERAGE 1.Which are no longer in force;or A.Who Is An Insured 2.Whose limits have been exhausted. Section II,Paragraph A.1.,B.Bail Bonds and Loss of EarningsThefollowing is added to Who Is An Insured:Section II,Paragraphs A.2.a.(2)and A.2.a.(4)are1. a.Any incorporated entity of which the Named revised as follows: Insured owns a majority of the voting stock on 1.a.(2),In the limit for the cost of bail bonds isthe date of inception of this Coverage Form;increased from $2,000 to $5,000, andprovidedthat, 2.a.(4),In the limit for the loss of earnings isb.A.1.The insurance afforded by this provision increased from $250 to $500 a day.does not apply to any such entity that is an "insured"under any other liability "policy"C.Fellow Employeeproviding"auto"coverage.Section II,Paragraph B.5 does not apply.2.Any organization you newly acquire or form,other Such coverage as is afforded by this provision C.isthan a limited liability company,partnership or excess over any other collectible insurance.joint venture,and over which you maintain majority ownership interest.II.PHYSICAL DAMAGE COVERAGE A.2.:The insurance afforded by this provision A.Towing a.Is effective on the acquisition or formation Section III.Paragraph A.2.,is revised to include Lightdate, and is afforded only until the end of the Trucks up to 10,000 pounds G.V.W.policy period of this Coverage Form,or the B.Glass Breakage –Hitting A Bird Or Animal –next anniversary of its inception date,Falling Objects Or Missileswhicheveris earlier. Section III,Paragraph A.3.:The following is added tob.Does not apply to: With respect to any covered "auto,"any deductible(1)"Bodily injury"or "property damage"shown in the Declarations will not apply to glasscausedbyan"accident"that occurred breakage if such glass is repaired,in a mannerbeforeyouacquiredorformedtheacceptabletous,rather than replaced.organization;or C.Transportation Expenses(2)Any such organization that is an "insured" under any other liability "policy"providing Section III,Paragraph A.4.a.is revised,with respect"auto"coverage.to transportation expense incurred by you,to provide: 3.Any person or organization that you are obligated a.$60 per day,in lieu of $20;subject totoprovideInsurancewhererequiredbyawrittenb.$1,800 maximum,in lieu of $600.contract or agreement is an insured,but only with respect to legal responsibility for acts or omissions D.Loss of Use Expensesof a person for whom Liability Coverage is afforded under this policy.Section III,Paragraph A.4.b.is revised,with respect to loss of use expenses incurred by you,to provide:4.An "employee"of yours is an "insured"while operating an "auto"hired or rented under a a.$1,000 maximum,in lieu of $600.contract or agreement in that "employee's"name,E.Personal Propertywithyourpermission,while performing duties related to the conduct of your business.Section III,Paragraph A.4.The following is added to A.Who Is An"Policy,"as used in this provision c.PersonalWewillpayup to $500 for loss tonsured,I includes those policies that were in force on Property which is:the inception date of this Coverage Form but: SCA 23 500D Page 1of3Copyright,CNA Corporation, 2000. (Ed.10/11)Includes copyrighted material of the Insurance Services Office used with its permission. 10 0 2 0 0 0 5 4 4 0 3 0 4 6 8 9 5 4 9 7 3 9 RMC Water & Environment Policy # 6014561843, Eff. 02/23/16-02/23/17 DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A SCA 23 500D (Ed.10/11) (1)Owned by an "insured";and in that individual "employee's"name,with your permission,while performing duties(2)In or on the covered "auto."related to the conduct of your business. This coverage applies only in the event of a total c.The most we will pay for any one "accident"ortheft of your covered "auto.""loss" is the actual cash value,cost of repair, cost of replacement or $75,000 whichever isThisinsuranceisexcessoveranyothercollectiblelessminusa $500 deductible for eachinsuranceand no deductible applies.covered auto.No deductible applies to "loss"F.Rental Reimbursement caused by fire or lightning. Section III,Paragraph A.4.:The following is added to d.The physical damage coverage as is providedd.We will pay for rental reimbursement expenses by this provision will be limited to the types ofincurredbyyoufortherentalof an "auto"because physical damage coverage(s)provided onof"loss"to a covered "auto." Payment applies in your owned "autos."addition to the otherwise applicable amount ofeachcoverageyouhaveon a covered "auto."No e.Such physical damage coverage for hireddeductiblesapplytothiscoverage."autos"will: 1.We will pay only for those expenses incurred (1)Include loss of use,provided it is theduringthepolicyperiodbeginning24hoursconsequenceof an "accident"for whichafterthe"loss"and ending,regardless of the the Named Insured is legally liable,andpolicy's expiration,with the lesser of the as a result of which a monetary loss isfollowingnumberofdays:sustained by the leasing or rental concern.(a)The number of days reasonably required to repair or replace the covered "auto";or,(2)Such coverage as is provided by thisG.e.(1)provision will be subject to a limit(b)15 days.of $750 per "accident."2.Our payment is limited to the lesser of the H.Airbag Coveragefollowingamounts: Section III,Paragraph B.3.The following is added to(a)Necessary and actual expenses incurred; or,The accidental discharge of an airbag shall not be considered mechanical breakdown.(b)$25 per day subject to a maximum of $375.I.Electronic Equipment 3.This coverage does not apply while there are Section III,Paragraphs B.4.c and B.4.d.are deletedspareorreserve"autos"available to you for and replaced by the following:your operations.c.Physical Damage Coverage on a covered4.If "loss"results from the total theft of a "auto"also applies to "loss"to anycovered"auto"of the private passenger type,permanently installed electronic equipmentwewillpayunderthiscoverageonlythatincludingitsantennasandotheraccessoriesamountofyourrentalreimbursementd.A $100 per occurrence deductible applies toexpenseswhichisnotalreadyprovidedforthecoverageprovidedbythisprovision.under the Physical Damage Coverage Extension.J.Diminution In Value G.Hired Autos""Section III,Paragraph B.6.The following is added to Section III.Paragraph A.:The following is added to Subject to the following,the "diminution in value" exclusion does not apply to:5.Hired "Autos" a.Any covered "auto"of the private passengerIfPhysicalDamagecoverageisprovidedundertypeyoulease,hire,rent or borrow,without athis policy,and such coverage does not extend to driver for a period of 30 days or less, whileHiredAutos,then Physical Damage coverage is performing duties related to the conduct ofextendedto:your business;anda.Any covered "auto"you lease,hire,rent or b.Any covered "auto"of the private passengerborrowwithoutadriver;and type hired or rented by your "employee"b.Any covered "auto"hired or rented by your without a driver for a period of 30 days or less,"employee"without a driver,under a contract SCA 23 500D Page 2of3Copyright,CNA Corporation, 2000. (Ed.10/11)Includes copyrighted material of the Insurance Services Office used with its permission. DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A SCA 23 500D (Ed.10/11) under a contract in that individual Such "executive officers"are "insureds"while "employee's"name,with your permission,using a covered "auto"described in this provision. while performing duties related to the conduct IV.BUSINESS AUTO CONDITIONSofyourbusiness. A.Duties In The Event Of Accident,Claim,Suit Orc.Such coverage as is provided by this Lossprovisionis limited to a "diminution in value" loss arising directly out of accidental damage Section IV,ParagraphThefollowing is added toand not as a result of the failure to make A.2.a.repairs;faulty or incomplete maintenance or (4)Your "employees"may know of an "accident"repairs;or the installation of substandard or "loss."This will not mean that you haveparts.such knowledge,unless such "accident"ord.The most we will pay for "loss"to a covered "loss" is known to you or if you are not an"auto"in any one accident is the lesser of:individual,to any of your executive officers orpartnersoryourinsurancemanager.(1)$5,000;or Section IV,ParagraphThefollowing is added to(2)20%of the "auto's"actual cash value A.2.b.(ACV) (6)Your "employees"may know of documentsIII.Drive Other Car Coverage –Executive Officers received concerning a claim or "suit."This will Sections II and III:The following is added to not mean that you have such knowledge, unless receipt of such documents is known to1.Any "auto"you don't own,hire or borrow is a you or if you are not an individual,to any ofcovered"auto"for Liability Coverage while being your executive officers or partners or yourusedby,and for Physical Damage Coverage insurance manager.while in the care,custody or control of,any of your B.Concealment,Misrepresentation or Fraud"executive officers,"except: a.Section IV,Paragraph B.2.An "auto"owned by that "executive officer"or The following is added to a member of that person's household;or Your failure to disclose all hazards existing on the date b.An "auto"used by that "executive officer" while of inception of this Coverage Form shall not prejudice working in a business of selling,servicing,you with respect to the coverage afforded provided repairing or parking "autos."such failure or omission is not intentional. C.Policy Period,Coverage TerritorySuchLiabilityand/or Physical Damage Coverage as is afforded by this provision will be:Section IV,Paragraphs 7.(5).(a).is revised to (1)Equal to the greatest of those coverages provide: afforded any covered "auto";and a.45 days of coverage in lieu of 30 days (2)Excess over any other collectible V.DEFINITIONSinsurance. Section V.Paragraph C.is deleted and replaced by2.For purposes of this provision,"executive officer"the following:means a person holding any of the officer positions created by your charter,constitution,by-"Bodily injury"means bodily injury,sickness or diseaselawsoranyothersimilargoverningdocument,sustained by a person,including mental anguish,and,while a resident of the same household,mental injury or death resulting from any of theseincludesthatperson's spouse. SCA 23 500D Page 3of3Copyright,CNA Corporation, 2000. (Ed.10/11)Includes copyrighted material of the Insurance Services Office used with its permission. 10 0 2 0 0 0 5 4 4 0 3 0 4 6 8 9 5 4 9 7 4 0 DocuSign Envelope ID: F45E8AA8-F67D-470B-A155-10EEF30DDA2A Page 1 of 191918 1 6053857 COST SHARING AGREEMENT BETWEEN CITY OF PALO ALTO AND SANTA CLARA VALLEY WATER DISTRICT REGARDING THE NORTHWEST COUNTY RECYCLED WATER STRATEGIC PLAN PROJECT This NORTHWEST COUNTY RECYCLED WATER STRATEGIC PLAN COST SHARING AGREEMENT ("AGREEMENT") is made and entered into this ___day of ______, 2016, by and between the City of Palo Alto,a chartered municipal corporation,and the Santa Clara Valley Water District,an independent special district located in the state of California, duly organized, existing, and acting pursuant to the laws thereof. The City of Palo Alto and Santa Clara Valley Water District may be referred to in this AGREEMENT individually as a “Party” or collectively as the “Parties”. RECITALS A.WHEREAS, the Santa Clara Valley Water District (“District”)develops, stores, manages, distributes, sells and delivers water for domestic, industrial and agricultural uses, as the primary water supply and groundwater management agency in Santa Clara County;and B.WHEREAS,the City of Palo Alto (“City”)owns and operates the Palo Alto Regional Water Quality Control Plant (“RWQCP”) and manages a recycled water program (“Recycled Water Program”);and C.WHEREAS, the City operates the RWQCP in compliance with California Regional Water Quality Control Board recycled water requirements; and D.WHEREAS, the City is interested in developing a plan to expand and understand the potable and non-potable reuse options available to the recycled water system at the RWQCP by developing a Northwest County Recycled Water Strategic Plan (“Strategic Plan”); and E.WHEREAS, on October 11, 2016, the District’s Board of Directors approved a District contribution of up to 90 percent of the cost (not-to-exceed $1,800,000) of a consultant contract awarded by the City for the development of the Strategic Plan; and F.WHEREAS, City and District desire to financially support the production and use of recycled water in Santa Clara County consistent with each Party's separate and distinct interests: for wastewater treatment and disposal for the City, and water quality and supply for the District, as well as to coordinate and cooperate to achieve the most cost effective, environmentally beneficial utilization of recycled water to meet both water supply and wastewater treatment and disposal needs; and G.WHEREAS, City is currently undertaking procurement efforts to award a consultant contract (“Consultant Contract”) to one or more qualified consultants to provide professional services for preparation of the Strategic Plan and other related services; and H.WHEREAS, District and City acknowledge that there is mutual benefit to develop the Strategic Plan,and; therefore,agree to share in the financial costs and responsibilities to support retaining qualified consultants or firms to render professional services to develop the Strategic Plan; and I.Funding provided under this AGREEMENT does not commit either party to a particular course of Page 2 of 191918 2 6053857 action that would likely result in a physical change to the environment, and; therefore, execution of this AGREEMENT is not subject to California Environmental Quality Act review. AGREEMENT PROVISIONS NOW, THEREFORE,for and in consideration of the mutual promises and covenants contained herein,the City and District hereby agree as follows: SECTION I SCOPE OF WORK 1.1 The consultant services that will be funded by this AGREEMENT consist of development of the Strategic Plan, which includes planning and preliminary design related to expansion of the Recycled Water Program, a Northwest Santa Clara County indirect potable reuse feasibility study, and identification of funding sources. The consultant services also include providing support on regulatory permitting efforts; and undertaking public outreach.A copy of the scope of work (“Scope of Work”) for the consultant services is attached to this AGREEMENT as Attachment A.The tasks and deliverables identified in the Scope of Work have been approved by both Parties. 1.2 The City,as the primary agency for ensuring the development of the Strategic Plan and completion of the other deliverables specified in the Scope of Work,is responsible for undertaking procurement efforts consistent with its procurement rules,procedures and policies to award a Consultant Contract to one or more consultants who will perform the Scope of Work. 1.3 The City will direct and manage the consultant in its performance of the Scope of Work, seeking review, feedback and technical support from the District in the process. The District may provide its input to the Strategic Plan and other deliverables as it deems necessary. 1.4 The District approves the City awarding a Consultant Contract via a competitive selection process consistent with the City’s procurement rules,procedures and policies to retain qualified consultants to perform the Scope of Work. 1.5 The City agrees to confer with the District regarding any issues the performance of the Consultant Contract raised by the City or the District. If the consultant breaches the Consultant Contract or substantially fails to perform and the City elects not to pursue legal remedies, the City agrees to confer in good faith with the District regarding potential assignment of rights under the Consultant Contract to the District. 1.6 The City agrees that the District shall have an irrevocable license to use all Consultant Contract deliverables,including but not limited to documentation, reports, recommendations, and all other work product developed as part of the Scope of Work. The City agrees that the District and City may both have access to and use of all work product developed under the Scope of Work. 1.7 The City shall ensure the Scope of Work is completed to both Parties’satisfaction. 1.8 Both Parties agree that undisputed consultant invoices from the consultant performing work pursuant to the Scope of Work will be paid 90% by the District, and 10% by the City. The District’s total for all payments shall not exceed $1,800,000, unless a higher amount is agreed to by the District in the form of a written amendment to this AGREEMENT. The City’s estimated Page 3 of 191918 3 6053857 costs for the consultant to complete the Scope of Work, including development of the Strategic Plan, is $2,000,000. The City shall not approve any expenditure exceeding this amount without the District’s written consent. 1.9 The term of this AGREEMENT is from the date of its execution through the consultant’s completion of the Scope of Work.The Consultant Contract is expected to be executed in December 2016 and is estimated to terminate on the latter of December 2020,or the date the Scope of Work is completed by the consultant. If it is deemed necessary, the Consultant Contract may be extended and additional funding added upon the approval of both:the City’s Assistant Public Works Director in accordance with the City’s protocol for extending and adding funds in contracts,and the District’s Chief Executive Officer in accordance with the District’s policies. SECTION II DUTIES 2.1 The District and City shall adhere to the following procedures for the City’s invoicing and the District’s payment of the City’s invoices for the District’s 90% contribution towards the payment of consultant invoices for professional services provided pursuant to the Consultant Contract: a.The City agrees to invoice the District in arrears for the tasks described in the Scope of Work that were completed and invoiced by the consultant per the terms of the Consultant Contract, on a monthly basis.The City’s invoice shall include a copy of the consultant’s invoice for which the City seeks the District’s 90% cost share contribution, and a statement that the City has reviewed the consultant’s invoice and as determined that it is accurate and reflects the services to be provided under the Scope of Work.Upon request by the District, the City shall provide the District with any deliverables or work product prepared by the consultant to enable the District to evaluate whether the amount the consultant invoiced for services rendered under the Scope of Work is reasonably justified. The City’s invoices shall specify the total portion of the District’s $1,800,000 not-to-exceed commitment that has been billed as of the invoice date. b.The District agrees to review the consultant’s invoice, services and deliverables to determine if the task(s) invoiced by the Consultant are within the Scope of Work and completed in a manner satisfactory to the District. Subject to a $1,800,000 not-to- exceed amount, the District agrees to pay to the City 90% of the amounts stated in all undisputed consultant invoices within 45 days from the date the District receives a City invoice for that amount.If the District disputes any portion of the City’s invoice, District shall provide the City with a written explanation of why it does not believe the invoiced amount is appropriate.Both Parties agree to confer in good faith towards resolution of concerns regarding disputed consultant invoices, and both Parties will endeavor to resolve all disputed consultant invoices within 30 days from the date District provides its written explanation of its dispute. c.If the District determines it will be late making a payment,it shall notify the City's Director of Public Works in writing at least two business days before the payment’s due date of its intent to make a late payment, including the date of when the payment will be made.In recognition of the fact that the City will invoice the District in arrears, monthly, for the consultant’s work, the District agrees that no undisputed payment will be submitted to the City more than 60 days late. c. d.If the City does not receive an undisputed payment within the due dates set forth in Page 4 of 191918 4 6053857 subsections (b) and (c) of this Section 2.1, the City shall provide the District with written notice of the late payment. The District shall have a grace period of 30 days from the date it receives such written notice to pay the undisputed payment. If the District fails to make such payment within the 30 day grace period, the City may terminate this Agreement.Termination of this Agreement will be in addition to, and not in lieu of, other remedies available to the City. SECTION III INDEMNIFICATION AND INSURANCE 3.1 In lieu of and notwithstanding the pro rata risk allocation, which might otherwise be imposed between the Parties pursuant to Government Code Section 895.6, the Parties agree that all losses or liabilities incurred by a Party shall not be shared pro rata but, instead, District and City agree that, pursuant to Government Code Section 895.4, each of the Parties hereto shall fully indemnify and hold each of the other Party,including its officers, board members, employees, and agents, harmless from any claim, expense or cost, damage or liability imposed for injury (as defined in Government Code Section 810.8) occurring by reason of the negligent acts or omissions or willful misconduct of the indemnifying Party, its officers, employees, or agents, under or in connection with or arising out of any work, authority, or jurisdiction delegated to such Party under this AGREEMENT. No Party, nor any officer, board member, or agent thereof shall be responsible for any damage or liability occurring by reason of the negligent acts or omissions or willful misconduct of the other Party hereto, its officers, board members, employees, or agents, under or in connection with or arising out of any work authority or jurisdiction delegated to such other Party under this AGREEMENT. 3.2 District and the City shall each require any consultant, contractor, or any other person or entity performing any part of the Scope of Work to secure and maintain in full force and effect at all times while undertaking the work and until the work is accepted by District and City, public liability and property damage insurance, errors and omission insurance,and other insurance in forms and limits of liability acceptable to both City and District, naming City and District and their respective officers, employees and agents as additional insured from and against all damages and claims, loss, liability, cost or expense arising out of or in any way connected with performing the Scope of Work. SECTION IV ADDITIONAL PROVISIONS 4.1 A Party's waiver of any term, condition or covenant, or breach of any term, condition, or covenant shall not be construed as a waiver of any other term, condition or covenant or breach of any other term, condition or covenant. 4.2 This AGREEMENT contains the entire AGREEMENT between DISTRICT and CITY relating to the cost sharing and completion of the Scope of Work, including development of the Strategic Plan. Any prior agreements, promises, negotiations, or representations not expressly set forth in this AGREEMENT are of no force or effect. 4.3 If any term, condition or covenant of this AGREEMENT is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions of this AGREEMENT shall be valid and binding on DISTRICT and CITY. 4.4 This AGREEMENT shall be governed and construed in accordance with the laws of the State Page 5 of 191918 5 6053857 of California. 4.5 This AGREEMENT may be executed in counterparts and will be binding as executed. 4.6 The term of this AGREEMENT will commence upon execution of the AGREEMENT by both Parties and terminate upon the completion of the Scope of Work by City and District and receipt by City of payment in full by District. 4.7 All changes or extensions to this AGREEMENT must be in writing in the form of an amendment approved by both Parties. 4.8 This AGREEMENT is entered into only for the benefit of the Parties executing this AGREEMENT and not for the benefit of any other individual, entity, or person. 4.9 Either District or City may terminate the AGREEMENT at any time prior to award of the Consultant Contracts upon a thirty (30) day written notice. Once the Consultant Contract has been awarded, the AGREEMENT can be terminated only upon the mutual written consent and terms acceptable to both Parties. SECTION V NOTICES 5.1 Notices given under this AGREEMENT may be delivered by first class mail addressed to the appropriate Party at the following addresses: TO DISTRICT:Santa Clara Valley Water District 5750 Almaden Expressway San Jose, CA 95118 Attn: Hossein Ashktorab, Manager, Recycled and Purified Water Program TO CITY:City of Palo Alto Department of Public Works, RWQCP 2501 Embarcadero Way Palo Alto, CA 94303 Attn: Karin North, Watershed Manager IN WITNESS WHEREOF, the Parties have executed this AGREEMENT as of the date first set forth above. Page 6 of 191918 6 Attachment B 6053857 City of Palo Alto Signature: Name: Title Approved as to form and legality: Santa Clara Valley Water District Signature: Norma J. Camacho Interim Chief Executive Officer Approved as to form and legality: Signature: Signature: Amy Bartell Anthony T. Fulcher Senior Deputy City Attorney Senior Assistant District Counsel Page 7 of 191918 7 Attachment B 6053857 Attachment A Scope of Work for the Consultant Contract The City of Palo Alto (Palo Alto or City) currently supplies tertiary-treated recycled water to several City-owned parks and facilities,Caltrans, a commercial fill truck standpipe at the City of Palo Alto Regional Water Quality Control Plant (RWQCP), and the City of Mountain View. Part of the project under consideration entails business plan development and preliminary design of a pipeline that would expand the use of tertiary recycled water to large landscape areas and potential dual plumbing systems in South Palo Alto including the Stanford Research Park. The Palo Alto City Council (Council) certified the Program Environmental Impact Report (EIR) on September 28, 2015. http://www.cityofpaloalto.org/civicax/filebank/documents/49079 The City, as lead, in collaboration with the Santa Clara Valley Water District (District) now seeks a CONSULTANT to conduct numerous recycled water preliminary planning studies as well as to usher Phase III of the recycled water system expansion through financial planning, preliminary design and funding, culminating in a Recycled Water Strategic Plan. GENERAL The CONSULTANT shall act as the project manager for Phase III of the recycled water delivery system, an expansion to the Stanford Research Park. The CONSULTANT shall also support the City and District’s efforts to produce a Recycled Water Strategic Plan. The project requires the CONSULTANT to have a breadth of knowledge and experience to provide various services as described below.The CONSULTANT team should have experience in grant-writing for state and federal funds and possess a full spectrum of engineering and financial planning expertise. The CONSULTANT must be knowledgeable of laws and regulations related to recycled water and water rate-making including California Proposition 218. The CONSULTANT shall put together a flexible team with flexible time allocation to accommodate the needs of the project. The CONSULTANT’s project manager will report to Samantha Engelage, City of Palo Alto Engineer. The CONSULTANT is not expected to navigate the projects through City processes, but is expected to provide all needed support documents. The CONSULTANT team shall keep its work properly organized at all times. As much as possible, records shall be in electronic format compatible with the RWQCP’s software. Records of work will be available to the RWQCP and District at all times, and the City will have ownership rights of all records and documents. The CONSULTANT will not share City and District documents or information with anyone outside of the organizations, except the CONSULTANT program team, without the City and District’s written approvals.Any preliminary design performed by CONSULTANT under this Agreement will be the property of the City and District and they have the right to allow the design engineer to use the preliminary design documents to complete the final design. TASK DESCRIPTIONS Task 1.0 Project Coordination & Administration ·CONSULTANT shall provide management of all task activities under this Agreement, including project team assignments; meeting preparation and attendance; maintenance and monitoring of the budget and schedule; quality assurance and quality control of all deliverables; and coordination of all sub-consultants. ·Consultant shall develop a work flow diagram with key decision points noted. ·CONSULTANT shall make Task 2.0 a priority for completion and meet the following deadlines: o Task 2.3 and 2.4 to be completed no later than 6 months from approval of Task 2.1 o Research and identification of near-term funding sources as defined under Task Page 8 of 191918 8 Attachment B 6053857 2.5 shall be completed within 3 months from completion of Task 2.1 o Task 3.1 completed no later than 3 months from issuance of the Notice to Proceed o Task 3 subtasks (optional tasks excluded) completed no later than 18 months from issuance of Notice to Proceed. o Task 3 optional subtasks completed no later than 9 months of written authorization to proceed from the City and District o All other tasks shall be completed by December 31, 2020. ·CONSULTANT shall set deadlines for funding, permitting, and preliminary design. ·CONSULTANT shall attend and coordinate routine update meetings with the City, District, and other stakeholders to occur no less than quarterly throughout the project. ·CONSULTANT shall develop and maintain a comprehensive overall project budget tracking system for the project. Task 1.1 Project Coordination & Administration Deliverables ·CONSULTANT shall produce a master schedule for the project including phasing of work, critical paths, and milestones. ·CONSULTANT shall provide the City and District with summary minutes and supplemental materials used during the update meetings no later than five (5) working days from the update meeting. ·CONSULTANT shall provide progress, schedule, and budget updates to City and District staff on a monthly basis and as requested by the City and District. Task 1.2 Optional Tasks ·CONSULTANT shall conduct the Optional tasks only at City and District discretion and upon written notification by the City. Optional Task 1.2 Stakeholder Meetings o A Stakeholder meeting shall be held at 80 and 95 percent project completion. o CONSULTANT shall present project progress results to stakeholders at 80 and 95 percent project completion. CONSULTANT shall incorporate feedback provided by the City, District, and other stakeholders at the progress presentations. Stakeholders include, but are not limited to, residents,nongovernmental organizations, the RWQCP partner agencies, and the San Francisco Bay Regional Water Quality Control Board. Task 2.0 Recycled Water Phase III Expansion Project Task 2.1: Phase III Expansion Work Plan ·Prior to conducting any work on this task, CONSULTANT shall produce a draft work plan detailing the proposed course of action to meet the task requirements for City and District approval. ·CONSULTANT shall present the work plan to the City and District during a meeting to be held within ten (10) working days of draft submittal. The City and District will provide comments within fourteen (14) working days of draft submittal. ·CONSULTANT shall provide revised work plan to the City and District within five (5) working days of receiving comments. ·City and District will approve/disapprove of the revised work plan within five (5) working days of receiving the finalized work plan and CONSULTANT shall then Page 9 of 191918 9 Attachment B 6053857 commence work on the tasks or commence work on a revised work plan that addresses the reasons for the City and/or District’s disapproval, as applicable. Task 2.2: Phase III Expansion Project Coordination and Planning ·CONSULTANT shall produce a master schedule for Task 2.0 including the phasing of work, critical paths, and milestones specific to the Phase III Expansion Project. ·CONSULTANT shall set deadlines for business plan, design, permitting, and securing outside funding specific to the Phase III Expansion Project. ·CONSULTANT shall develop and maintain a comprehensive overall task budget tracking system specific to the Phase III Expansion Project. ·CONSULTANT shall provide progress, schedule, and budget updates to City and District staff on a monthly basis, for the duration of Task 2.0 and no later than 6 months from the issuance of the Notice to Proceed. Task 2.3 Phase III Expansion Business Plan Development ·CONSULTANT shall produce a 20-year annual recycled water demand projection for the project area (refer to other attachment for Phase III Background & Map)taking into account potential changes in landscaping, land use, new dual-piped buildings coming online, groundwater recharge, indirect potable reuse, direct potable reuse, and other future potential changes in demand with the possibility of advanced treatment options. ·CONSULTANT shall perform risk assessment of the Phase III Expansion cost- effectiveness taking into account all the potential changes in demand, the potential changes in current water source costs and availability, as well as several scenarios for secured external funding. ·CONSULTANT shall identify and calculate a value for other potential uses for the pipeline if the risk assessment finds that there is a nontrivial possibility that the Phase III Expansion could prove not cost-effective in the future. o In coordination with Task 3.3, CONSULTANT shall include in Task 2.3 a high- level, feasibility evaluation of utilizing the Phase III expansion for IPR/DPR within Palo Alto and focused on Palo Alto utilization. As part of this, CONSULTANT shall include a high-level feasibility evaluation of the routing of a dedicated IPR pipeline in Palo Alto that would benefit potential future groundwater production in Palo Alto. In addition, CONSULTANT shall evaluate the potential challenges of siting a DPR treatment plant at the RWQCP site including but not limited to: space requirements for additional treatment steps and minimum likely storage requirements for DPR-treated water before entering the drinking water distribution system. ·CONSULTANT shall integrate the factors of the risk assessment to develop cost-based recycled water rates and fees given several scenarios and subject to Proposition 218 requirements. ·CONSULTANT shall integrate the factors of the risk assessment to provide a business plan for the Phase III Pipeline Expansion. Task 2.4 Phase III Expansion Preliminary Design ·CONSULTANT shall produce a preliminary (15 percent) engineering design that will focus on defining concepts for trenchless crossings and pump station development with the City identifying up to two alternative supply pump station and booster pump station sites and two Zone 2 sites for evaluation. CONSULANT shall include minor updates to Page 10 of 191918 Attachment B 6053857 the 2008 Facilities Plan for other Phase III elements, as requested by City. ·CONSULTANT shall utilize the 2008 Recycled Water Facility Plan (found at: http://www.cityofpaloalto.org/civicax/filebank/documents/15103), the 2015 EIR (found at: http://www.cityofpaloalto.org/gov/depts/utl/residents/resources/water_resources/recycled _water.asp) and Dec 2014 South Bay Water Recycling –Strategic and Master Planning Report (found at: http://www.valleywater.org/EkContent.aspx?id=184&terms=recycled+water. ·CONSULTANT shall coordinate and provide information needed for environmental documents. ·CONSULTANT shall produce a Class 4 project cost estimate given preliminary design per AACE International Classification System. The cost estimate shall be appropriate for a project definition of 15 percent and an expected accuracy of -15 to +20 percent. Task 2.5 Phase III Expansion Securing of Outside Funding ·CONSULTANT shall research and identify near-term funding sources for the Phase III Expansion Project as outlined in the 2008 City of Palo Alto Recycled Water Facility Plan. ·CONSULTANT shall complete all necessary work to apply for funding on behalf of the City and District leveraging past successful grant funding received. ·CONSULTANT shall track all applications and provide additional information or materials as needed. ·CONSULTANT shall maintain and submit all reports necessary to claim any secured funding. ·CONSULTANT shall maintain a clear, organized record of all applications and all secured funding specific to the Phase III Expansion Project. ·CONSULTANT shall coordinate and strategize applications for funding the Phase III Expansion Project in light of other tasks under this Agreement and potential collaborative funding opportunities. Task 2.6 Phase III Expansion Deliverables ·CONSULTANT shall produce a Task 2.0 Work Plan per Task 2.1. ·CONSULTANT shall produce & update a Task 2.0 Schedule per Task 2.2. ·CONSULTANT shall consolidate results from Tasks 2.3 –2.4 into a standalone Phase III Expansion Business Plan, Preliminary Design, & Secured Funding Effort Report, including a summary of the efforts undertaken in Task 2.5 to date. ·CONSULTANT shall provide the City and District with draft reports at 80 and 95 percent completion for review. CONSULTANT shall incorporate feedback from City and District for each of the above reports into subsequent draft and final reports. Task 2.7 Optional Tasks ·CONSULTANT shall conduct optional tasks only at the City’s discretion, with District concurrence, and upon written notification by the City and District. Optional Task 2.7.a Phase III Expansion Extended Design for Project Definition of 30 to 40 percent ·CONSULTANT shall produce an engineering design consistent with 30 to 40 percent Page 11 of 191918 Attachment B 6053857 project definition that will focus on the pipeline, including tree reconnaissance and alignment refinement. ·CONSULTANT shall provide recommendations of key points and specifications for full construction bid package. ·CONSULTANT shall produce a Class 3 cost estimate according to AACE International Classification System with an accuracy of ± 10 percent. ·CONSULTANT shall provide City and District with construction draft design documents at 80, and 95 percent completion for review. ·CONSULTANT shall incorporate feedback from City and District for each of the above items into subsequent draft designs no later than ten (10) working days after submittal. ·CONSULTANT shall identify and evaluate any CEQA and other potential regulatory requirements that may apply to the future construction and operation of the proposed pipeline expansion using the EIR completed in 2015. ·CONSULTANT shall include a CEQA checklist, if needed, and a list of permits required for construction. ·CONSULTANT shall provide recommendations of key points for full design bid package. Task 3.0 Northwest County Indirect Potable Reuse Feasibility Study The purpose of the Indirect Potable Reuse (IPR) Feasibility Study is to compile baseline information on the current condition of aquifers in northwestern Santa Clara County and adjacent areas, including sources and quantities of recharge, groundwater pumping, and water quality. This information will be used to evaluate whether increased groundwater utilization by the City is viable, and if so, to evaluate the feasibility of indirect potable reuse of advanced treated recycled water. This study will also evaluate impacts to groundwater resources from potential pumping or recharge projects to ensure continued sustainable groundwater management. Task 3.1 Work Plan & Schedule ·Prior to conducting any work on this task, the CONSULTANT shall produce a draft work plan detailing the proposed course of action and schedule to meet the task requirements and incorporating stakeholder feedback and comments for City and District approval. ·CONSULTANT shall include in the work plan, amongst other details, an outline of the needed elements for the assessment under Task 3.2. ·CONSULTANT shall present the work plan to the City, District, & stakeholders during a meeting to be held within ten (10) working days of draft submittal. The City, District, & stakeholders will provide comments within fourteen (14) working days of draft submittal. ·CONSULTANT shall provide revised work plan to the City & District within five (5) working days of receiving comments. ·City & District will approve/disapprove of the revised work plan within ten (10) working days of receiving the finalized work plan and CONSULTANT shall then commence work on the tasks or commence work on a revised work plan that addresses the reasons for the City and/or District’s disapproval, as applicable. Task 3.2 Groundwater Use Assessment ·CONSULTANT shall review and analyze currently available information and data on the Santa Clara and San Mateo Plain Subbasins (California Department of Water Resources Basins 2-9.02 and 2-9.03, respectively) in the RWQCP service area (Palo Alto, Stanford, Mountain View, Los Altos, Los Altos Hills, and East Palo Alto). The review and analysis Page 12 of 191918 Attachment B 6053857 topics will include groundwater and surface water divides, recharge areas, water quality, and the general structure of the aquifers, aquitards, and other geologic units, general groundwater quality, as well as other relevant information. o This assumes that data will be available from San Mateo County and that the City will provide available data on its potable supply wells. o This assumes that data is available in electronic formats (i.e., Excel, Access) and that this evaluation will rely on existing data and reports. ·CONSULTANT shall evaluate the hydrogeology and groundwater conditions in the RWQCP service area and surrounds, including defining the aerial extent, thickness and hydraulic properties of subsurface layers, surface water/groundwater interaction, quantifying seasonal fluctuations in upper and lower aquifer groundwater levels, inflows and outflows, basin storage, and evaluating hydraulic connectivity between the upper and lower aquifers and between adjacent subbasins. ·CONSULTANT shall provide a groundwater balance analysis focusing on the City in addition to the analyses above for the RWQCP service area. The groundwater system is comprised of multiple water-bearing zones, and the analysis shall include the identification and estimate of inflows and outflows in the different zones (e.g., in the shallow aquifer and deeper production aquifer).The groundwater balance analysis shall also include a schematic diagram showing the conceptual aquifer system, and uncertainty analysis. The analysis shall identify significant sources of groundwater inflows and outflows, including, but not limited to, natural and managed recharge, private and municipal wells, groundwater remediation systems, temporary and on-going dewatering sites, and surface water/groundwater interactions, as well as an evaluation of the extent which shallow groundwater recharges the deeper aquifer(s). ·CONSULTANT shall include geologic cross sections using existing data (e.g., well boring logs) that delineate water-bearing zones, aquitards, and depth to bedrock. ·CONSULTANT shall evaluate the feasibility of increased pumping to meet 25, 50, or 100 percent of the City’s water demands and identify additional infrastructure needed to meet demands at each level. ·CONSULTANT shall evaluate whether increased pumping at these levels would result in adverse impacts, including excessive drawdown in adjacent wells, regional land subsidence, salt water intrusion, significant depletions of surface water, or drawing contaminants from known contaminant release sites into municipal wells (e.g. Superfund sites, dry cleaners, fuel leaks, and other toxic release sites). ·CONSULTANT shall evaluate different water year (hydrologic) scenarios and potential increased pumping in adjacent cities in conjunction with evaluating the feasibility of increased pumping to meet the City’s future water demands. ·CONSULTANT shall identify data gaps and recommendations for further study as it relates to increased groundwater use. Task 3.3 Indirect Potable Reuse (IPR) Feasibility Evaluation ·CONSULTANT shall identify current natural groundwater recharge areas in the northwestern Santa Clara Subbasin, and identify potential areas for artificial recharge based on favorable geological conditions within the RWQCP’s service area. ·CONSULTANT shall identify areas within the RWQCP’s service area that fall within the northwest Santa Clara Subbasin on the scale of acres (versus parcel) of highest recharge, quantify recharge rates, identify current and near-term groundwater demand, and assess potential for IPR. Page 13 of 191918 Attachment B 6053857 ·CONSULTANT shall evaluate IPR from the perspective of the City as a utility as well as that of the RWQCP as a wholesaler. In the IPR utility evaluation, the CONSULTANT shall evaluate based on the City of Palo Alto borders and projected uses. In the IPR wholesaler evaluation, the CONSULTANT shall evaluate based on the RWQCP as a regional plant with multiple partners. The wholesaler evaluation will include a look at the potential intertie with Sunnyvale and East Palo Alto IPR opportunities. ·CONSULTANT shall provide schematics (e.g., maps and cross sections) indicating identified locations. ·CONSULTANT shall perform screening level calculations using Darcy’s law or similar approach to evaluate the movement and underground retention time of IPR water. ·CONSULTANT shall review the potential for IPR projects to create nuisance conditions by raising the water table into basements, elevator shafts, underground parking, street undercrossings, or flooding storm drains and sanitary sewers. ·CONSULTANT shall determine water quality parameter guidelines for IPR recycled water that would not adversely affect groundwater quality in the basin and ensure consistency with basin management objectives as defined in the 2012 Groundwater Management Plan prepared by the District, or subsequent versions. ·CONSULTANT shall evaluate the potential for IPR to introduce contaminants into the aquifer as well as evaluate the potential to increase mobilization and/or dissolution of contaminants. Contaminants of concern include salts, emerging contaminants, petroleum hydrocarbons and chlorinated hydrocarbons. Naturally-occurring compounds of potential concern may include arsenic, selenium and chromium and other metals. ·CONSULTANT shall evaluate the potential for injected or percolated water to discharge into creeks. ·CONSULTANT shall utilize existing data including that from the City emergency groundwater wells, the District well monitoring, the State Water Resources Control Board’s GeoTracker database, and other existing databases. This assumes that the District will provide assistance in acquiring District data in electronic format (i.e., Excel, Access) and will agree to share the data developed to date for the District’s IPR Study (model refinements are ongoing and subject to change during the course of this project). ·CONSULTANT shall identify possible IPR scenarios (e.g., injection wells, percolation ponds, etc.) that should be evaluated in more detail in subsequent studies for potential application in the identified potential IPR areas. ·If IPR is determined to be feasible, CONSULTANT shall produce a recommended implementation strategy for IPR within the portions of the RWQCP service area that fall within the northwest Santa Clara Subbasin. ·CONSULTANT shall include in the implementation strategy an overview of required permits and a CEQA checklist, other IPR regulatory constraints, monitoring requirements, on-going maintenance requirements, and associated cost estimates. ·CONSULTANT shall provide Class 5 cost estimates per AACE International Classification System. The cost estimate shall be appropriate for a feasibility study for a project definition of 0 –2 percent and an expected accuracy of -50 to + 100 percent. ·CONSULTANT shall identify data gaps and recommendations for further study. Task 3.4 Groundwater Study Deliverables ·CONSULTANT shall produce a Task 3 Work Plan & Schedule per Task 3.1. ·CONSULTANT shall produce a Groundwater Use Assessment Report per Task 3.2. ·CONSULTANT shall consolidate results from Tasks 3.2 –3.6 into a standalone Page 14 of 191918 Attachment B 6053857 Northwestern Santa Clara County Indirect Potable Reuse Feasibility Study Report. o CONSULTANT shall provide the City, District, & stakeholders with draft reports at 80 and 95 percent completion for review. o CONSULTANT shall incorporate feedback from the City, District, & stakeholders into each of the Reports above and into subsequent draft and final reports. Task 3.5 Refined Numerical Groundwater Model ·The model elements and format shall be proposed by the CONSULTANT via a work plan incorporating stakeholder feedback and comments, to be approved by the City and District prior to beginning this task. ·CONSULTANT shall use the hydrogeologic evaluation completed under Task 3.2 to develop a numerical groundwater model or refine an existing numerical groundwater model for use in forecasting future impacts to the aquifers, and for making calculations to satisfy regulations related to groundwater replenishment reuse projects (e.g. travel times). Future impacts could include those due to increased groundwater development, groundwater replenishment, wet and dry year extremes, or a combination thereof. Adequate model calibration to measured data (e.g., water levels) per industry standards (e.g. ASTM 5981-96) must be demonstrated to the satisfaction of the District and City. ·CONSULTANT shall propose and evaluate up to five (5) potential groundwater use scenarios, in addition to a baseline scenario reflecting current groundwater demand under dry, average and wet water years. ·CONSULTANT shall determine artificial recharge rates sufficient to maintain the system in balance under each scenario in the event natural recharge is not sufficient. Task 3.6 IPR Modeling Scenarios & Parcel Identification ·The model scenarios and identification format/procedure shall be proposed by the CONSULTANT via a work plan incorporating stakeholder feedback and comments to be approved by the City and District prior to beginning this task. ·CONSULTANT shall use the Refined Numerical Groundwater Model produced under Task 3.5 to run different IPR scenarios to ultimately identify ideal IPR opportunities (e.g., salt water intrusion mitigation, injection wells, percolation basins, etc.) and consider regulatory constraints to identify potential parcels for IPR projects. Task 3.7 Optional Tasks ·CONSULTANT shall conduct optional tasks only at the City’s discretion, with District concurrence, and upon written notification by the City and District. Optional Task 3.7.a Fulfilling Data Gaps in Numerical Groundwater Model ·CONSULTANT will identify data needed to complete the numerical groundwater model in Task 3.5 and prepare a work plan for a field investigation to satisfy the data requirements. The work plan shall incorporate stakeholder feedback and comments and be approved by the City and District prior to beginning this task. ·CONSULTANT shall conduct the field investigation identified in the work plan and document the results in a standalone report. Optional Task 3.7.b IPR Strategic Plan ·The exact content and format of the plan shall be proposed by the CONSULTANT via Page 15 of 191918 Attachment B 6053857 a work plan incorporating stakeholder feedback to be approved by the City and District prior to beginning this task. Task 4.0 Recycled Water Strategic Plan The ultimate goal of this study component is to produce a guideline for an alternative reliable water supply for the RWQCP service area and adjacent cities, to augment supplies with recycled water during droughts or other hydrologic events, and to increase the reliance on locally available water supplies such as recycled water. Task 4.1: Recycled Water Strategic Plan Work Plan & Schedule ·Prior to conducting any work on this task, the CONSULTANT shall produce a draft work plan detailing the proposed course of action and schedule to meet the task requirements, and incorporating stakeholder feedback and comments, for City and District approval.. ·CONSULTANT shall present the work plan to the City, District, & stakeholders during a meeting to be held within five (5) working days of draft submittal. The City, District, & stakeholders will provide comments within fourteen (14) working days of draft submittal. ·CONSULTANT shall provide revised work plan to the City & District within five (5) working days of receiving comments. ·City & District will approve/disapprove of the revised work plan within ten (10) working days of receiving the finalized work plan and CONSULTANT shall then commence work on the tasks or commence work on a revised work plan that addresses the reasons for the City and/or District’s disapproval, as applicable. Task 4.2: Recycled Water Strategic Plan Evaluations ·CONSULTANT shall develop a comprehensive Recycled Water Strategic Plan, including feasibility report that meets the requirements of WTR11-01, Reclamation Manual; Directives and Standards. ·CONSULTANT shall review the 1992 Recycled Water Master Plan and identify potential new water recycling customers within the RWQCP service area and adjacent areas. ·CONSULTANT shall incorporate key findings from Tasks 2.0 –3.0, the Advanced Water Purification System Feasibility Study, the Mountain View Recycled Water Expansion & Sunnyvale Intertie Projects, the District’s previous studies of stream augmentation, the City’s previous studies of contaminants of emerging concern, and other relevant studies conducted by the City, District, and other agencies into the Recycled Water Strategic Plan. ·CONSULTANT shall evaluate and develop rate structures to address cost recovery and encourage recycled water use,in compliance with the requirements of Proposition 218, as applicable. ·CONSULTANT shall also evaluate the long-term financial viability of the RWQCP Recycled Water Program given various scenarios of potable and non-potable recycled water demand, partnerships, and rates. ·CONSULTANT shall include at a minimum the following evaluations: o Existing recycled water demand (as defined as that projected through 2020) in the RWQCP service area and adjacent areas. o Future recycled water demands (as defined as that projected through 2030 and divided up into 5-year increments) within the RWQCP service area and adjacent areas (e.g., Sunnyvale intertie, etc.). o Recycled water use for potable reuse, non-potable reuse, and stream-flow Page 16 of 191918 Attachment B 6053857 augmentation within the RWQCP service area and adjacent areas and incorporate a ranking/ evaluation system to help prioritize future commitments and projects. o Identifying and recommending technologies that may further improve recycled water quality by incorporating the Advanced Water Purification System Feasibility Study and how these projects could be linked to the RWQCP’s Long Range Facilities Plan. o Developing revenue and market projections based on current (2020) conditions and an expanded distribution system (2030) throughout the RWQCP service area and adjacent areas o Summary of funding opportunities discovered under Task 5.0 and a summary of the statewide regulatory constraints tracked by the District. o Identification of opportunities for regional coordination and interconnections including an analysis of efficiencies realized by using interconnections. o Summary of the agreements that would be required to achieve recommended regional interconnections and additional expansion taking into account local policies in addition to agreements to support recycled water and interconnections. Task 4.3 Recycled Water Strategic Plan Deliverables ·CONSULTANT shall produce a Task 4 Work Plan & Schedule per Task 4.1. ·CONSULTANT shall consolidate results from Tasks 4.2 into a standalone Recycled Water Strategic Plan report. o CONSULTANT shall provide a report that can be used as a feasibility report that could be sent by the City to the Bureau of Reclamation for review and approval. o CONSULTANT shall incorporate any comments from the Bureau of Reclamation and issue a Project Feasibility Report. o CONSULTANT shall provide the City, District, & stakeholders with draft reports at 80 and 95 percent completion for review. o CONSULTANT shall incorporate feedback from the City, District, & stakeholders into each of these reports and into subsequent draft reports. Task 4.4 Optional Tasks ·CONSULTANT shall conduct optional tasks only at the City’s discretion, with District concurrence, and upon written notification by the City and District. Optional Task 4.4.a Mountain View Project Alignment o CONSULTANT shall conduct additional analyses as needed to incorporate work conducted separately by Mountain View on recycled water expansion into Task 4.2. Optional Task 4.4.b RWQCP Wholesaler Business Plan o The business plan elements and approach shall be proposed by the CONSULTANT via a work plan which shall incorporate stakeholder feedback and comments and be approved by the City and District prior to beginning this task. o CONSULTANT shall develop a business plan for RWQCP being a wholesaler of recycled water within South San Mateo County. Optional Task 4.4.c Assistance in Partner Agreements o CONSULTANT shall, as needed, draft partner agreements between different agencies on recycled water pipeline expansion projects. Page 17 of 191918 Attachment B 6053857 Optional Task 4.4.d Facility Assessment Plans o The plan elements and approach shall be proposed by the CONSULTANT via a work plan which shall incorporate stakeholder feedback and comments and to be approved by the City and District prior to beginning this task. o CONSULTANT shall develop facility assessment plans for expanding recycled water within East Palo Alto, Stanford, Los Altos Hills, and Los Altos. Optional Task 4.4.e Business Plan –East Palo Alto and East Menlo Park o The business plan elements and approach shall be proposed by the CONSULTANT via a work plan which shall incorporate stakeholder feedback and comments and be approved by the City and District prior to beginning this task. o CONSULTANT shall develop a business plan for expanding recycled water within East Palo Alto and East Menlo Park. Optional Task 4.4.f Business Plan –Los Altos o The business plan elements and approach shall be proposed by the CONSULTANT via a work plan which shall incorporate stakeholder feedback and comments and be approved by the City and District prior to beginning this task. o CONSULTANT shall develop a business plan for expanding recycled water within Los Altos. Optional Task 4.4.g Business Plan –Los Altos Hills o The business plan elements and approach shall be proposed by the CONSULTANT via a work plan which shall incorporate stakeholder feedback and comments and be approved by the City and District prior to beginning this task. o CONSULTANT shall develop a business plan for expanding recycled water within Los Altos Hills. Optional Task 4.4.h Business Plan –Stanford o The business plan elements and approach shall be proposed by the CONSULTANT via a work plan which shall incorporate stakeholder feedback and comments to be approved by the City and District, prior to beginning this task. o CONSULTANT shall develop a business plan for expanding recycled water to Stanford. Task 5.0 Funding Identification & Assistance ·CONSULTANT shall research and identify possible funding sources for the numerous recycled water projects under this scope of work, with funding for Phase III design and construction the priority. ·CONSULTANT, at the direction of the City and District, shall complete all necessary work to apply for funding on behalf of the City, District, and/or RWQCP partner agencies. The City and District will be responsible for compilation and submittal of subsequent administrative reports from any granted funding. ·CONSULTANT shall track all applications and provide additional information or materials as needed. Page 18 of 191918 Attachment B 6053857 ·CONSULTANT shall maintain and submit all reports necessary to claim any secured funding. ·CONSULTANT shall coordinate and strategize applications for funding in light of all tasks under this Agreement, City and District projects occurring simultaneously outside of this Agreement, as well as potential collaborative funding opportunities with other agencies. Task 5.1 Funding Identification & Assistance Deliverables ·CONSULANT shall produce and update a tracking sheet/record of funding opportunities, pending applications, & schedules under Task 5.0. ·CONSULTANT shall provide the City and District with copies of all submitted applications produced under Task 5.0. o CONSULTANT shall provide the City and District with draft applications for review and approval prior to submission. Task 6.0 Regulatory Support & Regional Coordination ·CONSULTANT shall develop an overarching regulatory strategy for coordination with key regulatory agencies (e.g., Regional Water Quality Control Board and the State Board Division of Drinking Water). The goal of which will be to assess the regulatory agencies’ comfort level with the proposed reuse plans and also to understand the technical data the agencies will expect to see during the permitting phase. ·CONSULTANT shall prepare applications and regulatory documents as needed and assist with permitting process. ·CONSULTANT shall update the City and District with respect to any relevant compliance requirements. ·CONSULTANT shall, upon City and District direction, aid in drafting of new ordinances or amending existing ordinances to encourage recycled water use. ·CONSULTANT shall evaluate regional opportunities to promote the use of recycled water within Santa Clara and South San Mateo Counties. Task 7.0 Public Outreach ·CONSULTANT shall, at the discretion of the City and District, prepare informational material in collaboration with City & District Outreach Staff and assist staff with reports, presentations, and workshops for City management, District Board of Directors, City Commissions and Committees, City Council and RWQCP partner agencies as needed. ·CONSULTANT shall, as needed, provide administrative and/or technical support at public outreach events. ·CONSULTANT shall assist, as needed, in educational campaigns and stakeholder meetings on the benefits of recycled water to increase public perception and awareness of the potential expansion opportunities. Task 7.1 Public Outreach Deliverables ·CONSULTANT shall produce and update a tracking sheet of outreach conducted throughout the year under Task 7.0 and provide the record to the City & District each year of the contract by December 31 of that year. o Tracking sheet shall include at a minimum the location, date, name, number of people, event theme, and any provided materials for each outreach event. ·CONSULTANT shall provide the City & District with electronic copies of all Page 19 of 191918 Attachment B 6053857 produced outreach materials. TO: FROM: DATE: CITY OF PALO ALTO HONORABLE CITY COUNCIL I COUNCIL MEETI ~ 12/12/16 20 0Received Before Meeti g JAMES M. SARTOR, DIRECTOR OF PUBLIC WORKS DECEMBER 12, 2016 SUBJECT: AGENDA ITEM NUMBER 20 -Approval of: 1) A Professional Services Agreement With RMC Water and Environment for Development of a Recycled Water Strategic Plan in a Total Amount Not-to-Exceed $2,000,000; and 2) A Cost Share Agreement With the Santa Clara Valley Water District Under Which the District Will Fund 90 Percent of Strategic Plan Consultant Costs; and 3) An Amendment to the Fiscal Year 2017 Budget Appropriation for the Wastewater Treatment Fund Attached is the final Attachment B: DRAFT 6053857 AGREEMENT Recycled Water Strategic Plan Cost Share with the signatures of the Santa Clara Valley Water District; it was not available at the time of report finalization. 1 of 1 COST SHARING AGREEMENT BETWEEN CITY OF PALO ALTO AND SANTA CLARA VALLEY WATER DISTRICT REGARDING THE NORTHWEST COUNTY RECYCLED WATER STRATEGIC PLAN PROJECT This NORTHWEST COUNTY RECYCLED WATER STRATEGIC PLAN COST SHARING AGREEMENT ("AGREEMENT") is made and entered into this _day of __ , 2016, by and between the City of Palo Alto, a chartered municipal corporation, and the Santa Clara Valley Water District, an independent special district located in the state of California, duly organized, existing, and acting pursuant to the laws thereof. The City of Palo Alto and Santa Clara Valley Water District may be referred to in this AGREEMENT individually as a "Party" or collectively as the "Parties". RECITALS A. WHEREAS, the Santa Clara Valley Water District ("District") develops, stores, manages, distributes, sells and delivers water for domestic, industrial and agricultural uses, as the primary water supply and groundwater management agency in Santa Clara County;and 8. WHEREAS, the City of Palo Alto ("City") owns and operates the Palo Alto Regional Water Quality Control Plant ("RWQCP") and manages a recycled water program ("Recycled Water Program"); and C. WHEREAS, the City operates the RWQCP in compliance with California Regional Water Quality Control Board recycled water requirements; and D. WHEREAS, the City is interested in developing a plan to expand and understand the potable and non-potable reuse options available to the recycled water system at the RWQCP by developing a Northwest County Recycled Water Strategic Plan ("Strategic Plan''); and E. WHEREAS, on October 11, 2016, the District's Board of Directors approved a District contribution of up to 90 percent of the cost (not-to-exceed $1,800,000) of a consultant contract awarded by the City for the development of the Strategic Plan; and F. WHEREAS, City and District desire to financially support the production and use of recycled water in Santa Clara County consistent with each Party's separate and distinct interests: for wastewater treatment and disposal for the City, and water quality and supply for the District, as well as to coordinate and cooperate to achieve the most cost effective, environmentally beneficial utilization of recycled water to meet both water supply and wastewater treatment and disposal needs; and G. WHEREAS, City is currently undertaking procurement efforts to award a consultant contract ("Consultant Contract") to one or more qualified consultants to provide professional services for preparation of the Strategic Plan and other related services; and H. WHEREAS, District and City acknowledge that there is mutual benefit to develop the Strategic Plan, and; therefore, agree to share in the financial costs and responsibilities to support retaining qualified consultants or firms to render professional services to develop the Strategic Plan; and Cost Share Agreement Between City of Palo Alto and Santa Clara Valley Water District Regarding the Northwest County Recycled Water Strategic Plan Project. Page 1 of 5 I . Funding provided under this AGREEMENT does not commit either party to a particular course of action that would likely result in a physical change to the environment, and; therefore, execution of this AGREEMENT is not subject to California Environmental Quality Act review. AGREEMENT PROVISIONS NOW, THEREFORE, for and in consideration of the mutual promises and covenants contained herein, the City and District hereby agree as follows: SECTION I SCOPE OF WORK 1.1 The consultant services that will be funded by this AGREEMENT consist of development of the Strategic Plan, which includes planning and preliminary design related to expansion of the Recycled Water Program, a Northwest Santa Clara County indirect potable reuse feasibility study, and identification of funding sources. The consultant services also include providing support on regulatory permitting efforts; and undertaking public outreach. A copy of the scope of work ("Scope of Work") for the consultant services is attached to this AGREEMENT as Attachment A. The tasks and deliverables identified in the Scope of Work have been approved by both Parties. 1.2 The City, as the primary agency for ensuring the development of the Strategic Plan and completion of the other deliverables specified in the Scope of Work, is responsible for undertaking procurement efforts consistent with its procurement rules, procedures and policies to award a Consultant Contract to one or more consultants who will perform the Scope of Work. 1.3 The City will direct and manage the consultant in its performance of the Scope of Work, seeking review, feedback and technical support from the District in the process. The District may provide its input to the Strategic Plan and other deliverables as it deems necessary. 1.4 The District approves the City awarding a Consultant Contract via a competitive selection process consistent with the City's procurement rules, procedures and policies to retain qualified consultants to perform the Scope of Work. 1.5 The City agrees to confer with the District regarding any issues the performance of the Consultant Contract raised by the City or the District. If the consultant breaches the Consultant Contract or substantially fails to perform and the City elects not to pursue legal remedies, the City agrees to confer in good faith with the District regarding potential assignment of rights under the Consultant Contract to the District. 1.6 The City agrees that the District shall have an irrevocable license to use all Consultant Contract deliverables, including but not limited to documentation, reports, recommendations, and all other work product developed as part of the Scope of Work. The City agrees that the District and City may both have access to and use of all work product developed under the Scope of Work. 1. 7 The City shall ensure the Scope of Work is completed to both Parties' satisfaction. 1.8 Both Parties agree that undisputed consultant invoices from the consultant performing work pursuant to the Scope of Work will be paid 90% by the District, and 10% by the City. The District's total for all payments shall not exceed $1,800,000, unless a higher amount is agreed Cost Share Agreement Between City of Palo Alto and Santa Clara Valley Water District Regarding the Northwest County Recycled Water Strategic Plan Project. Page 2 of 5 to by the District in the form of a written amendment to this AGREEMENT. The City's estimated costs for the consultant to complete the Scope of Work, including development of the Strategic Plan, is $2,000,000. The City shall not approve any expenditure exceeding this amount without the District's written consent. 1.9 The term of this AGREEMENT is from the date of its execution through the consultant's completion of the Scope of Work. The Consultant Contract is expected to be executed in December 2016 and is estimated to terminate on the latter of December 2020, or the date the Scope of Vvork is compieted by the consultant. If it is deemed necessary, the Consultant Contract may be extended and additional funding added upon the approval of both: the City's Assistant Public Works Director in accordance with the City's protocol for extending and adding funds in contracts, and the District's Chief Executive Officer in accordance with the District's policies. SECTION II DUTIES 2.1 The District and City shall adhere to the following procedures for the City's invoicing and the District's payment of the City's invoices for the District's 90% contribution towards the payment of consultant invoices for professional services provided pursuant to the Consultant Contract: a. The City agrees to invoice the District in arrears for the tasks described in the Scope of Work that were completed and invoiced by the consultant per the terms of the Consultant Contract, on a monthly basis. The City's invoice shall include a copy of the consultant's invoice for which the City seeks the District's 90% cost share contribution, and a statement that the City has reviewed the consultant's invoice and as determined that it is accurate and reflects the services to be provided under the Scope of Work. Upon request by the District, the City shall provide the District with any deliverables or work product prepared by the consultant to enable the District to evaluate whether the amount the consultant invoiced for services rendered under the Scope of Work is reasonably justified. The City's invoices shall specify the total portion of the District's $1,800,000 not-to-exceed commitment that has been billed as of the invoice date. b. The District agrees to review the consultant's invoice, services and deliverables to determine if the task( s) invoiced by the Consultant are within the Scope of Work and completed in a manner satisfactory to the District. Subject to a $1,800,000 not-to- exceed amount, the District agrees to pay to the City 90% of the amounts stated in all undisputed consultant invoices within 45 days from the date the District receives a City invoice for that amount. If the District disputes any portion of the City's invoice, District shall provide the City with a written explanation of why it does not believe the invoiced amount is appropriate. Both Parties agree to confer in good faith towards resolution of concerns regarding disputed consultant invoices, and both Parties will endeavor to resolve all disputed consultant invoices within 30 days from the date District provides its written explanation of its dispute. c. If the District determines it will be late making a payment, it shall notify the City's Director of Public Works in writing at least two business days before the payment's due date of its intent to make a late payment, including the date of when the payment will be made. In recognition of the fact that the City will invoice the District in arrears, monthly, for the consultant's work, the District agrees that no undisputed payment will be submitted to the City more than 60 days late. Cost Share Agreement Between City of Palo Alto and Santa Clara Valley Water District Regarding the Northwest County Recycled Water Strategic Plan Project. Page 3 of 5 d. If the City does not receive an undisputed payment within the due dates set forth in subsections (b) and (c) of this Section 2.1, the City shall provide the District with written notice of the late payment. The District shall have a grace period of 30 days from the date it receives such written notice to pay the undisputed payment. If the District fails to make such payment within the 30 day grace period, the City may terminate this Agreement. Termination of this Agreement will be in addition to, and not in lieu of, other remedies available to the City. ~1:::C I IUN Ill INDEMNIFICATION AND INSURANCE 3.1 In lieu of and notwithstanding the pro rata risk allocation, which might otherwise be imposed between the Parties pursuant to Government Code Section 895.6, the Parties agree that all losses or liabilities incurred by a Party shall not be shared pro rata but, instead, District and City agree that, pursuant to Government Code Section 895.4, each of the Parties hereto shall fully indemnify and hold each of the other Party, including its officers, board members, employees, and agents, harmless from any claim, expense or cost, damage or liability imposed for injury (as defined in Government Code Section 810.8) occurring by reason of the negligent acts or omissions or willful misconduct of the indemnifying Party, its officers, employees, or agents, under or in connection with or arising out of any work, authority, or jurisdiction delegated to such Party under this AGREEMENT. No Party, nor any officer, board member, or agent thereof shall be responsible for any damage or liability occurring by reason of the negligent acts or omissions or willful misconduct of the other Party hereto, its officers, board members, employees, or agents, under or in connection with or arising out of any work authority or jurisdiction delegated to such other Party under this AGREEMENT. 3.2 District and the City shall each require any consultant, contractor, or any other person or entity performing any part of the Scope of Work to secure and maintain in full force and effect at all times while undertaking the work and until the work is accepted by District and City, public liability and property damage insurance, errors and omission insurance, and other insurance in forms and limits of liability acceptable to both City and District, naming City and District and their respective officers, employees and agents as additional insured from and against all damages and claims, loss, liability, cost or expense arising out of or in any way connected with performing the Scope of Work. SECTION IV ADDITIONAL PROVISIONS 4.1 A Party's waiver of any term, condition or covenant, or breach of any term, condition, or covenant shall not be construed as a waiver of any other term, condition or covenant or breach of any other term, condition or covenant. 4.2 This AGREEMENT contains the entire AGREEMENT between DISTRICT and CITY relating to the cost sharing and completion of the Scope of Work, including development of the Strategic Plan. Any prior agreements, promises, negotiations, or representations not expressly set forth in this AGREEMENT are of no force or effect. 4.3 If any term, condition or covenant of this AGREEMENT is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions of this AGREEMENT shall be valid and binding on DISTRICT and CITY. 4.4 This AGREEMENT shall be governed and construed in accordance with the laws of the State of California. Cost Share Agreement Between City of Palo Alto and Santa Clara Valley Water District Regarding the Northwest County Recycled Water Strategic Plan Project. Page 4 of 5 Attachment A Scope of Work for the Consultant Contract The City of Palo Alto (Palo Alto or City) currently supplies tertiary-treated recycled water to several City-owned parks and facilities, Caltrans, a commercial fill truck standpipe at the City of Palo Alto Regional Water Quality Control Plant (RWQCP), and the City of Mountain View. Part of the project under consideration entails business plan development and preliminary design of a pipeline that would expand the use of tertiary recycled water to large landscape areas and potential dual plumbing systems in South Palo Alto including the Stanford Research Park. The Palo Alto City Council (Council) certified the Program Environmental Impact Report (EIR) on September 28, 2015. http://www.cityofpaloalto.org/civicax/filebank/documents/49079 The City, as lead, in collaboration with the Santa Clara Valley Water District (District) now seeks a CONSUL TANT to conduct numerous recycled water preliminary planning studies as well as to usher Phase Ill of the recycled water system expansion through financial planning, preliminary design and funding, culminating in a Recycled Water Strategic Plan. GENERAL The CONSULTANT shall act as the project manager for Phase Ill of the recycled water delivery system, an expansion to the Stanford Research Park. The CONSULTANT shall also support the City and District's efforts to produce a Recycled Water Strategic Plan. The project requires the CONSULT ANT to have a breadth of knowledge and experience to provide various services as described below. The CONSUL TANT team should have experience in grant- writing for state and federal funds and possess a full spectrum of engineering and financial planning expertise. The CONSUL TANT must be knowledgeable of laws and regulations related to recycled water and water rate-making including California Proposition 218. The CONSULTANT shall put together a flexible team with flexible time allocation to accommodate the needs of the project. The CONSUL TANT's project manager will report to Samantha Engelage, City of Palo Alto Engineer. The CONSULT ANT is not expected to navigate the projects through City processes, but is expected to provide all needed support documents. The CONSULT ANT team shall keep its work properly organized at all times. As much as possible, records shall be in electronic format compatible with the RWQCP's software. Records of work will be available to the RWQCP and District at all times, and the City will have ownership rights of all records and documents. The CONSUL TANT will not share City and District documents or information with anyone outside of the organizations, except the CONSUL TANT program team, without the City and District's written approvals. Any preliminary design performed by CONSUL TANT under this Agreement will be the property of the City and District and they have the right to allow the design engineer to use the preliminary design documents to complete the final design. TASK DESCRIPTIONS Task 1.0 Proiect Coordination & Administration • CONSULTANT shall provide management of all task activities under this Agreement, including project team assignments; meeting preparation and attendance; maintenance and monitoring of the budget and schedule; quality assurance and quality control of all deliverables; and coordination of all sub-consultants. • Consultant shall develop a work flow diagram with key decision points noted. • CONSULTANT shall make Task 2.0 a priority for completion and meet the following deadlines: o Task 2.3 and 2.4 to be completed no later than 6 months from approval of Task 2.1 Attachment A: Consultant Scope of Work Page 1 of 12 o Research and identification of near-term funding sources as defined under Task 2.5 shall be completed within 3 months from completion of Task 2.1 o Task 3.1 completed no later than 3 months from issuance of the Notice to Proceed o Task 3 subtasks (optional tasks excluded) completed no later than 18 months from issuance of Notice to Proceed. o Task 3 optional subtasks completed no later than 9 months of written authorization to proceed from the City and District o All other tasks shall be completed by December 31, 2020. • CONSUL TANT shall set deadlines for funding, permitting, and preliminary design. • CONSULTANT shall attend and coordinate routine update meetings with the City, District, and other stakeholders to occur no less than quarterly throughout the project. • CONSULTANT shall develop and maintain a comprehensive overall project budget tracking system for the project. Task 1.1 Project Coordination & Administration Deliverables • CONSUL TANT shall produce a master schedule for the project including phasing of work, critical paths, and milestones. • CONSULTANT shall provide the City and District with summary minutes and supplemental materials used during the update meetings no later than five (5) working days from the update meeting. • CONSUL TANT shall provide progress, schedule, and budget updates to City and District staff on a monthly basis and as requested by the City and District. Task 1.2 Optional Tasks • CONSUL TANT shall conduct the Optional tasks only at City and District discretion and upon written notification by the City. Optional Task 1. 2 Stakeholder Meetings o A Stakeholder meeting shall be held at 80 and 95 percent project completion. o CONSUL TANT shall present project progress results to stakeholders at 80 and 95 percent project completion. CONSUL TANT shall incorporate feedback provided by the City, District, and other stakeholders at the progress presentations. Stakeholders include, but are not limited to, residents, nongovernmental organizations, the RWQCP partner agencies, and the San Francisco Bay Regional Water Quality Control Board. Task 2.0 Recycled Water Phase Ill Expansion Proiect Task 2.1: Phase Ill Expansion Work Plan • Prior to conducting any work on this task, CONSUL TANT shall produce a draft work plan detailing the proposed course of action to meet the task requirements for City and District approval. • CONSUL TANT shall present the work plan to the City and District during a meeting to be held within ten (10) working days of draft submittal. The City and District will provide comments within fourteen (14) working days of draft submittal. • CONSUL TANT shall provide revised work plan to the City and District within five (5) working days of receiving comments. • City and District will approve/disapprove of the revised work plan within five (5) working days of receiving the finalized work plan and CONSULT ANT shall then commence work on the tasks or commence work on a revised work plan that addresses the reasons for the City and/or District's disapproval, as applicable. Attachment A: Consultant Scope of Work Page 2 of 12 Task 2.2: Phase Ill Expansion Project Coordination and Planning • CONSULTANT shall produce a master schedule for Task 2.0 including the phasing of work, critical paths, and milestones specific to the Phase Ill Expansion Project. • CONSULTANT shall set deadlines for business plan, design, permitting, and securing . outside funding specific to the Phase Ill Expansion Project. • CONSUL TANT shall develop and maintain a comprehensive overall task budget tracking system specific to the Phase 111 Expansion Project. • CONSUL TANT shall provide progress, schedule, and budget updates to City and District staff on a monthiy basis, for the duration of Task 2.0 and no iater than 6 months from the issuance of the Notice to Proceed. Task 2.3 Phase Ill Expansion Business Plan Development • CONSUL TANT shall produce a 20-year annual recycled water demand projection for the project area (refer to other attachment for Phase Ill Background & Map) taking into account potential changes in landscaping, land use, new dual-piped buildings coming online, groundwater recharge, indirect potable reuse, direct potable reuse, and other future potential changes in demand with the possibility of advanced treatment options. • CONSUL TANT shall perform risk assessment of the Phase Ill Expansion cost- effectiveness taking into account all the potential changes in demand, the potential changes in current water source costs and availability, as well as several scenarios for secured external funding. • CONSUL TANT shall identify and calculate a value for other potential uses for the pipeline if the risk assessment finds that there is a nontrivial possibility that the Phase Ill Expansion could prove not cost-effective in the future. o In coordination with Task 3.3, CONSULTANT shall include in Task 2.3 a high- level, feasibility evaluation of utilizing the Phase Ill expansion for IPR/DPR within Palo Alto and focused on Palo Alto utilization. As part of this, CONSUL TANT shall include a high-level feasibility evaluation of the routing of a dedicated IPR pipeline in Palo Alto that would benefit potential future groundwater production in Palo Alto. In addition, CONSULTANT shall evaluate the potential challenges of siting a DPR treatment plant at the RWQCP site including but not limited to: space requirements for additional treatment steps and minimum likely storage requirements for DPR-treated water before entering the drinking water distribution system. • CONSUL TANT shall integrate the factors of the risk assessment to develop cost-based recycled water rates and fees given several scenarios and subject to Proposition 218 requirements. • CONSUL TANT shall integrate the factors of the risk assessment to provide a business plan for the Phase Ill Pipeline Expansion. Task 2.4 Phase Ill Expansion Preliminary Design • CONSULTANT shall produce a preliminary (15 percent) engineering design that will focus on defining concepts for trenchless crossings and pump station development with the City identifying up to two alternative supply pump station and booster pump station sites and two Zone 2 sites for evaluation. CONSULANT shall include minor updates to the 2008 Facilities Plan for other Phase Ill elements, as requested by City. • CONSUL TANT shall utilize the 2008 Recycled Water Facility Plan (found at: http://www.cityofpaloalto.org/civicax/filebank/documents/15103), the 2015 EIR (found at: http://www.cityofpaloalto.org/gov/depts/utl/residents/resources/water resources/recycle d water.asp) and Dec 2014 South Bay Water Recycling -Strategic and Master Planning Report (found at: http://www. valleywater .org/EkContent.aspx?id= 184&terms=recycled+water. Attachment A: Consultant Scope of Work Page 3 of 12 • CONSUL TANT shall coordinate and provide information needed for environmental documents. • CONSUL TANT shall produce a Class 4 project cost estimate given preliminary design per AACE International Classification System. The cost estimate shall be appropriate for a project definition of 15 percent and an expected accuracy of -15 to +20 percent. Task 2.5 Phase Ill Expansion Securing of Outside Funding • CONSUL TANT shall research and identify near-term funding sources for ihe Phase 111 Expansion Project as outlined in the 2008 City of Palo Alto Recycled Water Facility Plan. • CONSUL TANT shall complete all necessary work to apply for funding on behalf of the City and District leveraging past successful grant funding received. • CONSUL TANT shall track all applications and provide additional information or materials as needed. • CONSUL TANT shall maintain and submit all reports necessary to claim any secured funding. • CONSUL TANT shall maintain a clear, organized record of all applications and all secured funding specific to the Phase Ill Expansion Project. • CONSUL TANT shall coordinate and strategize applications for funding the Phase Ill Expansion Project in light of other tasks under this Agreement and potential collaborative funding opportunities. Task 2.6 Phase Ill Expansion Deliverables • CONSUL TANT shall produce a Task 2.0 Work Plan per Task 2.1. • CONSUL TANT shall produce & update a Task 2.0 Schedule per Task 2.2. • CONSULTANT shall consolidate results from Tasks 2.3 -2.4 into a standalone Phase Ill Expansion Business Plan, Preliminary Design, & Secured Funding Effort Report, including a summary of the efforts undertaken in Task 2.5 to date. • CONSULTANT shall provide the City and District with draft reports at 80 and 95 percent completion for review. CONSUL TANT shall incorporate feedback from City and District for each of the above reports into subsequent draft and final reports. Task 2.7 Optional Tasks • CONSULTANT shall conduct optional tasks only at the City's discretion, with District concurrence, and upon written notification by the City and District. Optional Task 2. 7.a Phase Ill Expansion Extended Design for Project Definition of 30 to 40 percent • CONSUL TANT shall produce an engineering design consistent with 30 to 40 percent project definition that will focus on the pipeline, including tree reconnaissance and alignment refinement. • CONSULT ANT shall provide recommendations of key points and specifications for full construction bid package. • CONSUL TANT shall produce a Class 3 cost estimate according to AACE International Classification System with an accuracy of± 10 percent. • CONSUL TANT shall provide City and District with construction draft design documents at 80, and 95 percent completion for review. • CONSUL TANT shall incorporate feedback from City and District for each of the above items into subsequent draft designs no later than ten (10) working days after submittal. Attachment A: Consultant Scope of Work Page 4 of 12 • CONSUL TANT shall identify and evaluate any CEQA and other potential regulatory requirements that may apply to the future construction and operation of the proposed pipeline expansion using the EIR completed in 2015. • CONSUL TANT shall include a CEQA checklist, if needed, and a list of permits required for construction. • CONSUL TANT shall provide recommendations of key points for full design bid package. Task 3.0 Northwest County Indirect Potable Reuse Feasibility Study The purpose of the Indirect Potable Reuse (IPR) Feasibility Study is to compile baseline information on the current condition of aquifers in northwestern Santa Clara County and adjacent areas, including sources and quantities of recharge, groundwater pumping, and water quality. This information will be used to evaluate whether increased groundwater utilization by the City is viable, and if so, to evaluate the feasibility of indirect potable reuse of advanced treated recycled water. This study will also evaluate impacts to groundwater resources from potential pumping or recharge projects to ensure continued sustainable groundwater management. Task 3.1 Work Plan & Schedule • Prior to conducting any work on this task, the CONSUL TANT shall produce a draft work plan detailing the proposed course of action and schedule to meet the task requirements and incorporating stakeholder feedback and comments for City and District approval. • CONSUL TANT shall include in the work plan, amongst other details, an outline of the needed elements for the assessment under Task 3.2. • CONSUL TANT shall present the work plan to the City, District, & stakeholders during a meeting to be held within ten (10) working days of draft submittal. The City, District, & stakeholders will provide comments within fourteen (14) working days of draft submittal. • CONSUL TANT shall provide revised work plan to the City & District within five (5) working days of receiving comments. • City & District will approve/disapprove of the revised work plan within ten (10) working days of receiving the finalized work plan and CONSUL TANT shall then commence work on the tasks or commence work on a revised work plan that addresses the reasons for the City and/or District's disapproval, as applicable. Task 3.2 Groundwater Use Assessment • CONSULT ANT shall review and analyze currently available information and data on the Santa Clara and San Mateo Plain Subbasins (California Department of Water Resources Basins 2-9.02 and 2-9.03, respectively) in the RWQCP service area (Palo Alto, Stanford, Mountain View, Los Altos, Los Altos Hills, and East Palo Alto). The review and analysis topics will include groundwater and surface water divides, recharge areas, water quality, and the general structure of the aquifers, aquitards, and other geologic units, general groundwater quality, as well as other relevant information. o This assumes that data will be available from San Mateo County and that the City will provide available data on its potable supply wells. o This assumes that data is available in electronic formats (i.e., Excel, Access) and that this evaluation will rely on existing data and reports. • CONSUL TANT shall evaluate the hydrogeology and groundwater conditions in the RWQCP service area and surrounds, including defining the aerial extent, thickness and hydraulic properties of subsurface layers, surface water/groundwater interaction, quantifying seasonal fluctuations in upper and lower aquifer groundwater levels, inflows and outflows, basin storage, and evaluating hydraulic connectivity between the upper and lower aquifers and between adjacent subbasins. Attachment A: Consultant Scope of Work Page 5 of 12 • CONSUL TANT shall provide a groundwater balance analysis focusing on the City in addition to the analyses above for the RWQCP service area. The groundwater system is comprised of multiple water-bearing zones, and the analysis shall include the identification and estimate of inflows and outflows in the different zones (e.g., in the shallow aquifer and deeper production aquifer).The groundwater balance analysis shall also include a schematic diagram showing the conceptual aquifer system, and uncertainty analysis. The analysis shall identify significant sources of groundwater inflows and outflows, including, but not limited to, natural and managed recharge, private and municipal wells, groundwater remediation systems, tempoiai)' and on-going dewatering sites, and surface water/groundwater interactions, as well as an evaluation of the extent which shallow groundwater recharges the deeper aquifer(s). • CONSULTANT shall include geologic cross sections using existing data (e.g., well boring logs) that delineate water-bearing zones, aquitards, and depth to bedrock. • CONSUL TANT shall evaluate the feasibility of increased pumping to meet 25, 50, or 100 percent of the City's water demands and identify additional infrastructure needed to meet demands at each level. • CONSUL TANT shall evaluate whether increased pumping at these levels would result in adverse impacts, including excessive drawdown in adjacent wells, regional land subsidence, salt water intrusion, significant depletions of surface water, or drawing contaminants from known contaminant release sites into municipal wells (e.g. Superfund sites, dry cleaners, fuel leaks, and other toxic release sites). • CONSUL TANT shall evaluate different water year (hydrologic) scenarios and potential increased pumping in adjacent cities in conjunction with evaluating the feasibility of increased pumping to meet the City's future water demands. • CONSUL TANT shall identify data gaps and recommendations for further study as it relates to increased groundwater use. Task 3.3 Indirect Potable Reuse (IPR) Feasibility Evaluation • CONSULT ANT shall identify current natural groundwater recharge areas in the northwestern Santa Clara Subbasin, and identify potential areas for artificial recharge based on favorable geological conditions within the RWQCP's service area. • CONSUL TANT shall identify areas within the RWQCP's service area that fall within the northwest Santa Clara Subbasin on the scale of acres (versus parcel) of highest recharge, quantify recharge rates, identify current and near-term groundwater demand, and assess potential for IPR. • CONSUL TANT shall evaluate IPR from the perspective of the City as a utility as well as that of the RWQCP as a wholesaler. In the IPR utility evaluation, the CONSULTANT shall evaluate based on the City of Palo Alto borders and projected uses. In the IPR wholesaler evaluation, the CONSUL TANT shall evaluate based on the RWQCP as a regional plant with multiple partners. The wholesaler evaluation will include a look at the potential intertie with Sunnyvale and East Palo Alto IPR opportunities. • CONSUL TANT shall provide schematics (e.g., maps and cross sections) indicating identified locations. 8 CONSUL TANT shall perform screening level calculations using Darcy's law or similar approach to evaluate the movement and underground retention time of IPR water. • CONSULTANT shall review the potential for IPR projects to create nuisance conditions by raising the water table into basements, elevator shafts, underground parking, street undercrossings, or flooding storm drains and sanitary sewers. • CONSULTANT shall determine water quality parameter guidelines for IPR recycled water that would not adversely affect groundwater quality in the basin and ensure consistency with basin management objectives as defined in the 2012 Groundwater Management Plan prepared by the District, or subsequent versions. Attachment A: Consultant Scope of Work Page 6 of 12 • CONSULTANT shall evaluate the potential for IPR to introduce contaminants into the aquifer as well as evaluate the potential to increase mobilization and/or dissolution of contaminants. Contaminants of concern include salts, emerging contaminants, petroleum hydrocarbons and chlorinated hydrocarbons. Naturally-occurring compounds of potential concern may include arsenic, selenium and chromium and other metals. • CONSULTANT shall evaluate the potential for injected or percolated water to discharge into creeks. • CONSUL TANT shall utilize existing data including that from the City emergency groundwater wells, the District well monitoring, the State Water Resources Control Board's GeoTracker database, and other existing databases. This assumes that the District will provide assistance in acquiring District data in electronic format (i.e., Excel, Access) and will agree to share the data developed to date for the District's IPR Study (model refinements are ongoing and subject to change during the course of this project). • CONSULTANT shall identify possible IPR scenarios (e.g., injection wells, percolation ponds, etc.) that should be evaluated in more detail in subsequent studies for potential application in the identified potential IPR areas. • If IPR is determined to be feasible, CONSULTANT shall produce a recommended implementation strategy for IPR within the portions of the RWQCP service area that fall within the northwest Santa Clara Subbasin. • CONSULTANT shall include in the implementation strategy an overview of required permits and a CEQA checklist, other IPR regulatory constraints, monitoring requirements, on-going maintenance requirements, and associated cost estimates. • CONSULTANT shall provide Class 5 cost estimates per AACE International Classification System. The cost estimate shall be appropriate for a feasibility study for a project definition of O - 2 percent and an expected accuracy of -50 to + 100 percent. • CONSUL TANT shall identify data gaps and recommendations for further study. Task 3.4 Groundwater Study Deliverables • CONSUL TANT shall produce a Task 3 Work Plan & Schedule per Task 3.1. • CONSUL TANT shall produce a Groundwater Use Assessment Report per Task 3.2. • CONSULTANT shall consolidate results from Tasks 3.2 -3.6 into a standalone Northwestern Santa Clara County Indirect Potable Reuse Feasibility Study Report. o CONSULTANT shall provide the City, District, & stakeholders with draft reports at 80 and 95 percent completion for review. o CONSUL TANT shall incorporate feedback from the City, District, & stakeholders into each of the Reports above and into subsequent draft and final reports. Task 3.5 Refined Numerical Groundwater Model • The model elements and format shall be proposed by the CONSUL TANT via a work plan incorporating stakeholder feedback and comments, to be approved by the City and District prior to beginning this task. @ CONSULTANT shall use the hydrogeologic evaluation completed under Task 3.2 to develop a numerical groundwater model or refine an existing numerical groundwater model for use in forecasting future impacts to the aquifers, and for making calculations to satisfy regulations related to groundwater replenishment reuse projects (e.g. travel times). Future impacts could include those due to increased groundwater development, groundwater replenishment, wet and dry year extremes, or a combination thereof. Adequate model calibration to measured data (e.g., water levels) per industry standards (e.g. ASTM 5981-96) must be demonstrated to the satisfaction of the District and City. Attachment A: Consultant Scope of Work Page 7 of 12 • CONSUL TANT shall propose and evaluate up to five (5) potential groundwater use scenarios, in addition to a baseline scenario reflecting current groundwater demand under dry, average and wet water years. • CONSUL TANT shall determine artificial recharge rates sufficient to maintain the system in balance under each scenario in the event natural recharge is not sufficient. Task 3.6 IPR Modeling Scenarios & Parcel Identification • The model scenarios and identification format/procedure shall be proposed by the CONSULTANT via a work plan incorporating stakeholder feedback and comments to be approved by the City and District prior to beginning this task. • CONSUL TANT shall use the Refined Numerical Groundwater Model produced under Task 3.5 to run different IPR scenarios to ultimately identify ideal IPR opportunities (e.g., salt water intrusion mitigation, injection wells, percolation basins, etc.) and consider regulatory constraints to identify potential parcels for IPR projects. Task 3.7 Optional Tasks • CONSUL TANT shall conduct optional tasks only at the City's discretion, with District concurrence, and upon written notification by the City and District. Optional Task 3. 7.a Fulfilling Data Gaps in Numerical Groundwater Model • CONSULTANT will identify data needed to complete the numerical groundwater model in Task 3.5 and prepare a work plan for a field investigation to satisfy the data requirements. The work plan shall incorporate stakeholder feedback and comments and be approved by the City and District prior to beginning this task. • CONSUL TANT shall conduct the field investigation identified in the work plan and document the results in a standalone report. Optional Task 3. 7. b I PR Strategic Plan • The exact content and format of the plan shall be proposed by the CONSUL TANT via a work plan incorporating stakeholder feedback to be approved by the City and District prior to beginning this task. Task 4.0 Recycled Water Strategic Plan The ultimate goal of this study component is to produce a guideline for an alternative reliable water supply for the RWQCP service area and adjacent cities, to augment supplies with recycled water during droughts or other hydrologic events, and to increase the reliance on locally available water supplies such as recycled water. Task 4.1: Recycled Water Strategic Plan Work Plan & Schedule • Prior to conducting any work on this task, the CONSUL TANT shall produce a draft work plan detailing the proposed course of action and schedule to meet the task requirements, and incorporating stakeholder feedback and comments, for City and District approval.. • CONSUL TANT shall present the work plan to the City, District, & stakeholders during a meeting to be held within five (5) working days of draft submittal. The City, District, & stakeholders will provide comments within fourteen ( 14) working days of draft submittal. • CONSULTANT shall provide revised work plan to the City & District within five (5) working days of receiving comments. • City & District will approve/disapprove of the revised work plan within ten (10) working days of receiving the finalized work plan and CONSUL TANT shall then commence work on the tasks or commence work on a revised work plan that addresses the reasons for the City and/or District's disapproval, as applicable. Attachment A: Consultant Scope of Work Page 8 of 12 Task 4.2: Recycled Water Strategic Plan Evaluations • CONSUL TANT shall develop a comprehensive Recycled Water Strategic Plan, including feasibility report that meets the requirements of WTR11-01, Reclamation Manual; Directives and Standards. • CONSUL TANT shall review the 1992 Recycled Water Master Plan and identify potential new water recycling customers within the RWQCP service area and adjacent areas. • CONSULTANT shall incorporate key findings from Tasks 2.0 -3.0, the Advanced Water Purification System Feasibility Study, the Mountain View Recycied vVater Expansion & Sunnyvale lntertie Projects, the District's previous studies of stream augmentation, the City's previous studies of contaminants of emerging concern, and other relevant studies conducted by the City, District, and other agencies into the Recycled Water Strategic Plan. • CONSUL TANT shall evaluate and develop rate structures to address cost recovery and encourage recycled water use, in compliance with the requirements of Proposition 218, as applicable. • CONSUL TANT shall also evaluate the long-term financial viability of the RWQCP Recycled Water Program given various scenarios of potable and non-potable recycled water demand, partnerships, and rates. • CONSULT ANT shall include at a minimum the following evaluations: o Existing recycled water demand (as defined as that projected through 2020) in the RWQCP service area and adjacent areas. o Future recycled water demands (as defined as that projected through 2030 and divided up into 5-year increments) within the RWQCP service area and adjacent areas (e.g., Sunnyvale intertie, etc.). o Recycled water use for potable reuse, non-potable reuse, and stream-flow augmentation within the RWQCP service area and adjacent areas and incorporate a ranking/ evaluation system to help prioritize future commitments and projects. o Identifying and recommending technologies that may further improve recycled water quality by incorporating the Advanced Water Purification System Feasibility Study and how these projects could be linked to the RWQCP's Long Range Facilities Plan. o Developing revenue and market projections based on current (2020) conditions and an expanded distribution system (2030) throughout the RWQCP service area and adjacent areas o Summary of funding opportunities discovered under Task 5.0 and a summary of the statewide regulatory constraints tracked by the District. o Identification of opportunities for regional coordination and interconnections including an analysis of efficiencies realized by using interconnections. o Summary of the agreements that would be required to achieve recommended regional interconnections and additional expansion taking into account local policies in addition to agreements to support recycled water and interconnections. Task 4.3 Recycled Water Strategic Plan Deliverables • CONSUL TANT shall produce a Task 4 Work Plan & Schedule per Task 4.1. • CONSUL TANT shall consolidate results from Tasks 4.2 into a standalone Recycled Water Strategic Plan report. o CONSULTANT shall provide a report that can be used as a feasibility report that could be sent by the City to the Bureau of Reclamation for review and approval. o CONSUL TANT shall incorporate any comments from the Bureau of Reclamation and issue a Project Feasibility Report. Attachment A: Consultant Scope of Work Page 9 of 12 o CONSULTANT shall provide the City, District, & stakeholders with draft reports at 80 and 95 percent completion for review. o CONSULTANT shall incorporate feedback from the City, District, & stakeholders into each of these reports and into subsequent draft reports. Task 4.4 Optional Tasks • CONSUL TANT shall conduct optional tasks only at the City's discretion, with District concurrence, and upon written notification by the City and District. Optional Task 4.4.a Mountain View Project Alignment o CONSULTANT shall conduct additional analyses as needed to incorporate work conducted separately by Mountain View on recycled water expansion into Task 4.2. Optional Task 4.4.b RWQCP Wholesaler Business Plan o The business plan elements and approach shall be proposed by the CONSUL TANT via a work plan which shall incorporate stakeholder feedback and comments and be approved by the City and District prior to beginning this task. o CONSUL TANT shall develop a business plan for RWQCP being a wholesaler of recycled water within South San Mateo County. Optional Task 4.4.c Assistance in Partner Agreements o CONSULTANT shall, as needed, draft partner agreements between different agencies on recycled water pipeline expansion projects. Optional Task 4.4.d Facility Assessment Plans o The plan elements and approach shall be proposed by the CONSUL TANT via a work plan which shall incorporate stakeholder feedback and comments and to be approved by the City and District prior to beginning this task. o CONSUL TANT shall develop facility assessment plans for expanding recycled water within East Palo Alto, Stanford, Los Altos Hills, and Los Altos. Optional Task 4.4.e Business Plan-East Palo Alto and East Menlo Park o The business plan elements and approach shall be proposed by the CONSUL TANT via a work plan which shall incorporate stakeholder feedback and comments and be approved by the City and District prior to beginning this task. o CONSUL TANT shall develop a business plan for expanding recycled water within East Palo Alto and East Menlo Park. Optional Task 4.4.f Business Plan -Los Altos o The business plan elements and approach shall be proposed by the CONSUL TANT via a work plan which shali incorporate stakeholder feedback and comments and be approved by the City and District prior to beginning this task. o CONSUL TANT shall develop a business plan for expanding recycled water within Los Altos. Attachment A: Consultant Scope of Work Page 10 of 12 Optional Task 4.4.g Business Plan-Los Altos Hills o The business plan elements and approach shall be proposed by the CONSUL TANT via a work plan which shall incorporate stakeholder feedback and comments and be approved by the City and District prior to beginning this task. o CONSUL TANT shall develop a business plan for expanding recycled water within Los Altos Hills. Optional Task 4.4.h Business Plan -Stanford o The business plan elements and approach shall be proposed by the CONSUL TANT via a work plan which shall incorporate stakeholder feedback and comments to be approved by the City and District, prior to beginning this task. o CONSUL TANT shall develop a business plan for expanding recycled water to Stanford. Task 5.0 Funding Identification & Assistance • CONSUL TANT shall research and identify possible funding sources for the numerous recycled water projects under this scope of work, with funding for Phase Ill design and construction the priority. • CONSUL TANT, at the direction of the City and District, shall complete all necessary work to apply for funding on behalf of the City, District, and/or RWQCP partner agencies. The City and District will be responsible for compilation and submittal of subsequent administrative reports from any granted funding. • CONSUL TANT shall track all applications and provide additional information or materials as needed. • CONSUL TANT shall maintain and submit all reports necessary to claim any secured funding. • CONSULT ANT shall coordinate and strategize applications for funding in light of all tasks under this Agreement, City and District projects occurring simultaneously outside of this Agreement, as well as potential collaborative funding opportunities with other agencies. Task 5.1 Funding Identification & Assistance Deliverables • CONSULANT shall produce and update a tracking sheet/record of funding opportunities, pending applications, & schedules under Task 5.0. • CONSUL TANT shall provide the City and District with copies of all submitted applications produced under Task 5.0. o CONSUL TANT shall provide the City and District with draft applications for review and approval prior to submission. Task 6.0 Regulatory Support & Regional Coordination • CONSUL TANT shall develop an overarching regulatory strategy for coordination with key regulatory agencies (e.g., Regional Water Quality Control Board and the State Board Division of Drinking Water). The goal of which will be to assess the regulatory agencies' comfort level with the proposed reuse plans and also to understand the technical data the agencies will expect to see during the permitting phase. • CONSUL TANT shall prepare applications and regulatory documents as needed and assist with permitting process. • CONSUL TANT shall update the City and District with respect to any relevant compliance requirements. • CONSUL TANT shall, upon City and District direction, aid in drafting of new ordinances or amending existing ordinances to encourage recycled water use. Attachment A: Consultant Scope of Work Page 11 of 12 • CONSUL TANT shall evaluate regional opportunities to promote the use of recycled water within Santa Clara and South San Mateo Counties. Task 7 .0 Public Outreach • CONSUL TANT shall, at the discretion of the City and District, prepare informational material in collaboration with City & District Outreach Staff and assist staff with reports, presentations, and workshops for City management, District Board of Directors, City Commissions and Committees, City Council and RWQCP partner agencies as needed. = CONSUL TANT shall, as needed, provide administiative and/or technicai support at public outreach events. • CONSULTANT shall assist, as needed, in educational campaigns and stakeholder meetings on the benefits of recycled water to increase public perception and awareness of the potential expansion opportunities. Task 7. 1 Public Outreach Deliverables • CONSUL TANT shall produce and update a tracking sheet of outreach conducted throughout the year under Task 7.0 and provide the record to the City & District each year of the contract by December 31 of that year. o Tracking sheet shall include at a minimum the location, date, name, number of people, event theme, and any provided materials for each outreach event. • CONSUL TANT shall provide the City & District with electronic copies of all produced outreach materials. Attachment A: Consultant Scope of Work Page 12 of 12 City of Palo Alto (ID # 6862) City Council Staff Report Report Type: Action Items Meeting Date: 12/12/2016 City of Palo Alto Page 1 Summary Title: Housing Impact Fee Ordinance Title: PUBLIC HEARING: Adoption of Two Ordinances to Update the City's Below Market Rate (BMR) Housing Program as Recommended by the Finance Committee: (1) Repealing Municipal Code Section 16.47 (Non-residential Projects) and 18.14 (Residential Projects) and Adding a new Section 16.65 (Citywide Affordable Housing Requirements) and; (2) Establishing Housing Impact Fees and Housing In-Lieu Fees for Residential, Nonresidential, and Mixed Use Developments. The Proposed Ordinances are Exempt From the California Environmental Quality Act (CEQA) per Sections 15378(b)(4), 15305 and 15601(b)(3) of the State CEQA Guidelines. The BMR Ordinance and Fees Were Recommended for Adoption by the Planning and Transportation Commission on November 30, 2016 From: City Manager Lead Department: Planning and Community Environment Recommendation Staff recommends that the City Council hold a public hearing and: 1. Adopt an ordinance (Attachment A) updating the City’s Below Market Rate (BMR) Housing Program by repealing Municipal Code Section 16.47 (non-residential projects) and 18.14 (residential projects) and adding a new Section 16.65 (Citywide Affordable Housing Requirements); 2. Adopt an ordinance (Attachment B) establishing housing impact fees and housing in-lieu fees for residential, nonresidential, and mixed use developments; and 3. Find that the above actions are exempt from the California Environmental Quality Act (CEQA) per Sections 15378(b)(4), 15305 and 15601(b)(3) of the State CEQA Guidelines. The Finance Committee voted 3-1 on June 21, 2016 to recommend the fees and approach set forth in these ordinances. On November 30, 2016, the Planning and Transportation Commission (PTC) recommended the ordinance in Attachment A and the fees set forth in Attachment B with modifications described below. City of Palo Alto Page 2 Executive Summary The proposed ordinance included as Attachment A would rescind and replace sections of the City’s Municipal Code governing inclusionary housing as well as the collection of the affordable housing impact fees charged to commercial development and the housing in lieu fees charged to residential development. If adopted, the proposed ordinance and the associated fee ordinance included in Attachment B would: increase fees charged to new office/R&D development from $20.37 to $60 per square foot; increase fees charged to new hotel development from $20.37 to $30 per square foot; maintain fees charged to retail/other commercial development at $20.37 per square foot; institute an impact fee for new market rate rental housing of $50 per square foot; modify the in lieu fee for new market rate for-sale housing so that it is no longer calculated at the time of sale (7.5% of the sale price), and is instead collected at the time of building permit issuance, similar to an impact fee ($50 per square foot); modify the in lieu housing requirement for new market rate for-sale housing so that it is triggered when a development includes three or more dwellings, rather than five or more dwellings and so that there is clarity about when fees can be paid instead of providing units on- or off-site; and introduce other provisions to encourage developers to provide affordable housing rather than pay the fees. The proposed fees are based on the two “nexus” studies included in Attachments C and D which examined the relationship between new commercial and residential development and the increased demand for affordable housing. The Finance Committee of the City Council and the Planning and Transportation Commission reviewed these nexus studies and each voted to recommend slightly different fee amounts from those recommended by the consultant, as shown in Table 1, below. (The ordinance included as Attachment B would implement the Finance Committee’s recommendations.) Table 1. Existing and Proposed Affordable Housing Fees Existing Fees February 2016 Proposal Finance Committee Recommendation Planning & Transportation Commission Recommendation Office/R&D $20.37/sf $35/sf $60/sf $60/sf*** Hotel $20.37/sf $30/sf $30/sf $30/sf*** Retail/Restaurant/Other** $20.37/sf $19.85/sf $20.37/sf $20.37/sf Market Rate Single Family Detached* 7.5 to 10% of sales price $95/sf $50/sf $95/sf City of Palo Alto Page 3 Market Rate Single Family Attached* 7.5 to 10% of sales price $50/sf $50/sf $50/sf Market Rate Condo* 7.5 to 10% of sales price $50/sf $50/sf $50/sf Market Rate Rental Housing None $50/sf $50/sf $10-20/sf**** *Market rate ownership housing projects are currently subject to City’s Affordable housing in lieu fees. Market rate rental projects are exempt from this requirement. With the new fees, rental and for-sale units would both be charged the same fees, even though one would be called an impact fee, and the other would be called an in lieu fee. Projects providing affordable units on site would not be charged a fee. **Retail uses are not addressed in the nexus study and this row includes the current fee based on the last nexus study completed in May 2002. The fee was last updated as part of the City’s budget process from $19.85/sf to $20.37/sf. ***The PTC recommended phasing-in these fee amounts over five years, subject to annual review. ****The PTC recommended impact fees on rental housing be set to reflect the range in other nearby jurisdictions and requested that staff provide the City Council with this information. Source: Palo Alto Planning & Community Environment, November 2016 All fees would be adjusted by CPI on an annual basis. Further, all of the fees collected as a result of the ordinance would be used for the preservation, rehabilitation, and development of affordable housing, consistent with the City’s Affordable Housing Fund Guidelines available at http://www.cityofpaloalto.org/gov/depts/pln/bmrhousing.asp. Background In April of 2014, the City entered into a contract with Strategic Economics and Vernazza Wolfe Associates, Inc., (the Consultants) to develop two nexus studies for commercial and residential housing impact fees to mitigate the impact of new development on the demand for affordable housing (Attachments C and D). This effort was partially motivated by the City’s need to address a series of court decisions preventing the City from imposing inclusionary housing requirements on new rental housing developments making it difficult for the City to impose rental housing fees without economic justification. In addition, City policy requires that impact fees be periodically reviewed to determine whether they are set at appropriate levels. The City’s updated Housing Element (adopted November 2014) referenced these updated nexus studies in several implementation programs and final drafts of the two studies were provided to City staff in late November 2015. An impact fee is a monetary exaction that is charged by a local governmental agency to an applicant in connection with approval of a development project for the purpose of mitigating impacts of the project. There must be a “nexus” or connection between the fee and the actual impacts of the project. In general the fee must be “roughly proportional” to the impact the project is creating. In order to establish a reasonable relationship between the development project and the fee it is charged, cities typically commission “nexus studies.” City of Palo Alto Page 4 If a city has already established an impact fee through a nexus study, it is typical for a municipality to periodically commission a new study to determine whether the fee level is appropriately set. City staff presented the results of the two nexus studies to the City Council Finance Committee on February 16, 2016 and June 21, 2016. Staff reports for these meetings are available at: http://www.cityofpaloalto.org/civicax/filebank/documents/50935 and http://www.cityofpaloalto.org/civicax/filebank/documents/52827 respectively. Minutes are included in Attachment E. On June 21, 2016, The Committee voted 3-1 to direct staff to prepare an ordinance and a fee schedule based on the Finance Committee Recommendations found in Table 1 above. In addition, a motion was made for staff and the PTC to explore options which would allow Office, R&D and Hotels to proportionally reduce their impact fee payment by providing Below Market Rate housing onsite or offsite or by deed restricting existing units as affordable. Staff presented the Finance Committee’s recommendation along with the BMR Ordinance to the PTC at meetings held on July 27, 2016, August 31, 2016 and November 30, 2016. Staff reports for each of the three meetings are available at: http://www.cityofpaloalto.org/civicax/filebank/documents/53215 , http://www.cityofpaloalto.org/civicax/filebank/documents/53624 and http://www.cityofpaloalto.org/civicax/filebank/documents/54901. Minutes from the July and August PTC meetings are included in Attachment F and minutes from November 30, 2016 will be provided “at places” on December 12, 2016. In motions adopted on August 31 and November 30, the PTC recommended that the City Council approve the ordinance in Attachment A and the fees shown in Table 1, as explained further below. The fee ordinance in Attachment B was prepared based on the Finance Committee recommendations, as shown in Table 1. Nexus Study Methodology The two nexus studies, one for commercial construction and one for residential construction, were prepared by the Consultant based on staff’s input and direction. Each used a similar methodology to generate data and conclusions as shown in Table 2. This same methodology has also been used to support updated impact fees in jurisdictions throughout San Mateo County. (More detail on the methodology is provided in the nexus studies.) Table 2. Affordable Housing Nexus Studies -- Methodology Overview Residential Commercial 1. Develop a prototype Single Family Detached Hotel City of Palo Alto Page 5 Residential Commercial Single Family Attached Office/R&D/Medical Office1 Condominiums (sale) Apartments (rental) 2. Determine Household Income of Residents and Disposable Income X 3. Determine Employee Density2 X 4. Number of New Worker Households Created X X 5. Worker Household Incomes; % Needing Affordable Housing X X 6. Affordability Gap between cost to purchase/rent housing and the cost to build X X 7. Maximum Fee Calculation X X 8. Feasibility Analysis X X 9. Recommended Fees X X Source: Department of Planning & Community Development, May 2016 This is a standard methodology that is used in creating nexus studies of this nature and includes an assessment of the “affordability gap,” which is the theoretical difference between what very low, low and moderate income households can afford to pay for housing expenses and the cost of building new, modest rental and for-sale units. Commercial Nexus Study Conclusions The nexus study shows that the City could significantly raise its impact fees on hotels and office/R&D/medical office space construction. The recommendations were developed based on the methodology summarized in Table 2, and the consultant concluded (in Step 7) that the maximum justifiable fees for each prototype are $177 and $264/square foot, respectively. The feasibility analysis (in Step 8) concluded that the maximum feasible fees for each prototype are $30 and $60 per square foot respectively. The original recommendation (Step 9) of $35 per square foot for office/R&D/medical office, which was about 40% below the feasible maximum, was based on a comparison of fees in neighboring jurisdictions and other policy considerations. The revised fee amount of $60 per square foot reflects the Finance Committee’s interest in charging the maximum possible fee to 1 A third commercial prototype was initially considered for a retail/restaurant/personal services but such a prototype has only rarely been constructed in Palo Alto in recent years, and the staff’s recommendation is to maintain the current fee of $20.37/new net square footage for retail/other based on the prior nexus study. 2 For each building prototype, an average employment density was defined based on a review of national survey data for existing buildings and a review of recently completed linkage fees nexus studies in the Bay Area. City of Palo Alto Page 6 ensure impacts of new development can be mitigated to the extent feasible. At this level, the fee would be substantially higher than in other jurisdictions and may act as an incentive for developers to provide affordable units on- or off-site rather than paying the fee. Residential Nexus Study Conclusions The nexus study shows that the City could adopt significant impact fees on all four studied prototypes (single family detached, single family attached, condominiums and apartments). Maximum justified fees are $111/square foot for single family detached, $95/square foot for single family attached, $75/square foot for condominiums, and $105/square foot for apartments. The financial feasibility analysis concluded that a fee of $111 per square foot or less is feasible for single-family detached development; a fee of $90 per square foot or less is feasible for single-family attached development; a fee of $75 per square foot or less is feasible for condominium development; and a fee of $85 per square foot or less is feasible for apartment development. The study recommended establishing a fee of $95/square foot for single family detached, a fee of $50/square foot for single family attached, a fee of $50/square foot for condominiums, and a fee of $50/square foot for apartments. These recommendations were based on the results of the financial feasibility analysis, a comparison with fees adopted in other Bay Area communities and policy considerations including a comparison to existing City fees. The Finance Committee expressed an interest in reducing the fees for residential uses where warranted to ensure that residential development is not charged higher fees than commercial development. The consultant’s supplemental analysis supported a lesser fee for single-family detached units ($50 per foot instead of $95 per foot) based on this interest. With the recommended fees, the fees will be higher than other local jurisdictions with the exception of San Francisco, whose fees range from $199,000 to $522,000 per unit, based on unit size. As in San Francisco, the high fees can act as an incentive for developers of market rate rental housing to provide affordable units on-site, even though their projects are not subject to the City’s inclusionary requirement. Supplementary Memorandum Report In response to the feedback received by the Finance Committee at the February 16th meeting, the Consultant prepared a Supplementary Memorandum Report included as Attachment G. The supplementary report provides updated information and analysis including a summary of existing city fees and permits for housing and commercial development prototypes in Palo Alto demonstrating that the fees proposed in February 2016 were higher for commercial development than for residential development, with the exception of the single-family detached prototype. The consultant’s report also provides an updated table on existing linkage fees and housing impact fees in other jurisdictions demonstrating that the proposed fees would be significantly higher than other jurisdictions in the region. The supplemental report also provides a City of Palo Alto Page 7 comparison of the potential housing impact fees with Palo Alto’s existing below market rate (BMR) housing policy for ownership units. This comparison examines the costs to the developer under the existing and proposed in-lieu fee structure both if units are provided on-site, and if housing impact fees are paid. Comparison with Existing In-Lieu Fees for For-Sale Housing The City currently has an inclusionary housing program that requires that 15 percent of the units in market-rate developments consisting of five or more housing units must be sold at affordable sales prices. This percentage increases to 20 percent on parcels larger than five acres. With the proposed ordinance, these percentages (15 and 20%) would not change, but the requirement would apply to projects with three or more units, rather than five or more units. Under the current program, developers have the option of paying an in-lieu fee of between 7.5 and 10 percent of the sales price or fair market value, whichever is greater when providing affordable units on- or off-site is infeasible. (The developer must also pay a fee for fractional units.) Currently, there is little guidance in the code as to how to determine whether providing units is infeasible, and the proposed ordinance would offer clarity regarding the basis for such determinations. Using the prototypes in Figure I-2 in the Draft Residential Impact Fee Nexus Study, the in-lieu fee revenues per market rate unit under the existing method would be $228,225 for a 3,000- square foot single family detached home, while the fee would be $285,000 if the fee were assessed at the original level recommended ($95 per square foot) and $150,000 if the fee were assessed at the revised level of $50 per square foot. For the single-family attached prototype of 2,100 square feet, in-lieu fee revenues per market rate unit would be $124,950 under the existing inclusionary program and $105,000 if the recommended fee were to be assessed at $50 per square feet. For the 2,100-square foot condominium prototype, the in-lieu fee revenue per market rate unit under the existing program would be $104,250 and $105,000 at the recommended fee of $50 per square foot. These in lieu fees are summarized in the Cost Comparison of Inclusionary Policy and Housing Impact Fees included as Attachment H. Also, it’s important to note that the Ordinance in Attachment A, while exempting residential for sale projects with one or two units, would apply to residential for sale projects with three or more units even if those units are replacements for existing units on the site. Adopting high in lieu fees for market rate for-sale housing would reflect a preference for seeing units constructed on site, minimizing the use of in lieu fees to truly special situations and fractional units. The PTC questioned this preference after affordable housing advocates described the difficulty of administering small numbers of BMR units sprinkled throughout market rate projects and their preference for funds to construct 100% affordable projects. City of Palo Alto Page 8 Stakeholder Input City staff held a Stakeholder meeting on April 20, 2016 to obtain feedback from various parties on the proposed impact fees that were presented to the Finance Committee on February 16, 2016. Invitations were sent to representatives from 32 different organizations, including the Building Industry Association of the Bay Area, NAIOP Commercial Real Estate Development Association, for-profit and non-profit developers and other non-profit organizations and interested parties. Fifteen representatives from twelve organizations participated in the discussion and many have continued to participate in the planning/hearing process. In general, stakeholders have expressed concerns regarding the magnitude of the proposed fees that are being considered, particularly the Finance Committee’s original suggestion that fees be set above the “maximum feasible” amount. Some raised a number of questions about the City’s objectives, the study methodology, and the unintended consequences of proceeding with the suggested fees. At the big picture level, there was a concern that with high fees, no development would occur and thus no funds would be generated for affordable housing, and the City’s fundamental problem related to the supply of housing would not be addressed. There was also a concern that if Palo Alto raises its fees well above other Peninsula cities, it would trigger an “arms race,” or “bidding war,” such that other Cities would raise their fees and development of new housing in the region would completely stop. The Finance Committee and the PTC considered these and other concerns when adopting their recommendations. PTC Discussions & Recommendations The PTC had three public hearings and thoughtful deliberations on the proposed ordinance in Attachment A and on the proposed fee amounts in Attachment B. The two ordinances reflect two of the Commission’s specific recommendations by (1) allowing for deed restrictions of no longer than 55 years to preserve the ability of developers to seek affordable housing projects; and (2) requiring applicants who wish to provide rental units on site rather than paying the fees to provide units that are affordable to low income households, recognizing that for sale inclusionary units typically accommodate moderate income households and 100% affordable projects typically accommodate very low income households. The PTC unanamously recommended the ordinance in Attachment A to the City Council. As noted in Table 1, the PTC’s recommended fee amounts differed from the Finance Committees in two ways. First, the Commission thought the single family detatched in lieu fee should be $95/ft as recommended by the consultant, rather than $50/ft as recommended by the Finance Committee, in order to better reflect the cost of actually providing the units. Second, on a 5-1 vote, the PTC recommended that the impact fee for rental housing be lower than the in lieu fee for ownership units, suggesting a fee somewhere in the range of $10-20 per square foot, and requesting that staff provide the City Council with information about the fee amounts in nearby jurisdictions to guide their decision. (This information is included in Attachment G.) City of Palo Alto Page 9 Also, on a 4-1 vote, the PTC recommended phasing-in the commercial linkage fees over five years, subject to annual review. (Some of the Commissioners also suggested that the phase-in should be weighted, with higher increases in later years.) The PTC also unanamously requested that the Council allow the Commission to participate in the annual review, and as part of the review, the Commission indicated that it would like to examine the idea of a graduated fee schedule to incentivize smaller units. Summary of Key Issues Updating the City’s BMR Housing Program requires adoption of an ordinance rescinding and replacing Sections 16.47 (non-residential projects) and 18.14 (residential projects) of the Palo Alto Municipal Code (PAMC), and addressing provisions of Housing Element Program H3.1.2. The BMR ordinance in Attachment A and the accompanying fee ordinance in Attachment B would: Consolidate the commercial and residential fee programs into a single uniform ordinance codified in a new Chapter 16.65. Give the City the ability to charge a fee for rental housing. In 2009, the California Court of Appeal, in Palmer/Sixth Street Properties L.P. v. City of Los Angeles, held that requiring inclusionary housing in new rental housing projects violates the Costa Hawkins Act. The Costa Hawkins Act allows developers of new rental housing to set the initial rental rate and provides that owners of existing housing may set the rental rate whenever the units are vacated (“vacancy decontrol”). The Court found that limiting rents in new rental housing to make them affordable violated the Costa Hawkins Act. It also found that in-lieu fees there which were “inextricably intertwined” with the prohibited rent control and so also prohibited. As a result, the City has not imposed BMR requirements on rental housing projects.3 To date, legislative fixes exempting BMR programs from the Costa Hawkins Act have not been successful. In the absence of a legislative fix, the most legally defensible way to justify an affordable housing impact fee for rental housing is through a nexus study. Give developers the opportunity and an incentive to build affordable units on-site instead of paying the impact fees, even for commercial (mixed use) projects. The ordinance will encourage developers to provide units on-site as a first priority when feasible. If providing the units on-site is not feasible, then developers would have the option to pay the impact fees. Differentiate the fee structure for commercial development. Under the current structure for commercial development, all commercial development is subject to the 3 Interestingly, the City’s suspension of its BMR requirements on rental housing projects has not resulted in an appreciable increase in rental projects. This local trend is consistent with the City’s nexus study finding that impact fees do not serve as a significant constraint to rental housing production. City of Palo Alto Page 10 same fee per square foot, which is currently set at $20.37. Under the draft ordinance in Attachment B, there will be one fee for hotel development, one for office/R&D and retail will continue to charge the existing fee of $20.37. Simplify the fee assessed to for sale residential development. Under the current fee structure, residential developers who pay the in-lieu fee are required to pay 7.5% of the sales price of the market rate units. Thus City is unable to collect the in-lieu fees until the market rate units are sold and the actual amount of the fees is not known until that time. With the proposed fees, all residential prototypes would be charged the same fee, whether they are rental or for-sale housing, condos, attached, or semi-detached. Also, the amount of the fees will be known early in the project and fees can be collected prior to the issuance of building permits or final map approval, if required. Clarify projects which are exempt from impact fees and clarify that if an exempt use converts to a non-exempt use, the new use is subject to fees. Adjust the threshold for inclusionary units from projects with five or more units to projects with three or more units as stated in Program H3.1.1 of the Housing Element. Mixed use projects containing less than three units are also now subject to a housing fee. In addition, residential ownership projects of three or more units would not receive a credit for any demolished units. The draft BMR ordinance is not proposing to increase the existing inclusionary housing requirements to adjust the percentage of affordable units required. The current percentage required (15%) can be examined in a separate planning effort at a later date, as can the potential for a nexus between new development and (market rate) workforce housing for City and school district employees (Housing Element Program 3.6.1). Policy Implications Adoption of a new housing impact fee structure for commercial and residential development projects would support the City’s stated policy goals under the Affordable Housing Fund program and the adopted Housing Element. Affordable Housing Fund The City’s Affordable Housing Fund is used to provide financial assistance for the development, acquisition and rehabiltiation of housing affordable to income qualifying populations in the City. Since 1974, the City has committed resources to funding this program, and updating housing impact fees supported by nexus studies supports this policy. Housing Element The City adopted its 2015-2025 Housing Element in November 2014. A housing element contains a municipality’s vision and implementation concepts for providing housing for a diverse population. The adopted Housing Element contains the following programs that support City of Palo Alto Page 11 the adoption of increased housing impact fees: H3.1.2j Conduct a nexus study to identify the impacts of market rate housing and the need for affordable housing, and develop BMR rental policies based on the results of the study. H3.1.6 Require developers of employment-generating commercial and industrial developments to contribute to the supply of low- and moderate-income housing through the payment of commercial in-lieu fees as set forth in a nexus impact fee study and implementing ordinances, thru a continuing program of updating the commercial fee. H3.4.3 Periodically review the housing nexus formula required under Chapter 16.47 of the Municipal Code to fully reflect the impact of new jobs on housing demand and cost. The proposed BMR ordinance implements Housing Element Program H3.1.2. In particular, this ordinance: 1. Implements the inclusionary requirements, standards, and price limits contained in Programs H3.1.2(a) and (b); 2. Contains standards for determining the feasibility of on-site BMR units, contains BMR program priorities, and provides standards for alternatives, fractional units, and payment of in-lieu fees as contained in Programs H3.1.2(c), (d), and (e), and after consideration of the possible policy contained in Program H3.1.2(h); 3. Contains provisions for reviewing developer requests that the requirements in the ordinance constitute a taking, consistent with Program H3.1.2(f); 4. Permits smaller or duplex BMR units in new single family residential subdivisions after consideration of the possible policy contained in Program H3.1.2(g); 5. Evaluated and determined not to adopt the policy contained in Program H3.1.2(i); and 6. Completed a nexus study to identify the impact of market rate housing on the need for affordable housing, and developed policies for rental housing based on the results of the study, consistent with Program H3.1.2(j). The nexus study also ensured that commercial developments contribute to affordable housing through the payment of fees (Program H3.1.6). City of Palo Alto Page 12 Based on the above, this ordinance is consistent with the Housing Element and that any minor modifications in specific procedures are intended to better implement the Housing Element’s purpose to “encourage, foster, and preserve diverse housing opportunities for very low, low, and moderate income households.” Resource Impact Adjusting affordable housing impact fees is anticipated to increase revenues to the City, making additional funding available for the preservation and construction of affordable housing in Palo Alto. Between fiscal year 2013 to 2015, the City received an average of $1.65 million annually for the commercial housing fund. Based on the recommended fee adjustments for commercial development, the commercial housing fund contributions could potentially increase by approximately 85%, although the increase will of course depend on the amount of development that occurs. It is more difficult to project residential development and the City has not experienced a great deal of housing development in the past few years. Adoption of the reports’ recommendations would not only increase the amount of funding from fractional units required under the City’s 15% inclusionary requirement for newly constructed for-sale housing, but it would also create a new funding source from the construction of rental units. The revenues generated for the fund would depend on (1) the amount of rental housing that is proposed and permitted, as well as (2) the amount of for sale housing that consists of (a) fractional units required to meet the 15% inclusionary program, (b) units constructed in a mixed-use project with two or fewer units, and (c) units that are infeasible to provide as required by the 15% inclusionary program. If applications for housing that are currently pending with the City are an indication of the year’s unit production, it would mean that over 100 units would be produced. If at least 50 are subject to the fee for rental housing, rather than being sold as condominiums, and assuming an average unit size of 800 gross square feet, that would mean $2M for the Residential Housing Fund. Funds provided from the affordable housing fund for the development of new affordable housing by independent developers are generally used to leverage many other funding sources, and according to Palo Alto Housing, $2M in such funds could potentially leverage three to four times the available funds which would help to deliver approximately 12-16 affordable units. Members of the Commission suggested that the City’s general fund could backfill any reduction in impact fees that occurs if development slows down because of the increased cost of doing buisiness. This would represent an unknown risk to the general fund which is projecting a budget deficit in fiscal year 2018 and is facing increasing demands on resources as well. The suggestion also ignores the fact that a large percentage of the cost of doing buisiness is outside the City’s control and the new impact fees that are charged would represent a small percentage City of Palo Alto Page 13 of the cost to develop. Timeline If the City Council chooses to adopt new housing impact fees on first reading this evening, a second reading of the ordinances would be scheduled in January. The ordinances and the fees would become effective 60 days after approval of the implementing ordinance on a second reading. As currently drafted, the ordinances would apply the new fees to all pending and future projects that have not obtained building permits prior to the effective date of the ordinance. Environmental Review The proposed ordinance is exempt from the California Environmental Quality Act (CEQA) per Sections 15378(b)(4), 15305 and 15601(b)(3) of the State CEQA Guidelines. The new ordinances are not expected to increase or decrease the number of newly constructed housing units, but instead will regulate the unit’s affordability levels. Attachments: Attachment A: Affordable Housing Ordinance (PDF) Attachment B: Proposed Fee Ordinance (PDF) Attachment C: Commercial Linkage Fee Nexus Study (PDF) Attachment D: Residential Impact Fee Nexus Study (PDF) Attachment E: Finance Committee Minutes (PDF) Attachment F: July 27 & August 31, 2016 PTC Minutes (November 30, 2016 minutes will follow "at places") (PDF) Attachment G: April 18, 2016 Supplementary Memorandum Report (PDF) Attachment H: Cost Comparison of Inclusionary Policy and Housing Impact Fees (PDF) Not Yet Approved 161122 jb 0131520 1 December 1, 2016 Ordinance No. _____ Ordinance of the City of Palo Alto Repealing Chapter 16.47 (Approval of Projects with Impacts on Housing) and Chapter 18.14 (Below Market Rate Housing Program) of the Palo Alto Municipal Code and Replacing Them with a New Chapter 16.65 (Citywide Affordable Housing Requirements) The City Council of the City of Palo Alto hereby finds and declares as follows: A. Under California Government Code Section 65580(d) all cities have a responsibility to use the powers vested in them to facilitate the improvement and development of housing and to make adequate provision for the housing needs of all economic segments of the community. B. The provision of safe and stable housing for households at all income levels is essential for the public welfare of the city. Housing in Palo Alto has become steadily more expensive and housing costs have gone up faster than incomes. Federal and state government programs do not provide enough affordable housing to satisfy the needs of very low, low, or moderate income households. As a result, there is a severe shortage of adequate, affordable housing for extremely low, very low and moderate income households, as evidenced by the following findings in the City's 2015-2023 Housing Element: 1. Despite a high median income in Palo Alto, nearly 30 percent of all households overpaid for their housing (more than 30 percent of their income) in 2010; 2. It is estimated that 63 percent of extremely low income renter households and 75 percent of extremely low income owner households overpaid for housing in 2010. Of the estimated 1,520 low income households, 75 percent of renter households and 44 percent of homeowner households paid more than 30 percent of their income for housing. 3. Extremely low, very low and low income households in Palo Alto have almost no affordable housing options without substantial subsidies. For moderate income households, adequately sized and affordable rental housing options are very limited as well. 4. Homeownership is largely beyond the reach of most lower and moderate income households in Palo Alto and low and very low income households have difficulty finding rental properties in Palo Alto. C. As stated in the City of Palo Alto's Housing Element, it is the City's policy to encourage, foster, and preserve diverse housing opportunities for very low, low, and moderate income households. The City can achieve its goals of providing more affordable housing and achieving an economically balanced community only if part of the new housing built in the City is affordable to households with limited incomes. D. In order to meet the needs of moderate households, dwelling units will need to house a variety of household types, incomes, and age groups. E. The affordable housing ordinance codified in this chapter will substantially advance the City's legitimate interest in providing additional housing affordable to all income levels and dispersed Not Yet Approved 161122 jb 0131520 2 December 1, 2016 throughout the City by requiring construction of below-market rate housing and providing funds for housing affordable to very low, low, and moderate income households. F. New market-rate housing creates a demand for affordable housing, because new residents of that housing purchase goods and utilize services in the community, increasing local employment and attracting employees, of whom a quantifiable number will have very low, low, or moderate incomes and cannot afford market-rate housing, as demonstrated in the Residential Impact Fee Nexus Study dated October 2015, prepared by Strategic Economics and Vernazza Wolfe Associates, Inc. G. Because nonresidential projects also attracts employees, of whom a quantifiable number will have very low, low, or moderate incomes, new nonresidential projects similarly increase the demand for and exacerbate the shortage of housing available for people at these income levels, as demonstrated in the Commercial Linkage Fee Nexus Study dated November 2015, prepared by Strategic Economics and Vernazza Wolfe Associates, Inc. H. Construction of market-rate housing and nonresidential projects that do not include affordable units also aggravates the existing shortage of affordable housing by absorbing the supply of available land. I. Based on the findings above, the City desires to further the public health, safety and welfare by requiring residential and nonresidential projects in the City to mitigate their impact on the need for affordable housing in the City. J. This ordinance implements Housing Element Program H3.1.2. In particular, this ordinance: 1. Implements the inclusionary requirements, standards, and price limits contained in Programs H3.1.2(a) and (b); 2. Contains standards for determining the feasibility of on-site BMR units, contains BMR program priorities, and provides standards for alternatives, fractional units, and payment of in-lieu fees as contained in Programs H3.1.2(c), (d), and (e), and after consideration of the possible policy contained in Program H3.1.2(h); 3. Contains provisions for reviewing developer requests that the requirements in the ordinance constitute a taking, consistent with Program H3.1.2(f); 4. Permits smaller or duplex BMR units in new single family residential subdivisions after consideration of the possible policy contained in Program H3.1.2(g); 5. Evaluated and determined not to adopt the policy contained in Program H3.1.2(i); and 6. Completed a nexus study to identify the impact of market rate housing on the need for affordable housing, and developed policies for rental housing based on the results of the study, consistent with Program H3.1.2(j). The nexus study also ensured that commercial developments contribute to affordable housing through the payment of fees (Program H3.1.6). Not Yet Approved 161122 jb 0131520 3 December 1, 2016 Based on the above, the City Council further finds that this ordinance is consistent with the Housing Element and that any minor modifications in specific procedures are intended to better implement the Housing Element’s purpose to “encourage, foster, and preserve diverse housing opportunities for very low, low, and moderate income households.” NOW, THEREFORE, the City Council of the City of Palo Alto, California, hereby ordains as follows: SECTION 1: Chapter 16.47 (Approval of Projects with Impacts on Housing) of the Palo Alto Municipal Code is hereby repealed. SECTION 2: Chapter 18.14 (Below Market Rate Housing Program) of the Palo Alto Municipal Code is hereby repealed. SECTION 3: New Chapter 16.65 (Citywide Affordable Housing Requirements) is hereby added to the Palo Alto Municipal Code to read in full as follows: Chapter 16.65 CITYWIDE AFFORDABLE HOUSING REQUIREMENTS Sections: 16.65.010 Purpose 16.65.020 Definitions 16.65.025 Exemptions 16.65.030 Basic Affordable Housing Requirements – Residential Ownership Projects 16.65.040 Basic Affordable Housing Requirements – Mixed-Use, Nonresidential and Residential Rental Projects 16.65.060 Housing Impact Fee and In-Lieu Fee 16.65.070 Requirements for Residential Projects Containing Ownership and Rental Units and for Mixed Use Projects 16.65.075 Provision of Affordable Units 16.65.080 Alternative Means of Compliance 16.65.090 Application and Review Procedures 16.65.100 Affordable Housing Funds 16.65.110 Administrative Relief 16.65.120 Enforcement Not Yet Approved 161122 jb 0131520 4 December 1, 2016 16.65.010 Purpose. The purposes of this chapter are to: A. Enhance the public welfare by establishing policies to provide affordable housing, meet the City's regional share of housing needs, and implement the goals and objectives of the comprehensive plan and housing element. B. Mitigate the impacts of residential rental and nonresidential projects on the need for affordable housing by imposing a housing impact fee whereby developers of residential rental and nonresidential projects will contribute to the supply of housing for households with very low, low, and moderate incomes. C. Increase funds available to support the preservation and production of new affordable housing in the City of Palo Alto. D. Ensure that developers of new nonresidential square footage provide funding to mitigate the impacts of new employment on the demand for affordable housing. E. Ensure that developers of new market-rate rental housing provide funding to mitigate the impacts of new residents on local employment and the resultant increased demand for affordable housing. F. To create incentives for developers to build new affordable units on- or off-site instead of paying impact fees or in lieu fees. G. To provide affordable housing that serves qualifying Palo Alto residents and those who work in the City. 16.65.020 Definitions. The definitions set forth in this section shall govern the application and interpretation of this chapter. Words and phrases not defined in this section shall be interpreted so as to give this chapter its most reasonable application. A. "Affordable housing agreement" means an agreement in conformance with Section 16.65.090(B) between the City and an applicant, governing how the applicant shall comply with this chapter. B. "Affordable housing guidelines" means the requirements for implementation and administration of this chapter adopted by the planning and community environment director in accordance with Section 16.65.090(D). C. "Affordable housing plan" means a plan containing all of the information specified in and submitted in conformance with Section 16.65.090(A) specifying the manner in which affordable units will be provided in conformance with this chapter and the affordable housing guidelines. D. "Affordable rent" means the total monthly housing expenses for a rental affordable unit not exceeding the rents specified by Section 50053 of the California Health and Safety Code and California Code of Regulations Title 25, Sections 6910-6924. As used in this Chapter, "affordable rent" shall include the total of monthly payments by the tenant for Not Yet Approved 161122 jb 0131520 5 December 1, 2016 all of the following: (1) use and occupancy of the affordable unit and land and all facilities associated with the affordable unit, including but not limited to parking, bicycle storage, storage lockers, and use of all common areas; (2) any additional separately charged fees or service charges assessed by the owner, other than security deposits; (3) an allowance for utilities paid by the tenant as established by the City, including garbage collection, sewer, water, electricity, gas, and other heating, cooking, and refrigeration fuel, but not telephone service or cable TV; and (4) any other interest, taxes, fees or charges for use of the land or affordable unit or associated facilities and assessed by a public or private entity other than the owner, and paid by the tenant. E. "Affordable sales price" means the maximum purchase price that will be affordable to the specified household at the specified income level, calculated in accordance with California Health and Safety Code Section 50052.5. The affordable sales price shall include a reasonable down payment, and monthly housing payments (including interest, principal, mortgage insurance, property taxes, homeowners insurance, homeowners association dues, property maintenance and repairs, and a reasonable allowance for utilities), all as determined by the City. F. "Affordable unit" means a dwelling unit affordable to very low, low, or moderate income households. G. "Applicant" or "developer" means a person, persons, or entity that applies for a residential or nonresidential project and also includes the owner or owners of the property if the applicant does not own the property on which development is proposed. H. "Area median income" or "AMI" means the annual median income for Santa Clara County, adjusted for household size, as published periodically in the California Code of Regulations, Title 25, Section 6932, or its successor provision, or as established by the City of Palo Alto in the event that such median income figures are no longer published periodically in the California Code of Regulations. I. "Building permit" includes full structural building permits as well as partial permits such as foundation-only permits. J. "Common ownership or control" refers to property owned or controlled by the same person, persons, or entity, or by separate entities in which any shareholder, partner, member, or family member of an investor of the entity owns ten percent (10%) or more of the interest in the property. K. "Commercial housing fund" means a fund or account designated by the City to maintain and account for all monies received from nonresidential project applicants pursuant to this chapter. L. "Decision-making body" means the City staff person or body authorized to approve or deny an application for a planning or building permit for a residential, mixed use or nonresidential project. Not Yet Approved 161122 jb 0131520 6 December 1, 2016 M. "Density bonus units" means dwelling units approved in a residential project pursuant to California Government Code Section 65915 that are in excess of the maximum allowable residential density otherwise permitted by the City of Palo Alto. N. "First approval" means the first of the following approvals to occur with respect to a residential project: planning permit or building permit. O. "Housing impact fee" or "housing fee" means the fee paid by developers of residential and nonresidential projects to mitigate the impacts that such developments have on the demand for affordable housing in the City. P. "Low income households" are those households whose income does not exceed the low income limits applicable to Santa Clara County as defined in California Health and Safety Code Section 50079.5 and published annually pursuant to Title 25 of the California Code of Regulations, Section 6932 (or its successor provision) by the California Department of Housing and Community Development, generally households with incomes between fifty percent (50%) and eighty percent (80%) of area median income. Q. "Market rate unit" means a new dwelling unit in a residential project that is not an affordable unit. R. “Mixed use project” means an application for a planning permit or building permit that includes the creation of one or more new dwelling units and the construction of net new gross square footage of non-residential space or the conversion of a residential use to a nonresidential use. S. "Moderate income households" are those households whose income does not exceed the moderate income limits applicable to Santa Clara County as defined in California Health and Safety Code Section 50093 and published annually pursuant to Title 25 of the California Code of Regulations, Section 6932 (or its successor provision) by the California Department of Housing and Community Development, generally households with incomes between eighty percent (80%) and one hundred twenty percent (120%) of area median income. T. "Nonresidential project" means an application for a planning permit or building permit that includes the new construction of net new gross square feet of nonresidential space, the conversion of a residential use to a nonresidential use, or the conversion of exempt space (as provided in Section 16.65.025) to non-exempt space. U. "Planning permit" means any discretionary approval of a residential project, including but not limited to a comprehensive or specific plan adoption or amendment, rezoning, tentative map, parcel map, conditional use permit, variances, or architectural review. V. "Residential housing fund" means a fund or account designated by the City to maintain and account for all monies received from residential project applicants pursuant to this chapter. Not Yet Approved 161122 jb 0131520 7 December 1, 2016 W. "Residential ownership project" means any residential project that includes the creation of one or more new dwelling units that may lawfully be sold individually. A residential ownership project also includes the conversion of a residential rental project to a residential ownership project. X. "Residential project" means any development for which a planning permit or building permit is required that includes the creation of one or more new dwelling units, conversion of nonresidential uses to dwelling units, or the conversion of a use from a residential rental project to a residential ownership project. Y. "Residential rental project" means any residential project on property under common ownership and control that creates one or more net new dwelling units that cannot be lawfully sold individually. Z. "Very low income households" are those households whose income does not exceed the very low income limits applicable to Santa Clara County as defined in California Health and Safety Code Section 50105 and published annually pursuant to Title 25 of the California Code of Regulations, Section 6932 (or its successor provision) by the California Department of Housing and Community Development, generally households with incomes less than fifty percent (50%) of area median income. 16.65.025. Exemptions. The following development projects are exempt from the provisions of this chapter: A. Residential projects consisting of the construction of one or two units, unless included in a mixed use project. B. Accessory dwelling units. C. Junior accessory dwelling units. D. Places of worship; E. Colleges and universities F. Commercial recreation; G. Hospitals and convalescent facilities; H. Private clubs, lodges, and fraternal organizations; I. Private education facilities; J. Public Facilities; K. Retail service, eating and drinking service, personal service, or automotive service when the total additional service related square footage is 1,500 square feet or less. This exemption shall apply only when the additional square footage of new development does not exceed 1,500 square feet. Not Yet Approved 161122 jb 0131520 8 December 1, 2016 New development that is larger than 1,500 square feet shall pay a fee or otherwise comply with this Chapter for all square footage, including the first 1,500 square feet; L. New gross square footage used for (1) an on-site cafeteria, recreational facility, or day care facility provided for employees or their children and not open to the public; or (2) a hazardous materials storage facility; M. Projects that have established a vested right not to be subject to this chapter; and N. Any nonresidential project otherwise determined to be exempt pursuant to City Council resolution. If a development project is exempt from this Chapter at initial construction, but later converts to a use subject to this Chapter, the converted square footage will be deemed net new square footage or dwelling units, as applicable, subject to the requirements of this Chapter. [Exemptions contained in this section are currently contained in Municipal Code Section 16.47.020 and 16.47.30. This section has added (B) accessory dwelling units, (C) junior accessory dwelling units(M) projects with vested rights; and (N) projects exempted by Council resolution. This section has also changed “residential uses” to “(A) residential projects consisting of one or two units,” which will have the effect of applying the inclusionary requirement for residential ownership projects to projects with three or more units, rather than five or more units as currently provided for in Municipal Code Section 18.14.030(a). This section also deletes an existing exception for exempt square footage that is converted to gross square footage and clarifies that use conversions are subject to ordinance as well.] 16.65.030 Basic Affordable Housing Requirement – Residential Ownership Projects. The provisions of this section shall apply to all residential ownership projects, including the residential ownership portion of any mixed use project containing three or more units, except for any residential ownership project exempt under Section 16.65.025. A. Unless an alternative is approved as described in Section 16.65.080, residential ownership projects shall provide the following: a. For projects on sites of less than five acres, fifteen percent (15%) of the dwelling units in the project shall be made available at affordable sales price to very low, low, and moderate income households; b. For projects on sites of five acres or more, twenty percent (20%) of the dwelling units in the project shall be made available at affordable sales price to very low, low, and moderate income households; and c. For projects that convert existing rental housing to condominiums, other residential ownership or nonresidential space or that remove existing rental housing, twenty-five percent (25%) of the dwelling units in the project shall be made available at affordable sales price to very low, low, and moderate income households. Not Yet Approved 161122 jb 0131520 9 December 1, 2016 d. Calculations of the number of affordable units required by this Section shall be based on the number of dwelling units in the residential project, excluding any density bonus units. Projects shall not receive a credit for any existing dwelling units demolished as part of the project. [Requirements in this section are currently contained in Housing Element Program H3.1.2(a) and referenced in Municipal Code Section 18.14.030(a). There are no substantive changes except for the clarification in subparagraph d, which is based on provisions of the Density Bonus Law. The same paragraph would ensure that ownership units included in any subdivision or development of three or more units shall be subject to inclusionary requirements or in lieu fees, even if they replace existing units.] B. The affordable units shall be made available at the following affordable sales prices: 1. For projects subject to subsections 16.65.030(A)(1) and (2), at least two-thirds of the required affordable units must be made available at affordable sales price to households earning eighty percent (80%) to one-hundred percent (100%) of the area median income, and one-third may be made available at affordable sales prices to households earning between one-hundred percent (100%) and one-hundred twenty percent (120%) of the area median income. 2. For projects subject to subsection 16.65.030(A)(3), at least four-fifths of the required affordable units must be made available at affordable sales price to households earning eighty percent (80%) to one-hundred percent (100%) of the area median income, and one-fifth may be made available at affordable sales prices to households earning between one-hundred percent (100%) and one- hundred twenty percent (120%) of the area median income. [Requirements in this section are currently contained in Housing Element Program H3.1.2(b) and referenced in Municipal Code Section 18.14.030(a). There are no substantive changes.] C. When the affordable housing requirements described in this Section result in a fractional unit, an in-lieu payment as specified in Section 16.65.060 may be made for the fractional unit instead of providing an affordable unit, except that, if the project contains thirty (30) or more units, an additional affordable unit shall be provided for each fractional unit of 0.50 or more. The in-lieu fee for a fractional unit shall be calculated as described in the city’s affordable housing guidelines. [Requirements in this section are currently contained in Housing Element Program H3.1.2(e). There are no substantive changes.] 16.65.040 Basic Requirement – Mixed Use, Nonresidential and Residential Rental Projects. Unless the mixed use, nonresidential or residential rental project is exempt under Section 16.65.025 or an alternative is approved as described in Section 16.65.080, all mixed use, nonresidential and residential rental projects shall pay housing impact fees as specified in Section 16.65.060 to mitigate the projects’ impacts on the need for affordable housing; except that the residential ownership portion of a mixed use project containing three or more units shall comply with Section 16.65.030. Not Yet Approved 161122 jb 0131520 10 December 1, 2016 16.65.060 Housing Impact Fee and In-Lieu Fee. A. Fees. The amount of any housing impact fees and in-lieu fees shall be established from time to time by ordinance or resolution of the City Council. Housing impact fees shall not exceed the cost of mitigating the impact of mixed-use, nonresidential and residential rental projects on the need for affordable housing in the City. B. Fee Payment. Housing impact fees and in-lieu fees, if required, shall be paid prior to issuance of any building permit for a development project subject to this chapter or at a time otherwise specified by City Council ordinance or resolution. [These sections require the payment of fees which are established by separate ordinance. Currently, Municipal Code Section 16.47.040(d) establishes a $15 per square foot fee for nonresidential and the non-residential portion of mixed-use projects and that fee has been adjusted annually via adoption of the municipal fee schedule. Impact fees are not currently charged for residential rental projects and in lieu fees are charged to residential ownership projects as specified in Housing Element Program H3.1.2(b), which is referenced in Municipal Code Section 18.14.030.] 16.65.070 Requirements for Residential Projects Containing Ownership and Rental Units and for Mixed Use Projects A. Residential Projects Containing Ownership and Rental Units. When a residential project includes both ownership and rental dwelling units, the provisions of this chapter that apply to ownership residential projects shall apply to that portion of the development that consists of ownership dwelling units, while the provisions of this chapter that apply to rental residential project shall apply to that portion of the development that consists of rental dwelling units. B. Mixed Use Projects Containing Residential Units. When a mixed use project contains three or more dwelling units, either residential rental or residential ownership, the provisions of this chapter that apply to residential ownership and residential rental projects shall apply to those portions of the development that consist of residential ownership or residential rental units, as applicable, while the provisions of this chapter that apply to non-residential projects shall apply to that portion of the development that consists of non-residential uses. When a mixed use project contains fewer than three dwelling units, impact fees shall apply to those units. [These sections require the payment of impact fees for non-residential and residential rental projects. Municipal Code Chapter 16.47 currently requires impact fees for new non-residential square footage, and this does not constitute a change. The requirement for impact fees from residential rental projects is new. These projects were subject to inclusionary requirements until the Palmer decision in 2009 when the City suspended application of this requirement. These projects will now be charged rental impact fees. This section contains a new fee requirement for mixed use projects containing less than three units.] 16.65.075 Provision of Affordable Units. Not Yet Approved 161122 jb 0131520 11 December 1, 2016 A. Standards for Affordable Units. 1. Affordable units shall be comparable in exterior appearance and overall quality of construction to market-rate units in the same housing development. Interior finishes and amenities must equal those provided in the base model market- rate units. 2. The number of bedrooms and the size of the affordable units shall be comparable to the average number of bedrooms in the market-rate units, except that in a single-family detached development, the decision-making body may allow smaller affordable units or duplex affordable units, if permitted in the zoning district, when this furthers the provision of on-site affordable units. The affordable units shall be reasonably dispersed within the residential project, with unit locations comparable to those of the market-rate units, or, subject to the approval of the Planning and Community Environment director, may be clustered within the residential project when this furthers affordable housing opportunities. 3. The affordable units shall have the same amenities as the market rate units, including the same access to and enjoyment of common open space, parking, storage, and other facilities in the residential project. B. Timing of Construction. The affordable units shall be constructed in proportion to construction of the market-rate units. No building permit shall be issued for any market-rate unit unless a proportional number of building permits have been issued for affordable units, and no certificates of occupancy or final inspections shall be issued for any market-rate units unless a proportional number of certificates of occupancy or final inspections have been issued for affordable units. An alternative phasing plan may be approved as part of the approval of the affordable housing plan described in Section 16.65.090. C. Continued Affordability. 1. All affordable units provided under Section 16.65.030 or Section 16.65.080 shall be subject to a resale restriction, deed of trust, and/or regulatory agreement recorded against the property for execution by the city manager, in a form approved by the city attorney, to ensure the continued affordability of the affordable units. 2. Notwithstanding Section 18.15.040, to be considered as affordable units under this chapter, all affordable units shall remain affordable to the targeted income group for 99 years, except in the case of affordable housing developments provided as an alternate means of compliance pursuant to Section 16.65.080, the City may authorize a 55 year affordability restriction if required to maintain eligibility for tax credit financing. 3. Any household that occupies an affordable unit must occupy that unit as its principal residence, unless otherwise approved in writing for rental to a third Not Yet Approved 161122 jb 0131520 12 December 1, 2016 party for a limited period of time due to household hardship, as determined by the City. 4. No household may begin occupancy of an affordable unit until the household has been determined to be eligible to occupy that unit by the City or designee. [These sections amplify requirements contained in Housing Element Program H.3.1.2, which is referenced in Municipal Code Section 18.14.030(a). They also increase the affordability period for affordable units to 99 years while authorizing a shorter period to accommodate tax credit funding.] 16.65.080 Alternative Means of Compliance. The developer of a mixed use, residential or nonresidential project may request an alternate means of compliance, as described in this section, as a component of the affordable housing plan required by Section 16.65.090. A. Provisions Applicable to All Alternatives. The following provisions apply to all alternative means of compliance described in this Section 16.65.080. 1. The applicant shall bear the burden of presenting substantial evidence to support a finding of infeasibility under Section 16.65.080(B) and to support the feasibility of any proposed alternative. The applicant shall set forth in detail the factual and legal basis for any request under this section. 2. Any request under this section shall be submitted to the Planning and Community Environment Director together with an economic analysis, if required, or other supporting documentation and shall be acted upon by the City Council. 3. When the affordable housing alternative results in a fractional unit, fees shall be paid as specified in the affordable housing guidelines for any fractional units. 4. All affordable units shall conform with the provisions of Section 16.65.075. 5. The city council may approve or conditionally approve any alternative set forth in this section if it makes all of the following findings and any additional findings required for the selected alternative: (a) The number of affordable units provided by the alternative equals or exceeds that provided by on-site units or by the payment of impact fees, as applicable to the project; (b) The level of affordability provided by the alternative is the same or lower as provided by on-site units or by the payment of impact fees, as applicable to the project; and (c) The alternative is consistent with the comprehensive plan and housing element and the provisions of this chapter. B. Residential Ownership Projects. Not Yet Approved 161122 jb 0131520 13 December 1, 2016 1. If the provision of affordable ownership units under Section 16.65.030 is infeasible, an applicant for a residential ownership project may request, in order of priority, to: (a) provide on-site affordable rental units as provided in subsection C below; (b) provide off-site affordable units as provided in subsection D below; (c) dedicate land for affordable housing as provided in subsection D below; (d) rehabilitate and convert existing residences to affordable housing, or preserve existing affordable housing, as provided in subsection E below; or (e) pay the in-lieu fee adopted as described in Section 16.65.060. The applicant must demonstrate that each of the higher priority options is infeasible before the City will consider a lower priority option. 2. For the purposes of this section, "infeasible" means either that: (a) the affordable sales price would be less than the cost of constructing the affordable unit, including financing but excluding all other costs, including land, marketing, improvements, and profit; or (b) provision of the units would produce a confiscatory or unconstitutional result. C. Affordable Rental Units in a Residential Ownership Project or a Residential Rental Project. 1. An applicant for a residential ownership project or a residential rental project may elect to make available dwelling units in the residential project at affordable rent rather than provide on-site for-sale affordable units or pay housing impact fees, as applicable. The city council may by ordinance or resolution specify the percentage and affordability level of rental affordable units that are equivalent to provision of on-site for-sale affordable units or payment of housing impact fees, as applicable. 2. To ensure compliance with the Costa-Hawkins Act (Chapter 2.7 of Title 5 of Part 4 of Division 3 of the Civil Code), the City may approve such a proposal only if the applicant agrees in a rent regulatory agreement with the City to limit rents in consideration for a direct financial contribution or a form of assistance specified in Chapter 4.3 (commencing with Section 65915) of Division 1 of Title 7 of the Government Code. 3. Any rent regulatory agreement for rental units in a residential ownership project shall include provisions for sale of the affordable units and relocation benefits for tenants of the affordable units if the owner of the residential ownership project later determines to offer the affordable units in the residential project for sale to moderate income households at an affordable sales price. D. Dedication of Land and Off-Site Construction of Affordable Units. 1. The applicant may submit an affordable housing plan that proposes either to dedicate vacant land suitable for affordable housing or to construct affordable units on another site. Two or more applicants may also jointly propose the provision of vacant land suitable for affordable housing or the construction of off-site affordable units on a single site. Not Yet Approved 161122 jb 0131520 14 December 1, 2016 2. Construction of the off-site affordable units may not commence prior to the first approval of the residential project, and construction of the off-site units must occur concurrently with construction of the market-rate units in the residential project as described in Section 16.65.075. 3. The city council may approve or conditionally approve the dedication of land or off-site construction if it makes all of the following findings in addition to making the findings in subsection (A)(5) above: (a) Financing or a viable financing plan, which may include public funding, is in place for the off-site affordable units; and (b) The off-site location is suitable for the proposed affordable housing, consistent with any affordable housing guidelines and the Housing Element, and will not tend to cause residential segregation. 4. No building permit shall be issued for any units in the residential project until committed funding is available for the off-site units, or units to be constructed on land to be dedicated. 5. Off-site construction of affordable units does not qualify the residential project for a density bonus or other regulatory incentives allowed by Government Code Section 65915 unless the off-site development includes the dedication of land conforming to the provisions of Section 65915(g). No off-site alternative may be approved by the City if a density bonus or other regulatory incentive is requested for the site on which the affordable housing is to be built. Any off- site alternative must comply with the density, intensity and other development standards that are permitted under the zone for the site. E. Rehabilitation and Conversion of Existing Market-Rate Housing. 1. The applicant may submit an affordable housing plan that proposes the rehabilitation and conversion of existing market-rate housing to affordable housing, or the preservation of existing affordable housing that is not deed restricted as affordable. 2. The market-rate units to be converted to affordable units shall be located in a residential project that is not subject to any existing affordability covenants except covenants restricting other units in the development. 3. The affordable housing plan shall include a plan for long-term financial sustainability of the market-rate units to be converted to affordable units, which incorporate, among other things, provisions to accommodate increases in homeowners’ association fees, special assessments and maintenance costs. 4. Any existing tenants in the market-rate units to be converted to affordable units shall be eligible to remain in the units; or the applicant shall provide relocation assistance pursuant to Cal. Gov’t Code §§ 7260 et seq. Not Yet Approved 161122 jb 0131520 15 December 1, 2016 5. The city council may approve or conditionally approve the proposal if it makes all of the following findings in addition to making the findings in subsection (A)(5) above: (a) The proposal includes substantial rehabilitation of the existing housing equal to at least 25 percent of the after-rehabilitation value of the property, inclusive of land value, and the units shall be in decent, safe and sanitary condition and in compliance with all codes; (b) Financing or a viable financing plan is in place for the units to be converted to affordable units; and (c) The off-site location is suitable for the proposed affordable housing, consistent with any affordable housing guidelines and the Housing Element, and will not tend to cause residential segregation. 6. No building permit shall be issued for any units in the residential project until regulatory agreements approved by the city have been recorded for the existing units to be converted to affordable housing. F. Mixed Use Projects. An applicant for a mixed use development may submit an affordable housing plan that proposes to mitigate the affordable housing impacts of the non-residential and residential rental portions of the development through any of the options listed above or through on-site provision of affordable units conforming with applicable provisions of Section 16.65.075. In addition to making the findings in subsection (A)(3) above, the city council may approve or conditionally approve such an alternative if it determines, based on substantial evidence, that such alternative will provide equal or greater public benefit than would payment of the housing impact fee. G. Nonresidential Projects. An applicant for a nonresidential development may submit an affordable housing plan that proposes to mitigate the affordable housing impacts of the development through any of the options listed above or through on-site provision of affordable units conforming with applicable provisions of Section 16.65.075. In addition to making the findings in subsection (A)(5) above, the city council may approve or conditionally approve such an alternative if it determines, based on substantial evidence, that such alternative will provide equal or greater public benefit than would payment of the housing impact fee. [These sections provide alternatives for developers who do not wish to meet requirements for units on site or payment of impact fees. These alternatives derive from Municipal Code Section 16.47.040, Housing Requirements, for nonresidential development, and from Section 18.14.030(b) for residential ownership development.] 16.65.090 Application and Review Procedures. A. Affordable Housing Plan. 1. All residential ownership projects and any mixed use, residential rental or nonresidential project proposing to provide affordable units under the Not Yet Approved 161122 jb 0131520 16 December 1, 2016 provisions of Section 16.65.080 shall submit an affordable housing plan concurrently with the application for the first approval of the project. The city shall provide an application form specifying the contents of the affordable housing plan. If an affordable housing plan is required, no application for a first approval the project may be deemed complete until a complete affordable housing plan is submitted. The cost of reviewing any proposed alternative, including but not limited to the cost to the City of hiring a consultant to review the application, shall be borne by the applicant. 2. No affordable housing plan is required for a mixed use, residential rental project or a nonresidential project if the applicant proposes to pay housing impact fees, or if the project is exempt under Section 16.65.025. 3. Any affordable housing plan shall be processed concurrently with all other permits required for the development project. Before approving the affordable housing plan, the decision-making body shall find that the affordable housing plan conforms to this chapter. A condition shall be attached to require recordation of an affordable housing agreement, as described in subsection B of this section below, prior to the approval of any final or parcel map or building permit for the development project. 4. The approved affordable housing plan may be amended prior to issuance of any building permit for the development project. A request for a minor modification of an approved affordable housing plan may be granted by the Planning and Community Environment Director if the modification is substantially in compliance with the original affordable housing plan and conditions of approval. Other modifications to the affordable housing plan shall be processed in the same manner as the original plan. B. Affordable Housing Agreement. 1. Affordable housing agreements acceptable to the city manager or designee and approved as to form by the city attorney shall be recorded against the residential or nonresidential project prior to approval of any final or parcel map, or issuance of any building permit, whichever occurs first, unless the project is required only to pay impact fees. 2. The affordable housing agreement shall specify the number, type, location, size, and phasing of all affordable units, provisions for income certification and screening of potential purchasers or renters of units, and resale control mechanisms, including the financing of ongoing administrative and monitoring costs, consistent with the approved affordable housing plan and any affordable housing guidelines, as determined by the city manager or designee. C. The City Council, by resolution, may establish fees for the ongoing administration and monitoring of the affordable units, which fees may be updated periodically, as required. Not Yet Approved 161122 jb 0131520 17 December 1, 2016 D. The Planning and Community Environment Director may adopt affordable housing guidelines to implement this chapter, and may update those guidelines periodically as required. [These sections are procedural and do not represent substantive changes to existing affordable housing requirements.] 16.65.100 Affordable Housing Funds. A. All housing impact fees or other funds collected under this chapter shall be deposited into the City’s Commercial and Residential Housing Funds. B. The monies in the Commercial and Residential Housing Funds and all earnings from investment of the moneys in the Funds shall be expended exclusively to provide housing affordable to very low income, lower income, and moderate income households in the City, consistent with the goals and policies contained in the City’s Housing Element and for administration and compliance monitoring of the affordable housing program. 16.65.110 Administrative Relief. A. As part of an application for the first approval of a residential or nonresidential project, a developer may request that the requirements of this chapter be waived or modified by the city council, based upon a showing that applying the requirements of this chapter would result in an unconstitutional taking of property or would result in any other unconstitutional result. B. The request for a waiver or modification shall set forth in detail the factual and legal basis for the claim. C. Any request for a waiver or modification shall be reviewed and considered at the same time as the project application or any affordable housing plan. D. The waiver or modification may be approved only to the extent necessary to avoid an unconstitutional result, based upon legal advice provided by or at the behest of the City Attorney, after adoption of written findings, based on legal analysis and substantial evidence. If a waiver or modification is granted, any change in the project shall invalidate the waiver or modification, and a new application shall be required for a waiver or modification under this section. 16.65.120 Enforcement. A. Penalties. Persons employed in the following designated employee positions are authorized to exercise the authority provided in the California Penal Code Section 836.5 and are authorized to issue citation for violations of this chapter: development services director, director of planning and community environment and their designees. Not Yet Approved 161122 jb 0131520 18 December 1, 2016 B. The city attorney shall be authorized to enforce the provisions of this chapter and all affordable housing agreements, regulatory agreements, and all other covenants or restrictions placed on affordable units, by civil action and any other proceeding or method permitted by law. C. Failure of any official or agency to fulfill the requirements of this chapter shall not excuse any developer or owner from the requirements of this chapter. No permit, license, map, or other approval or entitlement for a residential project shall be issued, including without limitation a final inspection or certificate of occupancy, until all applicable requirements of this chapter have been satisfied. D. The remedies provided for in this section shall be cumulative and not exclusive and shall not preclude the city from any other remedy or relief to which it otherwise would be entitled under law or equity. SECTION 4. Severability. If any section, subsection, sentence, clause, phrase or word of this Ordinance is for any reason held to be invalid by a court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have passed and adopted this Ordinance, and each and all provisions hereof, irrespective of the fact that one or more provisions may be declared invalid. SECTION 5: CEQA: This ordinance is exempt from the California Environmental Quality Act (CEQA) under State CEQA Guidelines Section which 15061(b)(3) providing an exemption for administrative actions that do not result in physical changes to the environment; Section 15378(b)(4) providing an exemption for government funding mechanisms which do not involve a commitment to any specific project and Section 15305 (Minor Alterations in Land Use Limitations), a categorical exemption that applies to code amendments that will not have any significant environmental effects. SECTION 6: Public Notice and Effective Date. This Ordinance shall take effect 31 days after its adoption by the City Council or concurrent with Ordinance ___, whichever occurs later. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: __________________________ _____________________________ City Clerk Mayor Not Yet Approved 161122 jb 0131520 19 December 1, 2016 APPROVED AS TO FORM: APPROVED: ___________________________ _____________________________ Senior Asst. City Attorney City Manager _____________________________ Director of Planning and Community Environment Not Yet Approved 895\04\2003880.1 11/18/2016 161122 jb 0131543 1 Nov. 28, 2016 Ordinance No. _____ Ordinance of the Council of the City of Palo Alto Establishing Housing Impact Fees and Housing In-Lieu Fees for Residential, Nonresidential, and Mixed Use Developments The Council of the City of Palo Alto ORDAINS as follows: A. On November 10, 2014 the City Council of the City of Palo Alto adopted its 2015- 2023 Housing Element which includes the policy of encouraging, fostering, and preserving diverse housing opportunities and which contemplates, among other things, an amendment of the City's below market rate program to promote this policy and to be consistent with case law related to inclusionary rental housing; and B. To implement the affordable housing goals, policies and programs of the City's 2015-2023 Housing Element, the City Council has considered and introduced on this same date Ordinance No. ____ repealing Chapters 18.14 and 16.47 of the Palo Alto Municipal Code and adding a new chapter 16.65, Citywide Affordable Housing Requirements (the "Affordable Housing Ordinance"), which provides, among other things, that the City Council shall establish, from time to time, housing impact fees that may be applicable to residential rental projects, mixed use projects, and nonresidential projects and housing in-lieu fees that may be applicable to residential ownership projects. The Affordable Housing Ordinance further provides that the City Council may specify the percentage and affordability level of rental affordable units that are equivalent to provision of on-site for-sale affordable units or payment of housing impact fees. C. To ensure that future development projects mitigate their impact on the need for affordable housing in Palo Alto, and to ensure that any adopted housing impact fees or in- lieu fees do not exceed the actual affordable housing impacts attributable to the development projects to which the fees relate, the City Council has received and considered two reports from Strategic Economics and Vernazza Wolfe Associates dated October and November 2015 and entitled "Residential Impact Fee Nexus Study" and "Commercial Linkage Fee Nexus Study", respectively (collectively, the "Nexus Studies"), and the findings of the Nexus Studies are incorporated into this Ordinance by this reference. D. The Nexus Studies use widely used, appropriate methodology to determine the maximum amount needed to fully mitigate the burdens created by residential, nonresidential and mixed-use development on the need for affordable housing and establish that there is a reasonable relationship between the need for affordable housing and impacts of development for which a fee is charged, and that there is also a reasonable relationship between the impact fee’s use and the type of development for which the fee is charged. E. To ensure that development projects remain economically feasible, the recommended housing impact fees and in-lieu fees as shown in the attached Exhibit A are 95\04\2003880.1 11/18/2016 161122 jb 0131543 2 Nov. 28, 2016 lower than the maximum amount needed to fully mitigate the burdens created by new development on the need for affordable housing as determined by the Nexus Studies. F. The City Council now desires to adopt housing impact fees and in-lieu fees for certain residential, nonresidential, and mixed-use development projects as authorized by the Affordable Housing Ordinance, which fees do not exceed the justified fees needed to mitigate the actual affordable housing impacts attributable to the development projects to which the fees relate, as determined by the Nexus Studies; and further desires to specify the percentage and affordability level of rental affordable units that are equivalent to provision of on-site for- sale affordable units or payment of housing impact fees. The City Council further finds that the housing impact fees for retail, restaurant and other non-residential uses (excluding hotels, office, medical office and research and development uses) analyzed in the May 2002 Nexus Study and set forth in the 2016-17 Municipal Fee Schedule are sufficient to mitigate the actual affordable housing impacts attributable to the development projects to which the fees relate. G. The housing in-lieu fees adopted by this ordinance provide an alternative method for calculating the in-lieu fees described by Program H3.1.2 of the City's 2015-2023 Housing Element which, as described in the record, will in most instances provide equivalent or greater total revenue to the Residential Housing Fund. H. In compliance with the Affordable Housing Ordinance, all in-lieu fees and impact fees collected shall be deposited into the City’s Commercial and Residential Housing Funds to be used only for those purposes included in the Affordable Housing Ordinance. I. At least ten days prior to the date this ordinance is being heard, data was made available to the public indicating the amount of cost, or estimated cost, required to provide the service for which the fee or service charge is levied and the revenue sources anticipated to provide the service, including general fund revenues, in accordance with Government Code Section 66019. J. At least fourteen days prior to the date this ordinance is being heard, notice was provided to any persons or organizations who had requested notice, in accordance with Government Code Sections 66004 and 66019. K. Notice of the hearing on the proposed fees was published twice in the manner set forth in Government Code Section 6062a as required by Government Code Sections 66004 and 66018. L. The City Council has reviewed the information contained in this Ordinance and the accompanying staff report and all written and oral testimony at a meeting held on ___ __, 2016. NOW, THEREFORE, the Council of the City of Palo Alto does ORDAIN as follows: 95\04\2003880.1 11/18/2016 161122 jb 0131543 3 Nov. 28, 2016 SECTION 1. The foregoing recitals are true and correct and incorporated by this reference. SECTION 2. The City Council hereby repeals the housing impact and housing in lieu fees contained in the 2016-2017 Municipal Fee Schedule as adopted by City Council Ordinance 5386. SECTION 3. The City Council hereby amends the Municipal Fee Schedule by adopting housing impact fees and in-lieu fees for residential ownership development projects, for residential rental development projects, residences in mixed-use projects, and nonresidential development, as shown on Exhibit "A", attached hereto and incorporated by this reference. SECTION 4. The City Council may review housing impact and in-lieu fees from time to time. For any annual period during which the City Council does not review the housing impact and in-lieu fees, fee amounts shall be adjusted in accordance with Chapter 16.64. SECTION 5. As provided in Section 16.65.080(C)(1) of the Affordable Housing Ordinance, the City Council hereby determines that the following percentages of rental affordable units that are equivalent to provision of on-site for-sale affordable units or payment of housing impact fees: Required Affordable Rental Units (Where rental alternative requested under 16.65.080(C)) Rental Alternative to For-Sale Units (Sites Less than 5 Acres)* Rental Residential (no condo map) Income Category Very Low Income Low Income 15% Moderate Income 15% TOTAL 15% 15% *Rental alternative equivalents for projects over 5 acres will be subject to Council approval on a case by case basis. SECTION 6. The City has determined that the housing mitigation fees should be adopted and administered consistent with the requirements applicable to fees for public facilities in California Government Code Section 66000 et seq., commonly referred to as the Mitigation Fee Act, without determining that it is required to do so. 95\04\2003880.1 11/18/2016 161122 jb 0131543 4 Nov. 28, 2016 SECTION 7. Adoption of this ordinance is exempt from the California Environmental Quality Act because the proposed fee increase is not a project, in that it is a government funding mechanism which does not involve any commitment to any specific project (CEQA Guidelines Section 15378(b)(4)). SECTION 8. Severability. If any section, subsection, sentence, clause, phrase or word of this Ordinance is for any reason held to be invalid by a court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have passed and adopted this Ordinance, and each and all provisions hereof, irrespective of the fact that one or more provisions may be declared invalid. SECTION 9. This Ordinance shall be effective upon the sixtieth (60th) day after its passage and adoption. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk Mayor APPROVED AS TO FORM: Senior Asst. City Attorney APPROVED: City Manager Director of Planning and Community Environment Director of Administrative Services Not Yet Approved 895\04\2003880.1 11/18/2016 161122 jb 0131543 5 Nov. 28, 2016 EXHIBIT A Housing Impact Fees and In-Lieu Fees Residential Projects: " Residential Floor Area" for Single-Family Detached and Attached Homes includes all horizontal areas of the several floors of such buildings measured from the exterior faces of exterior walls or from the center line of party walls separating two (2) buildings, minus the horizontal areas of such buildings used exclusively for parking. Basements shall be included in this measurement when they include livable area. "Residential Floor Area" for Apartments and Condominiums includes all horizontal areas of the several floors of such buildings measured from the exterior faces of exterior walls or from the center line of party walls separating two (2) buildings, minus the horizontal areas of such buildings used exclusively for covered porches, patios, or other outdoor space, amenities and common space, parking, elevators, stairwells or stairs between floors, hallways, and between- unit circulation. “Net New Residential Floor Area” for Rental Projects (Apartments) means the Residential Floor Area for the net new units. Residential Ownership Projects and Residential Ownership Units in Mixed Use Projects * (For fractional units & where in-lieu fee approved under 16.65.080(B)) In-Lieu Fee per Square Foot of Residential Floor Area Single-Family Detached Home $50 Single-Family Attached Home $50 Condominiums $50 Residential Rental Projects and Residential Rental Units in Mixed Use Projects* Impact Fee per Square Foot of Net New Residential Floor Area Apartments $50 *The residential ownership portion of a mixed use project containing three or more units shall comply with Section 16.65.030 unless an alternative means of compliance is authorized under Section 16.65.080(F). The residential rental portion of a mixed use project containing three or more units shall comply with Section 16.65.040 unless an alternative means of compliance is authorized under Section 16.65.080(F). The residential component of mixed use projects containing fewer than three dwelling units shall be subject to the housing impact fees shown in this table. 95\04\2003880.1 11/18/2016 161122 jb 0131543 6 Nov. 28, 2016 Residential projects may be exempt from payment of housing impact and housing in-lieu fees as provided in Section 16.65.025. Nonresidential Projects and Nonresidential Square Footage in Mixed-Use Projects “Nonresidential Floor Area” includes all horizontal areas of the several floors of such buildings measured from the exterior faces of exterior walls or from the center line of party walls separating two (2) buildings, minus the horizontal areas of such buildings used exclusively for parking. If no non-residential use existed on the site within one year prior to the issuance of a building permit for the project, the Housing Impact Fee is calculated by multiplying the Nonresidential Floor Area contained in the project by the relevant Housing Impact Fee. Where another non-residential use existed on the site within one year prior to the issuance of a building permit for the project, the Housing Impact Fee is calculated by: 1. Multiplying the Nonresidential Floor Area contained in the project by the relevant Housing Impact Fee; 2. Multiplying the Nonresidential Floor Area of the former use by the relevant Housing Impact Fee shown in this table; and 3. Subtracting the amount calculated in Step 2 from the amount calculated in Step 1. Nonresidential Use Housing Impact Fee per Square Foot of Nonresidential Floor Area Hotel $30 Retail, Restaurants and Other Non- Residential* Uses $20.37** Office, Medical Office and Research and Development $60 *Hotels and Office, medical office and research and development uses are not included in “other non-residential uses.” **This rate is carried over from the 2016-17 Municipal Fee Schedule as analyzed in the May 2002 Nexus Study and adjusted for inflation. Nonresidential projects may be exempt from payment of housing impact fees as provided in Section 16.65.025. Attachment C Commercial Linkage Fee Nexus Study November 2015 prepared for: City of Palo Alto Vernazza Wolfe Associates, Inc. VWA Table of Contents I. EXECUTIVE SUMMARY .................................................................................................4 Introduction ....................................................................................................................................... 4 Background ...................................................................................................................................... 4 Report Organization ......................................................................................................................... 4 Implementation Options.................................................................................................................... 5 Nexus Analysis Results .................................................................................................................... 5 Policy Considerations ....................................................................................................................... 8 II. INTRODUCTION AND METHODOLOGY ..................................................................... 12 The Nexus Concept ........................................................................................................................ 12 Methodology ................................................................................................................................... 12 III. COMMERCIAL LINKAGE FEE NEXUS ANALYSIS ..................................................... 15 Nexus Analysis Steps ..................................................................................................................... 15 IV. HOUSING AFFORDABILITY GAP ............................................................................... 53 Methodology ................................................................................................................................... 53 Estimating Affordable Rents and Sales Prices ............................................................................... 53 Estimating Housing Development Costs ........................................................................................ 60 Calculating the Housing Affordability Gap ...................................................................................... 64 V. MAXIMUM LINKAGE FEES .......................................................................................... 68 Maximum Fee Calculation .............................................................................................................. 68 VI. FEASIBILITY AND POLICY CONSIDERATIONS ......................................................... 69 Prototypes and Fee Levels ............................................................................................................. 69 Methodology ................................................................................................................................... 70 Key Inputs ...................................................................................................................................... 70 Results ........................................................................................................................................... 75 Policy Considerations ..................................................................................................................... 78 VII. GLOSSARY OF TERMS AND ACRONYMS ................................................................. 85 Glossary of terms ........................................................................................................................... 85 Definition of Acronyms .................................................................................................................... 88 List of Figures Figure I-1. Maximum and Recommended Fee Levels by Prototype.............................................................. 5 Figure I-2. Commercial Prototypes ............................................................................................................... 6 Figure I-3. Calculation of Worker Household Income by Prototype ............................................................. 7 Figure I-4. Affordable Housing Gap ............................................................................................................. 7 Figure I-5. Maximum Commercial Linkage Fee by Prototype ...................................................................... 8 Figure I-6. Comparison of Commercial Linkage Fees in Palo Alto and Neighboring Jurisdictions .............. 8 Figure I-7. Comparison of Existing, Maximum, and Feasible Fee Levels by Prototype ................................ 9 Figure I-8. Commercial Linkage Fee Scenarios as Percent of Total Development Costs ............................ 11 Figure I-9. Total Fees and Permits per Square Foot .................................................................................... 11 Figure III-1. Description of Commercial Prototypes ................................................................................... 16 Figure III-2. Employment Density Data and Sources .................................................................................. 18 Figure III-3. Employment Density by Prototype ......................................................................................... 19 Figure III-4. Number of Worker Households by Prototype ......................................................................... 19 Figure III-5. Definition of Industries for Hotel Prototype ........................................................................... 19 Figure III-6. Definition of Industries for Office/ R&D/ Medical Office Prototype ..................................... 20 Figure III-7. Average Annual Wage by Prototype....................................................................................... 21 Figure III-8. Occupational Mix and Average Wages for Hotel Industry ..................................................... 22 Figure III-9. Occupational Mix and Average Wages for Office/ R&D/ Medical Office ............................. 31 Figure III-10. Household Income Categories .............................................................................................. 51 Figure III-11. Number of Worker Households by Income Category ........................................................... 52 Figure IV-1. Calculation of Affordable Rents in Santa Clara County by Household Size, 2014 ................ 56 Figure IV-2. Calculation of Affordable Rents in Santa Clara County by Unit Type, 2014 ......................... 57 Figure IV-3. Calculation of Affordable Sales Prices in Santa Clara County by Household Size, 2014 ....... 58 Figure IV-4. Calculation of Affordable Sales Prices in Santa Clara County by Unit Type, 2014 ............... 59 Figure IV-5. Affordable Housing Project Pro Forma Data .......................................................................... 61 Figure IV-6. Sales of Vacant Lands in San Mateo County and Northern Santa Clara County, 2014 .......... 62 Figure IV-7. Estimate of Development Costs of Hypothetical Condominium Project ................................ 63 Figure IV-8. Rental Housing Unit Sizes and Development Costs ............................................................... 64 Figure IV-9. For-Sale Housing Unit Sizes and Development Costs ............................................................ 64 Figure IV-10. Housing Affordability Gap Calculation for Rental Housing ................................................. 66 Figure IV-11. Housing Affordability Gap Calculation for For-Sale Condominium Housing ...................... 67 Figure IV-12. Average Housing Affordability Gap by Income Group ........................................................ 67 Figure V-1. Maximum Commercial Linkage Fees ...................................................................................... 68 Figure VI-1. Description of Commercial Prototypes ................................................................................... 69 Figure VI-2. Linkage Fee Scenarios by Prototype (per SF)......................................................................... 70 Figure VI-3. Pro Forma Revenue Inputs by Prototype ................................................................................ 72 Figure VI-4. Direct and Indirect Cost Inputs ............................................................................................... 73 Figure VI-5. Recent Commercial Vacant Land Transactions in Santa Clara County (2011-2014) ............. 74 Figure VI-6. Feasibility Thresholds for Return on Cost .............................................................................. 75 Figure VI-7. Pro Forma Analysis Results .................................................................................................... 77 Figure VI-8. Existing City Permits and Fees on Commercial Development by Prototype .......................... 79 Figure VI-9. Comparison to Linkage Fees in Neighboring Cities ............................................................... 80 Figure VI-10. Existing Linkage Fees in Bay Area Cities ............................................................................ 81 Palo Alto Linkage Fee Nexus Study -4- I. EXECUTIVE SUMMARY INTRODUCTION In April 2014, the City of Palo Alto hired Strategic Economics and Vernazza Wolfe Associates, Inc. to develop nexus studies for commercial linkage fees and housing impact fees to mitigate the impacts of new development on the demand for affordable housing. This draft report presents the findings of the commercial linkage fee study. In addition, the report describes the methodology, data sources, and analytical steps required for the nexus analysis. BACKGROUND Palo Alto is considering updating its existing commercial linkage fee for office/R&D/medical office and hotel uses. The City intends to maintain its current linkage fee for retail development. Palo Alto’s commercial linkage fee is currently set at $19.85 per square foot for all types of new non-residential development (except for retail spaces of less than 1,500 square feet and nonprofit uses). The purpose of the linkage fee is to mitigate the impacts of an increase in affordable housing demand from the new worker households related to the new commercial space. When a city or county adopts impact fees on new development, it must establish a reasonable relationship or connection between the development project and the fee that is charged. Studies undertaken to demonstrate this connection are called nexus studies. This nexus study quantifies the connection between the development of commercial space and the demand for affordable housing units. The funds raised by the linkage fees are deposited into a housing fund specifically reserved for use by a local jurisdiction to increase the supply of affordable housing for the workforce. Commercial linkage fees are one of several funding sources that jurisdictions can use to help meet the affordable housing needs of new workers. REPORT ORGANIZATION This executive summary provides an overview of the commercial linkage fee nexus analysis methodology, results, and policy considerations. The subsequent chapters of the report contain more detailed information regarding the methodology, data sources and analysis. The report is organized into six sections. Following this executive summary, Section II provides an introduction to the purpose of the study, and an overview of the methodology. Section III presents each of the steps of the commercial linkage fee analysis in detail. Section IV covers the housing affordability gap analysis. Section V presents the maximum fee calculation based on the nexus analysis and affordability gap results. The final section, Section VI, discusses financial feasibility and other policy considerations that jurisdictions typically weigh before selecting and implementing an impact fee policy. Palo Alto Linkage Fee Nexus Study -5- IMPLEMENTATION OPTIONS The per-square-foot maximum linkage fees are $177 for the hotel prototype and $264 for the office/medical office/R&D prototype. If Palo Alto elects to update its linkage fees on these uses, the recommended fee levels are as follows: $30 per square foot for hotels and $35 per square foot for office/R&D/medical office. These recommendations are based on the findings of the financial feasibility analysis, a comparison of fees in neighboring jurisdictions, and other factors as explained in the Policy Considerations section, below. The maximum, existing, and recommended fees for each prototype are shown in Figure I-1. Figure I-1. Maximum and Recommended Fee Levels by Prototype Prototype Maximum Justified Fee Existing Linkage Fee Recommended Linkage Fee Hotel $177 $19.85 $30 Office/ Medical Office/ R&D $264 $19.85 $35 Sources: Vernazza Wolfe Associates, Inc. and Strategic Economics, 2015. NEXUS ANALYSIS RESULTS The principal findings of the nexus analysis are presented below. More detail on each step can be found in subsequent sections of this report. Prototypes The first step in this nexus analysis is to define the types of new commercial developments in Palo Alto. These typical developments are called prototypes. This study identified two commercial development prototypes: 1. Hotel - includes full-service hotels, limited-service hotels, motels, and other lodging. 2. Office/ R&D/ Medical Office - covers a range of office and research and development (R&D) uses, including traditional office buildings, medical offices, and specialized spaces for highly advanced manufacturing and research. The definition of these commercial prototypes, summarized in Figure I-2, was informed by a review of recently completed and proposed development projects in Palo Alto, as well as discussions with City staff. A retail/ restaurant development prototype was considered, but as there are few examples of recently built or proposed standalone retail projects of this type, the nexus analysis for this prototype has not been updated. The City intends to maintain its current commercial linkage fee of $19.85 on retail and restaurant development. Palo Alto Linkage Fee Nexus Study -6- Figure I-2. Commercial Prototypes Prototype Description Hotel Office/R&D/ Medical Office Gross Building Area (GBA). excl. Parking (SF) 100,000 100,000 Efficiency Ratio (a) N/A 0.90 Net Leasable Sq. Ft. (NSF) N/A 90,000 Hotel Rooms 133 Parking Spaces 133 300 Podium Parking 33 240 Surface Parking 100 60 GBA Including Structured Parking 109,975 163,000 Floor Area Ratio (b) 1.1 2.0 Land Area (Acres) 2.3 1.9 Land Area (SF) 99,977 81,500 Notes: (a) Refers to ratio of gross building area to net leasable area. An efficiency ratio of 0.9 means that 90% of the gross building area is leasable. (b) The floor-area-ratio (FAR) is often used as a measure of density. In this analysis, it is calculated as the gross building area (including structured podium parking) divided by the total land area. Sources: Vernazza Wolfe Associates, Inc. and Strategic Economics, 2015. Employment Density The next step is to determine how many employees will work in the two prototypes. While these numbers will vary from building to building, there are sources of information that help researchers define employment “densities.” The employment density measures the number of employees who work in a given amount of space. For each building prototype, an average employment density was defined based on a review of national survey data for existing commercial buildings and a review of recently completed linkage fee nexus studies in the Bay Area. The densities selected were at the lower end of each range. By using slightly lower employment estimates, the study assumes a slightly lower number of future employees in calculating affordable housing needs. Therefore, the conclusions from this study are more conservative in estimating affordable housing impacts. Worker Household Incomes Using these prototypes, the nexus analysis estimates the wages of future workers based on industry and occupation data. After the average wage of workers is calculated, the next step is to compute the average household income of worker households. Assuming that there are multiple wage-earners per household, the household income of worker-households is estimated. Each worker-household is then classified into area median income (AMI) categories to determine the number of households that would require affordable housing. Figure I-3 summarizes the estimated worker-household incomes for each prototype. Palo Alto Linkage Fee Nexus Study -7- Figure I-3. Calculation of Worker Household Income by Prototype Number of Prototype Employee Households Hotel Very Low Income (<=50% AMI) 30.05 Low Income (51-80% AMI) 24.13 Moderate Income (81-120% AMI) 9.58 Above Moderate (>=120%) 3.36 Total 67.12 Office, R&D and Medical Office Land Use Very Low Income (<=50% AMI) 14.40 Low Income (51-80% AMI) 51.43 Moderate Income (81-120% AMI) 36.32 Above Moderate (>=120%) 99.39 Total 201.54 Sources: Vernazza Wolfe Associates, Inc; Strategic Economics, 2015. Affordability Gap Many of the new worker households will be unable to afford market-rate housing. In order to measure this shortfall, this study has calculated the housing affordability gap, shown in Figure I-4. The housing affordability gap measures the difference between what very low, low, and moderate income households can afford to pay for housing and the cost of building new, modest rental and for-sale housing units. Figure I-4. Affordable Housing Gap Average Affordability Income Level Gap Very Low-Income (<50% AMI) $306,164 Low-Income (50-80% AMI) $252,258 Moderate-Income (80-120% AMI) $249,596 Notes: (a) Low income households are defined at 70 percent of AMI for renters and 80 percent of AMI for owners. (b) Moderate income households are defined at 90 percent of AMI for renters and 110 percent AMI for owners. Acronyms: AMI: Area median income. Sources: Vernazza Wolfe Associates, Inc.; Strategic Economics, 2015. Maximum Nexus-Based Fee To calculate the maximum commercial impact fee, the Consultant Team began by calculating the total affordability gap by prototype, which is obtained by multiplying the average affordability gap at each income level by the number of very low, low and moderate income households for each prototype. The total affordability gap by prototype is then divided by the size of the prototype to obtain the maximum nexus-based fee per square foot (Figure I-5). The maximum per-square-foot linkage fees are $177 for hotel and $264 for office/R&D/medical office. The maximum fees are not the recommended fees for adoption. They are the nexus-justified fees that represent the maximum that Palo Alto could charge to mitigate affordable housing demand related to commercial development. Palo Alto Linkage Fee Nexus Study -8- Figure I-5. Maximum Commercial Linkage Fee by Prototype Office/ R&D/ Medical Prototype Hotel Office Square Footage 100,000 100,000 Total Affordability Gap $17,678,344 $26,447,718 Maximum Fee per SF $177 $264 Sources: Vernazza Wolfe Associates, Inc. & Strategic Economics, 2015. POLICY CONSIDERATIONS There are a number of policy considerations that can be taken into account when Palo Alto considers whether to update its commercial linkage fees on new hotel and office/ R&D/ medical office development. These may include factors such as: the likely financial impact of the proposed linkage fees on development; the additional cost of the new fees on the existing City fee structure; a comparison of the fee scenarios to existing linkage fees in nearby cities; the role of the fee in the City’s overall strategy for affordable housing implementation; and the potential overlap with a residential linkage fee. This section provides a discussion of each of these policy questions for Palo Alto. Comparison to Neighboring Jurisdictions – A comparison of the nexus fee scenarios to current commercial linkage fees charged in nearby cities is an important element of the policy analysis (Figure I- 6). At present, Palo Alto has fees of $19.85 per square foot for all commercial prototypes. Palo Alto’s existing fees are similar to the linkage fees adopted in San Francisco and Cupertino, which range from $10 to $24 per square foot, depending on the land use. In most cases, cities have adopted higher fee levels for office/ R&D/ medical office uses than for hotel uses. For example, in Cupertino, the commercial linkage fee for hotel is $10 per square foot, compared to $20 per square foot for office/ R&D/ medical office uses. Palo Alto’s recommended linkage fees for the commercial prototypes would be higher than the existing linkage fees in San Mateo County and Santa Clara County. The recommended per-square foot hotel fee ($30) and office/R&D/medical office fee ($35) would be the highest in the region, exceeding the fees in all of the comparison cities, including San Francisco. Figure I-6. Comparison of Commercial Linkage Fees in Palo Alto and Neighboring Jurisdictions Jurisdiction Hotel Office/R&D/ Medical Office Date Fee Was Adopted Palo Alto $19.85 $19.85 2002 Cupertino $10 $20 2015 Menlo Park (a) $8 $15 2014 Mountain View (b) $2.50 $25 2015 San Francisco (c) $18 $16-$24 2015 Sunnyvale (d) $7.50 $15 2015 Notes: (a) Buildings 10,000 SF and under are exempt from fees. A new nexus study is currently underway that may result in an updated fee. (b) New gross floor area under 25,000 SF pays 50 percent of full fee. (c) The fee for R&D is $16.01 and the fee for office is $24.03. The fee for a small enterprise is $18.89. (d) The fee on the first 25,000 SF, for all three commercial uses, is discounted by 50 percent. Sources: City staff and websites; Nonprofit Housing Association of Northern California, 2015; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2015. Palo Alto Linkage Fee Nexus Study -9- Financial Feasibility – Financial feasibility is just one of several factors to consider in making a decision regarding updating an existing fee. In order to provide Palo Alto with guidance on how different fee levels could influence development, the Consultant Team conducted a pro forma feasibility analysis that tested the impact of the maximum fee and three reduced fee scenarios on developer profit for the commercial prototypes. The analysis showed that establishing a fee at the maximum fee levels was not financially feasible at this time for the prototypes. However, reduced fee scenarios (including the existing linkage fee level of $19.85 per square foot) are financially feasible for the hotel and office/ R&D/ medical office prototypes (Figure I-7). The hotel prototype can support a commercial linkage fee of up to $30 per square foot. Fee levels of up to $60 per square foot were found to be financially feasible for the office/ R&D/ medical office prototype. Figure I-7. Comparison of Existing, Maximum, and Feasible Fee Levels by Prototype Maximum Feasible Prototype Existing Linkage Fee per SF Maximum Justified Fee per SF Fee Level per SF Hotel $19.85 $177 $30 Office/Medical Office/R&D $19.85 $264 $60 Sources: City of Palo Alto; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2015. Total Development Costs – Currently, the total development costs (including land, building and onsite improvements, parking, indirect costs, financing costs, and developer profit) are $443 per net square foot for the hotel prototype and $530 per net square foot for the office/ R&D/ medical office prototype. The maximum nexus-based linkage fee represents close to 30 percent of total development cost for the hotel and 50 percent of total development costs for the office/ R&D/ medical office prototype (Figure I-8). The existing linkage fee of $19.85 per square foot makes up three to four percent of development costs for the prototypes. A fee of $30 per square foot for the hotel prototype, which is the highest financially feasible fee level, represents six percent of total development costs. A fee of $60 per square foot for the office/R&D/medical office prototype, which is the highest feasible fee level, would represent 11 percent of total development costs. Comparison to Existing City Fees – In addition to the existing commercial linkage fee, the City of Palo Alto has other permits and fees on new development. The City may wish to consider the amount that total fees would increase with an updated commercial linkage fee. Existing permits and fees in Palo Alto for the commercial prototypes (including the existing linkage fees of $19.85 per square foot) are estimated to be $34 per square foot for the hotel prototype and $57 per square foot for the office/ R&D/ medical office prototype.1 If the maximum linkage fees were adopted, the total development fees and permits would be $192 per square foot for hotel and $302 for office, as shown in Figure I-9. The recommended fee of $30 per square foot for hotels and would increase total fees to $45. The recommended fee of $35 per square foot for office/R&D/medical office would result in total city fees of $73 per square foot for this prototype. Role of Fee in Palo Alto’s Overall Housing Strategy – Palo Alto currently charges a commercial linkage fee of $19.85 per square foot on all new non-residential development. These fees are payable at the time that the building permit is issued. Fee revenues are used to provide financial assistance for affordable housing developments and preservation. The City also has an inclusionary housing program that requires that 15 percent of the units in market-rate developments consisting of five or more housing units must be sold at affordable sales prices. This percentage increases to 20 percent on parcels larger than 1 The hotel calculations were estimated based on the permits and fees paid by new hotel projects in the city; the office/R&D/medical office fees are estimates by City staff. These fee estimates are the best approximations available, and do not represent the actual cost of a proposed new development project. Palo Alto Linkage Fee Nexus Study -10- five acres. In some cases, developers have the option of paying an in-lieu fee of 7.5 to 10 percent of the sales price or fair market value, whichever is greater. The developer must also pay a fee for fractional units. Revenues from the commercial linkage fee (and from residential impact fees, if they are adopted) would continue to support the City’s existing affordable housing programs. It should be noted that revenues from a commercial linkage fee need to be spent on housing that benefits the workforce since the funds stem from affordable housing impacts related to new employment. Overlap with Residential Impact Fees - In addition to the commercial linkage fee update described in this report, the City of Palo Alto is also considering implementing new residential impact fees on housing development. There may be a small share of jobs counted in the residential nexus analysis that are also included in this commercial linkage fee analysis. Thus, the two programs may have some overlap in mitigating the affordable housing demand from the same worker households. In order to reduce the potential for overlap between the two programs, it is advisable to set both the commercial linkage fees and housing impact fees at below 100 percent of the nexus-based maximum. In this way, when combined, the programs would mitigate less than 100 percent of the impact even if there were overlap in the jobs counted in the two nexus analyses. Palo Alto Linkage Fee Nexus Study -11- Figure I-8. Commercial Linkage Fee Scenarios as Percent of Total Development Costs Fee Scenario Fee Amount Hotel Fee as % of TDC Office/R&D/Medical Office Fee Amount Fee as % of TDC Existing Linkage Fee $19.85 4.29% $19.85 3.74% Scenario 1: Max Fee $177 28.55% $264 49.77% Scenario 2 $35 7.32% $60 11.31% Scenario 3 $30 6.34% $50 9.43% Scenario 4 $20 4.32% $35 6.60% Figure I-9. Total Fees and Permits per Square Foot Fee Scenario Linkage Fee per SF Hotel Total Permits and Fees Office/R&D/Medical Office Linkage Fee Total Permits per SF and Fees Existing Permits and Fees $19.85 $35 $19.85 $57 Scenario 1 (Maximum Fee) $177 $192 $264 $301 Scenario 2 $35 $50 $60 $97 Scenario 3 $30 $45 $50 $87 Scenario 4 $20 $35 $35 $72 Sources: Vernazza Wolfe Associates, Inc. & Strategic Economics, 2015. Palo Alto Linkage Fee Nexus Study -12- II. INTRODUCTION AND METHODOLOGY According to the City of Palo Alto’s Housing Element, home values in the City have been increasing steadily since 2010. The median home price in 2013 was $1.7 million, more than twice the median price in Santa Clara County. Rental rates have also escalated rapidly, with median rents ranging from $1,900 for studios to more than $8,500 for four-bedroom homes. Given the high prices and rents in the City, most of the new market-rate housing units built in Palo Alto are only affordable to high income households. Consequently, very low, low, and moderate income worker households have limited affordable housing options in the City. As one of its strategies to address the demand for affordable housing in the City, Palo Alto is considering updating its existing commercial linkage fees for hotel and office/R&D/medical office uses. A commercial linkage fee is an impact fee that is charged on new, non-residential development to address the affordable housing demand from new workers. Palo Alto currently has a commercial linkage fee of $19.85 per square foot on new, non-residential development. The purpose of this study is to provide a new nexus analysis in the event the Palo Alto decides to adopt an updated commercial linkage fee for hotel and office/R&D/medical office uses. The funds raised by the linkage fees are deposited into a housing fund specifically reserved for use by a local jurisdiction to increase the supply of affordable housing for the workforce. Linkage fees are one of several funding sources that jurisdictions can use to help meet the affordable housing needs of new workers. For more than thirty years, California cities and counties have imposed commercial linkage fees on new, non-residential developments. THE NEXUS CONCEPT In order to adopt a commercial linkage fee, a nexus study is required to determine the reasonable relationship between the fee's use and the impact of the development project on which the fee is imposed. This commercial linkage fee nexus study establishes and quantifies the linkages or “nexus” between new commercial development and the need for additional housing affordable to new workers. Some of the new workers will have household incomes that qualify them for income-restricted affordable housing. This study quantifies the demand for very low income, low income, and moderate income housing that is created by new development of commercial buildings. METHODOLOGY When a city or county adopts a development impact fee, it must establish a reasonable relationship between the development project and the fee being charged. Studies undertaken to demonstrate this connection are called nexus studies. Nexus studies for school impact fees, traffic mitigation fees, and parks are common. For commercial linkage fees, a methodology exists that establishes a connection between the development of commercial space and the need to expand the supply of affordable housing. This study is based on this established methodology. The purpose of a commercial linkage fee nexus analysis is to quantify the increase in demand for affordable housing that accompanies new non-residential development. There will be a net gain in employment when new commercial space is built. The ability of new workers to pay for housing costs is linked to their occupations (and hence salaries). Given anticipated incomes, there may be an affordability "gap" between what worker households can afford to pay (to rent or to buy) and the actual costs of new housing. Palo Alto Linkage Fee Nexus Study -13- A nexus analysis calculates the relationship between new commercial development and household incomes of employees and then determines the employees' need for affordable housing. These steps provide the rationale for calculating the maximum justified commercial linkage fee that could be levied on non-residential development. These steps are presented in more detail below, and the subsequent sections of this report present the results of each of these steps. Step 1. Define the commercial prototypes that represent new commercial development in Santa Clara County. The prototypes are defined based on recently completed and proposed development projects in Santa Clara County. The purpose of defining prototypes is to estimate future employment linked to the new commercial space. Two prototypes were selected and include Hotels (133 rooms or 100,000 SF) and Office/ R&D/ Medical Office (100,000 SF). The prototype definitions include information on gross and leasable area, number of rooms (for hotel only), parking, and floor-area-ratio. Step 2. Estimate the number of workers that will work in the new commercial space. Based on a national survey data on employment density for commercial land uses, as well as recently completed linkage fee nexus studies in the Bay Area, the estimated employment density in hotels is approximately 0.75 workers per room (average room size of 750 SF) and one worker per 333 SF for office/ R&D/ medical office. By dividing the prototype developments by employment density figures, the number of workers for each prototype is estimated. Step 3. Estimate the number of new households represented by these new workers. Since there are multiple wage earners in a household, the number of new workers will be higher than the number of new households moving into Palo Alto. Therefore, it is necessary to go from projected growth in the number of workers to household growth. This adjustment is based on the average number of wage- earners per worker household for the Palo Alto (1.49) according to the U.S. Census Bureau American Community Survey 3-Year Estimates, 2010-2012. Step 4. Estimate wages of new workers. The first step in calculating employee wages is to establish a list of the industries that can be associated with each prototype. Using industry data from QCEW, industries (defined by NAICS Codes) were identified that are associated with each prototype, or land use. The next step is to identify all the occupations that are associated with each industry based on data provided by the U.S. Bureau of Labor Statistics (BLS). The national BLS occupational matrix is then calibrated to match the county’s employment mix by weighting the national employment distribution to reflect the distribution of employment by industry within Santa Clara County. Finally, the average wage by worker is calculated using data on average annual wages by occupation in the San Jose – Sunnyvale – Santa Clara Metropolitan Statistical Area from the California Employment Development Department. Step 5. Estimate household income of worker households. Worker wage estimates from the previous step are then converted to household incomes. This step assumes that the income of the second wage-earner is similar to the wage of the first wage-earner. According to the U.S. Census Bureau American Community Survey 3-Year Estimates, 2010-2012, there are 1.49 wage-earners per worker household in Palo Alto. Individual worker wages are multiplied by 1.49 to represent household incomes. Step 6. Calculate the number of households that would be eligible for affordable housing divided into three categories: very low, low, and moderate income. The average household size in Palo Alto is estimated to be three, based on the US Census, American Community Survey 5-Year Estimates, 2008-2012. Thus, the income groups are defined for a household size of three persons based on the income categories established by California Department of Housing Palo Alto Linkage Fee Nexus Study -14- and Community Development (HCD) for Santa Clara County. Households with above-moderate income are removed to determine the number that would require below market rate affordable housing. Step 7. Estimate the affordability gap of new households requiring affordable housing. The affordability gap represents the difference between what households can afford to pay for housing and the development cost of a modest housing unit. For very low and low income households, a rental housing gap is used. For moderate income households, the housing affordability gap is calculated separately for renter and owner households, and then the two gaps are combined to derive an average affordability gap for moderate income households. Step 8. Estimate the total housing affordability gap of new households requiring affordable housing. The total number of very low, low, and moderate income new worker households for the each land use prototype is multiplied by the corresponding affordable housing gap figure. Step 9. Calculate maximum commercial linkage fees for each prototype. The total affordability gap is then divided by 100,000 SF, the size of each commercial prototype to generate a maximum fee per square foot. Palo Alto Linkage Fee Nexus Study -15- III. COMMERCIAL LINKAGE FEE NEXUS ANALYSIS This section discusses each step of the commercial linkage analysis calculations and the maximum nexus- based fees. The analysis presented in this section should be interpreted within the context of the previous sections establishing the overall methodology for this study. NEXUS ANALYSIS STEPS Using the methodology described in Section II, the following describes each of the steps to calculate the linkage fees in more detail. Commercial Prototypes This study examined the jobs-housing linkage for two commercial development prototypes, which are described below. 1. Hotel – This building prototype includes full-service hotels, limited-service hotels, motels, and other lodging. 2. Office/ R&D/ Medical Office – This category includes a wide range of office and R&D users, including traditional office buildings, open floor-plan offices, medical offices, and specialized spaces for highly advanced manufacturing and research commonly found in Santa Clara County. The prototypes defined above represent the types of new commercial buildings recently constructed or proposed in Santa Clara County. Each prototype was assumed to be 100,000 square feet in size. The building size is not prescriptive; it is only averaged to illustrate the overall numbers of workers and households associated with new development projects. Many linkage fee nexus studies use the 100,000 square foot number because it can easily be converted into per-square-foot calculations. The per-square- foot linkage fee can be applied to a project of any size. Figure III-1 below describes the building characteristics of each prototype, including factors like floor- area-ratios (FARs) and parking ratios, which were established based on a review of recent commercial development projects in the county. Palo Alto Linkage Fee Nexus Study -16- Figure III-1. Description of Commercial Prototypes Prototype Description Hotel Office/R&D/ Medical Office Gross Building Area (GBA). excl. Parking (SF) 100,000 100,000 Efficiency Ratio (a) N/A 0.90 Net Leasable Sq. Ft. (NSF) N/A 90,000 Hotel Rooms 133 Parking Spaces 133 300 Podium Parking 33 240 Surface Parking 100 60 GBA Including Structured Parking 109,975 163,000 Floor Area Ratio (b) 1.1 2.0 Land Area (Acres) 2.3 1.9 Land Area (sq. ft.) 99,977 81,500 Notes: (a) Refers to ratio of gross building area to net leasable area. An efficiency ratio of 0.9 means that 90% of the gross building area is leasable. (b) The floor-area-ratio (FAR) is often used as a measure of density. In this analysis, it is calculated as the gross building area (including structured podium parking) divided by the total land area. Sources: Vernazza Wolfe Associates, Inc. and Strategic Economics, 2015. Average Employment Density and Number of Workers For each building prototype, an average employment density was applied based on a combination of national survey data for existing commercial buildings and a review of recently completed linkage fee nexus studies in the Bay Area. Figure III-2 summarizes the building density data that formed the basis for establishing average employment density for each prototype. In order to create conservative assumptions about the number of jobs associated with new commercial development, the lower range of the density figures were selected for this analysis. Figure III-3 describes the density for each prototype, measured by the average number of square feet per worker for each prototype. This factor is multiplied by the size of the building (100,000 square feet) to calculate the total number of workers in each commercial prototype. The density factors represent the average density for the prototypes; individual projects and buildings may actually be more or less dense. The hotel prototype is assumed to be of lower density than office/ R&D/ medical office. The density assumption generates the total number of direct workers occupying the commercial space in each prototype. • Hotel – The hotel employment density assumption is 1,000 square feet per worker (or 0.75 workers per room). This density is at the mid-range of the densities shown in Figure III-2, and consistent with the Vallen and Vallen estimate for limited service mid-scale hotels, which are in between full-service “luxury” properties and economy properties. Given that many of the recently constructed and proposed hotel projects in Santa Clara County are limited service mid-scale hotels, this density is aligned with market trends. For a 100,000-square-foot hotel (roughly equivalent to 133 rooms), this density assumption results in a total number of 100 workers. • Office/ R&D/ Medical Office – The average density assumption for office/R&D/medical office is estimated at 333 square feet per worker. This density estimate is slightly lower than some recent Palo Alto Linkage Fee Nexus Study -17- linkage fee nexus studies, but higher than the national Energy Information Administration survey. The resulting number of total workers in this prototype is estimated at 300. Figure III-2. Employment Density Data and Sources Employee Density Figure Source Hotel 1.5 workers per full-service (luxury) hotel room Vallen and Vallen, "Chapter 1: The Traditional Hotel Industry," Check-In, Check-Out, 2012 0.5 to 1.0 workers per room for "in-between" hotels Vallen and Vallen, "Chapter 1: The Traditional Hotel Industry," Check-In, Check-Out, 2012 As few as 0.25 workers per room for "budget" hotels Vallen and Vallen, "Chapter 1: The Traditional Hotel Industry," Check-In, Check-Out, 2012 Energy Information Administration, 2003 Commercial Buildings Energy Consumption Survey, Rev. 2,074 square feet per worker 2006 720 square feet per worker A.C. Nelson, "Reshaping Metropolitan America" (based on calculations from EIA survey) 450 square feet per worker Jobs Housing Impact Fee Draft Nexus Study: City of Napa, CA, Vernazza Wolfe Associates Inc., 2011 2,000 square feet per worker Housing Impact Fee Nexus Study: Mountain View, CA, KMA, 2012 Office/ R&D/ Medical Office 185-340 square feet per employee Norm Miller, "Estimating Office Space per Worker: Implications for Future Office Space Demand," 2012 306 square feet per worker Building Owners and Managers Association Survey, 2012 Energy Information Administration, 2003 Commercial Buildings Energy Consumption Survey, Rev. 434 square feet per worker 2006 300 square feet per worker A.C. Nelson, "Reshaping Metropolitan America," 2013 250-350 square feet per worker San Mateo County Housing Needs Study, Economic & Planning Systems, 2006 300 square feet per worker Jobs Housing Impact Fee Draft Nexus Study: City of Napa, CA, Vernazza Wolfe Associates Inc., 2011 312.5 square feet per worker Housing Impact Fee Nexus Study: Mountain View, CA, KMA, 2012 Draft Palo Alto Linkage Fee Nexus Study -18- Palo Alto Linkage Fee Nexus Study -19- Figure III-3. Employment Density by Prototype Commercial Prototype Prototype Size (SF) Average Density Number of Workers in Prototype Hotel 100,000 SF 133 rooms 1,000 SF per worker 0.75 workers per room 100 workers Office/ R&D/ Medical Office 100,000 SF 333 square feet per worker 300 workers Sources: Vernazza Wolfe Associates, Inc.; Strategic Economics, 2015. Number of Worker Households Based on the total number of workers directly employed in the prototypes, the total number of worker households is estimated. The number of worker households is calculated by dividing the number of workers by the average number of wage-earners per household in the Palo Alto. Based on data from the U.S. Census American Community Survey 3-Year Estimates, 2010-2012, there is an average of 1.49 workers per household in Palo Alto. The calculation of total new worker households is demonstrated in Figure III-4 below. The number of worker households associated with the prototypes is 67 for hotels and 202 for office/R&D/medical office. Figure III-4. Number of Worker Households by Prototype Number of New Workers per Number of New Commercial Prototype Workers Household Worker Households Hotel 100 1.49 67.11 Office/R&D/Medical Office 300 1.49 201.54 Sources: US Census, American Community Survey 3-Year Estimates, 2010-2012; Vernazza Wolfe Associates, Inc.; Strategic Economics, 2015. Calculate Worker Wages and Household Income The first step in calculating employee wages is to establish a list of the industries that can be associated with each prototype. Using industry data from Quarterly Census of Employment and Wages (QCEW), industries (defined by NAICS Codes) were identified that are associated with each prototype, or land use. Figure III-5 and III-6 below describe the industries that are associated with the hotel and office/ R&D/ medical office prototypes. The hotel category shown in Figure III-5 has only one industry attached to it, while the office/ R&D/ medical office uses are associated with a larger number of industries, as shown in Figure III-6. Figure III-5. Definition of Industries for Hotel Prototype Hotels 721 Accommodation 100% Total 100% Note; Unlike other prototypes, the hotel prototype only includes one NAICS industry category. Source: United States Bureau of Labor Statistics, Quarterly Census of Employment and Wages (QCEW), 2013. Palo Alto Linkage Fee Nexus Study -20- Figure III-6. Definition of Industries for Office/ R&D/ Medical Office Prototype NAICS Code Description Percent Total Workers in Prototype 5415 Computer systems design and related services 13.5% 3344 Semiconductor and electronic component mfg. 10.2% 3341 Computer and peripheral equipment mfg. 9.3% 5191 Other information services 6.6% 5417 Scientific research and development services 5.2% 5613 Employment services 4.9% 5617 Services to buildings and dwellings 3.7% 5112 Software publishers 3.6% 5413 Architectural and engineering services 3.0% 5511 Management of companies and enterprises 2.8% 3345 Electronic instrument manufacturing 2.7% 6211 Offices of physicians 2.6% 5416 Management and technical consulting services 2.6% 6212 Offices of dentists 2.0% 3342 Communications equipment manufacturing 2.0% 6214 Outpatient care centers 1.9% 5412 Accounting and bookkeeping services 1.9% 5616 Investigation and security services 1.7% 5411 Legal services 1.7% 5221 Depository credit intermediation 1.6% 5182 Data processing, hosting and related services 1.6% 7223 Special food services 1.3% 517 Telecommunications 1.3% 5611 Office administrative services 1.1% 3391 Medical equipment and supplies manufacturing 1.1% 5313 Activities related to real estate 1.0% 523 Securities, commodity contracts, investments 0.9% 5311 Lessors of real estate 0.9% 5223 Activities related to credit intermediation 0.8% 6213 Offices of other health practitioners 0.8% 5419 Other professional and technical services 0.8% 5242 Insurance agencies and brokerages 0.6% 5312 Offices of real estate agents and brokers 0.5% 5222 Nondepository credit intermediation 0.5% 5121 Motion picture and video industries 0.4% 5418 Advertising, pr, and related services 0.4% 5614 Business support services 0.4% 6215 Medical and diagnostic laboratories 0.3% 5241 Insurance carriers 0.3% 5111 Newspaper, book, and directory publishers 0.3% 5414 Specialized design services 0.3% 515 Broadcasting, except internet 0.3% 5619 Other support services 0.3% 5612 Facilities support services 0.1% 3353 Electrical equipment manufacturing 0.1% 5331 Lessors of nonfinancial intangible assets 0.1% 5122 Sound recording industries 0.0% 5259 Other investment pools and funds 0.0% Total 100.0% Sources: United States Bureau of Labor Statistics, Quarterly Census of Employment and Wages (QCEW), 2013; Vernazza Wolfe Associates, Inc.; Strategic Economics, 2015 Palo Alto Linkage Fee Nexus Study -21- The next step is to identify all the occupations that are associated with each industry based on data provided by the U.S. Bureau of Labor Statistics (BLS). National level data on occupations are the best available; state level industry-occupation data exist but do not include all relevant industries. The national BLS occupational matrix is then calibrated to match the county’s employment mix by weighting the national employment distribution to reflect the distribution of employment by industry within Santa Clara County. Finally, the average wage by worker is calculated using data on average annual wages by occupation in the San Jose – Sunnyvale – Santa Clara Metropolitan Statistical Area (the smallest geographic level at which wage data are available) from the California Employment Development Department. Figure III-7 below summarizes the results of these calculations, computing the average weighted wages2 for each prototype. As shown, office/R&D/medical office employees have highest higher average wage of the three prototypes, due to a larger percentage of occupations in higher wage categories. Figure III-7. Average Annual Wage by Prototype Commercial Prototype Weighted Average Annual Wage (a) Hotel $35,157 Office, R&D and Medical Office $78,598 Notes: (a) Average wages are weighted to take into account the proportion of jobs in each occupational wage category. Sources: Bureau of Labor Statistics, Occupational Employment Statistics, 2013 and Quarterly Census of Employment and Wages (QCEW), 2013; California Economic Development Department, OES Employment and Wages by Occupation, 2013; Vernazza Wolfe Associates, Inc.; Strategic Economics, 2015. The complete occupational mix, and wage data tables for each prototype are presented in Figure III-8 and Figure III-9. 2 The weighted average wage takes into account the proportion of jobs in each occupational category. Palo Alto Linkage Fee Nexus Study -22- Figure III-8. Occupational Mix and Average Wages for Hotel Industry Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Hotel Workers (c) 11-0000 Management Occupations 11-9081 Lodging Managers $55,616 1.624% 11-1021 General and Operations Managers $150,054 0.988% 11-9051 Food Service Managers $55,929 0.499% 11-2022 Sales Managers $173,358 0.385% 11-3031 Financial Managers $162,295 0.205% 11-3011 Administrative Services Managers $116,009 0.169% 11-9199 Managers, All Other $164,693 0.128% 11-3121 Human Resources Managers $163,111 0.094% 11-1011 Chief Executives $218,577 0.066% 11-9141 Property, Real Estate, and Community Association Managers $75,727 0.057% 11-2021 Marketing Managers $185,177 0.056% 11-2011 Advertising and Promotions Managers $113,379 0.040% 11-3061 Purchasing Managers $149,288 0.026% 11-3021 Computer and Information Systems Managers $185,257 0.026% 11-2031 Public Relations and Fundraising Managers $129,248 0.008% 11-3111 Compensation and Benefits Managers $164,189 0.007% 11-9151 Social and Community Service Managers $80,170 0.006% 11-3131 Training and Development Managers $161,761 0.003% 11-9041 Architectural and Engineering Managers $186,557 0.003% 11-3071 Transportation, Storage, and Distribution Managers $110,880 0.003% 11-9021 Construction Managers $115,374 0.002% Weighted Mean Annual Wage $106,756 4.396% 13-0000 Business and Financial Operations Occupations 13-1121 Meeting, Convention, and Event Planners $58,851 0.487% 13-2011 Accountants and Auditors $87,797 0.468% 13-1071 Human Resources Specialists $84,352 0.201% 13-1199 Business Operations Specialists, All Other $95,424 0.096% 13-1023 Purchasing Agents, Except Wholesale, Retail, and Farm Products $79,868 0.083% 13-1161 Market Research Analysts and Marketing Specialists $103,979 0.069% Palo Alto Linkage Fee Nexus Study -23- Figure III-8. Occupational Mix and Average Wages for Hotel Industry, Continued Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Hotel Workers (c) 13-1151 Training and Development Specialists $83,797 0.027% 13-1141 Compensation, Benefits, and Job Analysis Specialists $90,004 0.019% 13-2051 Financial Analysts $112,220 0.018% 13-2099 Financial Specialists, All Other $63,667 0.013% 13-1041 Compliance Officers $84,523 0.012% 13-1131 Fundraisers $70,296 0.011% 13-1075 Labor Relations Specialists $61,652 0.009% 13-1111 Management Analysts $104,573 0.006% 13-1022 Wholesale and Retail Buyers, Except Farm Products $58,770 0.005% 13-2031 Budget Analysts $85,923 0.002% 13-2041 Credit Analysts $74,760 0.002% Weighted Mean Annual Wage $78,604 1.528% 15-0000 Computer and Mathematical Occupations 15-1151 Computer User Support Specialists $71,022 0.037% 15-1199 Computer Occupations, All Other $95,708 0.026% 15-1142 Network and Computer Systems Administrators $94,342 0.024% 15-1152 Computer Network Support Specialists $91,823 0.015% 15-1121 Computer Systems Analysts $105,259 0.009% 15-1134 Web Developers $101,961 0.005% 15-1141 Database Administrators $102,689 0.005% 15-1131 Computer Programmers $95,000 0.003% 15-1132 Software Developers, Applications $132,808 0.002% Weighted Mean Annual Wage $89,651 0.127% 17-0000 Architecture and Engineering Occupations 17-3023 Electrical and Electronics Engineering Technicians $66,014 0.004% 17-2051 Civil Engineers $101,748 0.003% 17-2141 Mechanical Engineers $110,763 0.003% Weighted Mean Annual Wage $91,430 0.011% Palo Alto Linkage Fee Nexus Study -24- Figure III-8. Occupational Mix and Average Wages for Hotel Industry, Continued Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Hotel Workers (c) 19-0000 Life, Physical, and Social Science Occupations $93,341 0.006% Weighted Mean Annual Wage $93,341 0.006% 21-0000 Community and Social Service Occupations 21-1099 Community and Social Service Specialists, All Other $45,821 0.003% Weighted Mean Annual Wage $45,821 0.003% 23-0000 Legal Occupations 23-1011 Lawyers $197,821 0.002% 23-2011 Paralegals and Legal Assistants $66,207 0.002% Weighted Mean Annual Wage $141,415 0.004% 25-0000 Education, Training, and Library Occupations 25-3021 Self-Enrichment Education Teachers $45,214 0.035% 25-3099 Teachers and Instructors, All Other, Except Substitute Teachers $61,887 0.005% 25-2011 Preschool Teachers, Except Special Education $39,943 0.003% 25-9031 Instructional Coordinators $72,975 0.002% Weighted Mean Annual Wage $48,010 0.044% 27-0000 Arts, Design, Entertainment, Sports, and Media Occupations 27-4011 Audio and Video Equipment Technicians $44,404 0.153% 27-2022 Coaches and Scouts $44,647 0.076% 27-3031 Public Relations Specialists $73,572 0.055% 27-3099 Media and Communication Workers, All Other $52,447 0.021% 27-4099 Media and Communication Equipment Workers, All Other $69,576 0.014% 27-1024 Graphic Designers $64,588 0.009% 27-1023 Floral Designers $33,640 0.008% 27-1025 Interior Designers $65,478 0.002% Weighted Mean Annual Wage $51,110 0.337% Palo Alto Linkage Fee Nexus Study -25- Figure III-8. Occupational Mix and Average Wages for Hotel Industry, Continued Occupation Code Occupation Name (a) 29-0000 Healthcare Practitioners and Technical Occupations Average Annual Wage (b) % of Total Hotel Workers (c) 29-1141 Registered Nurses $124,633 0.006% 29-9011 Occupational Health and Safety Specialists $91,672 0.005% Weighted Mean Annual Wage $110,755 0.011% 31-0000 Healthcare Support Occupations 31-9011 Massage Therapists $33,182 0.435% Weighted Mean Annual Wage $33,182 0.435% 33-0000 Protective Service Occupations 33-9032 Security Guards $31,791 1.595% 33-9092 Lifeguards, Ski Patrol, and Other Recreational Protective Service Workers $23,660 0.402% 33-1099 First-Line Supervisors of Protective Service Workers, All Other $55,471 0.140% 33-9099 Protective Service Workers, All Other $44,649 0.064% 33-9021 Private Detectives and Investigators $81,056 0.003% Weighted Mean Annual Wage $32,248 2.204% 35-0000 Food Preparation and Serving Related Occupations 35-3031 Waiters and Waitresses $22,964 7.606% 35-2014 Cooks, Restaurant $25,887 3.415% 35-9011 Dining Room and Cafeteria Attendants and Bartender Helpers $19,871 2.696% 35-3011 Bartenders $25,181 2.156% 35-3041 Food Servers, Nonrestaurant $29,514 1.857% 35-9021 Dishwashers $20,516 1.776% 35-1012 First-Line Supervisors of Food Preparation and Serving Workers $35,399 1.298% 35-2021 Food Preparation Workers $23,005 1.039% 35-9031 Hosts and Hostesses, Restaurant, Lounge, and Coffee Shop $20,153 0.922% 35-3021 Combined Food Preparation and Serving Workers, Including Fast Food $22,199 0.839% 35-1011 Chefs and Head Cooks $45,637 0.750% 35-3022 Counter Attendants, Cafeteria, Food Concession, and Coffee Shop $21,020 0.554% Palo Alto Linkage Fee Nexus Study -26- Figure III-8. Occupational Mix and Average Wages for Hotel Industry, Continued Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Hotel Workers (c) 35-2012 Cooks, Institution and Cafeteria $31,489 0.330% 35-2015 Cooks, Short Order $24,546 0.322% 35-9099 Food Preparation and Serving Related Workers, All Other $22,148 0.283% 35-2019 Cooks, All Other $25,413 0.097% 35-2011 Cooks, Fast Food $20,496 0.088% Weighted Mean Annual Wage $24,740 26.028% 37-0000 Building and Grounds Cleaning and Maintenance Occupations 37-2012 Maids and Housekeeping Cleaners $28,799 24.645% 37-2011 Janitors and Cleaners, Except Maids and Housekeeping Cleaners $27,549 2.606% 37-1011 First-Line Supervisors of Housekeeping and Janitorial Workers $50,352 1.778% 37-3011 Landscaping and Groundskeeping Workers $31,560 1.061% 37-1012 First-Line Supervisors of Landscaping, Lawn Service, and Groundskeeping Workers $52,297 0.120% 37-3019 Grounds Maintenance Workers, All Other $45,818 0.048% Weighted Mean Annual Wage $30,175 30.258% 39-0000 Personal Care and Service Occupations 39-5092 Manicurists and Pedicurists $19,327 0.059% 39-3031 Ushers, Lobby Attendants, and Ticket Takers $20,113 0.089% 39-7011 Tour Guides and Escorts $21,110 0.048% 39-9099 Personal Care and Service Workers, All Other $21,120 0.215% 39-6011 Baggage Porters and Bellhops $22,894 1.366% 39-5012 Hairdressers, Hairstylists, and Cosmetologists $23,942 0.060% 39-3091 Amusement and Recreation Attendants $24,637 0.681% 39-3093 Locker Room, Coatroom, and Dressing Room Attendants $25,685 0.137% 39-9021 Personal Care Aides $26,572 0.018% 39-9032 Recreation Workers $28,093 0.614% 39-2021 Nonfarm Animal Caretakers $28,990 0.023% 39-9011 Childcare Workers $29,565 0.040% 39-6012 Concierges $32,043 0.700% Palo Alto Linkage Fee Nexus Study -27- Figure III-8. Occupational Mix and Average Wages for Hotel Industry, Continued Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Hotel Workers (c) 39-9041 Residential Advisors $35,308 0.061% 39-2011 Animal Trainers $43,682 0.003% 39-1021 First-Line Supervisors of Personal Service Workers $45,485 0.238% Weighted Mean Annual Wage $26,795 4.350% 41-0000 Sales and Related Occupations 41-3099 Sales Representatives, Services, All Other $90,918 0.911% 41-2011 Cashiers $25,771 0.809% 41-2031 Retail Salespersons $27,121 0.316% 41-2012 Gaming Change Persons and Booth Cashiers $21,931 0.197% 41-1011 First-Line Supervisors of Retail Sales Workers $48,448 0.133% 41-2021 Counter and Rental Clerks $34,428 0.077% 41-1012 First-Line Supervisors of Non-Retail Sales Workers $111,025 0.072% 41-3041 Travel Agents $41,745 0.034% 41-9099 Sales and Related Workers, All Other $42,552 0.034% 41-9041 Telemarketers $29,631 0.030% 41-4012 Sales Representatives, Wholesale and Manufacturing, Except Technical and Scientific Products $68,867 0.020% 41-9022 Real Estate Sales Agents $70,439 0.007% 41-3011 Advertising Sales Agents $63,001 0.005% Weighted Mean Annual Wage $52,775 2.645% 43-0000 Office and Administrative Support Occupations 43-4081 Hotel, Motel, and Resort Desk Clerks $24,788 12.825% 43-1011 First-Line Supervisors of Office and Administrative Support Workers $67,296 1.502% 43-3031 Bookkeeping, Accounting, and Auditing Clerks $49,252 1.111% 43-9061 Office Clerks, General $39,450 0.564% 43-6014 Secretaries and Administrative Assistants, Except Legal, Medical, and Executive $43,308 0.497% 43-4051 Customer Service Representatives $46,518 0.454% 43-4181 Reservation and Transportation Ticket Agents and Travel Clerks $37,617 0.453% 43-2011 Switchboard Operators, Including Answering Service $35,683 0.369% 43-4171 Receptionists and Information Clerks $34,590 0.250% Palo Alto Linkage Fee Nexus Study -28- Figure III-8. Occupational Mix and Average Wages for Hotel Industry, Continued Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Hotel Workers (c) 43-3041 Gaming Cage Workers $31,137 0.247% 43-5081 Stock Clerks and Order Fillers $28,312 0.220% 43-6011 Executive Secretaries and Executive Administrative Assistants $65,402 0.195% 43-5071 Shipping, Receiving, and Traffic Clerks $35,207 0.126% 43-3051 Payroll and Timekeeping Clerks $51,773 0.094% 43-9199 Office and Administrative Support Workers, All Other $38,731 0.093% 43-4161 Human Resources Assistants, Except Payroll and Timekeeping $51,044 0.082% 43-5032 Dispatchers, Except Police, Fire, and Ambulance $53,920 0.076% 43-3021 Billing and Posting Clerks $45,890 0.065% 43-3061 Procurement Clerks $47,955 0.031% 43-5061 Production, Planning, and Expediting Clerks $58,689 0.020% 43-5021 Couriers and Messengers $36,189 0.016% 43-4041 Credit Authorizers, Checkers, and Clerks $41,981 0.011% 43-4151 Order Clerks $42,315 0.011% 43-3011 Bill and Account Collectors $49,434 0.010% 43-9051 Mail Clerks and Mail Machine Operators, Except Postal Service $34,691 0.008% 43-4199 Information and Record Clerks, All Other $46,467 0.007% 43-4071 File Clerks $34,012 0.005% 43-5111 Weighers, Measurers, Checkers, and Samplers, Recordkeeping $30,539 0.005% 43-9011 Computer Operators $46,204 0.005% 43-9071 Office Machine Operators, Except Computer $33,131 0.005% 43-3099 Financial Clerks, All Other $45,444 0.003% Weighted Mean Annual Wage $32,767 19.359% 45-0000 Farming, Fishing, and Forestry Occupations 45-2093 Farmworkers, Farm, Ranch, and Aquacultural Animals $28,101 0.032% 45-2092 Farmworkers and Laborers, Crop, Nursery, and Greenhouse $21,473 0.003% 45-1011 First-Line Supervisors of Farming, Fishing, and Forestry Workers $61,161 0.002% Weighted Mean Annual Wage $29,481 0.038% Palo Alto Linkage Fee Nexus Study -29- Figure III-8. Occupational Mix and Average Wages for Hotel Industry, Continued Occupation Average Annual Wage % of Total Hotel Code Occupation Name (a) (b) Workers (c) 47-0000 Construction and Extraction Occupations 47-2141 Painters, Construction and Maintenance $52,934 0.079% 47-2031 Carpenters $62,042 0.059% 47-2111 Electricians $64,835 0.031% 47-1011 First-Line Supervisors of Construction Trades and Extraction Workers $83,728 0.011% 47-2152 Plumbers, Pipefitters, and Steamfitters $80,317 0.010% 47-2061 Construction Laborers $44,910 0.010% 47-2073 Operating Engineers and Other Construction Equipment Operators $69,510 0.008% 47-2041 Carpet Installers $56,709 0.003% 47-4051 Highway Maintenance Workers $60,564 0.002% Weighted Mean Annual Wage $60,513 0.213% 49-0000 Installation, Maintenance, and Repair Occupations 49-9071 Maintenance and Repair Workers, General $48,997 4.553% 49-1011 First-Line Supervisors of Mechanics, Installers, and Repairers $77,658 0.400% 49-9091 Coin, Vending, and Amusement Machine Servicers and Repairers $36,977 0.094% 49-9099 Installation, Maintenance, and Repair Workers, All Other $49,058 0.044% 49-9021 Heating, Air Conditioning, and Refrigeration Mechanics and Installers $65,190 0.028% 49-9098 Helpers--Installation, Maintenance, and Repair Workers $34,330 0.023% 49-3053 Outdoor Power Equipment and Other Small Engine Mechanics $46,768 0.011% 49-9041 Industrial Machinery Mechanics $55,938 0.010% 49-3023 Automotive Service Technicians and Mechanics $51,582 0.009% 49-9094 Locksmiths and Safe Repairers $59,969 0.008% 49-3042 Mobile Heavy Equipment Mechanics, Except Engines $55,470 0.007% 49-9043 Maintenance Workers, Machinery $43,226 0.007% 49-2022 Telecommunications Equipment Installers and Repairers, Except Line Installers $65,495 0.002% 49-2094 Electrical and Electronics Repairers, Commercial and Industrial Equipment $51,745 0.002% Weighted Mean Annual Wage $51,047 5.199% 51-0000 Production Occupations 51-6011 Laundry and Dry-Cleaning Workers $25,879 1.611% Palo Alto Linkage Fee Nexus Study -30- Figure III-8. Occupational Mix and Average Wages for Hotel Industry, Continued Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Hotel Workers (c) 51-3011 Bakers $27,048 0.179% 51-8021 Stationary Engineers and Boiler Operators $78,511 0.054% 51-1011 First-Line Supervisors of Production and Operating Workers $63,406 0.051% 51-6052 Tailors, Dressmakers, and Custom Sewers $41,613 0.018% 51-9061 Inspectors, Testers, Sorters, Samplers, and Weighers $46,350 0.011% 51-3021 Butchers and Meat Cutters $34,021 0.008% 51-6031 Sewing Machine Operators $24,629 0.006% 51-6021 Pressers, Textile, Garment, and Related Materials $24,425 0.006% 51-9012 Separating, Filtering, Clarifying, Precipitating, and Still Machine Setters, Operators, and Tenders $40,373 0.003% 51-3092 Food Batchmakers $25,310 0.002% 51-9198 Helpers--Production Workers $27,546 0.002% Weighted Mean Annual Wage $28,730 1.950% 53-0000 Transportation and Material Moving Occupations 53-6021 Parking Lot Attendants $21,595 0.464% 53-7062 Laborers and Freight, Stock, and Material Movers, Hand $31,188 0.297% 53-1031 First-Line Supervisors of Transportation and Material-Moving Machine and Vehicle Operators $61,604 0.034% 53-1021 First-Line Supervisors of Helpers, Laborers, and Material Movers, Hand $52,489 0.018% 53-3033 Light Truck or Delivery Services Drivers $36,503 0.018% 53-7061 Cleaners of Vehicles and Equipment $25,762 0.008% 53-7199 Material Moving Workers, All Other $39,857 0.005% 53-6031 Automotive and Watercraft Service Attendants $27,042 0.004% 53-7051 Industrial Truck and Tractor Operators $37,469 0.003% 53-3031 Driver/Sales Workers $35,192 0.002% 53-3032 Heavy and Tractor-Trailer Truck Drivers $46,564 0.002% Weighted Mean Annual Wage $27,778 0.854% Total, Land Use $35,157 100.000% Notes: (a) Occupational mix by industry was obtained from US Bureau of Labor Statistics, Occupational Employment Statistics, 2013. (b) Wage data for the San Jose – Sunnyvale – Santa Clara MSA obtained from California Economic Development Department, OES Employment and Wages by Occupation, 2013. (c) Distribution of workers is calculated based on the existing distribution of employment by industry in Santa Clara County, provided by Quarterly Census of Employment and Wages (QCEW), 2013. Sources: Vernazza Wolfe Associates, Inc.; Strategic Economics, 2015. Palo Alto Linkage Fee Nexus Study -31- Figure III-9. Occupational Mix and Average Wages for Office/ R&D/ Medical Office Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Office/ R&D/ Medical Office Workers (c) 11-0000 Management Occupations 11-1021 General and Operations Managers $150,054 2.009% 11-3021 Computer and Information Systems Managers $185,257 1.370% 11-3031 Financial Managers $162,295 0.706% 11-9041 Architectural and Engineering Managers $186,557 0.475% 11-2022 Sales Managers $173,358 0.421% 11-2021 Marketing Managers $185,177 0.409% 11-9199 Managers, All Other $164,693 0.398% 11-1011 Chief Executives $218,577 0.290% 11-3011 Administrative Services Managers $116,009 0.273% 11-9111 Medical and Health Services Managers $139,807 0.184% 11-3121 Human Resources Managers $163,111 0.181% 11-9141 Property, Real Estate, and Community Association Managers $75,727 0.151% 11-3051 Industrial Production Managers $129,691 0.118% 11-9121 Natural Sciences Managers $189,368 0.107% 11-3061 Purchasing Managers $149,288 0.091% 11-9021 Construction Managers $115,374 0.059% 11-3131 Training and Development Managers $161,761 0.045% 11-2031 Public Relations and Fundraising Managers $129,248 0.044% 11-9051 Food Service Managers $55,929 0.042% 11-3071 Transportation, Storage, and Distribution Managers $110,880 0.039% 11-3111 Compensation and Benefits Managers $164,189 0.029% 11-2011 Advertising and Promotions Managers $113,379 0.022% 11-9151 Social and Community Service Managers $80,170 0.021% 11-9161 Emergency Management Directors $115,203 0.003% 11-9039 Education Administrators, All Other $85,561 0.003% 11-9081 Lodging Managers $55,616 0.002% 11-9013 Farmers, Ranchers, and Other Agricultural Managers $104,976 0.002% 11-9031 Education Administrators, Preschool and Childcare Center/Program $64,614 0.002% 11-9033 Education Administrators, Postsecondary $110,266 0.001% 11-9032 Education Administrators, Elementary and Secondary School $110,588 0.000% Weighted Mean Annual Wage $162,745 7.500% Palo Alto Linkage Fee Nexus Study -32- Figure III-9. Occupational Mix and Average Wages for Office/ R&D/ Medical Office, Continued Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Office/ R&D/ Medical Office Workers (c) 13-0000 Business and Financial Operations Occupations 13-2011 Accountants and Auditors $87,797 1.738% 13-1111 Management Analysts $104,573 1.252% 13-1199 Business Operations Specialists, All Other $95,424 1.164% 13-1161 Market Research Analysts and Marketing Specialists $103,979 0.902% 13-1071 Human Resources Specialists $84,352 0.876% 13-2051 Financial Analysts $112,220 0.466% 13-1151 Training and Development Specialists $83,797 0.384% 13-2072 Loan Officers $82,709 0.359% 13-1023 Purchasing Agents, Except Wholesale, Retail, and Farm Products $79,868 0.335% 13-2052 Personal Financial Advisors $90,346 0.208% 13-1081 Logisticians $97,520 0.194% 13-1041 Compliance Officers $84,523 0.183% 13-2099 Financial Specialists, All Other $63,667 0.163% 13-1031 Claims Adjusters, Examiners, and Investigators $71,737 0.140% 13-2082 Tax Preparers $51,506 0.135% 13-1141 Compensation, Benefits, and Job Analysis Specialists $90,004 0.116% 13-2041 Credit Analysts $74,760 0.101% 13-1022 Wholesale and Retail Buyers, Except Farm Products $58,770 0.085% 13-1051 Cost Estimators $78,709 0.061% 13-2031 Budget Analysts $85,923 0.061% 13-1121 Meeting, Convention, and Event Planners $58,851 0.043% 13-2021 Appraisers and Assessors of Real Estate $75,586 0.036% 13-2061 Financial Examiners $92,603 0.024% 13-2071 Credit Counselors $53,299 0.017% 13-1075 Labor Relations Specialists $61,652 0.014% 13-1131 Fundraisers $70,296 0.012% 13-1021 Buyers and Purchasing Agents, Farm Products $66,679 0.004% 13-1011 Agents and Business Managers of Artists, Performers, and Athletes $111,797 0.000% Weighted Mean Annual Wage $91,169 9.073% Palo Alto Linkage Fee Nexus Study -33- Figure III-9. Occupational Mix and Average Wages for Office/ R&D/ Medical Office, Continued Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Office/ R&D/ Medical Office Workers (c) 15-0000 Computer and Mathematical Occupations 15-1132 Software Developers, Applications $132,808 4.184% 15-1121 Computer Systems Analysts $105,259 2.702% 15-1133 Software Developers, Systems Software $133,577 2.548% 15-1151 Computer User Support Specialists $71,022 2.162% 15-1131 Computer Programmers $95,000 2.144% 15-1142 Network and Computer Systems Administrators $94,342 1.282% 15-1143 Computer Network Architects $137,806 0.708% 15-1152 Computer Network Support Specialists $91,823 0.667% 15-1134 Web Developers $101,961 0.519% 15-1199 Computer Occupations, All Other $95,708 0.475% 15-1141 Database Administrators $102,689 0.409% 15-1122 Information Security Analysts $106,331 0.392% 15-2031 Operations Research Analysts $118,553 0.188% 15-1111 Computer and Information Research Scientists $134,649 0.099% 15-2041 Statisticians $151,990 0.049% Weighted Mean Annual Wage $110,240 18.527% 17-0000 Architecture and Engineering Occupations 17-2061 Computer Hardware Engineers $135,975 0.598% 17-2071 Electrical Engineers $122,822 0.484% 17-2051 Civil Engineers $101,748 0.481% 17-3023 Electrical and Electronics Engineering Technicians $66,014 0.468% 17-2141 Mechanical Engineers $110,763 0.460% 17-2072 Electronics Engineers, Except Computer $127,436 0.434% 17-2112 Industrial Engineers $110,914 0.432% 17-2199 Engineers, All Other $114,931 0.242% 17-1011 Architects, Except Landscape and Naval $87,584 0.239% 17-3011 Architectural and Civil Drafters $60,227 0.227% 17-3026 Industrial Engineering Technicians $59,570 0.178% 17-2011 Aerospace Engineers $109,569 0.126% Palo Alto Linkage Fee Nexus Study -34- Figure III-9. Occupational Mix and Average Wages for Office/ R&D/ Medical Office, Continued Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Office/ R&D/ Medical Office Workers (c) 17-3029 Engineering Technicians, Except Drafters, All Other $60,430 0.113% 17-3027 Mechanical Engineering Technicians $53,712 0.105% 17-3022 Civil Engineering Technicians $59,600 0.103% 17-3031 Surveying and Mapping Technicians $61,684 0.099% 17-1022 Surveyors $82,141 0.096% 17-2081 Environmental Engineers $81,595 0.094% 17-3013 Mechanical Drafters $66,197 0.084% 17-3012 Electrical and Electronics Drafters $72,773 0.075% 17-2041 Chemical Engineers $100,575 0.051% 17-2131 Materials Engineers $106,068 0.047% 17-1012 Landscape Architects $79,349 0.045% 17-2031 Biomedical Engineers $116,701 0.042% 17-3024 Electro-Mechanical Technicians $52,852 0.041% 17-3025 Environmental Engineering Technicians $70,456 0.031% 17-3019 Drafters, All Other $46,498 0.025% 17-2111 Health and Safety Engineers, Except Mining Safety Engineers and Inspectors $99,077 0.023% 17-1021 Cartographers and Photogrammetrists $73,380 0.022% Weighted Mean Annual Wage $98,983 5.459% 19-0000 Life, Physical, and Social Science Occupations 19-1042 Medical Scientists, Except Epidemiologists $124,745 0.239% 19-2031 Chemists $78,337 0.159% 19-4021 Biological Technicians $51,638 0.126% 19-2041 Environmental Scientists and Specialists, Including Health $92,946 0.120% 19-4031 Chemical Technicians $46,266 0.111% 19-4099 Life, Physical, and Social Science Technicians, All Other $55,968 0.101% 19-1021 Biochemists and Biophysicists $110,044 0.091% 19-4061 Social Science Research Assistants $50,191 0.060% 19-4091 Environmental Science and Protection Technicians, Including Health $51,365 0.050% 19-2042 Geoscientists, Except Hydrologists and Geographers $79,339 0.049% 19-2012 Physicists $127,871 0.039% 19-3031 Clinical, Counseling, and School Psychologists $87,979 0.038% 19-1029 Biological Scientists, All Other $86,836 0.037% 19-1022 Microbiologists $88,980 0.035% Palo Alto Linkage Fee Nexus Study -35- Figure III-9. Occupational Mix and Average Wages for Office/ R&D/ Medical Office, Continued Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Office/ R&D/ Medical Office Workers (c) 19-3099 Social Scientists and Related Workers, All Other $90,447 0.032% 19-3011 Economists $52,377 0.030% 19-1013 Soil and Plant Scientists $58,255 0.025% 19-3051 Urban and Regional Planners $92,997 0.020% 19-4011 Agricultural and Food Science Technicians $31,444 0.020% 19-1012 Food Scientists and Technologists $70,689 0.019% 19-2032 Materials Scientists $111,916 0.019% 19-1023 Zoologists and Wildlife Biologists $66,925 0.016% 19-1099 Life Scientists, All Other $95,840 0.012% 19-3094 Political Scientists $82,718 0.005% 19-1031 Conservation Scientists $95,759 0.004% 19-3039 Psychologists, All Other $85,834 0.003% 19-4092 Forensic Science Technicians $76,587 0.002% Weighted Mean Annual Wage $82,195 1.461% 21-0000 Community and Social Service Occupations 21-1014 Mental Health Counselors $55,918 0.074% 21-1093 Social and Human Service Assistants $41,501 0.068% 21-1023 Mental Health and Substance Abuse Social Workers $61,148 0.067% 21-1011 Substance Abuse and Behavioral Disorder Counselors $44,070 0.048% 21-1022 Healthcare Social Workers $69,930 0.042% 21-1021 Child, Family, and School Social Workers $50,990 0.032% 21-1091 Health Educators $61,381 0.026% 21-1094 Community Health Workers $46,822 0.022% 21-1099 Community and Social Service Specialists, All Other $45,821 0.020% 21-1015 Rehabilitation Counselors $44,475 0.016% 21-1013 Marriage and Family Therapists $62,140 0.014% 21-1012 Educational, Guidance, School, and Vocational Counselors $63,546 0.014% 21-1019 Counselors, All Other $74,199 0.008% 21-1029 Social Workers, All Other $81,221 0.007% 21-2011 Clergy $55,058 0.002% 21-2021 Directors, Religious Activities and Education $61,067 0.000% Weighted Mean Annual Wage $54,459 0.462% Palo Alto Linkage Fee Nexus Study -36- Figure III-9. Occupational Mix and Average Wages for Office/ R&D/ Medical Office, Continued Occupation Code Occupation Name (a) 23-0000 Legal Occupations Average Annual Wage (b) % of Total Office/ R&D/ Medical Office Workers (c) 23-1011 Lawyers $197,821 0.881% 23-2011 Paralegals and Legal Assistants $66,207 0.433% 23-2093 Title Examiners, Abstractors, and Searchers $83,375 0.066% 23-2099 Legal Support Workers, All Other $74,493 0.032% 23-1022 Arbitrators, Mediators, and Conciliators $81,726 0.004% 23-2091 Court Reporters $73,188 0.002% Weighted Mean Annual Wage $148,985 1.419% 25-0000 Education, Training, and Library Occupations 25-3098 Substitute Teachers $40,206 0.175% 25-4021 Librarians $73,531 0.058% 25-4031 Library Technicians $52,447 0.045% 25-9041 Teacher Assistants $30,220 0.041% 25-2021 Elementary School Teachers, Except Special Education $70,132 0.025% 25-9031 Instructional Coordinators $72,975 0.022% 25-3099 Teachers and Instructors, All Other, Except Substitute Teachers $61,887 0.019% 25-9099 Education, Training, and Library Workers, All Other $38,617 0.018% 25-2022 Middle School Teachers, Except Special and Career/Technical Education $67,977 0.017% 25-2031 Secondary School Teachers, Except Special and Career/Technical Education $73,451 0.016% 25-3021 Self-Enrichment Education Teachers $45,214 0.008% 25-2011 Preschool Teachers, Except Special Education $39,943 0.008% 25-2059 Special Education Teachers, All Other $62,898 0.002% 25-2052 Special Education Teachers, Kindergarten and Elementary School $66,591 0.002% 25-1194 Vocational Education Teachers, Postsecondary $63,101 0.002% 25-4012 Curators $65,033 0.001% 25-3011 Adult Basic and Secondary Education and Literacy Teachers and Instructors $76,587 0.001% 25-1071 Health Specialties Teachers, Postsecondary $76,202 0.001% 25-4013 Museum Technicians and Conservators $44,819 0.001% 25-2054 Special Education Teachers, Secondary School $74,837 0.001% 25-2051 Special Education Teachers, Preschool $65,751 0.001% Weighted Mean Annual Wage $51,545 0.463% Palo Alto Linkage Fee Nexus Study -37- Figure III-9. Occupational Mix and Average Wages for Office/ R&D/ Medical Office, Continued Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Office/ R&D/ Medical Office Workers (c) 27-0000 Arts, Design, Entertainment, Sports, and Media Occupations 27-1024 Graphic Designers $64,588 0.236% 27-3042 Technical Writers $102,446 0.203% 27-3031 Public Relations Specialists $73,572 0.157% 27-3041 Editors $77,538 0.116% 27-1014 Multimedia Artists and Animators $79,399 0.090% 27-3043 Writers and Authors $72,833 0.043% 27-4021 Photographers $41,066 0.041% 27-3022 Reporters and Correspondents $50,727 0.041% 27-1025 Interior Designers $65,478 0.038% 27-1011 Art Directors $125,109 0.034% 27-1021 Commercial and Industrial Designers $89,992 0.025% 27-4011 Audio and Video Equipment Technicians $44,404 0.023% 27-3091 Interpreters and Translators $55,604 0.022% 27-3099 Media and Communication Workers, All Other $52,447 0.017% 27-1026 Merchandise Displayers and Window Trimmers $34,247 0.015% 27-4032 Film and Video Editors $43,564 0.013% 27-2022 Coaches and Scouts $44,647 0.012% 27-1022 Fashion Designers $53,236 0.011% 27-4012 Broadcast Technicians $40,560 0.010% 27-3011 Radio and Television Announcers $31,191 0.009% 27-4099 Media and Communication Equipment Workers, All Other $69,576 0.005% 27-1027 Set and Exhibit Designers $66,804 0.003% 27-1023 Floral Designers $33,640 0.002% 27-3012 Public Address System and Other Announcers $40,914 0.000% 27-1012 Craft Artists $43,696 0.000% 27-2041 Music Directors and Composers $69,576 0.000% Weighted Mean Annual Wage $74,013 1.163% 29-0000 Healthcare Practitioners and Technical Occupations 29-1141 Registered Nurses $124,633 1.072% 29-2061 Licensed Practical and Licensed Vocational Nurses $58,801 0.469% 29-1069 Physicians and Surgeons, All Other $147,650 0.426% Palo Alto Linkage Fee Nexus Study -38- Figure III-9. Occupational Mix and Average Wages for Office/ R&D/ Medical Office, Continued Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Office/ R&D/ Medical Office Workers (c) 29-2021 Dental Hygienists $96,750 0.401% 29-1062 Family and General Practitioners $193,329 0.240% 29-1021 Dentists, General $148,348 0.195% 29-2071 Medical Records and Health Information Technicians $51,233 0.178% 29-1171 Nurse Practitioners $135,499 0.174% 29-1071 Physician Assistants $106,938 0.164% 29-2034 Radiologic Technologists $86,552 0.148% 29-2012 Medical and Clinical Laboratory Technicians $55,209 0.121% 29-1123 Physical Therapists $95,587 0.115% 29-1063 Internists, General $185,589 0.089% 29-1067 Surgeons $241,668 0.086% 29-2099 Health Technologists and Technicians, All Other $59,115 0.076% 29-2057 Ophthalmic Medical Technicians $42,118 0.072% 29-2056 Veterinary Technologists and Technicians $44,161 0.071% 29-1061 Anesthesiologists $248,872 0.070% 29-2055 Surgical Technologists $64,790 0.066% 29-2011 Medical and Clinical Laboratory Technologists $87,938 0.066% 29-1065 Pediatricians, General $188,493 0.066% 29-2052 Pharmacy Technicians $46,256 0.048% 29-1064 Obstetricians and Gynecologists $237,622 0.048% 29-2032 Diagnostic Medical Sonographers $111,440 0.047% 29-1131 Veterinarians $115,073 0.047% 29-1122 Occupational Therapists $90,407 0.046% 29-2081 Opticians, Dispensing $45,527 0.044% 29-1051 Pharmacists $135,408 0.044% 29-9011 Occupational Health and Safety Specialists $91,672 0.039% 29-1041 Optometrists $119,251 0.035% 29-1127 Speech-Language Pathologists $94,686 0.033% 29-1031 Dietitians and Nutritionists $71,083 0.029% 29-1066 Psychiatrists $195,909 0.027% 29-1126 Respiratory Therapists $87,635 0.026% 29-2031 Cardiovascular Technologists and Technicians $60,774 0.026% 29-9099 Healthcare Practitioners and Technical Workers, All Other $69,879 0.021% 29-1199 Health Diagnosing and Treating Practitioners, All Other $78,459 0.020% Palo Alto Linkage Fee Nexus Study -39- Figure III-9. Occupational Mix and Average Wages for Office/ R&D/ Medical Office, Continued Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Office/ R&D/ Medical Office Workers (c) 29-2035 Magnetic Resonance Imaging Technologists $98,227 0.020% 29-1124 Radiation Therapists $115,649 0.014% 29-2033 Nuclear Medicine Technologists $117,025 0.013% 29-9012 Occupational Health and Safety Technicians $43,109 0.009% 29-9091 Athletic Trainers $63,263 0.009% 29-1081 Podiatrists $132,656 0.009% 29-2053 Psychiatric Technicians $49,787 0.006% 29-1129 Therapists, All Other $82,232 0.006% 29-2051 Dietetic Technicians $40,327 0.003% 29-2092 Hearing Aid Specialists $55,240 0.002% 29-1128 Exercise Physiologists $84,934 0.002% 29-1125 Recreational Therapists $52,963 0.002% Weighted Mean Annual Wage $114,459 5.039% 31-0000 Healthcare Support Occupations 31-9092 Medical Assistants $39,127 1.106% 31-9091 Dental Assistants $41,525 0.633% 31-1014 Nursing Assistants $34,421 0.263% 31-1011 Home Health Aides $25,141 0.119% 31-9094 Medical Transcriptionists $46,654 0.074% 31-9096 Veterinary Assistants and Laboratory Animal Caretakers $35,127 0.063% 31-9097 Phlebotomists $41,314 0.059% 31-2021 Physical Therapist Assistants $62,888 0.044% 31-2022 Physical Therapist Aides $35,651 0.035% 31-9099 Healthcare Support Workers, All Other $45,042 0.035% 31-9093 Medical Equipment Preparers $45,506 0.025% 31-9011 Massage Therapists $33,182 0.021% 31-2011 Occupational Therapy Assistants $45,798 0.014% 31-1015 Orderlies $45,576 0.007% 31-9095 Pharmacy Aides $31,136 0.005% 31-2012 Occupational Therapy Aides $42,563 0.003% Weighted Mean Annual Wage $39,262 2.506% Palo Alto Linkage Fee Nexus Study -40- Figure III-9. Occupational Mix and Average Wages for Office/ R&D/ Medical Office, Continued Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Office/ R&D/ Medical Office Workers (c) 33-0000 Protective Service Occupations 33-9032 Security Guards $31,791 1.389% 33-1099 First-Line Supervisors of Protective Service Workers, All Other $55,471 0.060% 33-9021 Private Detectives and Investigators $81,056 0.030% 33-9099 Protective Service Workers, All Other $44,649 0.020% 33-9092 Lifeguards, Ski Patrol, and Other Recreational Protective Service Workers $23,660 0.010% 33-9091 Crossing Guards $35,711 0.010% 33-2011 Firefighters $88,371 0.005% 33-3012 Correctional Officers and Jailers $74,193 0.003% 33-3041 Parking Enforcement Workers $45,455 0.001% 33-2021 Fire Inspectors and Investigators $91,626 0.001% 33-1021 First-Line Supervisors of Fire Fighting and Prevention Workers $133,564 0.000% Weighted Mean Annual Wage $34,146 1.529% 35-0000 Food Preparation and Serving Related Occupations 35-3021 Combined Food Preparation and Serving Workers, Including Fast Food $22,199 0.205% 35-3031 Waiters and Waitresses $22,964 0.182% 35-2021 Food Preparation Workers $23,005 0.104% 35-2012 Cooks, Institution and Cafeteria $31,489 0.085% 35-3022 Counter Attendants, Cafeteria, Food Concession, and Coffee Shop $21,020 0.082% 35-1012 First-Line Supervisors of Food Preparation and Serving Workers $35,399 0.079% 35-3041 Food Servers, Nonrestaurant $29,514 0.071% 35-9021 Dishwashers $20,516 0.062% 35-9011 Dining Room and Cafeteria Attendants and Bartender Helpers $19,871 0.061% 35-2014 Cooks, Restaurant $25,887 0.040% 35-3011 Bartenders $25,181 0.035% 35-1011 Chefs and Head Cooks $45,637 0.023% 35-9031 Hosts and Hostesses, Restaurant, Lounge, and Coffee Shop $20,153 0.019% 35-2019 Cooks, All Other $25,413 0.017% 35-9099 Food Preparation and Serving Related Workers, All Other $22,148 0.013% 35-2015 Cooks, Short Order $24,546 0.009% 35-2011 Cooks, Fast Food $20,496 0.006% Weighted Mean Annual Wage $24,987 1.092% Palo Alto Linkage Fee Nexus Study -41- Figure III-9. Occupational Mix and Average Wages for Office/ R&D/ Medical Office, Continued Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Office/ R&D/ Medical Office Workers (c) 37-0000 Building and Grounds Cleaning and Maintenance Occupations 37-2011 Janitors and Cleaners, Except Maids and Housekeeping Cleaners $27,549 3.532% 37-3011 Landscaping and Groundskeeping Workers $31,560 1.945% 37-2012 Maids and Housekeeping Cleaners $28,799 0.584% 37-2021 Pest Control Workers $37,354 0.238% 37-1011 37-1012 First-Line Supervisors of Housekeeping and Janitorial Workers First-Line Supervisors of Landscaping, Lawn Service, and Groundskeeping Workers $50,352 $52,297 0.232% 0.230% 37-3013 Tree Trimmers and Pruners $28,547 0.136% 37-3012 Pesticide Handlers, Sprayers, and Applicators, Vegetation $33,807 0.049% 37-3019 Grounds Maintenance Workers, All Other $45,818 0.031% Weighted Mean Annual Wage $30,824 6.978% 39-0000 Personal Care and Service Occupations 39-9021 Personal Care Aides $26,572 0.194% 39-3031 Ushers, Lobby Attendants, and Ticket Takers $20,113 0.058% 39-9011 Childcare Workers $29,565 0.026% 39-2021 Nonfarm Animal Caretakers $28,990 0.024% 39-9032 Recreation Workers $28,093 0.016% 39-1021 First-Line Supervisors of Personal Service Workers $45,485 0.015% 39-3091 Amusement and Recreation Attendants $24,637 0.012% 39-6012 Concierges $32,043 0.012% 39-9099 Personal Care and Service Workers, All Other $21,120 0.009% 39-9041 Residential Advisors $35,308 0.007% 39-9031 Fitness Trainers and Aerobics Instructors $53,265 0.007% 39-7011 Tour Guides and Escorts $21,110 0.006% 39-5012 Hairdressers, Hairstylists, and Cosmetologists $23,942 0.005% 39-6011 Baggage Porters and Bellhops $22,894 0.003% 39-3093 Locker Room, Coatroom, and Dressing Room Attendants $25,685 0.001% 39-2011 Animal Trainers $43,682 0.000% 39-5092 Manicurists and Pedicurists $19,327 0.000% Weighted Mean Annual Wage $27,171 0.395% Palo Alto Linkage Fee Nexus Study -42- Figure III-9. Occupational Mix and Average Wages for Office/ R&D/ Medical Office, Continued Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Office/ R&D/ Medical Office Workers (c) 41-0000 Sales and Related Occupations 41-3099 41-4011 Sales Representatives, Services, All Other Sales Representatives, Wholesale and Manufacturing, Technical and Scientific Products $90,918 $122,303 1.480% 0.645% 41-3031 41-4012 Securities, Commodities, and Financial Services Sales Agents Sales Representatives, Wholesale and Manufacturing, Except Technical and Scientific Products $94,597 $68,867 0.412% 0.334% 41-9031 Sales Engineers $121,759 0.235% 41-1012 First-Line Supervisors of Non-Retail Sales Workers $111,025 0.222% 41-3021 Insurance Sales Agents $73,372 0.213% 41-2031 Retail Salespersons $27,121 0.206% 41-9041 Telemarketers $29,631 0.184% 41-2011 Cashiers $25,771 0.150% 41-9022 Real Estate Sales Agents $70,439 0.121% 41-3011 Advertising Sales Agents $63,001 0.110% 41-2021 Counter and Rental Clerks $34,428 0.105% 41-9099 Sales and Related Workers, All Other $42,552 0.060% 41-9011 Demonstrators and Product Promoters $26,396 0.058% 41-1011 First-Line Supervisors of Retail Sales Workers $48,448 0.049% 41-9021 Real Estate Brokers $104,837 0.028% 41-2022 Parts Salespersons $36,575 0.005% 41-3041 Travel Agents $41,745 0.004% Weighted Mean Annual Wage $83,961 4.621% 43-0000 Office and Administrative Support Occupations 43-9061 Office Clerks, General $39,450 2.848% 43-4051 Customer Service Representatives $46,518 2.571% 43-6014 Secretaries and Administrative Assistants, Except Legal, Medical, and Executive $43,308 2.003% 43-3031 Bookkeeping, Accounting, and Auditing Clerks $49,252 1.528% 43-4171 Receptionists and Information Clerks $34,590 1.285% 43-1011 First-Line Supervisors of Office and Administrative Support Workers $67,296 1.261% 43-6011 Executive Secretaries and Executive Administrative Assistants $65,402 0.904% 43-3071 Tellers $31,886 0.879% 43-6013 Medical Secretaries $44,938 0.773% 43-3021 Billing and Posting Clerks $45,890 0.657% Palo Alto Linkage Fee Nexus Study -43- Figure III-9. Occupational Mix and Average Wages for Office/ R&D/ Medical Office, Continued Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Office/ R&D/ Medical Office Workers (c) 43-9021 Data Entry Keyers $33,820 0.411% 43-5081 Stock Clerks and Order Fillers $28,312 0.391% 43-3011 Bill and Account Collectors $49,434 0.379% 43-6012 Legal Secretaries $62,648 0.365% 43-5071 Shipping, Receiving, and Traffic Clerks $35,207 0.346% 43-5061 Production, Planning, and Expediting Clerks $58,689 0.307% 43-4131 Loan Interviewers and Clerks $47,712 0.275% 43-4071 File Clerks $34,012 0.229% 43-9199 Office and Administrative Support Workers, All Other $38,731 0.186% 43-3051 Payroll and Timekeeping Clerks $51,773 0.172% 43-9011 Computer Operators $46,204 0.144% 43-4161 Human Resources Assistants, Except Payroll and Timekeeping $51,044 0.144% 43-9041 Insurance Claims and Policy Processing Clerks $41,779 0.135% 43-4111 Interviewers, Except Eligibility and Loan $48,452 0.134% 43-4141 New Accounts Clerks $41,475 0.095% 43-9051 Mail Clerks and Mail Machine Operators, Except Postal Service $34,691 0.093% 43-2011 Switchboard Operators, Including Answering Service $35,683 0.086% 43-4199 Information and Record Clerks, All Other $46,467 0.082% 43-9071 Office Machine Operators, Except Computer $33,131 0.081% 43-4151 Order Clerks $42,315 0.072% 43-4011 Brokerage Clerks $57,261 0.066% 43-5032 Dispatchers, Except Police, Fire, and Ambulance $53,920 0.062% 43-4041 Credit Authorizers, Checkers, and Clerks $41,981 0.060% 43-5021 Couriers and Messengers $36,189 0.058% 43-4121 Library Assistants, Clerical $34,488 0.055% 43-9022 Word Processors and Typists $51,013 0.046% 43-3061 Procurement Clerks $47,955 0.040% 43-3099 Financial Clerks, All Other $45,444 0.040% 43-5111 Weighers, Measurers, Checkers, and Samplers, Recordkeeping $30,539 0.023% 43-9031 Desktop Publishers $58,750 0.018% 43-5011 Cargo and Freight Agents $38,650 0.013% 43-9081 Proofreaders and Copy Markers $48,371 0.013% 43-9111 Statistical Assistants $54,203 0.010% Palo Alto Linkage Fee Nexus Study -44- Figure III-9. Occupational Mix and Average Wages for Office/ R&D/ Medical Office, Continued Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Office/ R&D/ Medical Office Workers (c) 43-4181 Reservation and Transportation Ticket Agents and Travel Clerks $37,617 0.009% 43-4081 Hotel, Motel, and Resort Desk Clerks $24,788 0.008% 43-5041 Meter Readers, Utilities $52,330 0.006% 43-5031 Police, Fire, and Ambulance Dispatchers $71,660 0.004% 43-4061 Eligibility Interviewers, Government Programs $58,831 0.003% 43-4031 Court, Municipal, and License Clerks $42,184 0.001% Weighted Mean Annual Wage $45,403 19.372% 45-0000 Farming, Fishing, and Forestry Occupations 45-2092 Farmworkers and Laborers, Crop, Nursery, and Greenhouse $21,473 0.013% 45-2093 Farmworkers, Farm, Ranch, and Aquacultural Animals $28,101 0.006% 45-1011 First-Line Supervisors of Farming, Fishing, and Forestry Workers $61,161 0.002% 45-2091 Agricultural Equipment Operators $54,786 0.002% 45-2011 Agricultural Inspectors $55,849 0.002% 45-4011 Forest and Conservation Workers $19,510 0.001% 45-2041 Graders and Sorters, Agricultural Products $20,370 0.000% Weighted Mean Annual Wage $31,456 0.026% 47-0000 Construction and Extraction Occupations 47-2061 Construction Laborers $44,910 0.350% 47-4011 Construction and Building Inspectors $82,189 0.097% 47-2111 Electricians $64,835 0.089% 47-2031 Carpenters $62,042 0.088% 47-1011 First-Line Supervisors of Construction Trades and Extraction Workers $83,728 0.036% 47-2073 Operating Engineers and Other Construction Equipment Operators $69,510 0.033% 47-2152 Plumbers, Pipefitters, and Steamfitters $80,317 0.032% 47-2141 Painters, Construction and Maintenance $52,934 0.031% 47-2051 Cement Masons and Concrete Finishers $50,759 0.009% 47-4099 Construction and Related Workers, All Other $60,645 0.007% 47-2081 Drywall and Ceiling Tile Installers $62,062 0.006% 47-2221 Structural Iron and Steel Workers $83,677 0.004% 47-4071 Septic Tank Servicers and Sewer Pipe Cleaners $42,704 0.004% 47-3012 Helpers--Carpenters $49,079 0.004% Palo Alto Linkage Fee Nexus Study -45- Figure III-9. Occupational Mix and Average Wages for Office/ R&D/ Medical Office, Continued Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Office/ R&D/ Medical Office Workers (c) 47-2022 Stonemasons $46,306 0.004% 47-4041 Hazardous Materials Removal Workers $42,127 0.003% 47-2181 Roofers $51,558 0.003% 47-2151 Pipelayers $62,285 0.002% 47-2041 Carpet Installers $56,709 0.002% 47-4051 Highway Maintenance Workers $60,564 0.002% 47-2161 Plasterers and Stucco Masons $54,270 0.001% 47-2021 Brickmasons and Blockmasons $59,947 0.001% 47-2044 Tile and Marble Setters $44,141 0.001% 47-3019 Helpers, Construction Trades, All Other $28,061 0.001% 47-3014 Helpers--Painters, Paperhangers, Plasterers, and Stucco Masons $29,650 0.001% 47-2082 Tapers $63,074 0.001% 47-4021 Elevator Installers and Repairers $87,219 0.001% 47-2211 Sheet Metal Workers $69,014 0.001% 47-2071 Paving, Surfacing, and Tamping Equipment Operators $49,221 0.001% 47-2121 Glaziers $71,402 0.000% 47-3011 Helpers--Brickmasons, Blockmasons, Stonemasons, and Tile and Marble Setters $38,929 0.000% 47-2042 Floor Layers, Except Carpet, Wood, and Hard Tiles $64,045 0.000% Weighted Mean Annual Wage $58,523 0.813% 49-0000 Installation, Maintenance, and Repair Occupations 49-9071 Maintenance and Repair Workers, General $48,997 0.675% 49-2022 Telecommunications Equipment Installers and Repairers, Except Line Installers $65,495 0.243% 49-2011 Computer, Automated Teller, and Office Machine Repairers $46,697 0.184% 49-1011 First-Line Supervisors of Mechanics, Installers, and Repairers $77,658 0.127% 49-9052 Telecommunications Line Installers and Repairers $63,724 0.122% 49-9099 Installation, Maintenance, and Repair Workers, All Other $49,058 0.114% 49-2098 Security and Fire Alarm Systems Installers $64,885 0.068% 49-9041 Industrial Machinery Mechanics $55,938 0.066% 49-2094 Electrical and Electronics Repairers, Commercial and Industrial Equipment $51,745 0.046% 49-9098 Helpers--Installation, Maintenance, and Repair Workers $34,330 0.030% 49-3011 Aircraft Mechanics and Service Technicians $63,317 0.024% 49-3023 Automotive Service Technicians and Mechanics $51,582 0.023% Palo Alto Linkage Fee Nexus Study -46- Figure III-9. Occupational Mix and Average Wages for Office/ R&D/ Medical Office, Continued Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Office/ R&D/ Medical Office Workers (c) 49-9094 Locksmiths and Safe Repairers $59,969 0.023% 49-9021 Heating, Air Conditioning, and Refrigeration Mechanics and Installers $65,190 0.017% 49-3031 Bus and Truck Mechanics and Diesel Engine Specialists $55,745 0.015% 49-9043 Maintenance Workers, Machinery $43,226 0.015% 49-9062 Medical Equipment Repairers $56,416 0.011% 49-3053 Outdoor Power Equipment and Other Small Engine Mechanics $46,768 0.011% 49-3042 Mobile Heavy Equipment Mechanics, Except Engines $55,470 0.009% 49-9051 Electrical Power-Line Installers and Repairers $91,072 0.008% 49-9012 Control and Valve Installers and Repairers, Except Mechanical Door $62,330 0.006% 49-3093 Tire Repairers and Changers $30,300 0.004% 49-9069 Precision Instrument and Equipment Repairers, All Other $54,798 0.004% 49-3021 Automotive Body and Related Repairers $47,826 0.004% 49-2097 Electronic Home Entertainment Equipment Installers and Repairers $41,719 0.004% 49-2091 Avionics Technicians $65,780 0.003% 49-3041 Farm Equipment Mechanics and Service Technicians $43,847 0.001% 49-9031 Home Appliance Repairers $42,004 0.001% 49-9091 Coin, Vending, and Amusement Machine Servicers and Repairers $36,977 0.001% 49-2093 Electrical and Electronics Installers and Repairers, Transportation Equipment $65,251 0.000% 49-3091 Bicycle Repairers $26,890 0.000% 49-2096 Electronic Equipment Installers and Repairers, Motor Vehicles $37,638 0.000% Weighted Mean Annual Wage $55,278 1.862% 51-0000 Production Occupations 51-2092 Team Assemblers $34,315 1.193% 51-2022 Electrical and Electronic Equipment Assemblers $37,365 0.820% 51-9198 Helpers--Production Workers $27,546 0.702% 51-9061 Inspectors, Testers, Sorters, Samplers, and Weighers $46,350 0.532% 51-2099 Assemblers and Fabricators, All Other $38,137 0.473% 51-9199 Production Workers, All Other $36,491 0.387% 51-9111 Packaging and Filling Machine Operators and Tenders $29,762 0.339% 51-4041 Machinists $49,918 0.238% 51-1011 First-Line Supervisors of Production and Operating Workers $63,406 0.228% 51-9141 Semiconductor Processors $37,050 0.226% Palo Alto Linkage Fee Nexus Study -47- Figure III-9. Occupational Mix and Average Wages for Office/ R&D/ Medical Office, Continued Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Office/ R&D/ Medical Office Workers (c) 51-4031 Cutting, Punching, and Press Machine Setters, Operators, and Tenders, Metal and Plastic $35,860 0.140% 51-4121 Welders, Cutters, Solderers, and Brazers $43,484 0.126% 51-2023 Electromechanical Equipment Assemblers $36,531 0.100% 51-4011 Computer-Controlled Machine Tool Operators, Metal and Plastic $42,335 0.059% 51-9081 51-4072 Dental Laboratory Technicians Molding, Coremaking, and Casting Machine Setters, Operators, and Tenders, Metal and Plastic $41,827 $31,632 0.045% 0.045% 51-4193 Plating and Coating Machine Setters, Operators, and Tenders, Metal and Plastic $36,145 0.036% 51-5112 Printing Press Operators $37,416 0.034% 51-4199 Metal Workers and Plastic Workers, All Other $43,097 0.034% 51-2021 Coil Winders, Tapers, and Finishers $55,529 0.032% 51-6011 Laundry and Dry-Cleaning Workers $25,879 0.028% 51-9151 Photographic Process Workers and Processing Machine Operators $35,047 0.019% 51-4081 Multiple Machine Tool Setters, Operators, and Tenders, Metal and Plastic $42,477 0.017% 51-6021 Pressers, Textile, Garment, and Related Materials $24,425 0.017% 51-6031 Sewing Machine Operators $24,629 0.013% 51-9121 Coating, Painting, and Spraying Machine Setters, Operators, and Tenders $33,817 0.013% 51-3011 Bakers $27,048 0.012% 51-4111 Tool and Die Makers $51,310 0.011% 51-3099 Food Processing Workers, All Other $28,694 0.011% 51-4122 Welding, Soldering, and Brazing Machine Setters, Operators, and Tenders $44,744 0.011% 51-4012 Computer Numerically Controlled Machine Tool Programmers, Metal and Plastic $64,290 0.010% 51-3092 Food Batchmakers $25,310 0.010% 51-5113 51-4033 Print Binding and Finishing Workers Grinding, Lapping, Polishing, and Buffing Machine Tool Setters, Operators, and Tenders, Metal and Plastic $31,795 $31,053 0.010% 0.010% 51-2041 Structural Metal Fabricators and Fitters $43,504 0.009% 51-5111 Prepress Technicians and Workers $46,035 0.009% 51-9196 Paper Goods Machine Setters, Operators, and Tenders $42,264 0.009% 51-3022 Meat, Poultry, and Fish Cutters and Trimmers $24,923 0.008% 51-9011 Chemical Equipment Operators and Tenders $46,828 0.007% 51-8031 Water and Wastewater Treatment Plant and System Operators $76,488 0.007% 51-8012 Power Distributors and Dispatchers $118,172 0.006% 51-7011 Cabinetmakers and Bench Carpenters $38,086 0.006% 51-9032 Cutting and Slicing Machine Setters, Operators, and Tenders $29,569 0.006% Palo Alto Linkage Fee Nexus Study -48- Figure III-9. Occupational Mix and Average Wages for Office/ R&D/ Medical Office, Continued Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Office/ R&D/ Medical Office Workers (c) 51-8021 Stationary Engineers and Boiler Operators $78,511 0.005% 51-4061 Model Makers, Metal and Plastic $50,701 0.005% 51-9023 Mixing and Blending Machine Setters, Operators, and Tenders $42,508 0.005% 51-4034 Lathe and Turning Machine Tool Setters, Operators, and Tenders, Metal and Plastic $42,742 0.005% 51-9194 Etchers and Engravers $26,763 0.005% 51-9021 51-9012 Crushing, Grinding, and Polishing Machine Setters, Operators, and Tenders Separating, Filtering, Clarifying, Precipitating, and Still Machine Setters, Operators, and Tenders $37,751 $40,373 0.004% 0.004% 51-4022 Forging Machine Setters, Operators, and Tenders, Metal and Plastic $41,105 0.003% 51-9041 Extruding, Forming, Pressing, and Compacting Machine Setters, Operators, and Tenders $33,756 0.003% 51-9195 Molders, Shapers, and Casters, Except Metal and Plastic $38,971 0.003% 51-7099 Woodworkers, All Other $36,155 0.003% 51-9122 Painters, Transportation Equipment $51,656 0.003% 51-3091 Food and Tobacco Roasting, Baking, and Drying Machine Operators and Tenders $32,750 0.002% 51-4032 Drilling and Boring Machine Tool Setters, Operators, and Tenders, Metal and Plastic $37,741 0.002% 51-8091 Chemical Plant and System Operators $53,252 0.002% 51-4035 Milling and Planing Machine Setters, Operators, and Tenders, Metal and Plastic $37,324 0.002% 51-8099 Plant and System Operators, All Other $74,231 0.002% 51-9191 Adhesive Bonding Machine Operators and Tenders $31,784 0.002% 51-9123 Painting, Coating, and Decorating Workers $38,269 0.002% 51-9022 Grinding and Polishing Workers, Hand $29,680 0.002% 51-6052 Tailors, Dressmakers, and Custom Sewers $41,613 0.002% 51-9051 Furnace, Kiln, Oven, Drier, and Kettle Operators and Tenders $52,256 0.001% 51-9192 Cleaning, Washing, and Metal Pickling Equipment Operators and Tenders $23,551 0.001% 51-8013 Power Plant Operators $84,833 0.001% 51-4191 Heat Treating Equipment Setters, Operators, and Tenders, Metal and Plastic $50,609 0.001% 51-3093 Food Cooking Machine Operators and Tenders $28,593 0.001% 51-4194 Tool Grinders, Filers, and Sharpeners $50,131 0.001% 51-8093 Petroleum Pump System Operators, Refinery Operators, and Gaugers $77,972 0.001% 51-9031 Cutters and Trimmers, Hand $24,446 0.001% 51-6062 Textile Cutting Machine Setters, Operators, and Tenders $27,109 0.000% 51-3021 Butchers and Meat Cutters $34,021 0.000% 51-7021 Furniture Finishers $29,630 0.000% Palo Alto Linkage Fee Nexus Study -49- Figure III-9. Occupational Mix and Average Wages for Office/ R&D/ Medical Office, Continued Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Office/ R&D/ Medical Office Workers (c) 51-7041 Sawing Machine Setters, Operators, and Tenders, Wood $33,543 0.000% Weighted Mean Annual Wage $37,809 6.124% 53-0000 Transportation and Material Moving Occupations 53-7062 Laborers and Freight, Stock, and Material Movers, Hand $31,188 2.554% 53-7064 Packers and Packagers, Hand $23,607 0.672% 53-7051 Industrial Truck and Tractor Operators $37,469 0.285% 53-3032 Heavy and Tractor-Trailer Truck Drivers $46,564 0.199% 53-3033 Light Truck or Delivery Services Drivers $36,503 0.137% 53-7063 Machine Feeders and Offbearers $33,475 0.052% 53-1021 First-Line Supervisors of Helpers, Laborers, and Material Movers, Hand $52,489 0.037% 53-3099 Motor Vehicle Operators, All Other $48,302 0.030% 53-3041 Taxi Drivers and Chauffeurs $31,493 0.026% 53-7061 53-1031 Cleaners of Vehicles and Equipment First-Line Supervisors of Transportation and Material-Moving Machine and Vehicle Operators $25,762 $61,604 0.023% 0.021% 53-7081 Refuse and Recyclable Material Collectors $46,188 0.017% 53-3031 Driver/Sales Workers $35,192 0.016% 53-6021 Parking Lot Attendants $21,595 0.014% 53-2012 Commercial Pilots $69,308 0.010% 53-3021 Bus Drivers, Transit and Intercity $56,828 0.004% 53-6031 Automotive and Watercraft Service Attendants $27,042 0.004% 53-3022 Bus Drivers, School or Special Client $36,117 0.004% 53-6051 Transportation Inspectors $87,640 0.003% 53-7032 Excavating and Loading Machine and Dragline Operators $62,966 0.003% 53-6099 Transportation Workers, All Other $33,607 0.001% Palo Alto Linkage Fee Nexus Study -50- Figure III-9. Occupational Mix and Average Wages for Office/ R&D/ Medical Office, Continued Occupation Code Occupation Name (a) Average Annual Wage (b) % of Total Office/ R&D/ Medical Office Workers (c) 53-7199 Material Moving Workers, All Other $39,857 0.001% 53-1011 Aircraft Cargo Handling Supervisors $54,846 0.000% 53-2022 Airfield Operations Specialists $67,925 0.000% Weighted Mean Annual Wage $32,020 4.116% Notes: Total, Land Use $78,597.78 100.000% (a) Occupational mix by industry was obtained from US Bureau of Labor Statistics, Occupational Employment Statistics, 2013. (b) Wage data for the San Jose – Sunnyvale – Santa Clara Metropolitan Statistical Area obtained from California Economic Development Department, OES Employment and Wages by Occupation, 2013. (c) Distribution of workers is calculated based on the existing distribution of employment by industry in Santa Clara County, provided by Quarterly Census of Employment and Wages (QCEW), 2013. Sources: Vernazza Wolfe Associates, Inc.; Strategic Economics, 2015. Palo Alto Linkage Fee Nexus Study Household Incomes Based on the employee wage calculations discussed above, household incomes are estimated for each prototype. This step assumes that the income of the second wage-earner is similar to the wage of the first wage-earner. In order to calculate the annual household income, the average worker wage is multiplied by the number of wage-earners per household. According to the U.S. Census Bureau American Community Survey 3-Year Estimates, 2010-2012, there is an average of 1.49 wage-earners per household in Palo Alto. The average annual wage per employee within each occupation was multiplied by 1.49 in order to determine annual average household income. Employee households are then categorized as very low, low, moderate, and above moderate income based on the income definitions and cut-offs established by the California Housing and Community Development Department (HCD). According to the U.S. Census Bureau American Community Survey 5- Year Estimates, 2008-2012, the average household size in the City of Palo Alto is 2.41. This has been rounded to 2, the nearest whole number. The income categories for very low, low, moderate, and above moderate income households are therefore based on the household size of two persons, using the California Department of Housing and Community Development’s definitions of income thresholds for area median income, as shown in Figure III-10. Figure III-10. Household Income Categories Income Category 2-Person Household Very Low Income (<=50% AMI) $42,450 Low Income (51-80% AMI) $67,900 Moderate Income (81-120% AMI) $101,300 Above Moderate Income (>=120%) >$101,300 Source: California Department of Housing and Community Development, "State Income Limits for 2014", February 28, 2014. Using the income categories described above, the new worker households were sorted into income groups. As shown in Figure III-11 below, most hotel worker households are in very low and low income categories, and about half of office/ R&D/ medical office workers are in very low, low, and moderate income categories. Above moderate income households were removed from the subsequent steps of the nexus analysis, as it is determined that these income groups would be able to afford market-rate housing. Palo Alto Linkage Fee Nexus Study Figure III-11. Number of Worker Households by Income Category Number of Worker Prototype Hotel Households Very Low Income (<=50% AMI) 30.05 Low Income (51-80% AMI) 24.13 Moderate Income (81-120% AMI) 9.58 Above Moderate (>=120%) 3.36 Total 67.12 Office, R&D and Medical Office Land Use Very Low Income (<=50% AMI) 14.40 Low Income (51-80% AMI) 51.43 Moderate Income (81-120% AMI) 36.32 Above Moderate (>=120%) 99.39 Total 201.54 Sources: Vernazza Wolfe Associates, Inc; Strategic Economics, 2015. Palo Alto Linkage Fee Nexus Study IV. HOUSING AFFORDABILITY GAP Estimating the housing affordability gap is necessary to calculate the maximum housing impact fee. This section summarizes the approach to calculating the housing affordability gap and the results of the analysis. METHODOLOGY The housing affordability gap is defined as the difference between what very low, low, and moderate income households can afford to pay for housing and the development cost of new, modest housing units. Calculating the housing affordability gap involves the following three steps: 1. Estimating affordable rents and housing prices for households in target income groups. 2. Estimating development costs of building new, modest housing units, based on current cost and market data. 3. Calculating the different between what renters and owners can afford to pay for housing and the cost of development of rental and ownership units. The housing affordability gap is estimated at a countywide level because the California Department of Housing and Community Development Department (HCD) and U.S. Housing and Urban Development Department (HUD) define the ability to pay for housing at the county (rather than the city) level. This analysis uses 2014 income limits published by California Department of Housing and Community Development (HCD). ESTIMATING AFFORDABLE RENTS AND SALES PRICES The first step in calculating the housing affordability gap is to determine the maximum amount that households at the targeted income levels can afford to pay for housing. For eligibility purposes, most affordable housing programs define very low income households as those earning approximately 50 percent or less of area median income (AMI), low income households as those earning between 51 and 80 percent of AMI, and moderate income households as those earning between 81 and 120 percent of AMI. In order to ensure that the affordability of housing does not use the top incomes in each category, the analysis uses a point within the income ranges for the low and moderate income groups.3 Figure IV-1 and Figure IV-2 show the calculations for rental housing. The maximum affordable monthly rent is calculated as 30 percent of gross monthly household income, minus a deduction for utilities. For example, a very low income, three-person household could afford to spend $1,194 on total monthly housing costs. After deducting for utilities, $1,145 a month is available to pay for rent (Figure IV-1). Figure IV-3 and Figure IV-4 demonstrate housing affordability for homeowners. Homeowners are assumed to pay a maximum of 35 percent of gross monthly income on total housing costs, depending on income level. The maximum affordable price for for-sale housing is then calculated based on the total monthly mortgage payment that a homeowner could afford, using standard loan terms used by CalHFA 3 For rental housing, 70 percent of AMI is used to represent low income households and 90 percent of AMI is used to represent moderate income households. For ownership housing, it is assumed that moderate income homebuyers may earn slightly less than the maximum for that income category (110 percent of AMI). Higher income limits are used for ownership than for rental housing because ownership housing is more expensive to purchase and maintain. Palo Alto Linkage Fee Nexus Study programs and many private lenders for first-time homebuyers, including a five percent down payment (Figure IV-3). For example, a moderate income, three-person household could afford to spend $3,046 a month on total housing costs, allowing for the purchase of a $359,897 home. Key assumptions used to calculate the maximum affordable rents and housing prices are discussed below. • Unit types: For rental housing, the analysis included studios, one-, two-, and three-bedroom units. For for-sale housing, one-, two-, and three-bedroom units were included. These unit types represent the affordable and modest market-rate apartment and condominium units available in Palo Alto. Condominiums were used to represent modest for-sale housing because single-family homes in Palo Alto tend to be significantly more expensive than condominiums. • Occupancy and household size assumptions. Because income levels for affordable housing programs vary by household size, calculating affordable unit prices requires defining household sizes for each unit type. Consistent with California Health and Safety Code Section 50052.5(h), unit occupancy was generally estimated as the number of bedrooms plus one. For example, a studio unit is assumed to be occupied by one person, a one bedroom unit is assumed to be occupied by two people, and so on. Several adjustments to this general assumption were made in order to capture the full range of household sizes. In particular, it is assumed that one-bedroom condominiums could be occupied by one- or two-person households, and three-bedroom apartments and condominiums could be occupied by four- or five-person households.4 • Targeted income levels for rental housing: For rental housing, affordable rents were calculated for very low income, low income, and moderate income households (see Figure IV-1 and Figure IV-2). For eligibility purposes, most affordable housing programs define very low income households as those earning 50 percent or less of area median income (AMI), low income households as those earning between 51 and 80 percent of AMI, and moderate income households as those earning between 81 and 120 percent of AMI. However, defining affordable housing expenses based at the top of each income range would result in prices that are not affordable to most of the households in each category. Thus, this analysis does not use the maximum income level for all of the income categories. Instead, for rental housing, 70 percent of AMI is used to represent low income households and 90 percent of AMI is used to represent moderate income households. • Targeted income levels for ownership housing For ownership housing, affordable home prices were calculated only for moderate income households, because very low and low income households are unlikely to be homebuyers. Higher income limits are used for ownership than for rental housing because ownership housing is more expensive to purchase and maintain. It is assumed that moderate income homebuyers may earn slightly less than the maximum for that income category (110 percent of AMI). • Maximum monthly housing costs.5 For all renters, maximum monthly housing costs are assumed to be 30 percent of gross household income. For homebuyers, 35 percent of gross income is assumed to be available for monthly housing costs, reflecting the higher incomes of this 4 For these unit types, the maximum affordable home price (or rent) is calculated as the average price (or rent) that the relevant household sizes can afford to pay. For example, the maximum affordable home price for a one-bedroom condominium is calculated as the average of the maximum affordable home price for one- and two-person households. 5 The calculation of homeowner affordability is conservative in that the model accounts for additional costs for buyers (such as utility costs) that might not be considered by all lenders. Palo Alto Linkage Fee Nexus Study group.6 These standards are based on California’s Health & Safety Code Sections 50052.5 and 50053. • Utilities. The monthly utility cost assumptions are based on Santa Clara County’s “2013 Utility Allowance Schedule.”7 Both renters and owners are assumed to pay for heating, cooking, other electric, and water heating. In addition, owners are assumed to pay for water and trash collection.8 • Mortgage terms & costs included for ownership housing. For ownership housing, the mortgage calculations are based on the terms typically offered to first-time homebuyers (such as the terms offered by the California Housing Finance Authority), which is a 30-year mortgage with a five percent down payment. A five percent down payment standard is also used by many private lenders for first-time homebuyers. Based on recent interest rates to first-time buyers, the analysis assumes a 5.375 percent annual interest rate.9 In addition to mortgage payments and utilities, monthly ownership housing costs include homeowner association (HOA) dues,10 property taxes,11 private mortgage insurance,12 and hazard and casualty insurance.13 6 The assumption that homebuyers spend 35 percent of gross household income on housing results in a reduced affordability gap than if 30 percent of gross household income were used instead. 7 Santa Clara County, “Utility Allowance Schedule”, 2013. 8 Based on the most common types of fuel for owner and rental units in Palo Alto, all units are assumed to have natural gas heating and water heating systems; for-sale units are also assumed to have natural gas stoves, while rental units are assumed to use electric stoves. Sources: U.S. Census Bureau, 2008-2012 American Community Survey, “Table B25117: Tenure by House Heating Fuel,” City of Palo Alto; U.S. Census Bureau, 2011 American Housing Survey, “Table C-03-AH-M, San Jose-Sunnyvale-Santa Clara: Heating, Air Conditioning, and Appliances – All Housing Units.” 9 Sources: CalHFA Mortgage Calculator, accessed March 2014; Zillow.com, “Current Mortgage Rates and Home Loans,” accessed March 2014; interviews with California Housing Finance Agency (CalHFA) Preferred Loan Officers, March 2014. 10 HOA fees are estimated at $300 per unit per month, based on common HOA fees in Santa Clara County as reported in: Polaris Pacific, “Silicon Valley Condominium Market,” February 2014. 11 The annual property tax rate is estimated at 1.16, based on the total direct and overlapping property tax rate for Palo Alto reported in the City’s 2012-13 Comprehensive Annual Financial Report (page 144). 12 The annual private mortgage insurance premium rate is estimated at 0.89 percent of the total mortgage amount, consistent with standard requirements for conventional loans with a five percent down payment. Sources: Genworth, February 2014; MGIC, December 2013; Radian, April 2014. 13 The annual hazard and casualty insurance rate is assumed to be 0.35 percent of the sales price, consistent with standard industry practice. Palo Alto Linkage Fee Nexus Study -56- Figure IV-1. Calculation of Affordable Rents in Santa Clara County by Household Size, 2014 Persons per Household (HH) 1 2 3 4 5 Very Low Income (50% AMI) Maximum Household Income at 50% AMI $37,150 $42,450 $47,750 $53,050 $57,300 Maximum Monthly Housing Cost (a) $929 $1,061 $1,194 $1,326 $1,433 Utility Deduction $29 $40 $49 $60 $60 Maximum Available for Rent (HH Size) (b) $900 $1,021 $1,145 $1,266 $1,373 Low Income (70% AMI) Maximum Household Income at 70% AMI $51,695 $59,080 $66,465 $73,850 $79,765 Maximum Monthly Housing Cost (a) $1,292 $1,477 $1,662 $1,846 $1,994 Utility Deduction $29 $40 $49 $60 $60 Maximum Available for Rent (HH Size) (b) $1,263 $1,437 $1,613 $1,786 $1,934 Moderate Income (90% AMI) Maximum Household Income at 90% AMI $66,465 $75,960 $85,455 $94,950 $102,555 Maximum Monthly Housing Cost (a) $1,662 $1,899 $2,136 $2,374 $2,564 Utility Deduction $29 $40 $49 $60 $60 Maximum Available for Rent (HH Size) (b) $1,633 $1,859 $2,087 $2,314 $2,504 Notes: (a) 30 percent of maximum monthly household income. (b) Maximum monthly housing cost minus utility deduction. Acronyms: AMI: Area median income HH: Household Sources: California Department of Housing and Community Development, "State Income Limits for 2014," February 28, 2014 and “Overpayment and Overcrowding,” 2010; Housing Authority of Santa Clara County, "2013 Utility Allowances Schedule," Santa Clara County, October 2013; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2014. Palo Alto Linkage Fee Nexus Study -57- Figure IV-2. Calculation of Affordable Rents in Santa Clara County by Unit Type, 2014 Affordable Rents by Unit Type (a) Studio 1 Bedroom 2 Bedroom 3 Bedroom Very Low Income (50% AMI) $900 $1,021 $1,145 $1,319 Low Income (70% AMI) $1,263 $1,437 $1,613 $1,860 Moderate Income (90% AMI) $1,633 $1,859 $2,087 $2,409 (a) Affordable rents are calculated as follows: Studios are calculated as one-person households; One-bedroom units are calculated as two-person households; Two-bedroom units are calculated as three-person households; Three-bedroom units are calculated as an average of four and five person households. Sources: California Department of Housing and Community Development, "State Income Limits for 2014," February 28, 2014 and “Overpayment and Overcrowding,” 2010; Housing Authority of Santa Clara County, "2013 Utility Allowances Schedule," Santa Clara County, October 2013; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2014. Palo Alto Linkage Fee Nexus Study -58- Figure IV-3. Calculation of Affordable Sales Prices in Santa Clara County by Household Size, 2014 Household Size (Persons per HH) 1 2 3 4 5 Moderate Income (110% AMI) (g) Maximum Household Income at 110% AMI $81,235 $92,840 $104,445 $116,050 $125,345 Maximum Monthly Housing Cost (a) Monthly Deductions $2,369 $2,708 $3,046 $3,385 $3,656 Utilities $113 $113 $125 $174 $174 HOA Dues $300 $300 $300 $300 $300 Property Taxes and Insurance (b) $527 $619 $706 $785 $858 Monthly Income Available for Mortgage Payment (c) $1,429 $1,676 $1,915 $2,126 $2,324 Maximum Mortgage Amount (d) $255,155 $299,376 $341,902 $379,732 $415,083 Maximum Affordable Sales Price - HH Size (e) $268,584 $315,133 $359,897 $399,717 $436,929 Notes: (a) 30 percent of monthly household income for very low and low income households; 35 percent of monthly household income for moderate-income households (b) Assumes annual property tax rate of 1.16 percent of sales price; annual private mortgage insurance premium rate of 0.89 percent of mortgage amount; annual hazard and casualty insurance rate of 0.35 percent of sales price (c) Maximum monthly housing cost minus deductions (d) Assumes 5.375 percent interest rate and 30 year loan term. Assumes CalHFA first-time homebuyer program. (e) Assumes 5 percent down payment (95 percent loan-to-value ratio). Assumes CalHFA first-time homebuyer program. (f) Calculated as an average of household sizes occupying unit type. 1-bedroom units are assumed to accommodate 1- and 2-person households; 3-bedroom units are assumed to accommodate 4- and 5-person households. (g) Calculated as 110 percent of the median household income reported by HCD for each household size. Acronyms: AMI: Area median income HH: Household HOA: Homeowners association Sources: California Department of Housing and Community Development, "State Income Limits for 2014," February 28, 2014 and “Overpayment and Overcrowding,” 2010; Housing Authority of Santa Clara County, "2013 Utility Allowances Schedule," Santa Clara County, October 2013; Mortgage insurance provider websites; Interviews with California Housing Finance Agency (CalHFA) Preferred Loan Officers, March 2014; CalHFA Mortgage Calculator, March 2014; Zillow.com, March 2014; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2014. Palo Alto Linkage Fee Nexus Study -59- Figure IV-4. Calculation of Affordable Sales Prices in Santa Clara County by Unit Type, 2014 Affordable Sales Price by Unit Type (a) 1 Bedroom 2 Bedroom 3 Bedroom Moderate Income (110% AMI) $291,858 $359,897 $418,323 (a) One-bedroom units are calculated as an average of one- and two-person households; Two-bedroom units are calculated as three-person households; and three-bedroom units are calculated as an average of four and five person households. Sources: California Department of Housing and Community Development, "State Income Limits for 2014," February 28, 2014 and “Overpayment and Overcrowding,” 2010; Housing Authority of Santa Clara County, "2013 Utility Allowances Schedule," Santa Clara County, October 2013; Mortgage insurance provider websites; Interviews with California Housing Finance Agency (CalHFA) Preferred Loan Officers, March 2014; CalHFA Mortgage Calculator, March 2014; Zillow.com, March 2014; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2014. Palo Alto Linkage Fee Nexus Study ESTIMATING HOUSING DEVELOPMENT COSTS The second step in calculating the housing affordability gap is to estimate the cost of developing new, modest housing units. Modest housing is defined slightly differently for rental and ownership housing. For rental housing, the costs and characteristics of modest housing are similar to recent projects developed in Palo Alto by the affordable rental housing sector. However, there are no examples of new modest ownership housing units built in Palo Alto by the private or nonprofit sectors. The new for-sale homes in Palo Alto are typically luxury custom-built single family homes and large upscale condominium units, which are too costly to meet the standard for modest housing. For the purposes of this affordability gap analysis, modest for-sale housing units are defined as compact, non-luxury multifamily condominium units. The calculation of housing development costs used in the housing affordability gap requires several steps. Because the gap covers both rental housing and for-sale housing, it is necessary to estimate costs for each. The following describes the data sources used to calculate rental and for-sale housing development costs. Rental Housing Rental housing development costs were based on pro forma data obtained from recent affordable housing projects in Palo Alto. Figure IV-5 shows the description of these projects and summarizes the information that was used to generate a per-square-foot cost of $446 used in the cost analysis. These costs include site acquisition costs, hard costs (on- and off-site improvements), soft costs (such as design, city permits and fees, construction interest, and contingencies), and developer fees. The costs from the rental housing pro formas were also cross-referenced against proprietary pro formas available to the consultant team from other private development projects in order to ensure accuracy. Since these projects assumed state and federal funding, the labor costs included in the original pro formas reflect the prevailing wage requirement imposed by state and local governments. The costs shown in Figure IV-5 have been adjusted to subtract out the prevailing wage requirement because the development cost model used in the housing affordability gap analysis does not assume receipt of government subsidies. A rule of thumb used by local economists who assist affordable housing developers in obtaining public financing, is to estimate that, under the prevailing wage requirement, labor costs are 25 percent higher than would otherwise be the case. Therefore, on-site and off-site improvement costs obtained from the original pro formas are reduced by 25 percent to reflect actual labor costs that would apply to construction projects that do not have these requirements.14 Finally, on average, land acquisition costs accounted for 20 percent or less of these total adjusted costs. 14 These prevailing wage requirements refer only to labor cost requirements on construction projects that receive funding from the state or federal government. These are not the same as minimum wage requirements that individual cities may adopt. Palo Alto Linkage Fee Nexus Study Figure IV-5. Affordable Housing Project Pro Forma Data Project Description Maybelle Alma Garden Apts Location Palo Alto Palo Alto Date of Pro Forma 2013 2013 Land Area (acres) 1.03 0.6 Gross Building Area (SF) 56,192 63,885 Number of Units 60 50 Parking Type Uncovered Underground Parking Spaces/ Unit 0.8 1.0 Land Acquisition Costs Project Costs per SF of Gross Building Area $7,498,524 ($167 per SF of land) $7,480,000 ($286 per SF of land) Land Cost (a) $133 $117 Hard Costs (b) $160 $153 Soft Costs (c) $91 $192 Developer Fees $25 $22 Total Project Costs (d) $409 $484 Notes: (a) Calculated per square foot of gross building area. (b) Excludes prevailing wage requirements for on-site and off-site hard costs. (c) Includes design, engineering, city permits and fees, construction interest, contingencies, legal, etc. (d) Total costs include developer fees. Acronyms: SF: Square feet Source: Pro Forma Data provided by City of Palo Alto; Vernazza Wolfe Associates, Inc; Strategic Economics, 2014. To ensure that the land value assumptions used in the rental development cost estimates (ranging from $167 to $286 per square foot of land) were reasonable, the consultant team analyzed recent sales of vacant properties in Santa Clara County using DataQuick, a commercial vendor that tracks real estate transactions. As shown below in Figure IV-6, land values in Southern San Mateo County and Northern Santa Clara County are highly variable from city to city, ranging from $96 to $228 per square foot. The analysis demonstrates that the land costs for the affordable rental housing projects shown in Figure IV-5 are generally consistent with the land values in the market area. Palo Alto Linkage Fee Nexus Study Figure IV-6. Sales of Vacant Lands in San Mateo County and Northern Santa Clara County, 2014 Property Location Sales Date Sales Price Site Size (SF) Average Sales Price/ SF Page Mill Palo Alto 2012 $3,959,000 26,926 $147 389 El Camino Real Menlo Park 2012 $12,200,000 53,579 $228 1300 El Camino Real Menlo Park 2012 $24,500,000 148,165 $165 E. side of Tilton Avenue, N. of El Camino Real San Mateo 2012 $4,505,000 33,572 $134 1275 El Camino Real Menlo Park 2014 $3,600,000 17,960 $200 3877 El Camino Real Palo Alto 2013 $4,450,000 32,825 $136 536 N Wishman Rd Mountain View 2014 $1,050,000 7,000 $150 1958 Latham St Mountain View 2014 $1,600,000 16,600 $96 Value Range per SF of Land $96 - $228 Source: City of Palo Alto; Independent appraisals; Loopnet, 2015; Strategic Economics, 2015. For-Sale Housing Market-rate for-sale housing units in Palo Alto are priced at over $1 million; these units are too upscale to be considered “modest” units. Because of the lack of examples of built modest units in the City, the cost of developing new, modest for-sale housing was estimated using published industry data sources, recent financial feasibility studies, and data from other projects in Santa Clara County. The Consultant Team estimated the development costs of a hypothetical condominium project, as described in Figure IV-7.15 Land costs were estimated based on recent DataQuick sales of multi-family zoned properties in Southern San Mateo County and Northern Santa Clara County. As shown in Figure IV-6, land values vary depending on location and lot size, ranging from $96 to $228 per square foot. Because most transactions occurred in 2012 and 2013 in other lower cost jurisdictions, the current land value for multi-family land for condominium development in Palo Alto was estimated at $200 per square foot. RS Means cost data, adjusted for the Bay Area’s construction costs, was used to calculate hard costs. Based on a review of recent financial feasibility analyses in the Bay Area, soft costs were estimated at 30 percent of hard costs, and developer fees and profits were estimated at 12 percent of hard and soft costs. Using this method, the development costs are estimated at approximately $500 per net square foot of building area. 15 The hypothetical condominium building type is a Type V building with underground parking and floor-area ratio of 1.7. Palo Alto Linkage Fee Nexus Study Figure IV-7. Estimate of Development Costs of Hypothetical Condominium Project Building Characteristics Land Area (SF) 110,727 Gross Building Area (SF) 188,235 Net Building Area (SF) 160,000 Number of Units 100 Parking Type Underground Parking Spaces/ Unit 2 Floor-area ratio (FAR) 1.7 Density (units per acre) 39 Average Unit Size 1,600 Land Acquisition Costs per Square Foot (a) $200 Development Cost Land Cost (b) Cost per Net SF $138 Hard Costs $250 Soft Costs (c) $75 Developer Fees (d) $39 Total Development Costs $502 Notes: (a) Land value is estimated at $200 per square foot based on recent transactions in market area. (b) Calculated based on RS Means cost estimates per square foot of net building area. (c) Estimated at 30 percent of hard costs. Includes design, engineering, city permits and fees, construction interest, contingencies, legal, etc. (d) Estimated at 12 percent of hard costs and soft costs. Sources: RS Means, 2014; DataQuick 2014; Recent financial feasibility studies; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2014. Cost Estimates by Unit Size The data sources described above also provided information on estimated unit sizes. Unit size information is needed to translate costs/sales prices per square foot to unit costs. Unit sizes are estimated separately for rental and for-sale units. For the rental units, the recent inventory of projects developed by MidPen Housing was analyzed. For ownership units, the average sizes of recently built condominium units (Figure IV-7) were analyzed. Figure IV-8 provides the unit sizes and development cost estimates for rental units. Per-unit development costs were calculated by multiplying average unit sizes by the per-square foot development costs of $446. Rental unit costs range from $223,000 for studio units to $499,520 for three-bedroom units. Figure IV-9 summarizes the costs of condominium units. The per-unit costs were derived by multiplying the average unit size by the development cost, estimated at $500 per square foot. On a per unit basis, condominium development costs are $450,000 for one-bedroom units, $650,000 for two-bedroom units, and $875,000 for three-bedroom units. Palo Alto Linkage Fee Nexus Study Figure IV-8. Rental Housing Unit Sizes and Development Costs Unit Type Estimated Cost per Net SF Unit Size (net SF) Development Costs Studio $446 500 $223,000 One bedroom $446 700 $312,200 Two bedroom $446 900 $401,400 Three bedroom $446 1,120 $499,520 Acronyms: SF: Square feet Sources: Confidential Pro Forma Data; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2014. Figure IV-9. For-Sale Housing Unit Sizes and Development Costs Unit Type Estimated Cost per Net SF Unit Size (net SF) Development Costs One bedroom $500 900 $450,000 Two bedroom $500 1,300 $650,000 Three bedroom $500 1,750 $875,000 Acronyms: SF: Square feet Sources: DataQuick, 2014; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2014. CALCULATING THE HOUSING AFFORDABILITY GAP The final step in the analysis is to calculate the housing affordability gap, or the difference between what renters and owners can afford to pay and the total cost of developing new units. The purpose of the housing affordability gap calculation is to help determine the fee amount that would be necessary to cover the cost of developing housing for very low, low, and moderate income households. The calculation does not assume the availability of any other source of housing subsidy because not all "modest" housing is built with public subsidies, and tax credits and tax-exempt bond financing are highly competitive programs that will not always be available to developers of modest housing units. Figure IV-10 shows the housing affordability gap calculation for rental units. For each rental housing unit type and income level, the gap is defined as the difference between the per-unit cost of development and the supportable debt per unit. The supportable debt is calculated based on the net operating income generated by an affordable monthly rent, incorporating assumptions about operating expenses (including property taxes, insurance, etc.), reserves, vacancy and collection loss, and mortgage terms based on discussions with local affordable housing developers. Because household sizes are not uniform and the types of units each household may occupy is variable, the average housing affordability gap is calculated by averaging the housing affordability gaps for the various unit sizes. Figure IV-11 shows the housing affordability gap calculation for ownership units. For each unit type, the gap is calculated as the difference between the per-unit cost of development and the affordable sales price for each income level. As with rental housing, the average housing affordability gap is calculated by averaging the housing affordability gaps across unit sizes in order to reflect that households in each income group vary in size, and may occupy any of these unit types. Finally, the tenure-neutral estimates of the housing affordability gap were estimated for very low, low, and moderate income households (Figure IV-12). Because very low and low income households that are looking for housing in today’s market are much more likely to be renters, an ownership gap was not calculated for these income groups. The rental gap represents the overall affordability gap for these two income groups. On the other hand, moderate income households could be either renters or owners. Palo Alto Linkage Fee Nexus Study Therefore, the rental and ownership gaps are averaged for this income group to calculate the overall affordability gap for moderate income households. The calculated average affordability gap per unit is $306,164 for very low income households; $252,258 for low income households, and $249,596 for moderate income households. The housing affordability gap is highest for very low income households because they can afford to pay the least amount for housing. Palo Alto Linkage Fee Nexus Study -66- Figure IV-10. Housing Affordability Gap Calculation for Rental Housing Income Level and Unit Type Unit Size (SF) Maximum Monthly Rent (a) Annual Rental Revenue Net Operating Income (b) Available for Debt Service (c) Supportable Debt (d) Development Costs (e) Affordability Gap (f) Very-Low Income (50% AMI) Studio 500 $900 $10,797 $2,757 $2,206 $29,166 $223,000 $193,834 1 Bedroom 700 $1,021 $12,255 $4,142 $3,314 $43,818 $312,200 $268,382 2 Bedroom 900 $1,145 $13,737 $5,550 $4,440 $58,711 $401,400 $342,689 3 Bedroom 1,120 $1,319 $15,833 $7,541 $6,033 $79,769 $499,520 $419,751 Average Affordability Gap $306,164 Low Income (70% AMI) Studio 500 $1,263 $15,161 $6,902 $5,522 $73,016 $223,000 $149,984 1 Bedroom 700 $1,437 $17,244 $8,882 $7,105 $93,954 $312,200 $218,246 2 Bedroom 900 $1,613 $19,352 $10,884 $8,707 $115,133 $401,400 $286,267 3 Bedroom 1,120 $1,860 $22,322 $13,706 $10,965 $144,987 $499,520 $354,533 Average Affordability Gap $252,258 Moderate Income (90% AMI) Studio 500 $1,633 $19,592 $11,112 $8,890 $117,544 $223,000 $105,456 1 Bedroom 700 $1,859 $22,308 $13,693 $10,954 $144,843 $312,200 $167,357 2 Bedroom 900 $2,087 $25,049 $16,296 $13,037 $172,383 $401,400 $229,017 3 Bedroom 1,120 $2,409 $28,906 $19,960 $15,968 $211,146 $499,520 $288,374 Average Affordability Gap $197,551 Notes: (a) Affordable Rents are based on HCD FY 2014 Income Limits for Santa Clara County. See Figure 2, above. (b) Amount available for debt. Assumes 5% vacancy and collection loss and $7,500 per unit for operating expenses and reserves, based on pro formas for affordable housing projects recently proposed in Palo Alto. (c) Assumes 1.25 Debt Coverage Ratio. (d) Assumes 6.38%, 30 year loan. Calculations based on annual payments. (e) Assumes development cost of $446 per net square foot on rental units. (f) Calculated as the difference between development costs and supportable debt. Rounded to nearest whole number. Acronyms: SF: Square feet AMI: Area median income Sources: Selected Palo Alto Rental Housing Pro Formas; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2014. Palo Alto Linkage Fee Nexus Study -67- Figure IV-11. Housing Affordability Gap Calculation for For-Sale Condominium Housing Income Level and Unit Type Unit Size (SF) Affordable Sales Price (a) Development Costs (b) Affordability Gap (c) Moderate Income (110% of AMI) 1 Bedroom 900 $291,858 $450,000 $158,142 2 Bedroom 1,300 $359,897 $650,000 $290,103 3 Bedroom 1,750 $418,323 $875,000 $456,677 Average Affordability Gap $301,641 (a) See calculation in Figure IV-9, above. (b) Assumes $500/SF for development costs, based on recent condominium sales. (c) Calculated as the difference between affordable sales price and development cost; rounded to nearest whole number. Acronyms: SF: Square feet AMI: Area median income Sources: DataQuick Sales Data, 2008-2012; Vernazza Wolfe Associates, Inc. and Strategic Economics, 2015. Figure IV-12. Average Housing Affordability Gap by Income Group Income Level Rental Gap Ownership Gap Average Affordability Gap Very Low-Income (50% AMI) (a) $306,164 N/A $306,164 Low-Income (70% - 80% AMI) (b) $252,258 N/A $252,258 Moderate-Income (90% - 110% AMI) (c) $197,551 $301,641 $249,596 Notes: (a) Based on rental housing only; very-low-income gap was not calculated for ownership housing. (b) Low-income households are assumed to earn 70 percent of AMI for rental housing and 80 percent of AMI for ownership housing. (c) Moderate-income households are assumed to earn 90 percent of AMI for rental housing and 110 percent of AMI for ownership housing. Acronyms: AMI: Area median income Source: Vernazza Wolfe Associates, Inc. & Strategic Economics, 2014. Palo Alto Linkage Fee Nexus Study -68- V. MAXIMUM LINKAGE FEES This section builds on the findings of the previous analytical steps to calculate the maximum justified linkage fees for each commercial prototype. MAXIMUM FEE CALCULATION To derive the maximum nexus-based fee, the housing affordability gap (see Section IV) is applied to the number of lower-income worker households linked to the prototypes. This is the basis for developing an estimate of the total affordability gap for each prototype. The total gap for each prototype is then divided by the size of each development prototype to calculate a single maximum fee per square foot. Figure V-1 presents the results of the linkage fee calculations for each prototype. The calculations shown below assume that 100 percent of the very low, low, and moderate income households linked to the new commercial space would be accommodated in Palo Alto. The maximum fee results (rounded to the nearest dollar) are $177 per square foot for hotel and $264 per square foot for office/ R&D/ medical office. The calculated linkage fees are high for two reasons: 1) the cost of housing development in Palo Alto is high, creating a large affordability gap for very low, low, and moderate income households; 2) many of the workers associated with new commercial development, especially those in the hotel industry, earn low wages and fall into very low and low income household categories. Although average wages for hotel workers are lower than for office workers, the density of workers in hotels is lower than in office/ R&D/ medical office space; therefore maximum linkage fees for hotels are lower than for offices. . The maximum fees shown in Figure V-1 are not the recommended fees for adoption. They are the nexus-justified fees that represent the maximum that Palo Alto could charge to mitigate affordable housing demand related to commercial development. Figure V-1. Maximum Commercial Linkage Fees Very Low, Low, and Moderate Income Worker Total Affordability Size of Maximum Households Gap Prototype (SF) Fee (per SF) Hotel 64 $17,678,344 100,000 $177 Office, R&D and Medical Office 102 $26,447,718 100,000 $264 Note: Maximum fee per square foot has been rounded to the nearest dollar. Sources: Vernazza Wolfe Associates, Inc; Strategic Economics, 2015. Palo Alto Linkage Fee Nexus Study -69- VI. FEASIBILITY AND POLICY CONSIDERATIONS There are a number of policy considerations that can be taken into account when a jurisdiction considers an update to its commercial linkage fee. These policy factors include the financial impact of fee scenarios on future development, the potential increase to the city’s existing fees on commercial development, a comparison of proposed linkage fees with those fees already charged in adjacent jurisdictions, and how potential revenues from new linkage fees can benefit the City’s overall affordable housing goals. This section provides a discussion of some of the key financial and policy questions for Palo Alto. PROTOTYPES AND FEE LEVELS Commercial Prototypes As described in Section III, the analysis estimates linkage fees for two commercial prototypes: hotel and office/ R&D/ medical office. The building characteristics, including size, density (floor-area-ratio), and parking assumptions are based on a review of recently built and proposed projects in Palo Alto (Figure VI-1). The financial feasibility of potential fee levels is tested for each of these prototypes. Figure VI-1. Description of Commercial Prototypes Prototype Description Hotel Office/R&D/ Medical Office Gross Building Area (GBA). excl. Parking (SF) 100,000 100,000 Efficiency Ratio (a) N/A 0.90 Net Leasable Sq. Ft. (NSF) N/A 90,000 Hotel Rooms 133 Parking Spaces 133 300 Podium Parking 33 240 Surface Parking 100 60 GBA Including Structured Parking 109,975 163,000 Floor Area Ratio (b) 1.1 2.0 Land Area (Acres) 2.3 1.9 Land Area (sq. ft.) 99,977 81,500 Notes: (a) Refers to ratio of gross building area to net leasable area. An efficiency ratio of 0.9 means that 90% of the gross building area is leasable. (b) The floor-area-ratio (FAR) is often used as a measure of density. In this analysis, it is calculated as the gross building area (including structured podium parking) divided by the total land area. Sources: Vernazza Wolfe Associates, Inc. and Strategic Economics, 2015. Palo Alto Linkage Fee Nexus Study -70- Fee Levels In order to provide Palo Alto with some guidance on how proposed fees could impact development decisions, the Consultant Team conducted a financial feasibility analysis that tested the impact of the maximum linkage fee, the existing fee, and other potential fee levels, on developer profit. Figure VI-2 illustrates the different per-square-foot fee scenarios, by prototype. Figure VI-2. Linkage Fee Scenarios by Prototype (per SF) Office/ R&D/ Fee Scenarios Hotel Medical Office Existing Fee (rounded) $19.85 $19.85 Scenario 1: Maximum Fee $177 $264 Scenario 2 $35 $60 Scenario 3 $30 $50 Scenario 4 $20 $35 Sources: Vernazza Wolfe Associates, Inc; Strategic Economics, 2015. METHODOLOGY Financial feasibility was tested using a pro forma model that measures the return on cost of the commercial prototypes. Return on cost is a commonly used metric indicating the profitability of a project. The pro forma model tallies all development costs, including land, direct construction costs, indirect costs (including financing), and developer fees. Revenues from lease rates or hotel room rates are the basis for calculating annual income from the new commercial development. The total operating costs are subtracted from the total revenues to calculate the annual net operating income. The return on cost is then estimated by dividing the annual net operating income by the total development costs. The fee levels were then added as an additional development cost to measure the resulting change in the developer’s return on cost. KEY INPUTS The key revenue and cost inputs to the financial pro forma analysis are based on market research and published resources. The data inputs are explained in more detail below. Revenues To estimate income from commercial development, the pro forma analysis used rental data from Costar for the Palo Alto market for existing office buildings. A 10 percent revenue increase was applied to account for the value premium of new office/R&D space. To calculate hotel revenues, the Consultant Team interviewed hotel managers of hotel properties in Palo Alto to determine average daily rates and occupancy rates. 16 The surveyed managers reported average rates of between $150 and $400 for weekend, off-peak stays, and between $289 and $800 for peak, weekday stays. Occupancy rates were reported at between 78 percent and 95 percent. Based on these findings, the analysis estimated average daily rate at $240 per night, and occupancy rates at 83 percent. The revenue inputs for each land use prototype are shown in Figure VI-3. 16 Properties surveyed include Hilton Garden Inn, Homewood Suites, The Epiphany, Hotel Keen, Dinah’s Garden Hotel, Sheraton Palo Alto, and Garden Court Hotel. Palo Alto Linkage Fee Nexus Study -71- Direct and Indirect Costs Cost estimates for the commercial prototypes include direct construction costs (site work, building costs, and parking), indirect costs, financing costs, and developer overhead and profit. Direct building construction cost estimates for office/ R&D/ medical office are based on RS Means. Hotel construction costs were estimated based on recent data from HVS Consulting and Smith Travel Research, and include costs for Furniture, Fixtures, and Equipment (FF&E). Direct and indirect cost inputs for the pro forma analysis are shown in Figure VI-4. Land Costs One of the critical cost factors for a commercial development project is land cost. To determine the land value of sites zoned for commercial uses, the Consultant Team analyzed recent sales transactions in Santa Clara County and reviewed third-party property appraisals. The high average value of land per square foot in Palo Alto, illustrated in Figure VI-5, is partly due to the relatively smaller average size of the sold parcels. As a result, the Consultant Team estimated a commercial land value of $160 per square foot, closer to the sub-market average.17 This approximate land cost is an estimate for the purposes of this analysis; the value of any particular site is likely to vary based on its location, amenities, and property owner expectations, among other factors. Return on Cost Thresholds In order to understand how the different fee levels impact financial feasibility, the return on cost results can be compared to an investor’s expectations for each type of development. The thresholds for this analysis were pegged to investor expectations regarding overall capitalization rates (cap rate) for each product type in the Bay Area. The cap rate, which is measured by dividing net income generated by a property by the total project value, is a commonly used metric to estimate potential returns. Lower cap rates signify high performing markets. In this analysis, the total project value is equivalent to the total development cost. PWC Real Estate Investor Survey (Fourth Quarter 2014) was the primary data source for determining cap rates for office/ R&D/ medical office uses. For hotel, cap rate data was obtained from HVS, a consulting firm that tracks hotel markets. To ensure that the financial analysis is conservative and does not reflect peak market conditions, the thresholds selected for determining project feasibility are slightly higher than the published cap rates. It was determined that the threshold for the return on cost is between 6.75 percent and 7.0 percent for office/ R&D/ medical office and between 7.0 percent and 7.25 percent for hotel (see Figure VI-6). 17 The commercial land value used in the pro forma analysis is different from the calculated land value for the affordability gap analysis because it is for commercially zoned land rather than multifamily zoned land. Palo Alto Linkage Fee Nexus Study -72- Figure VI-3. Pro Forma Revenue Inputs by Prototype Prototypes Metric Input Hotel Average Daily Rate (a) Daily per Room $240 Occupancy Rate (a) Annual 83% RevPAR (b) Daily per Room $198 Gross Annual Room Income Annual per Room $72,270 Gross Annual Other Revenue Annual per Room $10,950 Less: Vacancy (c) $0 Less: Operating Expenses (d) 70% ($58,254) Annual Net Operating Income $24,966 Office/R&D Revenues and Expenses (d) Monthly Rent - Gross per NSF $68 Operating Expenses % of Gross 28% Vacancy Rate % of Gross 5% Estimates Net Square Footage 90,000 Annual Gross Revenues $6,120,000 Operating Expenses ($1,713,600) Vacancy Rate ($306,000) Net Operating Income $4,100,400 Notes: (a) Based on a survey of Palo Alto hotel managers, including Hilton Garden Inn, Homewood Suites, The Epiphany, Hotel Keen, Dinah’s Garden Hotel, Sheraton Palo Alto, and Garden Court Hotel. Hotel property managers reported average rates of between $150 and $400 for weekend and off-peak days, and between $289 and $800 for peak, weekday stays. Occupancy rates were reported at between 78 percent and 95 percent. RevPAR (revenue per available room) is calculated as occupancy percentage times average daily rate. (b) RevPAR, a measure of revenue per room, is calculated by multiplying the occupancy rate by the average daily rate. (c) Vacancy is already reflected in RevPAR estimate. (d) Costar Group average rents in the Palo Alto market. A premium of 10% is applied to account for newer product. Sources: Palo Alto hotel property managers; HVS and STR Consulting, 2014; Costar, 2015; Vernazza Wolfe Associates, Inc. and Strategic Economics, 2015. Palo Alto Linkage Fee Nexus Study -73- Figure VI-4. Direct and Indirect Cost Inputs Development Assumptions Metric Hotel Direct Costs (a) Office/R&D/ Medical Office Building & On-Site Improvements (b) per sq. ft. of GBA $200 $200 Parking Costs - Podium per space $25,000 $25,000 Parking Costs - Surface per space $2,500 $2,500 Indirect Costs (c) Notes: (a) Review of pro formas for similar projects in Silicon Valley region; RS Means, 2014. (b) Hotel costs include Furniture, Fixtures & Equipment (FF&E). (c) Review of pro formas for similar projects in Bay Area. (d) For the hotel prototype, permit and fee calculations are based on recently developed hotel projects in the City. For the office/R&D/medical office prototype, permits & fee calculations were provided by the City of Palo Alto. These are estimates for the prototypes created in this analysis and do not represent actual costs for specific development projects. Sources: Project pro formas; RS Means, 2014; HVS and STR Consulting; City of Palo Alto; Strategic Economics, 2015. A&E & Consulting % of Direct Costs 8.0% 8.0% Tenant Improvements per NSF N/A $40 Permits & Fees (d) total $1,490,679 $3,745,450 Taxes, Insurance, Legal & Accounting % of Direct Costs 3.0% 3.0% Financing Costs % of Direct Costs 6.0% 6.0% Developer Overhead &Fee % of Direct Costs 8.5% 8.5% Contingency % of Indirect Costs 5.0% 5.0% Palo Alto Linkage Fee Nexus Study -74- Figure VI-5. Recent Commercial Vacant Land Transactions in Santa Clara County (2011-2014) Property City Site Area Sale Price Sale Price/ SF of Land 1236 College Avenue Palo Alto 5,750 $2,795,000 $486.09 3502 Emma Court Palo Alto 7,369 $2,150,000 $291.76 382 Curtner Avenue Palo Alto 8,525 $1,384,000 $162.35 4220 El Camino Real Palo Alto 55,609 $3,775,000 $67.88 370 Lowell Avenue Palo Alto 12,474 $4,450,000 $356.74 3500 South Court Palo Alto 6,250 $2,700,000 $432.00 3333 Bryant Street Palo Alto 6,125 $2,700,000 $440.82 405 Curtner Avenue Palo Alto 12,375 $1,800,000 $145.45 363 Garden Street Palo Alto 5,000 $195,000 $39.00 897 Marshall Drive Palo Alto 2,801 $49,000 $17.49 3265 El Camino Real Palo Alto 7,490 $975,000 $130.17 1130 Middlefield Road Palo Alto 5,600 $2,800,000 $500.00 El Camino Real Palo Alto 55,609 $3,775,000 $67.88 N San Antonio Rd Los Altos 11,960 $1,200,000 $100.33 N San Antonio Rd Los Altos 11,600 $1,030,000 $88.79 Los Gatos Blvd Los Gatos 20,038 $5,800,000 $47.38 Los Gatos Blvd Los Gatos 102,366 $5,800,000 $47.38 Placer Oaks Rd Los Gatos 2,351 $266,000 $113.14 Placer Oaks Rd Los Gatos 2,262 $266,000 $117.60 S Main St Milpitas 9,148 $775,000 $84.72 Dempsey Rd Milpitas 52,392 $1,250,000 $23.86 Milpitas 15,000 $530,000 $35.33 Milpitas 44,431 $14,563,500 $327.78 Dixon Rd Milpitas 14,810 $812,500 $54.86 Old Middlefield Way Mountain View 11,175 $1,600,000 $143.18 Church St Mountain View 11,250 $2,270,000 $201.78 Moffett Blvd Mountain View 79,715 $10,100,000 $126.70 El Camino Real Santa Clara 63,162 $6,100,000 $96.58 Saratoga Ave Santa Clara 16,700 $1,075,000 $64.37 El Camino Real Santa Clara 4,960 $275,000 $55.44 Big Basin Way Saratoga 17,187 $1,398,000 $81.34 Average Palo Alto Sales 14,691 $2,272,923 $241 Average All Sales 21,983 $2,730,935 $160 Sources: CoreLogic, 2015; Loopnet, 2015; Vernazza Wolfe Associates, Inc. and Strategic Economics, 2015. Palo Alto Linkage Fee Nexus Study -75- Figure VI-6. Feasibility Thresholds for Return on Cost Prototype Capitalization Rates Selected Threshold for Return on Cost Hotel (a) 6.75% - 7.25% 7.0% - 7.25% Office/ R&D/ Medical Office(b) 5.88% - 6.71% 6.75% - 7.0% Notes: (a) HVS Consulting, January 2015. Cap rate data was only available at the national level. However, the Bay Area market generally outperforms the rest of the country, so this estimate is likely lower than cap rates Santa Clara County. (b) PWC Real Estate Investor Survey, San Francisco Office Market, 4th Quarter 2014. Because capitalization rates for office may be peaking in the Bay Area market, and R&D and medical office uses have higher cap rates, the financial analysis set the threshold at a higher rate. Sources: HVS Consulting, January 2015; PWC Real Estate Investor Survey, 4Q2014; Vernazza Wolfe Associates, Inc. and Strategic Economics, 2015. RESULTS Hotel The pro forma analysis shows that under current economic conditions, without the addition of a commercial linkage fee, the hotel prototype generates a healthy return on cost of 7.5 percent, which is financially feasible (Figure VI-7). The annual net operating income is estimated at $3.3 million ($24,966 per room). The total development costs, including land, direct, and indirect costs total $44.3 million. The following describes the financial implications of adding new commercial linkage fees at various fee levels: • The existing fee level of $19.85 per square foot increases development costs to $46.3 million. The current fee is approximately four percent of total development costs for a hotel prototype. A hotel prototype that is charged the existing fee can generate a strong return on cost of 7.2 percent. • Fee scenario 1, the maximum fee level of $177 per square foot, increases total development costs to almost $62 million. The maximum fee accounts for 28.6 percent of total development costs. This fee scenario generates a calculated return on cost of 5.4 percent, which is not financially feasible. • Fee scenario 2, a lower nexus fee of $35 per square foot is equivalent to 7.3 percent of total development costs and generates a potential return of 6.95 percent. This return is not financially feasible. • Scenario 3, a fee of $30 per square foot, would account for 6.3 percent of total development costs. At this fee level, the return on cost is estimated at 7 percent, which is financially feasible. • Fee scenario 4 is a nexus fee of $20 per square foot, which represents 4.3 percent of the project’s total development costs. The return on cost is estimated at 7.2 percent, which is also financially feasible. Palo Alto Linkage Fee Nexus Study -76- Office/R&D/Medical Office Under a base scenario with no commercial linkage fees on office/R&D/medical office development, a prototypical project generates an estimated net operating income of $4.1 million, with total development costs estimated at $53.0 million. The net operating income divided by the total development costs results in an estimated return on cost of 7.7 percent, a higher percentage than the minimum threshold for financial feasibility for office/ R&D/ medical office development, which is 6.75 to 7.0 percent (see Figure VI-7). The high return on cost indicates that this prototype would offer attractive returns under current market conditions. The following describes the financial implications of adding new commercial linkage fees at various fee levels: • The City’s existing linkage fee of $19.85 per square foot is approximately 3.7 percent of total development costs. An office prototype charged the existing fee level can generate a healthy return on costs of 7.5 percent. • Scenario 1, a fee set at the maximum level of $264 per square foot, would account for about half of total development costs for the office/R&D/medical office prototype. The return on cost with this fee is estimated at 5.2 percent, which would not be financially feasible. • Scenario 2, a fee level of $60 per square foot, would make up 11.3 percent of total development costs. The calculated return on cost is 6.9 percent, which is financially feasible. • Scenario 3, a fee level of $50 per square foot, is equivalent to 9.4 percent of total project development costs. Under this scenario, the office/R&D/medical office project generates a return on cost of 7.1 percent, which is feasible. • The fee scenario 4 of $35 per square foot would be equivalent to 6.6 percent of total project costs. The estimated return on costs is 7.3 percent, which is financially feasible. Palo Alto Linkage Fee Nexus Study -77- Figure VI-7. Pro Forma Analysis Results Hotel Office/R&D/Medical Office Development Costs (a) Land Direct Costs Building & On-Site Improvements per Room $120,273 $150,376 Total $15,996,364 $20,000,000 Per Gross SF $130 $200 Total $13,040,000 $20,000,000 Parking $8,125 $1,080,625 $55 $5,475,000 Total Direct Costs $158,501 $21,080,625 $255 $25,475,000 Indirect Costs A&E & Consulting $12,680 $1,686,450 $20 $2,038,000 Tenant Improvements FF&E (b) $0 $0 $36 $3,600,000 Permits & Fees (c) $11,208 $1,490,679 $37 $3,745,450 Taxes, Insurance, Legal, Acctg $4,755 $632,419 $8 $764,250 Financing Costs $9,510 $1,264,838 $15 $1,528,500 Developer Overhead & fee $13,473 $1,791,853 $22 $2,165,375 Contingency $2,581 $343,312 $7 $692,079 Total Indirect Costs Total Development Costs (TDC) without Nexus Fees $54,207 $7,209,551 $44,286,539 $145 $14,533,654 $53,048,654 TDC with Nexus Fees by Fee Scenario No Fee Linkage Fee per SF $0.00 TDC incl. Nexus Fee $44,286,539 Linkage Fee per SF $0.00 TDC incl. Nexus Fee $53,048,654 Existing Fee $19.85 $46,271,539 $19.85 $55,033,654 Fee Scenario 1: Maximum Fee $177 $61,986,539 $264 $79,448,654 Fee Scenario 2 $35 $47,786,539 $60 $59,048,654 Fee Scenario 3 $30 $47,286,539 $50 $58,048,654 Fee Scenario 4 $20 $46,286,539 $35 $56,548,654 Revenues Annual Net Operating Income (d) per SF $24,966 Total $3,320,478 per SF $41 Total $4,100,400 Return on Cost by Fee Scenario: Nexus Fee per SF Return on Costs Nexus Fee per SF Return on Costs No Fee $0.00 7.50% $0.00 7.73% Existing Fee $19.85 7.18% $19.85 7.45% Scenario 1: Maximum Fee $177 5.36% $264 5.16% Fee Scenario 2 $35 6.95% $60 6.94% Fee Scenario 3 $30 7.02% $50 7.06% Fee Scenario 4 Fees as % of TDC $20 Nexus Fee per SF 7.17% Nexus Fee as % of TDC $35 Nexus Fee per SF 7.25% Nexus Fee as % of TDC No Fee $0.00 0.00% $0.00 0.00% Existing Fee $19.85 4.29% $19.85 3.74% Scenario 1: Maximum Fee $177 28.55% $264 49.77% Fee Scenario 2 $35 7.32% $60 11.31% Fee Scenario 3 $30 6.34% $50 9.43% Fee Scenario 4 $20 4.32% $35 6.60% Return on Cost - Threshold for Feasibility 7.0-7.25% 6.75-7.0% Notes: (a) See Figure VI-4. (b) Furniture Fixtures & Equipment for hotel is included in the direct costs. (c) Permit & fee calculations, excluding linkage fees, as provided by City of Palo Alto. These are estimates for the prototypes created in this analysis; specific development projects may have different results. (d) See Figure VI-3. Sources: Vernazza Wolfe Associates, Inc; Strategic Economics, 2015. Palo Alto Linkage Fee Nexus Study -78- POLICY CONSIDERATIONS While the nexus study provides the necessary economic analysis for the updated linkage fees, it is up to policymakers to decide which fee level is appropriate to charge to new development. Financial feasibility is one important factor to examine. In addition, there are a number of other policy issues to consider, such as: • How much the City’s development fees would increase with an updated commercial linkage fee; • How an updated linkage fee in Palo Alto would compare with those recently adopted in neighboring jurisdictions; • What options exist for establishing alternatives to the payment of fees; and • How the updated commercial linkage fee fits into the City’s overall affordable housing strategy. Existing City Permits and Fees on Commercial Development In addition to its existing commercial linkage fee of $19.85 per square foot, the City of Palo Alto has other permits and fees on new development. 18 The City may wish to consider the amount that total fees would increase with an updated commercial linkage fee. Based on the current schedule of fees in Palo Alto, existing fees (including the existing linkage fees) for the commercial prototypes are estimated to be $35 per square foot for the hotel prototype and $57 per square foot for the office/R&D/medical office prototype.19 If the maximum linkage fees were adopted, the total development fees and permits would be $192 per square foot for hotel and $301 for office, as shown in Figure VI-8. 18 New non-profit development, including churches, educational facilities, and hospitals, is exempt from the current fee. New retail space smaller than 1,500 square feet is also exempted. 19 The hotel fees were estimated based on the fees paid by new hotel projects in the city; the retail/restaurant/services fees and office/R&D/medical office fees are estimates by City staff. These fee estimates are the best approximations available, and do not represent the actual cost of a proposed new development project. Palo Alto Linkage Fee Nexus Study -79- Figure VI-8. Existing City Permits and Fees on Commercial Development by Prototype Office/R&D/ Hotel Medical Office Existing Fees/ Permits per SF (excl. linkage fee) $15 $37 Current Linkage Fee $20 $20 Total Existing Fees Per SF $35 $57 Fee Scenario 1 (Maximum Fees) Nexus Fee Per SF $177 $264 Combined Fees Per SF $192 $301 Fee Scenario 2 Nexus Fee Per SF $35 $60 Combined Fees Per SF $50 $97 Fee Scenario 3 Nexus Fee Per SF $30 $50 Combined Fees Per SF $45 $87 Fee Scenario 4 Nexus Fee Per SF $20 $35 Combined Fees Per SF $35 $72 Sources: Palo Alto, Department of Planning and Building, 2014; Vernazza Wolfe Associates, Inc; Strategic Economics, 2015. Comparison with Fees Charged in Other Jurisdictions Figure VI-9 compares Palo Alto’s existing commercial linkage fee and proposed fee scenarios with the linkage fees adopted by nearby cities. At present, Palo Alto has fees of $19.85 per square foot for all commercial uses. Palo Alto’s existing fees are similar to the linkage fees adopted San Francisco and Cupertino, which range from $16 to $24 per square foot, depending on the land use. In most cases, cities have adopted higher fee levels for office/ R&D/ medical office uses than for hotel uses. For example, in Cupertino, the commercial linkage fee for hotel is $10 per square foot, compared to $20 per square foot for office/ R&D/ medical office uses. The maximum linkage fees calculated for all the commercial prototypes, ranging from $177 to $295 per square foot in this study are much higher than existing linkage fees in Bay Area jurisdictions. Other cities in the Bay Area also have commercial linkage fees that can be compared to the potential fee scenarios for Palo Alto. A summary of some of these existing fees is shown in Figure VI-10, based on the most current information available. The fee amounts vary significantly by jurisdiction. Palo Alto Linkage Fee Nexus Study -80- Figure VI-9. Comparison to Linkage Fees in Neighboring Cities Hotel Office/ R&D/ Medical Office Date Fee Was Adopted Palo Alto Fee Scenarios (per SF) Existing Linkage Fee $19.85 $19.85 2002 Scenario 1 (Maximum) $177 $264 Scenario 2 $35 $60 Scenario 3 $30 $50 Scenario 4 $20 $35 Fees in Nearby Cities (per SF) Cupertino $10 $20 2015 Menlo Park (a) $8 $15 2014 Mountain View (b) $2.50 $25 2015 San Francisco (c) $18 $16-$24 2015 Sunnyvale (d) $7.50 $15 (e) 2015 Notes: (a) Buildings 10,000 SF and under are exempt from fees. A new nexus study is currently underway that may result in an updated fee. (b) New gross floor area under 25,000 SF pays 50 percent of full fee. (c) The fee for R&D is $16.01 and the fee for office is $24.03. The fee for a small enterprise is $18.89. (d) Approval of the proposed fees is pending a community process. (e) The fee on the first 25,000 SF is discounted by 50 percent. Sources: City staff and websites; Nonprofit Housing Association of Northern California, 2015; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2015. Palo Alto Linkage Fee Nexus Study -81- Figure VI-10. Existing Linkage Fees in Bay Area Cities Commercial Development City Subject to Fees Fee Amount Walnut Creek All development commercially classified i.e. R&D, for-profit medical offices/hospitals, etc. $5.00 per SF Oakland Office and Warehouse/Distribution $5.24 per SF used for office of warehouse /distribution needs beyond 25,000 SF Dublin Industrial, Office, R&D, Retail, Services & Accommodations Industrial: $.048 per SF Office: $1.24 per SF R&D: $0.81 per SF Retail: $1.00 per SF Services & Acc.: $0.42 per SF * Buildings less than 20,000 SF are exempt. Pleasanton All commercial office or industrial development projects $2.87 per SF Adjusted annually based on CPI Alameda Retail, Office, Warehousing, Manufacturing, Hotel//Motel Retail: $2.24 per SF Office: $4.42 per SF Warehouse & Manufacturing: $0.77 per SF Hotel/Motel: $1,108 per room/suite May be adjusted annually based on CPI Napa Office, Hotel, Retail, Industrial (Industrial, Warehouse, Wine Production) Office: $1.00 per SF Hotel: $3.00 per SF Retail: $0.80 per SF Industrial: $0.50 per SF San Rafael Office or R&D, Retail, Restaurant, Personal Service, Manufacturing, Light Industrial, Warehouse, Hotel/Motel 5,000 SF or more to provide affordable housing units or pay a fee * $254,599 per unit Office & R&D: 0.03 units Retail, Restaurant or Personal Service: 0.0225 units Manufacturing or Light Industrial: 0.01625 units Warehouse: 0.00875 units Hotel/Motel: 0.0075 units Palo Alto Linkage Fee Nexus Study -82- Figure VI-10. Summary of Existing Linkage Fees in Other Bay Area Cities (Continued) Commercial Development City Subject to Fees Fee Amount Petaluma Commercial, Retail, Industrial Commercial: $2.14 per SF Retail: $3.69 per SF Industrial: $2.21 per SF Emeryville Any development of non residential uses for which a discretionary permit or building permit is required $4.00 per SF Berkeley Developments in non-residential and R-4 Zones, except in South Berkeley IX Target Area, over 7,500 SF Office/Retail/Restaurant/Hotel/Lodging/R&D: $4.50 per SF Industrial/Manufacturing/Warehouse/Storage: $2.25 per sq. ft Sources: The Non-Profit Housing Association of Northern California, Strategic Economics, and Vernazza Wolfe Associates, Inc, 2015. Palo Alto Linkage Fee Nexus Study -83- Benefit to Palo Alto’s Overall Affordable Housing Strategy The City currently charges a commercial linkage fee of $19.85 per square foot on all new non-residential development. These fees are payable at the time that the building permit is issued. The city also has an inclusionary housing program that requires that 15 percent of the units in market-rate developments consisting of five or more housing units must be sold at below-market rate (BMR) prices. The inclusionary requirement increases to 20 percent for larger projects on five-acre and larger parcels. Two- thirds of the BMR units are to be affordable at the 90 percent AMI level households and the remaining one-third is to be affordable at the 110 percent AMI level. City policy generally requires that the BMR units be provided in the project. In some cases, developers have the option of paying an in-lieu fee of 7.5 to 10 percent of the sales price or fair market value, whichever is greater. The developer must also pay a fee for fractional units. Revenues from the BMR in-lieu fee and commercial linkage fee programs are deposited into the City’s Affordable Housing Fund. The Affordable Housing Fund is a local housing trust fund established by the City Council of Palo Alto to provide financial assistance for the development of housing affordable to very low-, low- and moderate-income households that live or work within the City. It is largely made up of two sub-funds: the Commercial Housing Fund and the Residential Housing Fund. While both rental and ownership units are eligible for assistance, in practice all units assisted thus far have been rental units and almost all have been affordable to very low- or low-income households. The revenues to be collected from the commercial linkage fee provide an important source of local funding; however, local fee revenues do not generally cover the entire funding gap encountered by sponsors of new affordable housing. Additional funding from a variety of sources will remain critical. These funding sources typically include public subsidies from Santa Clara County, equity from the Low Income Housing Tax Credits, and financing from conventional lenders. Potential for Overlap between Residential and Commercial Fees The City is also undertaking a housing impact nexus study simultaneously, and may soon adopt a housing impact fee in a parallel process to the commercial linkage fee considered in this report. One issue that may arise if a City considers the adoption of both fees is whether there is any overlap between the two impact fees, resulting in potential “double-counting” of impacts. The commercial linkage fee study examined jobs located in new commercial buildings including office/ R&D/ medical office buildings and hotels. The nexus analysis then calculated the average wages of the workers associated with each commercial building to derive the annual income of the new worker households. The analysis determines the area median income (AMI) level of the new worker-households to identify the number of worker-households that would require affordable housing. The housing impact fee nexus analysis examined households buying or renting new market rate units in the jurisdiction. The household expenditures by these new residents have an economic impact in the county, which can be linked to new jobs. The nexus analysis quantified the jobs linked to new household spending, and then calculated the wages of new workers and the household income of new worker households. Each worker household was then categorized by area median income (AMI) to determine the number of households that require affordable housing. There may be a share of jobs counted in the commercial linkage fee analysis that are also included in the residential nexus analysis, particularly those in the service sector. Other types of jobs counted in the residential nexus analysis are unique to that analysis, and are not included in the commercial linkage fee analysis (for example, public sector employees). The commercial linkage fee analysis is limited to new development in private sector office/ R&D/ medical office buildings and hotels space. Palo Alto Linkage Fee Nexus Study -84- There is potential that some jobs could be counted in both analyses, and that the two programs may overlap in mitigating the affordable housing demand from the same worker households. Each of the proposed fees is required to mitigate no more than 100 percent of the demand for affordable units by new worker households. In order to reduce the potential for overlap between the two programs, it is advisable to set both the commercial linkage fees and housing impact fees at below 100 percent of the nexus-based maximum. In this way, when combined, the programs would mitigate less than 100 percent of the impact even if there were overlap in the jobs counted in the two nexus analyses. Administrative Issues Similar to any impact fee, the fee should be adjusted annually for inflation and increases in construction costs. Adjustments are also needed due to possible changes in the housing affordability gap. However, the connection between new commercial construction and growth in employment derived from employment densities is unlikely to change in the short run. It is advisable that the City adjusts its commercial linkage fee annually by using an annual adjustment mechanism. An adjustment mechanism updates the fees to compensate for inflation in development costs. To simplify annual adjustments, it is recommended that the City selects a cost index that is routinely published. While there is no index that tracks changes in Palo Alto’s development costs, including land, there are a few other options to consider. • The first option is the Consumer Price Index (Shelter Only). The shelter component of the index covers costs for rent of primary residence, lodging away from home, owner’s equivalent rent of primary residence, and household insurance. Of the total shelter index, costs associated with the owner’s equivalent rent of primary residence constitute 70% of total costs entered into the index. • A second option to adjust the fee for annual inflation is the construction cost index published in the Engineering News Record (ENR). This index is routinely used to update other types of impact fees. Cost index information for the San Francisco area, the closest geographical area to Palo Alto, is available on an annual basis. While this index measures inflation in construction costs, it does not incorporate changes in land costs and public fees charged on new development. While both indices measure changes in housing costs, both understate the magnitude of inflation for the reasons presented above. However, since these indices are readily available and relatively simple to use, it is recommended, that City uses these indices for annual adjustments. It is further recommended that the City base its annual adjustment mechanism on the higher of the two indices (CPI or ENR), using a five- year moving average as the inflation factor. In addition to revising the fee annually for inflation, the City is encouraged to update the commercial linkage fee study every five years, or at the very least, update the housing affordability gap used in the basic model. The purpose of these updates is to insure that the fee is still based on a cost/revenue structure that remains applicable in the Palo Alto housing market. In this way, the fee will more accurately reflect any structural changes between affordable prices/rents and market rate sales prices/development costs. Palo Alto Linkage Fee Nexus Study -85- VII. GLOSSARY OF TERMS AND ACRONYMS GLOSSARY OF TERMS Affordable Housing: Under state and federal statutes, housing is defined as affordable if housing costs do not exceed 30 to 35 percent of gross household income. Annual Adjustment Mechanism: Due to inflation in housing construction costs, it is frequently necessary to adjust impact fees. An index, such as the Consumer Price Index (CPI) or a published construction cost index (for example, from the Engineering News Record) is used to revise housing fees to reflect inflation in housing construction costs. Assisted Housing: Housing that has received public subsidies (such as low interest loans, density bonuses, direct financial assistance, etc.) from federal, state, or local housing programs in exchange for restrictions requiring a certain number of housing units to be affordable to very low, low, and moderate- income households. Boomerang Funds: Monies returned to the City by the State of California, after dissolution of redevelopment agencies in the State. Consumer price index (CPI): Index that measures changes in the price level of a market basket of consumer goods and services purchased by households. Employment Densities: The amount of square feet per employee is calculated for each property use that is subject to a commercial development housing linkage fee. Employment densities are used to estimate the number of employees that will work in a new commercial development. Household: The US Census Bureau defines a household as all persons living in a housing unit whether or not they are related. A single person living in an apartment as well as a family living in a house is considered a household. Households do not include individuals living in dormitories, prisons, convalescent homes, or other group quarters. Household Income: The total income of all the persons living in a household. Household income is commonly grouped into income categories based upon household size and income, relative to the regional median family income. Palo Alto Linkage Fee Nexus Study -86- Housing Affordability Gap: The affordability gap is defined as the difference between what a household can afford to spend on housing and the market rate cost of housing. Affordable rents and sales prices are defined as a percentage of gross household income, generally between 30 percent and 35 percent of income. For renters, rental costs are assumed to include the contract rent as well as the cost of utilities, excluding cable and telephone service. The difference between these gross rents and affordable rents is the housing affordability gap for renters. This calculation assumes that 30% of income is paid for gross rent. For owners, costs include mortgage payments, mortgage insurance, property taxes, property insurance, and homeowner association dues.20 The difference between these housing expenses and affordable ownership costs is the housing affordability gap for owners. This calculation assumes that 35% of income is paid for housing costs. Housing Subsidy: Housing subsidies refer to government assistance aimed at reducing housing sales prices or rents to more affordable levels. Housing Unit: A housing unit can be a room or group of rooms used by one or more individuals living separately from others in the structure, with direct access to the outside or to a public hall and containing separate toilet and kitchen facilities. Inclusionary Zoning: Inclusionary zoning, also known as inclusionary housing, refers to a planning ordinance that requires that a given percentage of new construction be affordable to households with very low, low, moderate, or workforce incomes. In-Lieu Fee: A literal definition for an in-lieu fee for inclusionary units would be a fee adopted “in place of” providing affordable units. For the purposes of operating an inclusionary housing program, a public jurisdiction may adopt a fee option for developers that prefer paying fees over providing housing units on- or off-site. A fee study is frequently undertaken to establish the maximum fee that can be charged as an in-lieu fee. This fee study must show that there is a reasonable relationship between the fee and the cost of providing affordable housing. Market-Rate Housing: Housing which is available on the open market without any public subsidy. The price for housing is determined by the market forces of supply and demand and varies by location. Nexus Study: In order to adopt a residential housing impact fee or a commercial linkage fee, a nexus study is required. A nexus requires local agencies proposing a fee on a development project to identify the purpose of the fee, the use of the fee, and to determine that there is “a reasonable relationship between the fee’s use and the type of development project on which the fee is imposed.” A Nexus Study establishes 20 Mortgage terms for first-time homebuyers typically allow down payment of five percent; these terms require private mortgage insurance. Palo Alto Linkage Fee Nexus Study -87- and quantifies a causal link or “nexus” between new residential and commercial development and the need for additional housing affordable to new employees. Non-Residential Development Housing Impact Fee (or Linkage Fee): A fee or charge imposed on commercial developers to pay for a development’s impact on the need for affordable housing. The fee is based on projected household incomes of new employees that will work in newly created space. The fee varies according to the type of property use. Palmer Case: This civil suit affects rental housing only. It affirmed that the Costa Hawkins Rental Act, passed in 1995 by the California State Legislature, applies to inclusionary rental units. The implication of this finding is that cities or counties cannot require rental property owners to rent inclusionary units that become vacant at below market rents, unless the developer accepted financial assistance (including fee waivers) or received other incentives that lowered development costs. Property Prototypes: Property prototypes are used for residential and commercial developments in order to define housing impact fees. The prototypes generally represent new development projects built in a community and are used to estimate affordable housing impacts associated with new market rate commercial and residential developments. While the prototypes should be “typical” of what is built, for ease of mathematical computation, they are often expressed as larger developments in order to avoid awkward fractions. Residential Housing Impact Fee: A fee imposed on residential development to pay for a development’s impact on the need for affordable housing. The fee is based on projected incomes of new employees associated with the expansion of market rate developments. Two steps are needed to define the fees. The first step is the completion of a nexus study, and the second step entails selection of the actual fee amount, which can be below the amount justified by the fee study, but not above that amount. RS Means: Data source of information for construction cost data. Palo Alto Linkage Fee Nexus Study -88- DEFINITION OF ACRONYMS AMI: Area Median Income CBIA: California Building Industry Association EDD: State of California Employment Development Department FAR: Floor-area-ratio FF&E: Furniture, Fixtures, and Equipment GBA: Gross Building Area HCD: Department of Housing and Community Development (State of California) NAICS: North American Industry Classification System NSF: Net Square Feet QCEW: Quarterly Census of Employment and Wages R&D: Research and development SF: Square Feet Attachment D Residential Impact Fee Nexus Study October 2015 prepared for: City of Palo Alto Vernazza Wolfe Associates, Inc. VWA Table of Contents I. EXECUTIVE SUMMARY .................................................................................................5 Introduction ....................................................................................................................................... 5 Background ...................................................................................................................................... 5 Report Organization ......................................................................................................................... 5 Fee Implementation Options ............................................................................................................ 5 Nexus Analysis Methodology and Results ............................................................................................ 6 Policy Considerations ..................................................................................................................... 12 II. INTRODUCTION AND METHODOLOGY ..................................................................... 14 Background .................................................................................................................................... 14 The Nexus Concept ........................................................................................................................ 15 Methodology ................................................................................................................................... 15 III. RESIDENTIAL PROTOTYPES ..................................................................................... 17 Recent Housing Development Trends ............................................................................................ 17 Residential Prototypes.................................................................................................................... 18 Household Incomes of Buyers and Renters ....................................................................................... 23 IV. ECONOMIC IMPACT ANALYSIS (IMPLAN3) .............................................................. 29 The IMPLAN3 Model ...................................................................................................................... 29 Household Income Impacts ............................................................................................................ 30 Employment and Wage Impacts .......................................................................................................... 30 Estimating Worker-Households ...................................................................................................... 30 Estimating Demand for Affordable Housing ................................................................................... 31 V. AFFORDABILITY GAP ANALYSIS .............................................................................. 36 Methodology ................................................................................................................................... 36 Estimating Affordable Rents and Sales Prices ............................................................................... 36 Estimating Housing Development Costs ........................................................................................ 43 Calculating the Housing Affordability Gap ...................................................................................... 47 VI. MAXIMUM FEE AND REQUIREMENTS ....................................................................... 51 Maximum Fee Calculation .............................................................................................................. 51 Inclusionary Housing Requirements ............................................................................................... 55 VII. FEASIBILITY AND POLICY CONSIDERATIONS ......................................................... 56 Financial Feasibility Analysis .......................................................................................................... 56 Additional Policy Considerations .................................................................................................... 68 VIII. GLOSSARY OF TERMS AND ACRONYMS ................................................................. 76 Glossary of terms ........................................................................................................................... 76 Definition of Acronyms .................................................................................................................... 79 -3- Palo Alto Housing Impact Fee Nexus Study List of Figures Figure I-2. Sales Prices and Rental Rates of Residential Prototypes .............................................................. 7 Figure I-3. Estimated Annual Household Incomes of Buyers of Single-Family Detached Units ................... 7 Figure I-4. Estimated Annual Household Incomes of Buyers of Single-Family Attached Units ................... 8 Figure I-5. Estimated Annual Household Incomes of Buyers of Condominium Units .................................. 8 Figure I-6. Estimated Annual Household Incomes of Renters of Apartment Units ....................................... 8 Figure I-7. New Worker Households by Income Group for Prototypes ........................................................ 9 Figure I-8. Number of Worker Households Associated with 100-Unit Prototypes, by Income Level ........... 9 Figure I-9. Total Affordability Gap for Single-Family Detached Units (30 Units) ...................................... 10 Figure I-10. Total Affordability Gap for Single-Family Attached Units (10 Units) ..................................... 10 Figure I-11. Total Affordability Gap for Condominiums (35 Units) ........................................................... 10 Figure I-12. Total Affordability Gap for Apartments (70 Units) ................................................................. 10 Figure I-13. Maximum Housing Impact Fee by Prototype .......................................................................... 11 Figure III-1. Single-Family Detached Home Sales in Palo Alto, Units Built 2012-2013 ............................ 19 Figure III-2. New Market-Rate Single-Family Attached Development in Palo Alto ................................... 19 Figure III-3. New Market-Rate Apartment Projects in Mountain View and Redwood City ........................ 20 Figure III-4. New Condominium Unit Sales in Palo Alto, Sold 2009 - 2011 .............................................. 21 Figure III-5. Recent Condominium Sales in Palo Alto and Surrounding Communities: Sold July 2014- July 2015 ..................................................................................................................................................... 22 Figure III-6. Average Net Residential SF per Unit ...................................................................................... 23 Figure III-7. Estimated Annual Household Incomes of Buyers of Single-Family Detached Units .............. 25 Figure III-8. Estimated Annual Household Incomes of Buyers of Single-Family Attached Units ............... 26 Figure III-9. Estimated Annual Household Incomes of Buyers of Condominium Units .............................. 27 Figure III-10. Estimated Annual Household Incomes of Renters of Apartment Units ................................. 28 Figure IV-1. Estimated Incomes by Income Categories for Buyers and Renters of New Units ................... 32 Figure IV-2. Estimated Job and Wage Impacts of Prototypes by Industry .................................................. 33 Figure IV-3. Estimated Job and Wage Impacts of Prototypes by Occupation ............................................. 34 Figure IV-4. Induced Employment Impacts, Palo Alto ................................................................................ 35 Figure IV-5. New Worker Households by Income Group for Prototypes .................................................... 35 Figure V-1. Calculation of Affordable Rents in Santa Clara County by Household Size, 2014 .................. 39 Figure V-2. Calculation of Affordable Rents in Santa Clara County by Unit Type, 2014 ........................... 40 Figure V-3. Calculation of Affordable Sales Prices in Santa Clara County by Household Size, 2014 ........ 41 Figure V-4. Calculation of Affordable Sales Prices in Santa Clara County by Unit Type, 2014 ................. 42 Figure V-5. Affordable Housing Project Pro Forma Data ........................................................................... 44 Figure V-6. Sales of Vacant Lands in San Mateo County and Northern Santa Clara County, 2014 ............ 45 Figure V-7. Estimate of Development Costs of Hypothetical Condominium Project .................................. 46 Figure V-8. Rental Housing Unit Sizes and Development Costs ................................................................. 47 Figure V-9. For-Sale Housing Unit Sizes and Development Costs .............................................................. 47 Figure V-10. Housing Affordability Gap Calculation for Rental Housing .................................................. 49 Figure V-11. Housing Affordability Gap Calculation for For-Sale Condominium Housing ........................ 50 Figure V-12. Average Housing Affordability Gap by Income Group ......................................................... 50 Figure VI-1. Maximum Per-Unit Fee for Single-Family Detached Prototype ............................................. 52 Figure VI-2. Maximum Per-Unit Fee for Single-Family Attached Prototype .............................................. 52 Figure VI-3. Maximum Per-Unit Fee for Condominium Prototype ............................................................. 52 Figure VI-4. Maximum Per-Unit Fee for Apartment Prototype ................................................................... 53 Figure VI-5. Maximum Fee per SF for Single-Family Detached Prototype ................................................ 53 Figure VI-6. Maximum Fee per SF for Single-Family Attached Prototype ................................................. 53 Figure VI-7. Maximum Fee per SF for Condominium Prototype ................................................................ 54 Figure VI-8. Maximum Fee per SF for Apartment Prototype ...................................................................... 54 -4- Palo Alto Housing Impact Fee Nexus Study Figure VII-1. Residential Prototypes ........................................................................................................... 56 Figure VII-2. Fee Levels per Unit for Prototypes ....................................................................................... 57 Figure VII-3. Fee Levels per Square Foot for Prototypes ........................................................................... 58 Figure VII-4. Sales Prices and Rents for Prototypes ................................................................................... 59 Figure VII-5. Apartment Revenue Calculations .......................................................................................... 59 Figure VII-6. Development Cost Factors .................................................................................................... 60 Figure VII-7. Recent Single-Family Land Sales Transactions in Palo Alto and Neighboring Cities ........... 62 Figure VII-8. Recent Multi-Family Land Sales Transactions in Palo Alto and Neighboring Cities ............ 63 Figure VII-9. Pro Forma Model Results for Single-Family Detached and Attached Prototypes ................ 66 Figure VII-10. Pro Forma Model Results for Condominium and Apartment Prototypes ............................ 66 Figure VII-11. Palo Alto Total Residential Fees under Selected Fee Scenarios .......................................... 69 Figure VII-12. Comparison with Impact Fees and In-Lieu Fees in Neighboring Jurisdictions ................... 70 Figure VII-13. Existing Housing Impact Fees in Bay Area Cities .............................................................. 72 -5- Palo Alto Housing Impact Fee Nexus Study I. EXECUTIVE SUMMARY INTRODUCTION In April 2014, the City of Palo Alto hired Strategic Economics and Vernazza Wolfe Associates, Inc. to develop nexus studies for commercial linkage fees and residential impact fees to mitigate the impacts of new development on the demand for affordable housing. This draft report presents the findings of the residential impact fee study. In addition, the report describes the methodology, data sources, and analytical steps required for the nexus analysis. BACKGROUND Palo Alto is interested in adopting an affordable housing impact fee on new residential development. The purpose of this fee would be to mitigate the impact of an increase in affordable housing demand from new worker households associated with new market-rate residential units. When a city or county adopts a development impact fee, it must establish a reasonable relationship or connection between the development project and the fee that is charged. Studies undertaken to demonstrate this connection are called nexus studies. This nexus study quantifies the connection between the development of market rate housing and the need for affordable housing units. This residential impact fee nexus study measures the income and spending generated by the households renting or buying new market rate units in Palo Alto. The increase in consumption is then translated into new “induced” job growth. These induced jobs will be at various wage rates; many will be at lower wages, for example in the retail and personal services sectors. Since low-wage households cannot reasonably afford to pay for market rate rental and for-sale housing in Palo Alto, a housing impact fee can be justified to bridge the difference between what these new households can afford to pay and the cost of developing modest housing units to accommodate them. REPORT ORGANIZATION This executive summary provides an overview of the housing nexus analysis methodology and results. The subsequent chapters of the report contain more detailed information regarding the methodology, data sources, and the steps of the analysis. The report is organized into seven sections and provides a glossary of terms at its conclusion. Following this executive summary, Section II provides an introduction to the purpose of the study, and an overview of the methodology. Section III presents the residential prototypes used in the analysis. Section IV describes the methodology and results of the IMPLAN economic impact analysis. Section V covers the housing affordability gap analysis. Section VI presents the maximum fee calculation based on the nexus analysis and affordability gap results. The final section, Section VII, discusses financial feasibility and other policy considerations that jurisdictions typically assess before implementing a nexus fee. FEE IMPLEMENTATION OPTIONS The maximum single-family detached impact fee per unit is $333,501, the maximum townhouse fee per unit is $189,037, the maximum condominium impact fee per unit is $158,519, and the maximum apartment fee per unit is $101,906. The fees are also calculated on a per-square-foot basis by dividing the unit fee by the average size of the unit. On a per-square-foot basis, the maximum impact fee is $111 for single-family detached, $90 for townhouses, $75 for condominiums and $105 for apartments. Palo Alto Housing Impact Fee Nexus Study -6- If the City of Palo Alto decides to adopt a housing impact fee, the recommended fee levels are: $95 per square foot for single-family detached housing ($285,000 per unit), $50 per square foot for single- family attached housing ($105,000 per unit), $50 per square foot for condominiums ($105,000 per unit), and $50 per square foot for apartments ($48,571 per unit). These recommendations are based on the results of the financial feasibility analysis, a comparison with fees adopted in other Bay Area communities, and other policy issues. The maximum and recommended fee levels are shown in Figure I-1. Figure I-1. Recommended Housing Impact Fees by Residential Prototype Maximum Justified Maximum Recommended Fee per Justified Fee Recommended Recommended Fee as % of Prototype Unit per SF Fee per Unit Fee per SF Sales Price Single-Family Detached $333,501 $111 $285,000 $95 9% Single-Family Attached $189,037 $90 $105,000 $50 6% Condominium $158,519 $75 $105,000 $50 8% Apartments $101,906 $105 $48,571 $50 n/a Sources: Vernazza Wolfe Associates, Inc. & Strategic Economics, 2015 NEXUS ANALYSIS METHODOLOGY AND RESULTS Prototypes The first step in the nexus analysis is developing residential housing prototypes. The prototypes establish the types of market rate housing development that are occurring or are expected to occur in the city that could potentially be subject to the affordable housing impact fee. The fees calculated in this nexus study are only applicable to the housing prototypes defined in this analysis. Based on historical development trends, market data, broker interviews, and input from city staff, the Consultant Team constructed four housing prototypes that represent the type of development that is likely to occur in Palo Alto: single-family detached housing (for-sale), single-family attached units (for-sale), condominiums (for-sale) and rental apartments. These development prototypes are not intended to represent specific development projects; rather, they are designed to illustrate the type of projects that are likely to be built in Palo Alto in the near future. Figure I-2 provides information on the unit type and size, as well as estimated sales prices and average monthly rents for each prototype. Palo Alto Housing Impact Fee Nexus Study -7- Figure I-2. Sales Prices and Rental Rates of Residential Prototypes Prototype Unit Type Number of Units Net Area (SF) Unit Sales Price/ Monthly Rent Price or Rent per SF Single-Family Detached (For-Sale) Type V wood frame 5 BD/4 BA 30 3,000 $3,043,000 $1,015 6 units per acre Attached garage Net Residential Area (Net SF) 90,000 Single-Family Attached (For-Sale) Type V wood frame 3 BD/ 4 BA 10 2,100 $1,666,000 $793 11 units per acre Tuck-under garage Net Residential Area 21,000 Condominiums (For-Sale) Type V wood frame 4 BD/3 BA 35 2,100 $1,390,000 $662 30 units per acre Underground parking Net Residential Area (Net SF) 73,500 Apartments (Rental) Type V wood frame 1 BD/ 1 BA 20 795 $3,247 $4.09 41 units per acre 2 BD/2 BA 50 1,114 $4,191 $3.76 Podium parking Net Residential Area 68,000 Average Net SF per Unit 1,063 Sources: Sources: DataQuick, 2014; Carmel the Village, 2014; CoStar, 2014; Individual Project Websites, 2014; City of Palo Alto, 2014; Strategic Economics & Vernazza Wolfe Associates, Inc., 2014. Household Income The next step is to calculate the annual household incomes of the buyers of new for-sale units and the renters occupying new apartment units by using the sales prices and rents shown in Figure I-1. Threshold incomes needed to purchase or rent units are based on standards used in the housing industry1. Figures I-3 through I-6 summarize the estimated household incomes of for-sale home buyers, by housing type, and Figure I-5 presents the calculated household incomes of apartment renters. Household incomes are a key input to the IMPLAN3 economic impact analysis described in Section IV of this report. Figure I-3. Estimated Annual Household Incomes of Buyers of Single-Family Detached Units Single-Family Detached Unit Type 5 BR/ 4 BA Number of Households 30 Sales Price $3,043,000 Household Income $546,783 Sources: California Health & Safety Code; Freddie Mac, 2014; Strategic Economics & Vernazza Wolfe Associates, Inc., 2015. 1 These standards are presented in greater detail in Section III of this report. Palo Alto Housing Impact Fee Nexus Study -8- Figure I-4. Estimated Annual Household Incomes of Buyers of Single-Family Attached Units Single-Family Attached Unit Type 3 BR/ 4 BA Number of Households 10 Sales Price $1,666,000 Household Income $309,642 Sources: California Health & Safety Code; Freddie Mac, 2014; Strategic Economics & Vernazza Wolfe Associates, Inc., 2015 Figure I-5. Estimated Annual Household Incomes of Buyers of Condominium Units Condominium Unit Type 4 BR/ 3 BA Number of Households 35 Sales Price $1,390,000 Household Income $260,049 Sources: California Health & Safety Code; Freddie Mac, 2014; Strategic Economics & Vernazza Wolfe Associates, Inc., 2015 Figure I-6. Estimated Annual Household Incomes of Renters of Apartment Units Apartment Unit Type 1 BR/ 1 BA 2 BR/ 2 BA Number of Households 20 50 Monthly Rent $3,247 $4,191 Household Income $129,894 $167,654 Sources: California Health & Safety Code; Freddie Mac, 2014; Strategic Economics & Vernazza Wolfe Associates, Inc., 2015 Economic Impact Analysis (IMPLAN) The next step is to determine employment and wage impacts of each prototype based on the incomes of the occupants of new housing units. The buyers and renters of the new market-rate units create new spending in the local economy. These new expenditures can be linked to new jobs, many of which pay low wages. The job and wage impacts related to new market-rate housing units are measured using IMPLAN3, an economic impact analysis tool. An economics consulting firm, Applied Development Economics (ADE) undertook the IMPLAN3 analysis for this study. The results of the IMPLAN analysis indicate that many of the induced jobs generated within Santa Clara County are in low-wage sectors like retail and food services (restaurants). However, a significant proportion of induced jobs are also in higher-paying resident-serving categories such as health care and government. Demand for Affordable Housing Since the focus of this study is on households, the next step is to calculate the number of new worker households by dividing the total number of new workers by the average number of wage-earners per household in Palo Alto. However, not all of the worker households require affordable housing. To estimate the affordable housing demand, the average annual household income of worker households is sorted into income categories that are consistent with area median income (AMI) levels defined for Santa Clara County. Figure I-7 indicates that of the 48.54 new worker households associated with single-family detached development, there are 38.32 households that need affordable housing. The comparable figures for single-family attached, condominium and apartment development are 7.23, 21.26, and 27.31 households, respectively. In order to directly compare the impact of market rate residential development by prototype, Figure I-8 displays the number of worker households, at Palo Alto Housing Impact Fee Nexus Study -9- various income levels, associated with a 100-unit development project. As shown, a 100-unit single- family detached subdivision, which has the highest sales values of all the prototypes, is linked to 161.8 worker households. Townhouse, condominium, and apartment developments of the same size are linked to 91.63 worker households, 76.95 worker households, and 49.39 worker households, respectively. Figure I-7. New Worker Households by Income Group for Prototypes Worker Households by Income Category Single- Family Detached (30 Units) Single- Family Attached (10 Units) Condominium Apartment (35 Units) (70 Units) Households Requiring Affordable Housing Very Low Income (<=50% AMI) 6.98 1.32 3.87 5.07 Low Income (51-80% AMI) 17.15 3.24 9.51 12.26 Moderate Income (81-120% AMI) 14.19 2.68 7.87 9.98 Subtotal Very Low, Low, Moderate Income 38.32 7.23 21.26 27.31 Above Moderate Income Households 10.22 1.93 5.67 7.26 Total All Worker Households 48.54 9.16 26.93 34.57 Note: For each prototype and income category, the number of households requiring affordable housing has been rounded to nearest one-hundredth. Sources: IMPLAN 3 via Applied Development Economics, 2015; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2015 Figure I-8. Number of Worker Households Associated with 100-Unit Prototypes, by Income Level Worker Households by Income Category Single- Family Detached Single- Family Attached Condominium Apartment Households Requiring Affordable Housing Very Low Income (<=50% AMI) 23.25 13.17 11.06 7.25 Low Income (51-80% AMI) 57.16 32.37 27.19 17.51 Moderate Income (81-120% AMI) 47.31 26.79 22.50 14.25 Subtotal Very Low, Low, Moderate Income 127.73 72.30 60.74 39.01 Above Moderate Income Households 34.07 19.33 16.21 10.37 Total All Worker Households 161.80 91.63 76.95 49.39 Note: For each prototype and income category, the number of households requiring affordable housing has been rounded to nearest one-hundredth. Source: Applied Development Economics, Inc., 2015; Strategic Economics & Vernazza Wolfe Associates, Inc 2015. Affordability Gap The next step is to quantify the total gap between what very low, low, and moderate income households can afford to pay for housing expenses and the cost of building new, modest rental and for-sale housing units. This housing “affordability gap” number per household is then multiplied by the number of income-qualified households in each income category for each housing type separately in order to estimate the total housing affordability gap for each prototype. Figure I-9 through I-12 present these totals by housing type. Palo Alto Housing Impact Fee Nexus Study -10- Figure I-9. Total Affordability Gap for Single-Family Detached Units (30 Units) Households Income Level Requiring Affordable Housing Average Affordability Gap per Household Affordability Gap for All Households Very Low-Income (<50% AMI) 6.98 $306,164 $2,137,025 Low-Income (50-80% AMI) 17.15 $252,258 $4,326,225 Moderate-Income (80-120% AMI) 14.19 $249,596 $3,541,767 Total 38.32 $10,005,017 Sources: California Housing and Community Development; Individual lenders; Affordable and market-rate project pro formas; DataQuick, 2014; RS Means, 2014; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2014. Figure I-10. Total Affordability Gap for Single-Family Attached Units (10 Units) Households Income Level Requiring Affordable Housing Average Affordability Gap per Household Affordability Gap for All Households Very Low-Income (<50% AMI) 1.32 $306,164 $404,136 Low-Income (50-80% AMI) 3.24 $252,258 $817,316 Moderate-Income (80-120% AMI) 2.68 $249,596 $668,917 Total 7.23 $1,890,370 Sources: California Housing and Community Development; Individual lenders; Affordable and market-rate project pro formas; DataQuick, 2014; RS Means, 2014; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2014. Figure I-11. Total Affordability Gap for Condominiums (35 Units) Households Income Level Requiring Affordable Housing Average Affordability Gap per Household Affordability Gap for All Households Very Low-Income (<50% AMI) 3.87 $306,164 $1,184,855 Low-Income (50-80% AMI) 9.51 $252,258 $2,398,974 Moderate-Income (80-120% AMI) 7.87 $249,596 $1,964,321 Total 21.26 $5,548,149 Sources: California Housing and Community Development; Individual lenders; Affordable and market-rate project pro formas; DataQuick, 2014; RS Means, 2014; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2014. Figure I-12. Total Affordability Gap for Apartments (70 Units) Income Level Households Requiring Subsidy Average Affordability Gap per Household Affordability Gap for All Households Very Low-Income (<50% AMI) 5.07 $306,164 $1,552,251 Low-Income (50-80% AMI) 12.26 $252,258 $3,092,683 Moderate-Income (80-120% AMI) 9.97 $249,596 $2,488,472 Total 27.30 $7,133,407 Sources: California Housing and Community Development; Individual lenders; Affordable and market-rate project pro formas; DataQuick, 2014; RS Means, 2014; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2014. Maximum Nexus-Based Fee The final step in calculating the maximum housing impact fee by prototype is to divide the total gap at each income level by the number of units in each prototype (Figure I-13). This maximum fee amount represents the ceiling on the fee that could be charged to mitigate affordable housing impacts from new residential development. The maximum single-family detached impact fee per unit is $333,501, the maximum townhouse fee per unit is $189,037, the maximum condominium impact fee per unit is $158,519, and the maximum apartment fee per unit is $101,906. The fees are also calculated on a per-square-foot Palo Alto Housing Impact Fee Nexus Study -11- basis by dividing the unit fee by the average size of the unit. On a per-square-foot basis, the maximum impact fee is $111 for single-family detached, $90 for townhouses, $75 for condominiums and $105 for apartments. Figure I-13. Maximum Housing Impact Fee by Prototype Prototype Single-Family Detached Single-Family Attached Condominiums Apartments Total Number of Units 30 10 35 70 Average Unit Size 3,000 2,100 2,100 971 Total Affordability Gap $10,005,017 $1,890,370 $5,548,149 $7,133,407 Maximum Fee per Unit $333,501 $189,037 $158,519 $101,906 Maximum Fee per SF $111.17 $90.02 $75.49 $104.90 Note: The affordability gap by prototype and maximum fee per unit numbers have been rounded to the nearest whole number. The maximum fee per SF has been rounded to the nearest one hundredth. Sources: California Housing and Community Development; Individual lenders; Affordable and market-rate project pro formas; DataQuick, 2014; RS Means, 2014; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2014. Palo Alto Housing Impact Fee Nexus Study -12- POLICY CONSIDERATIONS There are a number of policy considerations that can be taken into account when jurisdictions consider adopting an affordable housing impact fee on new market-rate development. These may include factors such as: the likely financial impact of the proposed housing impact fees on development; the additional cost of the new fees on the existing city fee structure; a comparison of the fee scenarios to existing housing impact fees in nearby cities; the role of the fee in the City’s overall strategy for affordable housing implementation; and the potential overlap with a commercial linkage fee. This section provides a discussion of each of these policy questions for Palo Alto. Financial Feasibility – Financial feasibility is just one of several factors to consider in making a decision regarding a potential nexus fee. In order to provide Palo Alto with guidance on how proposed fees could impact development decisions, the Consultant Team conducted a pro forma analysis that tested the impact of potential fee scenarios on developer profit for each prototype. The impact fees were tested at various levels, including the maximum fee level and lower fee levels. • Single-Family Detached - According to the results of the pro forma analysis, the maximum and reduced fee levels for single-family detached prototype are financially feasible. • Single-Family Attached – The maximum fee and reduced fee levels for the single-family attached prototype are financially feasible to implement. • Condominiums – All of the fee levels tested, including the maximum nexus fee, are financially feasible for condominium development. • Apartment - While the maximum nexus fee is not supportable for the apartment prototype, reduced fee levels of $50 per square foot and lower are financially feasible. Comparison to Existing City Fees – Palo Alto has existing city permits and fees on new development that would increase with the adoption of a new housing impact fee. The City may wish to consider the amount that total city fees would increase with the additional housing impact fee. Based on the current schedule of fees in Palo Alto, existing permits and fees (excluding the nexus fee) for the residential prototypes are estimated at $53 per square foot ($158,808 per unit) for single- family detached units, $66 per square foot ($138,777 per unit) for single-family attached units, $30 per square foot ($63,247 per unit) for condominiums, and $32 per square foot ($30,617 per unit) for apartments.2 Once the nexus-based residential impact fees at various levels are added to existing fees, the total fees increase significantly. The maximum fee scenario increases total per-square-foot fees to $164 for detached single-family homes, $156 for attached single-family homes, $106 for condominiums, and $136 for apartments. Comparison to Nearby Jurisdictions – Palo Alto’s maximum fee level, if adopted, would be considerably higher than what has been adopted in other San Mateo County and Santa Clara County cities to date. However, San Francisco has adopted fees ranging from $199,000 to $522,000 per unit, amounts that are similar to the maximum fee levels calculated for Palo Alto’s single-family detached and single-family attached prototypes. The recommended fee levels for single-family detached and single-family attached prototypes are lower than the adopted fees in San Francisco. The recommended fee level for condominiums of $40 per square foot is higher than the adopted fees in many other Peninsula cities, but similar to the fees established in East Palo Alto and San Carlos. The 2 The fee estimates presented above represent the best approximations available from the City of Palo Alto for these prototypes. Actual fees will vary depending on the specifics of the project. Palo Alto Housing Impact Fee Nexus Study -13- recommended apartment fee level of $50 per square foot is higher than fees adopted in Cupertino, Daly City, San Jose, Mountain View, and Sunnyvale, but significantly lower than the fees adopted in San Francisco. Role of Fee in Palo Alto’s Overall Housing Strategy – Palo Alto currently charges a commercial linkage fee of $19.31 per square foot on all new non-residential development, but does not have a housing impact fee. The City also has an inclusionary housing program that requires that 15 percent of the units in market-rate developments consisting of five or more housing units must be sold at affordable sales prices. This percentage increases to 20 percent on parcels larger than five acres. In some cases, developers have the option of paying an in-lieu fee of between 7.5 and 10 percent of the sales price or fair market value, whichever is greater. The developer must also pay a fee for fractional units. Revenues from the residential impact fees, if they are adopted, would continue to support the City’s existing affordable housing programs. It should be noted that revenues from a housing nexus fee need to be spent on housing that benefits the workforce since the funds stem from affordable housing impacts related to new employment. Overlap with Commercial Linkage Fee – In addition to the residential impact fee described in this report, Palo Alto has existing commercial linkage fees on non-residential development. There may be a small share of jobs counted in the commercial nexus analysis that supports its commercial linkage fee program that are also included in this residential impact fee analysis. Thus, the two programs may have some overlap in mitigating the affordable housing demand from the same worker households. In order to reduce the potential for overlap between the two programs, it is advisable to set both the commercial linkage fees and housing impact fees at below 100 percent of the nexus-based maximum. In this way, when combined, the programs would mitigate less than 100 percent of the impact even if there were overlap in the jobs counted in the two nexus analyses. Palo Alto Housing Impact Fee Nexus Study -14- II. INTRODUCTION AND METHODOLOGY According to the City of Palo Alto’s Housing Element, home values in the City have been increasing steadily since 2010. The median home price in 2013 was $1.7 million, more than twice the median price in Santa Clara County. Rental rates have also escalated rapidly, with median rents ranging from $1,900 for studios to more than $8,500 for four-bedroom homes. Given the high prices and rents in the City, most of the new market-rate housing units built in Palo Alto are only affordable to high- income households. Consequently, very low, low, and moderate income households have limited affordable housing options in the City. As one of its strategies to address the demand for affordable housing in the City, Palo Alto is considering a housing impact fee on new residential development. The purpose of this fee would be to mitigate the impact of an increase in demand for affordable housing due to employment growth associated with potential new residential development. When a city or county adopts a development impact fee, it must establish a reasonable relationship or connection between the development project and the impacts for which the fee is charged. Studies undertaken to demonstrate this connection are called nexus studies. Nexus studies for school impact fees, traffic mitigation fees, and park fees are common. For housing impact fees, a methodology exists that establishes a connection between the development of market rate housing and the need to expand the supply of affordable housing. This study is based on this methodology. The approach for this nexus study is to estimate the number of new workers that will be required to provide goods and services to the market rate households that are occupying new units in Palo Alto. Although growth in employment will provide jobs at various wage rates, many of the new jobs will be at low-wage rates in retail trade and services, consistent with job patterns in the County. Since low-wage households cannot reasonably afford to pay for market rate rental and for-sale housing in Palo Alto, a housing impact fee can bridge the difference between what these new households can afford to pay and the costs of developing new housing units for them. New market rate housing units in Palo Alto create a need for low-wage employees to provide goods and services to residents of the new units. If new market rate housing were not built, there would not be an increase in employment nor the accompanying demand for affordable housing from these new workers. Because housing impact fees are directed related to employment growth, the revenues collected from these fees needs to be spent on workforce housing and not on housing for households that do not participate in the labor force, such as retired seniors, unemployed homeless, and full-time student populations. BACKGROUND Cities and counties in California have operated inclusionary zoning programs to increase the supply of affordable housing since the 1970s. An inclusionary program requires that builders of new residential projects provide a specified percentage of units, either on-site or off-site, at affordable prices. Some programs have also allowed developers the option of paying fees “in lieu” of providing inclusionary units. Inclusionary zoning policies were usually established based on the police power of cities and counties to enact legislation benefitting public health, safety, and welfare. However, in 2009, the Court of Appeal held in Palmer/Sixth Street Properties, L.P. v. City of Los Angeles that inclusionary rental requirements based on the police power violates the Costa Hawkins Rental Housing Act, which allows landlords to determine the rents of all new units. Affordable rental housing may still be required if a developer agrees by contract to do so, in exchange for financial assistance or regulatory Palo Alto Housing Impact Fee Nexus Study -15- incentives. However, in the absence of these incentives, restricted rents cannot be required of a developer. Consequently, communities have completed nexus studies and imposed rental housing impact fees to mitigate the impact of market-rate rental housing on the need for affordable housing. Recently, the California Supreme Court’s decision on the California Building Industry Association (CBIA) Versus the City of San Jose upheld the use of local inclusionary housing programs for ownership units. The nexus analyses presented in this study are designed to define an upper limit for a housing impact fee to be charged on new rental and for-sale housing to mitigate impacts on affordable housing needs. The maximum fee is not necessarily the recommended fee. Subsequent sections of this report address additional policy considerations to consider when adopting housing impact fees. THE NEXUS CONCEPT In a balanced housing market, the development of new market rate housing results in population growth. Residents purchasing and renting these new units now spend money in the city. For example, they go out to eat in local restaurants, shop for food and clothing in local stores, and patronize other local businesses, such as hair salons, dry cleaners, and dental offices. This local spending results in the need to hire new workers to respond to the increased demand for goods and services. A nexus study establishes the connection between the households that purchase new housing units (or rent newly constructed rental units) and the number of new workers that will be hired by local businesses to serve the needs of new residents. Growth in employment will provide jobs at various wage rates. While some jobs will pay salaries that will allow new workers to rent or purchase market rate housing, many new jobs will also be at lower wages. Since low-wage households cannot reasonably afford to pay for market rate rental and for-sale housing in Palo Alto, a housing impact fee addresses the demand for affordable housing. METHODOLOGY The first step of the nexus analysis is to estimate the market prices or rents of new housing units. Based on these prices or rents, gross household incomes of buyers and renters are calculated. The gross household incomes of buyers and renters are then translated into direct economic impacts (new spending on retail goods and personal services), and induced impacts (new jobs and wage income) using the IMPLAN3 model. The IMPLAN3 analysis provides information on likely incomes of new workers. These incomes can then be used to estimate the demand for affordable housing from new worker households, and the costs of providing these affordable units. Each step of the nexus analysis is described in greater detail below. Step 1. Define the residential prototypes that represent new market rate housing development. Based on a review of recent development trends, pipeline projects, and market data for the city and county, the residential prototypes are defined. The prototypes represent typical new market-rate development projects likely to occur in the city. The prototype definitions include information on the building characteristics, net residential area, unit mix and sizes, and sales prices or rents. Step 2. Estimate household income of buyers and renters of new market rate units. The average gross household income required to purchase or rent new market rate units is estimated based on the market value or rents of new units. For ownership units, the calculation assumes typical mortgage terms and assumes that buyers spend 35 percent of their gross incomes on housing costs. Palo Alto Housing Impact Fee Nexus Study -16- For rental units, is assumed that renter households spend 30 percent of their gross incomes on housing. Step 3. Estimate economic impacts of new buyers and renters using IMPLAN3. The IMPLAN3 model uses Bureau of Labor Statistics Consumer Expenditure Survey data to model the spending patterns of different income groups. The model estimates the increase in expenditures from new households, the number of new (induced) workers related to new households, and the occupations and wages of these new workers. Step 4. Estimate the number of new worker households and annual household incomes. The number of new induced workers from the IMPLAN3 analysis is divided by the average number of workers per household in the city (defined by the U.S. Census Bureau) to calculate the total number of worker households associated with each housing prototype. The average worker’s wage calculated in the IMPLAN3 analysis is multiplied by the number of workers per household in the city to derive gross household income. This step assumes that the all wage-earners in a household have the same income. Step 5. Estimate the demand for affordable housing from new worker households. Based on the calculation of new worker household income, the worker households are categorized by target income group (very low income, low income, moderate income, and above moderate income). Worker households with above-moderate incomes are removed from the nexus analysis, because they would not require affordable housing. Step 6. Estimate the affordability gap of new households requiring affordable housing. The affordability gap represents the difference between what households can afford to pay for housing and the development cost of a modest housing unit. For very low and low income households, a rental housing gap is used. For moderate income households, the housing affordability gap is calculated separately for renter and owner households, and then the two gaps are combined to derive an average affordability gap for moderate income households. Step 7. Estimate nexus-based fees for each prototype. The number of new households requiring affordable housing is multiplied by the average affordability gap per household to estimate the total affordability gap for each prototype. The maximum per-unit and per-square foot fees are then calculated by dividing the aggregate affordability gap by the number of units or net residential area in each prototype. Palo Alto Housing Impact Fee Nexus Study -17- III. RESIDENTIAL PROTOTYPES The first step in the nexus analysis is developing residential housing prototypes. The residential prototypes establish the types of residential development that are occurring or are expected to occur in the city and could potentially be subject to the affordable housing impact fee. The housing prototypes are not intended to represent specific development projects; rather, they are designed to illustrate the type of projects that are likely to be built in Palo Alto in the near future. The fees calculated in this nexus study are only applicable to the housing prototypes defined in this analysis. Based on estimated sales prices and rents of new market-rate units, the household incomes of buyers and renters of new units are estimated. This section of the report describes the methodology for establishing the prototypes and calculating the household incomes of buyers and renters of new market-rate units in Palo Alto. The estimated household incomes are then used as inputs to the IMPLAN3 analysis to estimate the employment impacts of the market-rate households, which is described in more detail in Section IV of this report. RECENT HOUSING DEVELOPMENT TRENDS In order to ensure that the prototypes accurately reflect current market conditions, the Consultant Team analyzed recently built market rate housing development projects, as well as planned and proposed projects in Palo Alto. In the last years, Palo Alto has seen the development of new for-sale market rate housing including single-family detached, single-family attached and condominium units. As the City is anticipating new apartment development in the near future, this report examined proposed projects in Palo Alto and recently built apartments in nearby cities to establish an apartment prototype. Figure III-1 summarized recent sales of single-family detached units in Palo Alto built between 2012 and 2013. The weighted average sale price (accounting for the size of the unit) is $1,015 per square foot. Similarly, Figure III-2 presents a recent single-family attached development built in Palo Alto in 2013. According to recent sales data, the single-family attached units sold at an average price of $803 per square foot. Because Palo Alto has not experienced new apartment development, market data from recently built apartment projects in nearby cities was analyzed for this prototype. Figure III-3 contains the market data for recently built market-rate apartment projects in Mountain View and Redwood City. As shown, the average asking monthly rents are approximately $3,200 for one bedroom units, $4,200 for two bedroom units, and $4,000 for three bedroom units. Palo Alto has seen the development of several condominium projects between 2008 and 2011 , with no new completions since then. According to the data shown in Figure III-4, the average price for newer units sold between 2009 and 2013 is $1.3 million per unit ($660 per square foot), and the average size is 2,121 square feet. An updated list showing 2014 and 2015 condominium sales in Palo Alto and in other nearby communities in Santa Clara County is shown in Figure III-5. As shown, Palo Alto commands a price premium over other cities, with average condominium units selling for $1.3 million square feet per unit ($874 per square foot), compared to $1.1 million per unit in other nearby communities ($739 per square foot). Based on this information, the condominium prototype is a $1.39 million unit with an average size of 2,100 square feet. Palo Alto Housing Impact Fee Nexus Study -18- RESIDENTIAL PROTOTYPES Based on historical development trends, market data, broker interviews, and input from city staff, the Consultant Team constructed four housing prototypes that represent the type of development that is likely to occur in Palo Alto. These development prototypes are not intended to represent specific development projects; rather, they are designed to illustrate the type of projects that are likely to be built in Palo Alto in the near future. The prototypes, as shown in Figure III-5, provide information on the building type, number of units, average size by unit type, and average monthly rents or sales prices by unit type. Single-Family Detached The single-family prototype is a 30-unit subdivision of detached homes with an average net density of six units per acre. This development type is representative of recently built and proposed single- family projects in Palo Alto and the immediate area. The single-family homes are five-bedroom units with a total net area of 3,000 square feet. The average estimated price of newly built single-family detached units is $3,043,000. Single-Family Attached The single-family attached prototype is a 10-unit single-family attached development with tuck-under garage. The estimated average net density is 11 units per acre. The units are three-bedroom units with an average size of 2,100 square feet. The estimated price of a new single-family attached unit s $1,666,000.The single-family attached prototype represents typical new market-rate single-family attached homes proposed or recently built in Palo Alto and nearby cities. For-Sale Condominiums The for-sale condominium prototype is a 35-unit Type V wood-frame building with an underground parking garage. The estimated average density is 30 units per acre. This building type is representative of recently built condominium projects in Palo Alto. The condominium prototype is a four-bedroom unit with a size of 2,100 square feet. The average estimated price of newly built condominiums is $1,390,000. Rental Apartments The rental apartment prototype is a Type V wood-frame building with podium parking and net residential area of 214,900 square feet. The estimated density is 41 units per acre. Because new market-rate apartment development has not occurred in Palo Alto, the prototype is based on trends in rental apartment development in nearby cities including Mountain View and Redwood City. Consistent with market trends, the apartment unit mix consists of one- and two-bedroom units. Estimated monthly rents range from $3,200 to $4,200 per unit, depending on unit size and number of bedrooms. Figure III-1. Single-Family Detached Home Sales in Palo Alto, Units Built 2012-2013 Address Year Built Number of Bedrooms Number of Bathrooms Unit Size (SF) Sale Price Price/SF 3466 RAMBOW DR 2012 4 3.5 2,318 $2,690,000 $1,160 928 ADDISON AVE 2012 6 5.5 4,084 $4,650,000 $1,139 4008 EL CERRITO RD 2012 5 4.5 3,746 $3,780,000 $1,009 130 IRIS WAY 2013 4 3 2,502 $3,060,000 $1,223 3500 EMMA CT 2012 4 3.5 2,523 $2,250,000 $892 740 SEALE AVE 2012 7 6 5,598 $6,000,000 $1,072 849 NORTHAMPTON DR 2012 5 4.5 3,533 $4,700,000 $1,330 3872 CORINA WAY 2012 5 3.5 2,675 $2,150,000 $804 387 ELY PL 2012 3 3.5 2,588 $2,452,000 $947 747 ROSEWOOD DR 2012 5 4.5 2,954 $3,300,000 $1,117 3501 EMMA CT 2012 4 3 2,431 $2,350,000 $967 3503 EMMA CT 2012 5 3 2,653 $2,650,000 $999 886 CHIMALUS DR 2012 4 3.5 2,504 $2,751,000 $1,099 3342 SOUTH CT 2012 4 3.5 2,384 $2,300,000 $965 1091 EMERSON ST 2013 5 5 5,043 $3,800,000 $754 1112 HIGH ST 2012 4 3 2,208 $2,250,000 $1,019 434 FULTON ST 2012 3 2 1,558 $2,157,000 $1,384 525 GUINDA ST 2012 4 3 2,251 $2,445,000 $1,086 1135 WEBSTER ST 2013 4 3.5 3,300 $3,450,000 $1,046 Weighted Average $1,015 Sources: DataQuick, 2014; Strategic Economics & Vernazza Wolfe Associates, Inc., 2014. Figure III-2. New Market-Rate Single-Family Attached Development in Palo Alto Project Year Built Building Type Unit Types Number Units Unit Size (SF) Average Sale Price Average Price/SF Classics at Monroe Place 2013 3-story single-family attached 3 BR/ 3.5 BA 10 2,075 $1,665,888 $803 Attached garage Sources: Classic Communities, 2014; City of Palo Alto, 2014; Strategic Economics & Vernazza Wolfe Associates, Inc., 2014. Palo Alto Housing Impact Fee Nexus Study -19- Palo Alto Housing Impact Fee Nexus Study -20- Figure III-3. New Market-Rate Apartment Projects in Mountain View and Redwood City Project Building Type Year Built Unit Type Number Units Unit Size Avg. Monthly Rent Avg. Rent/ SF Carmel the Village 5 stories 2013 Studio 41 537 $2,795 $5.20 555 San Antonio Rd Underground parking 1 BR/ 1 BA 192 693 $3,350 $4.83 Mountain View 2 BR/ 2 BA 97 1054 $4,820 $4.57 201 Marshall Apartments 7 stories 2014 Studio 10 634 $2,495 $3.94 201 Marshall Underground parking 1 BR/ 1 BA 64 1,030 $3,378 $3.28 Redwood City 2 BR/ 2 BA 39 1,129 $4,260 $3.77 Radius 5-6 stories 2014 1 BR/ 1 BA 150 840 $3,100 $3.69 640 Veteran's Dr Underground parking 2 BR/ 2 BA 100 1,132 $3,845 $3.40 Redwood City 3 BR/ 2 BA 14 1,289 $4,093 $3.18 Township Apartments 4 stories 2013 1 BR/ 1 BA 41 725 $3,063 $4.22 333 Main St Podium garage 2 BR/ 2 BA 88 1,080 $3,600 $3.33 Redwood City 3 BR/ 2 BA 3 1,224 $3,300 $2.70 Woodside 4-5 stories 2011 1 BR/ 1 BA 14 840 $3,365 $4.01 885 Woodside Rd Redwood City Podium and underground 2 BR/ 2 BA 21 1,424 $5,290 $3.72 Average All Projects Studio 6% 556 $2,736 1 BR/ 1 BA 53% 795 $3,247 $4.09 2 BR/ 2 BA 39% 1,114 $4,191 $3.76 3 BR/ 2 BA 2% 1,277 $3,953 $3.10 Sources: Carmel the Village, 2014; CoStar, 2014; 201marshall.com, 2014; Apartments.com, 2014. Calculations by Vernazza Wolfe Associates, Inc. and Strategic Economics, 2014. Palo Alto Housing Impact Fee Nexus Study -21- Figure III-4. New Condominium Unit Sales in Palo Alto, Sold 2009 - 2011 Year Built Unit Size (SF) Number of Bedrooms Number of Bathrooms Sale Price Price/SF 2009 2,122 4 3.5 $1,240,000 $584 2009 2,423 4 3.5 $1,440,000 $594 2009 2,122 4 3.5 $1,259,500 $594 2009 2,407 4 3.5 $1,412,500 $587 2009 1,769 3 2.5 $1,060,000 $599 2009 2,330 4 3.5 $1,415,000 $607 2009 2,368 4 3.5 $1,419,500 $599 2009 2,363 4 3.5 $1,396,000 $591 2009 2,368 4 3.5 $1,889,000 $798 2009 2,330 4 3.5 $1,430,000 $614 2009 1,811 3 2.5 $1,450,000 $801 2010 1,846 4 2.5 $1,330,000 $720 2010 1,769 3 2.5 $1,139,500 $644 2010 2,423 4 3.5 $1,400,000 $578 2010 2,122 4 3.5 $1,336,500 $630 2010 2,122 4 3.5 $1,341,500 $632 2010 2,407 4 3.5 $1,399,000 $581 2010 2,407 4 3.5 $1,520,000 $631 2010 2,330 4 3.5 $1,425,000 $612 2010 2,122 4 3.5 $1,387,500 $654 2010 2,368 4 3.5 $1,446,500 $611 2010 1,838 4 2.5 $1,259,000 $685 2010 1,948 4 2.5 $1,434,000 $736 2010 1,948 4 2.5 $1,480,000 $760 2011 1,846 4 2.5 $1,400,000 $758 2011 1,838 4 2.5 $1,330,000 $724 2011 1,838 4 2.5 $1,380,000 $751 2011 1,948 4 2.5 $1,710,000 $878 2011 1,935 4 2.5 $1,350,000 $698 2011 1,838 4 2.5 $1,330,000 $724 2011 1,935 4 2.5 $1,300,000 $672 2011 2,330 4 3.5 $1,382,500 $593 2011 2,122 4 3.5 $1,345,000 $634 2011 2,423 4 3.5 $1,408,500 $581 Average 2,121 $1,389,588 $660 Source: DataQuick, 2014, Vernazza Wolfe Associates, Inc. and Strategic Economics, 2015. Palo Alto Housing Impact Fee Nexus Study -22- Figure III-5. Recent Condominium Sales in Palo Alto and Surrounding Communities: Sold July 2014-July 2015 City Project Address Building Type Year Built Number Units Unit Type Unit Size Sold Price Sold PSF Palo Alto Arbor Real El Camino Real and W. Charleston Rd 3 stories 2007 129 2 BR 1,636 $1,237,000 $756 3 BR 1,913 $1,580,000 $826 Palo Alto Sterling Park Loma Verde Ave & Fallen Leaf St 3 stories 2011 120 3 BR 1,715 $1,460,000 $851 Palo Alto Echolon 1101 E. Meadow Dr 3 stories 2009 70 3 BR 1,300 $1,320,000 $1,015 Palo Alto Vantage E. Meadow Dr & Quail Dr 2 stories 2008 76 2 BR 1,197 $1,102,000 $921 Average Palo Alto $1,339,800 $874 Mountain View Mondrian E. Evelyn Ave & Moorpark Wy 3 stories 2007 151 2 BR 1,410 $1,310,000 $929 3 BR 1,602 $1,192,333 $744 Mountain View Gables End Plymouth St & Amherst Wy 2-3 stories 2008 108 2 BR 1,490 $1,100,000 $738 Mountain View Bedford Square Bedford Dr & Ferguson Dr 3 stories 2007 106 2 BR 1,374 $977,500 $711 3 BR 1,843 $1,480,000 $803 Los Altos 100 First 100 First St 3 stories 2015 46 1 BR 1,156 $910,000 $787 2 BR 1,621 $1,450,000 $895 3 BR 2,281 $2,383,500 $1,045 Los Altos 396 First 396 First St 3 stories 2013 20 1 BR 891 $861,000 $966 2 BR 1,557 $1,172,688 $753 Sunnyvale Evelyn Glen E. Evelyn Ave & Peppermint Tree Ter 3 stories 2008 130 2 BR 1,251 $816,888 $653 3 BR 1,426 $865,643 $607 Verona at 4 BR 1,586 $1,100,000 $694 Sunnyvale Sunnyvale Tasman Dr & Morse Ave 3 stories 2009 72 2 BR 1,392 $821,000 $590 3 BR 1,555 $895,000 $576 Sunnyvale Fusion Deguine Dr & Glen Valley Ter 3 stories 2012 228 4 BR 1,882 $1,060,000 $563 Average Other Cities $1,149,722 $739 Source: Polaris Pacific, 2015; Strategic Economics, 2015. Palo Alto Housing Impact Fee Nexus Study -23- Figure III-6. Average Net Residential SF per Unit Prototype Unit Type Number of Units Net Area (SF) Unit Sales Price/ Monthly Rent Price or Rent per SF Single-Family Detached (For-Sale) Type V wood frame 5 BD/4 BA 30 3,000 $3,043,000 $1,015 6 units per acre Attached garage Net Residential Area (Net SF) 90,000 Single-Family Attached (For-Sale) Type V wood frame 3 BD/ 4 BA 10 2,100 $1,666,000 $793 11 units per acre Tuck-under parking Net Residential Area 21,000 Condominiums (For-Sale) Type V wood frame 4 BD/3 BA 35 2,100 $1,390,000 $662 30 units per acre Underground parking Net Residential Area (Net SF) 73,500 Apartments (Rental) Type V wood frame 1 BD/ 1 BA 20 795 $3,247 $4.09 41 units per acre 2 BD/2 BA 50 1,114 $4,191 $3.76 Podium parking Net Residential Area 68,000 Average Net SF per Unit 1,063 Sources: DataQuick, 2014; Carmel the Village, 2014; CoStar, 2014; 201marshall.com, 2014; Apartments.com, 2014; Classic Communities, 2014; City of Palo Alto, 2014; Strategic Economics & Vernazza Wolfe Associates, Inc., 2014. HOUSEHOLD INCOMES OF BUYERS AND RENTERS Using the sales prices and rents shown in Figure III-5, the next step is to calculate the annual household incomes of the buyers of new for-sale condominium units and the renters occupying new apartment units. The household income is a key input to the IMPLAN3 economic impact analysis described in Section IV of this report. The calculations demonstrate that the estimated annual household income of buyers of new market-rate units in Palo Alto is between $260,000 and $550,000, depending on the unit prototype. For renters of new market-rate apartment units, the annual household income is estimated between approximately $130,000 and $170,000. This shows that new housing units developed in the City are priced for high-income households, and cannot be accessed by very low, low, and moderate income households. Income of Single-Family Detached Buyers To calculate the household income of single-family detached buyers, the analysis applied typical mortgage terms for Santa Clara County: 20 percent down payment, 30 year fixed rate mortgage, and 4.35 percent interest rate. Palo Alto property tax rates were estimated from recent budget documents. Total housing costs, including monthly payments for mortgage payments, property taxes and insurance, are assumed to be 35 percent of available monthly income. The result of the income estimates for households buying new single-family detached units is shown in Figure III-6. As shown Palo Alto Housing Impact Fee Nexus Study -24- in the calculations, for single-family detached units, household incomes are estimated to be almost $550,000. Income of Single-Family Attached Buyers For buyers of single-family attached units, the analysis applied the same typical mortgage terms as those used for single-family detached units, and Palo Alto’s property tax rates. Homeowner association (HOA) fees were based on a review of HOA fees at similar new single-family attached developments in Santa Clara County. As in the previous case, households are expected to spend 35 percent of available monthly income on total housing costs, including monthly payments for mortgage payments, property taxes, insurance and HOA fees. Figure III-7 shows the result of the income estimates for households buying new single-family detached units. As shown in the calculations, for single-family attached units, household incomes are estimated to be approximately $310,000. Incomes of Condominium Buyers To calculate the household income of buyers of new condominium units, the analysis applied mortgage terms typical for Santa Clara County: 20 percent down payment, 30 year fixed rate mortgage, and 4.35 percent interest rate. Property tax rates were estimated from recent budget documents, and homeowner association (HOA) fees were based on a review of HOA fees at similar new condominium developments in Santa Clara County. Total housing costs, including monthly payments for mortgage payments, property taxes, insurance, and HOA fees, are assumed to be 35 percent of available monthly income. The result of the income estimates for households buying new condominium units is shown in Figure III-8. As shown in the calculations, for condominium units, household incomes are estimated at over $260,000. Incomes of Apartment Renters For renter households, maximum annual housing costs are assumed to be 30 percent of gross household income, a standard established in California’s Health and Safety Code Sections 50052.5 and 50053. The estimated household income of renters varies by unit type, as indicated in Figure III- 9. One-bedroom renter households have an estimated annual income of nearly $130,000, while renters of two-bedroom units have estimated household incomes of about $170,000. Palo Alto Housing Impact Fee Nexus Study -25- Figure III-7. Estimated Annual Household Incomes of Buyers of Single-Family Detached Units Single-Family Detached Unit Type 5 BR/ 4 BA Number of Households 30 Sales Price $3,043,000 Down Payment (a) $608,600 Loan Amount $2,434,400 Monthly Debt Service (b) $12,119 Annual Debt Service $145,425 Annual Property Taxes (c) $35,299 Fire and Hazard Insurance (d) $10,651 Annual Housing Costs (e) $191,374 Household Income $546,783 Notes: (a) Down payment is estimated at 20% of sales price, based on Freddie Mac data for Santa Clara County. (b) Interest rate is estimated at 4.35% for a 30-year term, based on Freddie Mac data. http://www.freddiemac.com/pmms/pmms30.htm. (c) Property tax rate is 1.16% based Palo Alto CAFR, 2013. (d) Industry standard (e) Homeownership housing burden is estimated at 35%, based on California Health & Safety Code Sections 50052.5 and 50053. Sources: Strategic Economics & Vernazza Wolfe Associates, Inc., 2014. Palo Alto Housing Impact Fee Nexus Study -26- Figure III-8. Estimated Annual Household Incomes of Buyers of Single-Family Attached Units Single-Family Attached Unit Type 3 BR/ 4 BA Number of Households 10 Sales Price $1,666,000 Down Payment (a) $333,200 Loan Amount $1,332,800 Monthly Debt Service (b) $6,635 Annual Debt Service $79,618 Annual Property Taxes (c) $19,326 Annual HOA Fees (d) $3,600 Fire and Hazard Insurance (e) $5,831 Annual Housing Costs (f) $108,375 Household Income $309,642 Notes: (a) Down payment is estimated at 20% of sales price, based on Freddie Mac data for Santa Clara County. (b) Interest rate is estimated at 4.35% for a 30-year term, based on Freddie Mac data. http://www.freddiemac.com/pmms/pmms30.htm. (c) Property tax rate is 1.16% based Palo Alto CAFR, 2013. (d) Homeownership association (HOA) fees are estimated at $300 per month, based on review of recently built projects. (e) Industry standard (f) Homeownership housing burden is estimated at 35%, based on California Health & Safety Code Sections 50052.5 and 50053. Sources: Strategic Economics & Vernazza Wolfe Associates, Inc., 2014. Palo Alto Housing Impact Fee Nexus Study -27- Figure III-9. Estimated Annual Household Incomes of Buyers of Condominium Units Condominium Unit Type 4 BR/ 3 BA Number of Households 35 Sales Price $1,390,000 Down Payment (a) $278,000 Loan Amount $1,112,000 Monthly Debt Service (b) $5,536 Annual Debt Service $66,428 Annual Property Taxes (c) $16,124 Annual HOA Fees (d) $3,600 Fire and Hazard Insurance (e) $4,865 Annual Housing Costs (f) $91,017 Household Income $260,049 Notes: (a) Down payment is estimated at 20% of sales price, based on Freddie Mac data for Santa Clara County. (b) Interest rate is estimated at 4.35% for a 30-year term, based on Freddie Mac data. http://www.freddiemac.com/pmms/pmms30.htm. (c) Property tax rate is 1.16% based Palo Alto CAFR, 2013. (d) Homeownership association (HOA) fees are estimated at $300 per month, based on review of recently built projects. (e) Industry standard (f) Homeownership housing burden is estimated at 35%, based on California Health & Safety Code Sections 50052.5 and 50053. Sources: Strategic Economics & Vernazza Wolfe Associates, Inc., 2014. Palo Alto Housing Impact Fee Nexus Study -28- Figure III-10. Estimated Annual Household Incomes of Renters of Apartment Units Apartment Unit Type 1 BR/ 1 BA 2 BR/ 2 BA Number of Households 20 50 Monthly Rent $3,247 $4,191 Annual Housing Costs $38,968.31 $50,296.35 Housing Costs as % of Income (a) 30% 30% Household Income $129,894 $167,655 Notes: (a) Renter housing burden is estimated at 30%, based on California Health & Safety Code Sections 50052.5 and 50053. Sources: Strategic Economics & Vernazza Wolfe Associates, Inc., 2014. Palo Alto Housing Impact Fee Nexus Study -29- IV. ECONOMIC IMPACT ANALYSIS (IMPLAN3) The buyers and renters of the new market-rate condominiums and apartments create new spending in the local economy. These new expenditures can be linked to new jobs, many of which pay low wages. The job and wage impacts related to new market-rate housing units are measured using IMPLAN3, an economic impact analysis tool. An economics consulting firm, Applied Development Economics (ADE) undertook the IMPLAN3 analysis with the information on residential prototypes and associated buyers’ and renters incomes provided by Strategic Economics and Vernazza Wolfe Associates Inc. In this section of the report, the methodology and results of the IMPLAN3 analysis are described in detail. THE IMPLAN3 MODEL The IMPLAN model is an economic dataset that has been used for over 35 years to measure the economic impacts of new investments and spending using the industrial relationships defined through an Input-Output Model. The IMPLAN model can estimate economic impacts resulting from changes in industry output, employment, income, and other measures. The latest version of this model is referred to as IMPLAN3. For this analysis, the input-output model used data specific to Santa Clara County in order to estimate the multiplier effects resulting from the households that could potentially rent or buy new housing units in Palo Alto. In this case, all of the multiplier effects derive from new demand for goods and local services (including government) that new households would generate within Santa Clara County. It does not account for economic impacts generated during the construction period, or any economic impacts that would occur outside of the county. The economic impacts estimated by the model generally fall into one of three categories - direct, indirect, or induced. For this analysis, the direct impacts represent the household income brought into the community by new residents. Indirect impacts would normally result from demand for commodities and services provided by suppliers for business operations. (Because the direct impacts come only from household spending, and not from business activity, the indirect effects were not calculated.) Induced impacts represent the potential effects resulting from household spending at local establishments by the new workers hired as a result of increased household expenditures. These impacts affect all sectors of the economy, but primarily affect retail businesses, health services, personal services providers, and government services. The employment estimates provided by the IMPLAN3 model cover all types of jobs, including full and part time jobs. The first analysis undertaken by the IMPLAN3 model estimated the household demand for retail goods and personal services. It is assumed that buyers and renters of new housing units in Palo Alto increase demand for goods and services within Santa Clara County. This demand is based on the projected incomes of renters and owners for each prototype. The IMPLAN3 model’s calculations are based on changes in household income, which adjusts the gross income to account for the payment of income taxes and savings.3 The second analysis estimated the induced impacts, or multiplier effects of new household spending in terms of jobs and wage income. The jobs and income calculations are focused on the induced jobs that would be created through local spending by the new households. The input-output model estimates the job impacts by detailed industry sector. The analysis took the detailed industry impact 3 According to IMPLAN Group LLC, when the economic impact is modeled based on household income change, IMPLAN3 will adjust the input for income taxes and savings. Palo Alto Housing Impact Fee Nexus Study -30- estimates and distributed them by occupational category. The occupational employment data used in the analysis came from the California Employment Development Department (EDD) Labor Market Information Division, and aggregates together data for all of California. After converting the industry level data into occupational employment, the income distribution was calculated using the occupational wage data for the San Jose-Santa Clara-Sunnyvale Metropolitan Statistical Area (MSA).. The average wage by occupation was used to make this calculation. The 2014 (first quarter) occupational wage data used in the analysis comes from California’s EDD. It should be noted that the figures used in the IMPLAN3 analysis reflect the demand for retail goods and services by net, new Santa Clara County households. The multiplier impacts assume that all of this spending will remain in Santa Clara County.4 HOUSEHOLD INCOME IMPACTS Since the IMPLAN3 Model bases its household income impacts on Consumer Expenditure Survey data, income categories are used in the model instead of continuous income information. Because of this feature, the analysis sorted the renters and buyers of new market rate units into income groups, and then calculated the economic impacts based on the total income calculated for each income group. Figure IV-1 below summarizes the household income data for single-family detached, single-family attached, condominium and apartment households. As shown, all 30 single-family detached households are in the income category of $150,000 or higher, with a total combined household income of $16.40 million. The ten single-family attached households are also all in the over $150,000 income category, reaching a combined household income of $3.1 million. Likewise, all 35 condominium households belong to the income category of $150,000 or higher, with an aggregate income of $9.1 million. Figure IV-1 also demonstrates the same calculation for renter households. The rental prototype has 20 households in the $100,000-$150,000 income category, and 50 households in the over $150,000 income category. The combined total household income for renter households is $10.98 million. These total income figures, adjusted to account for taxes and savings, were used as inputs for the IMPLAN3 analysis. EMPLOYMENT AND WAGE IMPACTS Based on the incomes of the new buyers and renters, the next step is to determine employment and wage impacts from each prototype. Estimated employment and wages are shown in Figure IV-2 for each IMPLAN3 industry sector, indicating the number of induced jobs, the industry’s share of total employment growth by prototype, and the average wage by industry. Figure IV-3 provides the same IMPLAN3 output data, organized by occupation rather than industry, for each prototype. As shown in both figures, many of the induced jobs generated within Santa Clara County are in low-wage sectors and occupations related to retail and food services (restaurants). For example, workers in the food preparation and services earn annual wages of approximately $24,000. In addition to the very low paying occupations, a smaller share of induced jobs are in higher-paying resident-serving categories such as health care and government. ESTIMATING WORKER-HOUSEHOLDS Recognizing that many households have more than one wage-earner, the next step is to calculate the number of worker–households by dividing the total number of new workers by the average number of 4 Estimating the retail leakage would require a detailed analysis of retail sales totals for existing businesses in Santa Clara County and is beyond the scope of this study. Palo Alto Housing Impact Fee Nexus Study -31- wage-earners per household in Palo Alto. According to the U. S. Census Bureau 2008-2012 American Community Survey 3-Year Estimate, Palo Alto has an average of 1.51 workers per household. The number of induced jobs is divided by 1.51 to calculate the total number of worker households. Figure IV-4 illustrates this calculation. ESTIMATING DEMAND FOR AFFORDABLE HOUSING To estimate the demand for affordable housing, it is first necessary to determine the incomes of the new households. Once the average annual household income of worker households is calculated, the next step is to categorize households into area median income (AMI) levels based on the thresholds set by California Department of Housing and Community Development for Santa Clara County. The average household size in Palo Alto is 2.41 (rounded to 2.0), according to the US Census American Community Survey 5-Year Estimates 2008-2012. The income threshold for a two-person household in Santa Clara County was therefore used to determine the AMI categories of each new worker household. Figure IV-5 indicates that of the 48.5 new worker households associated with single- family detached development, there will be 38.3 households that need affordable housing. The comparable figures for single-family attached, condominium and apartment development are, respectively, 7.2, 21.3 and 27.3 households. -32- Palo Alto Housing Impact Fee Nexus Study Figure IV-1. Estimated Incomes by Income Categories for Buyers and Renters of New Units Single-Family Detached Prototype Single-Family Attached Prototype Condominium Prototype Apartment Prototype New Aggregate Average Household Household New Aggregate Average Household Household New Aggregate Average Household Household New Aggregate Average Household Household Income Category Households Incomes Income Households Incomes Income Households Incomes Income Households Incomes Income Less than $10,000 0 $0 n/a 0 $0 n/a 0 $0 n/a 0 $0 n/a $10,000-$15,000 0 $0 n/a 0 $0 n/a 0 $0 n/a 0 $0 n/a $15,000-$25,000 0 $0 n/a 0 $0 n/a 0 $0 n/a 0 $0 n/a $25,000-$35,000 0 $0 n/a 0 $0 n/a 0 $0 n/a 0 $0 n/a $35,000-$50,000 0 $0 n/a 0 $0 n/a 0 $0 n/a 0 $0 n/a $50,000-$75,000 0 $0 n/a 0 $0 n/a 0 $0 n/a 0 $0 n/a $75,000-$100,000 0 $0 n/a 0 $0 n/a 0 $0 n/a 0 $0 n/a $100,000-$150,000 0 $0 n/a 0 $0 n/a 0 $0 n/a 20 $2,597,887 $129,894 Over $150,000 30 $16,403,491 $546,783 10 $3,096,418 $309,642 35 $9,101,701 $260,049 50 $8,382,725 $167,655 Total 30 $16,403,491 $546,783 10 $3,096,418 $309,642 35 $9,101,701 $260,049 70 $10,980,612 $156,866 Sources: Applied Development Economics, Inc., 2015; Vernazza Wolfe Associates, Inc. and Strategic Economics, 2015. -33- Palo Alto Housing Impact Fee Nexus Study Figure IV-2. Estimated Job and Wage Impacts of Prototypes by Industry Single-Family Detached Prototype Single-Family Attached Prototype Condominium Prototype Apartment Prototype Industry (NAICS code) Average Wage Jobs % Of Jobs Jobs % Of Jobs Jobs % Of Jobs Jobs % Of Jobs 11 Forestry, fishing, hunting, and agriculture $30,270 0.02 0% 0.005 0% 0.01 0% 0.02 0% 21 Mining $68,709 0.005 0% 0.001 0% 0.003 0% 0.004 0% 22 Utilities $73,885 0.09 0% 0.02 0% 0.05 0% 0.06 0% 23 Construction $65,942 1.52 2% 0.29 2% 0.84 2% 1.04 2% 31 Manufacturing $68,114 0.18 0% 0.03 0% 0.10 0% 0.13 0% 42 Wholesale trade $61,865 1.27 2% 0.24 2% 0.71 2% 0.91 2% 44 Retail trade $53,534 10.24 14% 1.93 14% 5.68 14% 7.36 14% 48 Transportation & warehousing $44,980 0.94 1% 0.18 1% 0.52 1% 0.66 1% 51 Information $77,807 0.99 1% 0.19 1% 0.55 1% 0.72 1% 52 Finance & insurance $71,401 3.97 5% 0.75 5% 2.20 5% 2.84 5% 53 Real estate & rental & leasing $65,766 3.30 5% 0.62 5% 1.83 5% 2.40 5% 54 Professional, scientific & technical services $93,985 2.50 3% 0.47 3% 1.39 3% 1.75 3% 55 Management of companies & enterprises $90,580 0.22 0% 0.04 0% 0.12 0% 0.16 0% 56 Admin, support, waste mgt, remediation services $51,482 2.73 4% 0.52 4% 1.51 4% 1.95 4% 61 Educational services $61,806 4.97 7% 0.94 7% 2.76 7% 3.30 6% 62 Health care and social assistance $66,334 13.91 19% 2.63 19% 7.72 19% 10.25 20% 71 Arts, entertainment & recreation $46,623 2.27 3% 0.43 3% 1.26 3% 1.60 3% 72 Accommodation & food services $28,709 9.90 14% 1.87 14% 5.49 14% 7.23 14% 81 Other services (except public administration) $50,865 6.34 9% 1.20 9% 3.52 9% 4.59 9% 91 Government $69,032 7.92 11% 1.49 11% 4.39 11% 5.23 10% Total 73.30 100% 13.84 100% 40.67 100% 52.20 100% Note: Average wage is calculated based on the mean occupational wages, and the average statewide distribution of occupations for each industry. Sources: Applied Development Economics, Inc, 2015; Vernazza Wolfe Associates, Inc. and Strategic Economics, 2015. -34- Palo Alto Housing Impact Fee Nexus Study Figure IV-3. Estimated Job and Wage Impacts of Prototypes by Occupation SOC Code Occupational Title Average Annual Wage Single-Family Detached Jobs Single-Family Attached Jobs Condominium Jobs Apartment Jobs 11-0000 Management Occupations $157,147 3.48 0.66 1.93 2.48 13-0000 Business and Financial Operations Occupations $91,243 3.74 0.71 2.07 2.62 15-0000 Computer and Mathematical Occupations $117,227 1.36 0.26 0.75 0.95 17-0000 Architecture and Engineering Occupations $109,326 0.71 0.13 0.39 0.48 19-0000 Life, Physical, and Social Science Occupations $93,341 0.69 0.13 0.38 0.47 21-0000 Community and Social Services Occupations $58,932 1.71 0.32 0.95 1.22 23-0000 Legal Occupations $138,848 0.50 0.09 0.28 0.34 25-0000 Education, Training, and Library Occupations $58,305 3.79 0.72 2.10 2.56 27-0000 Arts, Design, Entertainment, Sports, Media Occupations $67,471 1.11 0.21 0.62 0.79 29-0000 Healthcare Practitioners and Technical Occupations $108,395 4.97 0.94 2.76 3.62 31-0000 Healthcare Support Occupations $37,001 2.34 0.44 1.30 1.71 33-0000 Protective Service Occupations $53,668 1.96 0.37 1.09 1.32 35-0000 Food Preparation and Serving-Related Occupations $23,861 10.53 1.99 5.84 7.66 37-0000 Building and Grounds Cleaning and Maintenance $29,998 2.22 0.42 1.23 1.58 39-0000 Personal Care and Service Occupations $28,970 5.19 0.98 2.88 3.75 41-0000 Sales and Related Occupations $54,182 9.06 1.71 5.03 6.51 43-0000 Office and Administrative Support Occupations $45,414 11.49 2.17 6.38 8.15 45-0000 Farming, Fishing, and Forestry Occupations $25,561 0.06 0.01 0.03 0.04 47-0000 Construction and Extraction Occupations $59,340 1.35 0.25 0.75 0.92 49-0000 Installation, Maintenance, and Repair Occupations $54,737 2.45 0.46 1.36 1.75 51-0000 Production Occupations $40,099 1.29 0.24 0.71 0.92 53-0000 Transportation and Material Moving Occupations $35,640 3.31 0.63 1.84 2.35 Total all occupations 73.30 13.84 40.67 52.20 -35- Palo Alto Housing Impact Fee Nexus Study Figure IV-4. Induced Employment Impacts, Palo Alto Project Prototype Single-Family Detached Single-Family Attached Condominium Apartment Number of Units 30 10 35 70 Induced Employment (Workers) 73.30 13.84 40.67 52.20 Average Number of Workers per Household 1.51 1.51 1.51 1.51 New Worker Households 48.54 9.16 26.93 34.57 Source: ADE, 2015; Strategic Economics & Vernazza Wolfe Associates, Inc. 2015. Figure IV-5. New Worker Households by Income Group for Prototypes Worker Households by Income Category Income Thresholds (2-Person Household) Single-Family Detached Single Family Attached Condominium Apartment Households Requiring Affordable Housing Very Low Income (<=50% AMI) $42,450 6.98 1.32 3.87 5.074 Low Income (51-80% AMI) $67,900 17.15 3.24 9.51 12.259 Moderate Income (81-120% AMI) $101,300 14.19 2.68 7.87 9.975 Subtotal 38.32 7.23 21.26 27.310 Above Moderate Income Households >$101,300 10.22 1.93 5.67 7.26 Total All Worker Households 48.54 9.16 26.93 34.57 Note: For each prototype and income category, the number of households requiring affordable housing has been rounded to nearest one-hundredth. Sources: Applied Development Economics, 2015; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2015 Palo Alto Housing Impact Fee Nexus Study -36- V. AFFORDABILITY GAP ANALYSIS Estimating the housing affordability gap is necessary to calculate the maximum housing impact fee. This section summarizes the approach to calculating the housing affordability gap and the results of the analysis. METHODOLOGY The housing affordability gap is defined as the difference between what very low, low, and moderate income households can afford to pay for housing and the development cost of new, modest housing units. Calculating the housing affordability gap involves the following three steps: 1. Estimating affordable rents and housing prices for households in target income groups. 2. Estimating development costs of building new, modest housing units, based on current cost and market data. 3. Calculating the different between what renters and owners can afford to pay for housing and the cost of development of rental and ownership units. The housing affordability gap is estimated at a countywide level because the California Department of Housing and Community Development Department (HCD) and U.S. Housing and Urban Development Department (HUD) define the ability to pay for housing at the county (rather than the city) level. This analysis uses 2014 income limits published by California Department of Housing and Community Development (HCD). ESTIMATING AFFORDABLE RENTS AND SALES PRICES The first step in calculating the housing affordability gap is to determine the maximum amount that households at the targeted income levels can afford to pay for housing. For eligibility purposes, most affordable housing programs define very low income households as those earning approximately 50 percent or less of area median income (AMI), low income households as those earning between 51 and 80 percent of AMI, and moderate income households as those earning between 81 and 120 percent of AMI. In order to ensure that the affordability of housing does not use the top incomes in each category, the analysis uses a point within the income ranges for the low and moderate income groups.5 Figure V-1 and Figure V-2 show the calculations for rental housing. The maximum affordable monthly rent is calculated as 30 percent of gross monthly household income, minus a deduction for utilities. For example, a very low income, three-person household could afford to spend $1,194 on total monthly housing costs. After deducting for utilities, $1,145 a month is available to pay for rent (Figure V-1). Figure V-3 and Figure V-4 demonstrate housing affordability for homeowners. Homeowners are assumed to pay a maximum of 35 percent of gross monthly income on total housing costs, depending on income level. The maximum affordable price for for-sale housing is then calculated based on the total monthly mortgage payment that a homeowner could afford, using standard loan terms used by CalHFA programs and many private lenders for first-time homebuyers, including a five percent down payment (Figure V-3). 5 For rental housing, 70 percent of AMI is used to represent low income households and 90 percent of AMI is used to represent moderate income households. For ownership housing, it is assumed that moderate income homebuyers may earn slightly less than the maximum for that income category (110 percent of AMI). Higher income limits are used for ownership than for rental housing because ownership housing is more expensive to purchase and maintain. Palo Alto Housing Impact Fee Nexus Study -37- For example, a moderate income, three-person household could afford to spend $3,046 a month on total housing costs, allowing for the purchase of a $359,897 home. Key assumptions used to calculate the maximum affordable rents and housing prices are discussed below. • Unit types: For rental housing, the analysis included studios, one-, two-, and three-bedroom units. For for-sale housing, one-, two-, and three-bedroom units were included. These unit types represent the affordable and modest market-rate apartment and condominium units available in Palo Alto. Condominiums were used to represent modest for-sale housing because single-family homes in Palo Alto tend to be significantly more expensive than condominiums. • Occupancy and household size assumptions. Because income levels for affordable housing programs vary by household size, calculating affordable unit prices requires defining household sizes for each unit type. Consistent with California Health and Safety Code Section 50052.5(h), unit occupancy was generally estimated as the number of bedrooms plus one. For example, a studio unit is assumed to be occupied by one person, a one bedroom unit is assumed to be occupied by two people, and so on. Several adjustments to this general assumption were made in order to capture the full range of household sizes. In particular, it is assumed that one-bedroom condominiums could be occupied by one- or two-person households, and three-bedroom apartments and condominiums could be occupied by four- or five-person households.6 • Targeted income levels for rental housing: For rental housing, affordable rents were calculated for very low income, low income, and moderate income households (see Figure V-1 and Figure V-2). For eligibility purposes, most affordable housing programs define very low income households as those earning 50 percent or less of area median income (AMI), low income households as those earning between 51 and 80 percent of AMI, and moderate income households as those earning between 81 and 120 percent of AMI. However, defining affordable housing expenses based at the top of each income range would result in prices that are not affordable to most of the households in each category. Thus, this analysis does not use the maximum income level for all of the income categories. Instead, for rental housing, 70 percent of AMI is used to represent moderate income households and 90 percent of AMI is used to represent moderate income households. • Targeted income levels for ownership housing For ownership housing, affordable home prices were calculated only for moderate income households, because very low and low income households are unlikely to be homebuyers. Higher income limits are used for ownership than for rental housing because ownership housing is more expensive to purchase and maintain. It is assumed that moderate income homebuyers may earn slightly less than the maximum for that income category (110 percent of AMI). • Maximum monthly housing costs.7 For all renters, maximum monthly housing costs are assumed to be 30 percent of gross household income. For homebuyers, 35 percent of gross income is assumed to be available for monthly housing costs, reflecting the higher incomes of this group.8 These standards are based on California’s Health & Safety Code Sections 50052.5 and 50053. 6 For these unit types, the maximum affordable home price (or rent) is calculated as the average price (or rent) that the relevant household sizes can afford to pay. For example, the maximum affordable home price for a one-bedroom condominium is calculated as the average of the maximum affordable home price for one- and two-person households. 7 The calculation of homeowner affordability is conservative in that the model accounts for additional costs for buyers (such as utility costs) that might not be considered by all lenders. 8 The assumption that homebuyers spend 35 percent of gross household income on housing results in a reduced affordability gap than if 30 percent of gross household income were used instead. Palo Alto Housing Impact Fee Nexus Study -38- • Utilities. The monthly utility cost assumptions are based on Santa Clara County’s “2013 Utility Allowance Schedule.”9 Both renters and owners are assumed to pay for heating, cooking, other electric, and water heating. In addition, owners are assumed to pay for water and trash collection.10 • Mortgage terms & costs included for ownership housing. For ownership housing, the mortgage calculations are based on the terms typically offered to first-time homebuyers (such as the terms offered by the California Housing Finance Authority), which is a 30-year mortgage with a five percent down payment. A five percent down payment standard is also used by many private lenders for first-time homebuyers. Based on recent interest rates to first-time buyers, the analysis assumes a 5.375 percent annual interest rate.11 In addition to mortgage payments and utilities, monthly ownership housing costs include homeowner association (HOA) dues,12 property taxes,13 private mortgage insurance,14 and hazard and casualty insurance.15 9 Santa Clara County, “Utility Allowance Schedule”, 2013. 10 Based on the most common types of fuel for owner and rental units in Palo Alto, all units are assumed to have natural gas heating and water heating systems; for-sale units are also assumed to have natural gas stoves, while rental units are assumed to use electric stoves. Sources: U.S. Census Bureau, 2008-2012 American Community Survey, “Table B25117: Tenure by House Heating Fuel,” City of Palo Alto; U.S. Census Bureau, 2011 American Housing Survey, “Table C-03-AH-M, San Jose-Sunnyvale-Santa Clara: Heating, Air Conditioning, and Appliances – All Housing Units.” 11 Sources: CalHFA Mortgage Calculator, accessed March 2014; Zillow.com, “Current Mortgage Rates and Home Loans,” accessed March 2014; interviews with California Housing Finance Agency (CalHFA) Preferred Loan Officers, March 2014. 12 HOA fees are estimated at $300 per unit per month, based on common HOA fees in Santa Clara County as reported in: Polaris Pacific, “Silicon Valley Condominium Market,” February 2014. 13 The annual property tax rate is estimated at 1.16, based on the total direct and overlapping property tax rate for Palo Alto reported in the City’s 2012-13 Comprehensive Annual Financial Report (page 144). 14 The annual private mortgage insurance premium rate is estimated at 0.89 percent of the total mortgage amount, consistent with standard requirements for conventional loans with a five percent down payment. Sources: Genworth, February 2014; MGIC, December 2013; Radian, April 2014. 15 The annual hazard and casualty insurance rate is assumed to be 0.35 percent of the sales price, consistent with standard industry practice. Palo Alto Housing Impact Fee Nexus Study -39- Figure V-1. Calculation of Affordable Rents in Santa Clara County by Household Size, 2014 Persons per Household (HH) 1 2 3 4 5 Very Low Income (50% AMI) Maximum Household Income at 50% AMI $37,150 $42,450 $47,750 $53,050 $57,300 Maximum Monthly Housing Cost (a) $929 $1,061 $1,194 $1,326 $1,433 Utility Deduction $29 $40 $49 $60 $60 Maximum Available for Rent (HH Size) (b) $900 $1,021 $1,145 $1,266 $1,373 Low Income (70% AMI) Maximum Household Income at 70% AMI $51,695 $59,080 $66,465 $73,850 $79,765 Maximum Monthly Housing Cost (a) $1,292 $1,477 $1,662 $1,846 $1,994 Utility Deduction $29 $40 $49 $60 $60 Maximum Available for Rent (HH Size) (b) $1,263 $1,437 $1,613 $1,786 $1,934 Moderate Income (90% AMI) Maximum Household Income at 90% AMI $66,465 $75,960 $85,455 $94,950 $102,555 Maximum Monthly Housing Cost (a) $1,662 $1,899 $2,136 $2,374 $2,564 Utility Deduction $29 $40 $49 $60 $60 Maximum Available for Rent (HH Size) (b) $1,633 $1,859 $2,087 $2,314 $2,504 Notes: (a) 30 percent of maximum monthly household income. (b) Maximum monthly housing cost minus utility deduction. Acronyms: AMI: Area median income HH: Household Sources: California Department of Housing and Community Development, "State Income Limits for 2014," February 28, 2014 and “Overpayment and Overcrowding,” 2010; Housing Authority of Santa Clara County, "2013 Utility Allowances Schedule," Santa Clara County, October 2013; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2014. Palo Alto Housing Impact Fee Nexus Study -40- Figure V-2. Calculation of Affordable Rents in Santa Clara County by Unit Type, 2014 Affordable Rents by Unit Type (a) Studio 1 Bedroom 2 Bedroom 3 Bedroom Very Low Income (50% AMI) $900 $1,021 $1,145 $1,319 Low Income (70% AMI) $1,263 $1,437 $1,613 $1,860 Moderate Income (90% AMI) $1,633 $1,859 $2,087 $2,409 (a) Affordable rents are calculated as follows: Studios are calculated as one-person households; One-bedroom units are calculated as two-person households; Two-bedroom units are calculated as three-person households; Three-bedroom units are calculated as an average of four and five person households. Sources: California Department of Housing and Community Development, "State Income Limits for 2014," February 28, 2014 and “Overpayment and Overcrowding,” 2010; Housing Authority of Santa Clara County, "2013 Utility Allowances Schedule," Santa Clara County, October 2013; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2014. Palo Alto Housing Impact Fee Nexus Study -41- Figure V-3. Calculation of Affordable Sales Prices in Santa Clara County by Household Size, 2014 Household Size (Persons per HH) 1 2 3 4 5 Moderate Income (110% AMI) (g) Maximum Household Income at 110% AMI $81,235 $92,840 $104,445 $116,050 $125,345 Maximum Monthly Housing Cost (a) Monthly Deductions $2,369 $2,708 $3,046 $3,385 $3,656 Utilities $113 $113 $125 $174 $174 HOA Dues $300 $300 $300 $300 $300 Property Taxes and Insurance (b) $527 $619 $706 $785 $858 Monthly Income Available for Mortgage Payment (c) $1,429 $1,676 $1,915 $2,126 $2,324 Maximum Mortgage Amount (d) $255,155 $299,376 $341,902 $379,732 $415,083 Maximum Affordable Sales Price - HH Size (e) $268,584 $315,133 $359,897 $399,717 $436,929 Notes: (a) 30 percent of monthly household income for very low and low income households; 35 percent of monthly household income for moderate-income households (b) Assumes annual property tax rate of 1.16 percent of sales price; annual private mortgage insurance premium rate of 0.89 percent of mortgage amount; annual hazard and casualty insurance rate of 0.35 percent of sales price (c) Maximum monthly housing cost minus deductions (d) Assumes 5.375 percent interest rate and 30 year loan term. Assumes CalHFA first-time homebuyer program. (e) Assumes 5 percent down payment (95 percent loan-to-value ratio). Assumes CalHFA first-time homebuyer program. (f) Calculated as an average of household sizes occupying unit type. 1-bedroom units are assumed to accommodate 1- and 2-person households; 3-bedroom units are assumed to accommodate 4- and 5-person households. (g) Calculated as 110 percent of the median household income reported by HCD for each household size. Acronyms: AMI: Area median income HH: Household HOA: Homeowners association Sources: California Department of Housing and Community Development, "State Income Limits for 2014," February 28, 2014 and “Overpayment and Overcrowding,” 2010; Housing Authority of Santa Clara County, "2013 Utility Allowances Schedule," Santa Clara County, October 2013; Mortgage insurance provider websites; Interviews with California Housing Finance Agency (CalHFA) Preferred Loan Officers, March 2014; CalHFA Mortgage Calculator, March 2014; Zillow.com, March 2014; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2014. Palo Alto Housing Impact Fee Nexus Study -42- Figure V-4. Calculation of Affordable Sales Prices in Santa Clara County by Unit Type, 2014 Affordable Sales Price by Unit Type (a) 1 Bedroom 2 Bedroom 3 Bedroom Moderate Income (110% AMI) $291,858 $359,897 $418,323 (a) One-bedroom units are calculated as an average of one- and two-person households; Two-bedroom units are calculated as three-person households; and three-bedroom units are calculated as an average of four and five person households. Sources: California Department of Housing and Community Development, "State Income Limits for 2014," February 28, 2014 and “Overpayment and Overcrowding,” 2010; Housing Authority of Santa Clara County, "2013 Utility Allowances Schedule," Santa Clara County, October 2013; Mortgage insurance provider websites; Interviews with California Housing Finance Agency (CalHFA) Preferred Loan Officers, March 2014; CalHFA Mortgage Calculator, March 2014; Zillow.com, March 2014; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2014. Palo Alto Housing Impact Fee Nexus Study -43- ESTIMATING HOUSING DEVELOPMENT COSTS The second step in calculating the housing affordability gap is to estimate the cost of developing new, modest housing units. Modest housing is defined slightly differently for rental and ownership housing. For rental housing, the costs and characteristics of modest housing are similar to recent projects developed in Palo Alto by the affordable rental housing sector. However, there are no examples of new modest ownership housing units built in Palo Alto by the private or nonprofit sectors. The new for-sale homes in Palo Alto are typically luxury custom-built single family homes and large upscale condominium units, which are too costly to meet the standard for modest housing. For the purposes of this affordability gap analysis, modest for-sale housing units are defined as a compact, non-luxury multifamily condominium units. The calculation of housing development costs used in the housing affordability gap requires several steps. Because the gap covers both rental housing and for-sale housing, it is necessary to estimate costs for each. The following describes the data sources used to calculate rental and for-sale housing development costs. Rental Housing Rental housing development costs were based on pro forma data obtained from recent affordable housing projects in Palo Alto. Figure V-5 shows the description of these projects and summarizes the information that was used to generate a per-square-foot cost of $446 used in the cost analysis. These costs include site acquisition costs, hard costs (on- and off-site improvements), soft costs (such as design, city permits and fees, construction interest, and contingencies), and developer fees. The costs from the rental housing pro formas were also cross-referenced against proprietary pro formas available to the consultant team from other private development projects in order to ensure accuracy. Since these projects assumed state and federal funding, the labor costs included in the original pro formas reflect the prevailing wage requirement imposed by state and local governments. The costs shown in Figure V-5 have been adjusted to subtract out the prevailing wage requirement because the development cost model used in the housing affordability gap analysis does not assume receipt of government subsidies. A rule of thumb used by local economists who assist affordable housing developers in obtaining public financing, is to estimate that, under the prevailing wage requirement, labor costs are 25 percent higher than would otherwise be the case. Therefore, on-site and off-site improvement costs obtained from the original pro formas are reduced by 25 percent to reflect actual labor costs that would apply to construction projects that do not have these requirements.16 Finally, on average, land acquisition costs accounted for 20 percent or less of these total adjusted costs. 16 These prevailing wage requirements refer only to labor cost requirements on construction projects that receive funding from the state or federal government. These are not the same as minimum wage requirements that individual cities may adopt. Palo Alto Housing Impact Fee Nexus Study -44- Figure V-5. Affordable Housing Project Pro Forma Data Project Description Maybelle Alma Garden Apts Location Palo Alto Palo Alto Date of Pro Forma 2013 2013 Land Area (acres) 1.03 0.6 Gross Building Area (SF) 56,192 63,885 Number of Units 60 50 Parking Type Uncovered Underground Parking Spaces/ Unit 0.8 1.0 Land Acquisition Costs Project Costs per SF of Gross Building Area $7,498,524 ($167 per SF of land) $7,480,000 ($286 per SF of land) Land Cost (a) $133 $117 Hard Costs (b) $160 $153 Soft Costs (c) $91 $192 Developer Fees $25 $22 Total Project Costs (d) $409 $484 Notes: (a) Calculated per square foot of gross building area. (b) Excludes prevailing wage requirements for on-site and off-site hard costs. (c) Includes design, engineering, city permits and fees, construction interest, contingencies, legal, etc. (d) Total costs include developer fees. Acronyms: SF: Square feet Source: Pro Forma Data provided by City of Palo Alto; Vernazza Wolfe Associates, Inc; Strategic Economics, 2014. To ensure that the land value assumptions used in the rental development cost estimates (ranging from $167 to $286 per square foot of land) were reasonable, the consultant team analyzed recent sales of vacant properties in Santa Clara County using DataQuick, a commercial vendor that tracks real estate transactions. As shown below in Figure IV-6, land values in Southern San Mateo County and Northern Santa Clara County are highly variable from city to city, ranging from $96 to $228 per square foot. The analysis demonstrates that the land costs for the affordable rental housing projects shown in Figure V-5 are generally consistent with the land values in the market area. Palo Alto Housing Impact Fee Nexus Study -45- Figure V-6. Sales of Vacant Lands in San Mateo County and Northern Santa Clara County, 2014 Property Location Sales Date Sales Price Site Size (SF) Average Sales Price/ SF Page Mill Palo Alto 2012 $3,959,000 26,926 $147 389 El Camino Real Menlo Park 2012 $12,200,000 53,579 $228 1300 El Camino Real Menlo Park 2012 $24,500,000 148,165 $165 E. side of Tilton Avenue, N. of El Camino Real San Mateo 2012 $4,505,000 33,572 $134 1275 El Camino Real Menlo Park 2014 $3,600,000 17,960 $200 3877 El Camino Real Palo Alto 2013 $4,450,000 32,825 $136 536 N Wishman Rd Mountain View 2014 $1,050,000 7,000 $150 1958 Latham St Mountain View 2014 $1,600,000 16,600 $96 Value Range per SF of Land $96 - $228 Source: City of Palo Alto; Independent appraisals; Loopnet, 2015; Strategic Economics, 2015. For-Sale Housing Market-rate for-sale housing units in Palo Alto are priced at over $1 million; these units are too upscale to be considered “modest” units. Because of the lack of examples of built modest units in the City,the cost of developing new, modest for-sale housing was estimated using using published industry data sources, recent financial feasibility studies, and data from other projects in Santa Clara County. The Consultant Team estimated the development costs of a hypothetical condominium project, as described in Figure V- 7.17 Land costs were estimated based on recent DataQuick sales of multi-family zoned properties in Southern San Mateo County and Northern Santa Clara County. As shown in Figure V-6, land values vary depending on location and lot size, ranging from $96 to $228 per square foot. Because most transactions occurred in 2012 and 2013 in other lower cost jurisdictions, the current land value for multi-family land for condominium development in Palo Alto was estimated at $200 per square foot. RS Means cost data, adjusted for the Bay Area’s construction costs, was used to calculate hard costs. Based on a review of recent financial feasibility analyses in the Bay Area, soft costs were estimated at 30 percent of hard costs, and developer fees and profits were estimated at 12 percent of hard and soft costs. Using this method, the development costs are estimated at approximately $500 per net square foot of building area. 17 The hypothetical condominium building type is a Type V building with underground parking and floor-area ratio of 1.7. Palo Alto Housing Impact Fee Nexus Study -46- Figure V-7. Estimate of Development Costs of Hypothetical Condominium Project Building Characteristics Land Area (SF) 110,727 Gross Building Area (SF) 188,235 Net Building Area (SF) 160,000 Number of Units 100 Parking Type Underground Parking Spaces/ Unit 2 Floor-area ratio (FAR) 1.7 Density (units per acre) 39 Average Unit Size 1,600 Land Acquisition Costs per Square Foot (a) $200 Development Cost Land Cost (b) Cost per Net SF $138 Hard Costs $250 Soft Costs (c) $75 Developer Fees (d) $39 Total Development Costs $502 Notes: (a) Land value is estimated at $200 per square foot based on recent transactions in market area. (b) Calculated based on RS Means cost estimates per square foot of net building area. (c) Estimated at 30 percent of hard costs. Includes design, engineering, city permits and fees, construction interest, contingencies, legal, etc. (d) Estimated at 12 percent of hard costs and soft costs. Sources: RS Means, 2014; DataQuick 2014; Recent financial feasibility studies; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2014. Cost Estimates by Unit Size The data sources described above also provided information on estimated unit sizes. Unit size information is needed to translate costs/sales prices per square foot to unit costs. Unit sizes are estimated separately for rental and for-sale units. For the rental units, the recent inventory of projects developed by MidPen Housing was analyzed. For ownership units, the average sizes of recently built condominium units (Figure V-7) were analyzed. Figure V-8 provides the unit sizes and development cost estimates for rental units. Per-unit development costs were calculated by multiplying average unit sizes by the per-square foot development costs of $446. Rental unit costs range from $223,000 for studio units to $499,520 for three-bedroom units. Figure V-9 summarizes the costs of condominium units. The per-unit costs were derived by multiplying the average unit size by the development cost, estimated at $500 per square foot. On a per unit basis, condominium development costs are $450,000 for one-bedroom units, $650,000 for two-bedroom units, and $875,000 for three-bedroom units. Palo Alto Housing Impact Fee Nexus Study -47- Figure V-8. Rental Housing Unit Sizes and Development Costs Unit Type Estimated Cost per Net SF Unit Size (net SF) Development Costs Studio $446 500 $223,000 One bedroom $446 700 $312,200 Two bedroom $446 900 $401,400 Three bedroom $446 1,120 $499,520 Acronyms: SF: Square feet Sources: Confidential Pro Forma Data; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2014. Figure V-9. For-Sale Housing Unit Sizes and Development Costs Unit Type Estimated Cost per Net SF Unit Size (net SF) Development Costs One bedroom $500 900 $450,000 Two bedroom $500 1,300 $650,000 Three bedroom $500 1,750 $875,000 Acronyms: SF: Square feet Sources: DataQuick, 2014; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2014. CALCULATING THE HOUSING AFFORDABILITY GAP The final step in the analysis is to calculate the housing affordability gap, or the difference between what renters and owners can afford to pay and the total cost of developing new units. The purpose of the housing affordability gap calculation is to help determine the fee amount that would be necessary to cover the cost of developing housing for very low, low, and moderate income households. The calculation does not assume the availability of any other source of housing subsidy because not all "modest" housing is built with public subsidies, and tax credits and tax-exempt bond financing are highly competitive programs that will not always be available to developers of modest housing units. Figure V-10 shows the housing affordability gap calculation for rental units. For each rental housing unit type and income level, the gap is defined as the difference between the per-unit cost of development and the supportable debt per unit. The supportable debt is calculated based on the net operating income generated by an affordable monthly rent, incorporating assumptions about operating expenses (including property taxes, insurance, etc.), reserves, vacancy and collection loss, and mortgage terms based on discussions with local affordable housing developers. Because household sizes are not uniform and the types of units each household may occupy is variable, the average housing affordability gap is calculated by averaging the housing affordability gaps for the various unit sizes. Figure V-11 shows the housing affordability gap calculation for ownership units. For each unit type, the gap is calculated as the difference between the per-unit cost of development and the affordable sales price for each income level. As with rental housing, the average housing affordability gap is calculated by averaging the housing affordability gaps across unit sizes in order to reflect that households in each income group vary in size, and may occupy any of these unit types. Finally, the tenure-neutral estimates of the housing affordability gap were estimated for very low, low, and moderate income households (Figure V-12). Because very low and low income households that are looking for housing in today’s market are much more likely to be renters, an ownership gap was not calculated for these income groups. The rental gap represents the overall affordability gap for these two income groups. On the other hand, moderate income households could be either renters or owners. Palo Alto Housing Impact Fee Nexus Study -48- Therefore, the rental and ownership gaps are averaged for this income group to calculate the overall affordability gap for moderate income households. The calculated average affordability gap per unit is $306,164 for very low income households; $252,258 for low income households, and $249,596 for moderate income households. The housing affordability gap is highest for very low income households because they can afford to pay the least amount for housing. Palo Alto Housing Impact Fee Nexus Study -49- Figure V-10. Housing Affordability Gap Calculation for Rental Housing Income Level and Unit Type Unit Size (SF) Maximum Monthly Rent (a) Annual Rental Revenu e Net Operating Income (b) Available for Debt Service (c) Supportable Debt (d) Development Costs (e) Affordability Gap (f) Very-Low Income (50% AMI) Studio 500 $900 $10,797 $2,757 $2,206 $29,166 $223,000 $193,834 1 Bedroom 700 $1,021 $12,255 $4,142 $3,314 $43,818 $312,200 $268,382 2 Bedroom 900 $1,145 $13,737 $5,550 $4,440 $58,711 $401,400 $342,689 3 Bedroom 1,120 $1,319 $15,833 $7,541 $6,033 $79,769 $499,520 $419,751 Average Affordability Gap $306,164 Low Income (70% AMI) Studio 500 $1,263 $15,161 $6,902 $5,522 $73,016 $223,000 $149,984 1 Bedroom 700 $1,437 $17,244 $8,882 $7,105 $93,954 $312,200 $218,246 2 Bedroom 900 $1,613 $19,352 $10,884 $8,707 $115,133 $401,400 $286,267 3 Bedroom 1,120 $1,860 $22,322 $13,706 $10,965 $144,987 $499,520 $354,533 Average Affordability Gap $252,258 Moderate Income (90% AMI) Studio 500 $1,633 $19,592 $11,112 $8,890 $117,544 $223,000 $105,456 1 Bedroom 700 $1,859 $22,308 $13,693 $10,954 $144,843 $312,200 $167,357 2 Bedroom 900 $2,087 $25,049 $16,296 $13,037 $172,383 $401,400 $229,017 3 Bedroom 1,120 $2,409 $28,906 $19,960 $15,968 $211,146 $499,520 $288,374 Average Affordability Gap $197,551 Notes: (a) Affordable Rents are based on HCD FY 2014 Income Limits for Santa Clara County. See Figure 2, above. (b) Amount available for debt. Assumes 5% vacancy and collection loss and $7,500 per unit for operating expenses and reserves, based on pro formas for affordable housing projects recently proposed in Palo Alto. (c) Assumes 1.25 Debt Coverage Ratio. (d) Assumes 6.38%, 30 year loan. Calculations based on annual payments. (e) Assumes development cost of $446 per net square foot on rental units. (f) Calculated as the difference between development costs and supportable debt. Rounded to nearest whole number. Acronyms: SF: Square feet AMI: Area median income Sources: Selected Palo Alto Rental Housing Pro Formas; Vernazza Wolfe Associates, Inc. & Strategic Economics, 2014. Palo Alto Housing Impact Fee Nexus Study -50- Figure V-11. Housing Affordability Gap Calculation for For-Sale Condominium Housing Income Level and Unit Type Unit Size (SF) Affordable Sales Price (a) Development Costs (b) Affordability Gap (c) Moderate Income (110% of AMI) 1 Bedroom 900 $291,858 $450,000 $158,142 2 Bedroom 1,300 $359,897 $650,000 $290,103 3 Bedroom 1,750 $418,323 $875,000 $456,677 Average Affordability Gap $301,641 (a) See calculation in Figure V-9, above. (b) Assumes $500/SF for development costs, based on recent condominium sales. (c) Calculated as the difference between affordable sales price and development cost; rounded to nearest whole number. Acronyms: SF: Square feet AMI: Area median income Sources: DataQuick Sales Data, 2008-2012; Vernazza Wolfe Associates, Inc. and Strategic Economics, 2015. Figure V-12. Average Housing Affordability Gap by Income Group Average Income Level Rental Gap Ownership Gap Affordability Gap Very Low-Income (50% AMI) (a) $306,164 N/A $306,164 Low-Income (70% - 80% AMI) (b) $252,258 N/A $252,258 Moderate-Income (90% - 110% AMI) (c) $197,551 $301,641 $249,596 Notes: (a) Based on rental housing only; very-low-income gap was not calculated for ownership housing. (b) Low-income households are assumed to earn 70 percent of AMI for rental housing and 80 percent of AMI for ownership housing. (c) Moderate-income households are assumed to earn 90 percent of AMI for rental housing and 110 percent of AMI for ownership housing. Acronyms: AMI: Area median income Source: Vernazza Wolfe Associates, Inc. & Strategic Economics, 2014. VI. MAXIMUM FEE AND REQUIREMENTS This section builds on the findings of the previous analytical steps to calculate maximum justified housing impact fees for each prototype. MAXIMUM FEE CALCULATION To derive the maximum nexus-based fee, the housing affordability gap is applied to the number of lower-income worker households linked to the prototypes. This is the basis for developing an estimate of the total affordability gap for each prototype. The total gap for each prototype is then divided by the number of units in the development prototype to calculate a single maximum fee per unit. Figure VI-1 presents the results of the nexus fee calculation for the single-family detached prototype. The per unit housing affordability gap number is multiplied by the number of income-qualified worker households linked to the prototype to estimate the total gap. The total affordability gap is then divided by the number of units in the prototype to derive the maximum fee per unit, estimated at $333,501 per unit. The same steps are taken for the single-family attached, condominium and rental apartment prototypes to estimate the maximum fee per unit, as shown in Figures VI-2, VI-3 and VI-4. The calculated maximum fees are $189,037 per single-family attached unit, $158,519 per condominium unit and $101,906 per apartment unit. The fees can also be calculated on per-square-foot basis by dividing the total gap by the net residential area for each prototype. The maximum fee per square foot is $111 for the 90,000-square- feet single-family detached prototype (Figure V-5), $90 for the 21,000-square-foot single-family attached prototype (Figure V-6), $75 for the 73,500-square-foot condominium prototype (Figure VI- 7) and $105 for the 67,970-square-foot apartment prototype (Figure VI-8). The per-unit and per-square-foot fees shown in the tables below express the total nexus-based fees for the four housing prototypes in Palo Alto. They represent the maximum justified fees based on the nexus analysis that could be imposed on new development. The City may adopt fees or require mitigations at a lower level than these justified fees, depending on financial feasibility and other policy considerations. Palo Alto Housing Impact Fee Nexus Study -51- Figure VI-1. Maximum Per-Unit Fee for Single-Family Detached Prototype Average Number Total Income Category Affordability Gap Worker Affordability Number Units Total Fee Per (per Household) Households Gap in Prototype Unit Very Low Income (<=50% AMI) $306,164 6.98 $2,137,025 Low Income (51-80% AMI) $252,258 17.15 $4,326,225 Moderate Income (81-120% AMI) $249,596 14.19 $3,541,767 Total $10,005,017 30 $333,501 Sources: Vernazza Wolfe Associates, Inc. & Strategic Economics, 2015. Figure VI-2. Maximum Per-Unit Fee for Single-Family Attached Prototype Average Number Total Income Category Affordability Gap Worker Affordability Number Units Total Fee Per (per Household) Households Gap in Prototype Unit Very Low Income (<=50% AMI) $306,164 1.32 $404,136 Low Income (51-80% AMI) $252,258 3.24 $817,316 Moderate Income (81-120% AMI) $249,596 2.68 $668,917 Total $1,890,370 10 $189,037 Sources: Vernazza Wolfe Associates, Inc. & Strategic Economics, 2015. Figure VI-3. Maximum Per-Unit Fee for Condominium Prototype Average Number Total Affordability Gap Worker Affordability Number Units Total Fee Per Income Category (per Household) Households Gap in Prototype Unit Very Low Income (<=50% AMI) $306,164 3.87 $1,184,855 Low Income (51-80% AMI) $252,258 9.51 $2,398,974 Moderate Income (81-120% AMI) $249,596 7.87 $1,964,321 Total $5,548,149 35 $158,519 Sources: Vernazza Wolfe Associates, Inc. & Strategic Economics, 2015. Palo Alto Housing Impact Fee Nexus Study -52- Palo Alto Housing Impact Fee Nexus Study -53- Figure VI-4. Maximum Per-Unit Fee for Apartment Prototype Average Number Total Affordability Gap Worker Affordability Number Units Total Fee Per Income Category (per Household) Households Gap in Prototype Unit Very Low Income (<=50% AMI) $306,164 3.87 $1,552,251 Low Income (51-80% AMI) $252,258 9.51 $3,092,683 Moderate Income (81-120% AMI) $249,596 7.87 $2,488,472 Total $7,133,407 70 $101,906 Sources: Vernazza Wolfe Associates, Inc. & Strategic Economics, 2015. Figure VI-5. Maximum Fee per SF for Single-Family Detached Prototype Average Number Total Net Income Category Affordability Gap Worker Affordability Residential Total Fee Per (per Household) Households Gap Area (SF) SF Very Low Income (<=50% AMI) $306,164 6.98 $2,137,025 Low Income (51-80% AMI) $252,258 17.15 $4,326,225 Moderate Income (81-120% AMI) $249,596 14.19 $3,541,767 Total $10,005,017 90,000 $111.17 Sources: Vernazza Wolfe Associates, Inc. & Strategic Economics, 2015. Figure VI-6. Maximum Fee per SF for Single-Family Attached Prototype Average Number Total Net Income Category Affordability Gap Worker Affordability Residential Total Fee Per (per Household) Households Gap Area (SF) SF Very Low Income (<=50% AMI) $306,164 1.32 $404,136 Low Income (51-80% AMI) $252,258 3.24 $817,316 Moderate Income (81-120% AMI) $249,596 2.68 $668,917 Total $1,890,370 21,000 $90.02 Sources: Vernazza Wolfe Associates, Inc. & Strategic Economics, 2015. Palo Alto Housing Impact Fee Nexus Study -54- Figure VI-7. Maximum Fee per SF for Condominium Prototype Average Number Total Net Affordability Gap Worker Affordability Residential Total Fee Per Income Category (per Household) Households Gap Area (SF) SF Very Low Income (<=50% AMI) $306,164 3.87 $1,184,855 Low Income (51-80% AMI) $252,258 9.51 $2,398,974 Moderate Income (81-120% AMI) $249,596 7.87 $1,964,321 Total $5,548,149 73,500 $75.49 Sources: Vernazza Wolfe Associates, Inc. & Strategic Economics, 2015. Figure VI-8. Maximum Fee per SF for Apartment Prototype Income Category Average Affordability Gap (per Household) Number Worker Households Total Affordability Gap Net Residential Area (SF) Total Fee Per SF Very Low Income (<=50% AMI) $306,164 5.07 $1,552,251 Low Income (51-80% AMI) $252,258 12.26 $3,092,683 Moderate Income (81-120% AMI) $249,596 9.97 $2,488,472 Total $7,133,407 67,970 $104.95 Sources: Vernazza Wolfe Associates, Inc. & Strategic Economics, 2015. Palo Alto Housing Impact Fee Nexus Study -55- INCLUSIONARY HOUSING REQUIREMENTS In addition to establishing the maximum potential justified fee for new development projects, the nexus results described above can also be used to establish the percentage of inclusionary units under the City’s current program. At present, inclusionary housing is one of the primary tools for providing affordable housing units in Palo Alto. Palo Alto currently has an inclusionary policy in the General Plan that requires that 15 to 20 percent of units in new developments be affordable housing units. The affordability levels for the inclusionary units are typically determined on a case by case basis, and developers have historically built the units within their projects. If the City adopts a housing impact fee, it could replace its inclusionary zoning program with an impact fee program that still allows developers the option of providing affordable units; or it could continue to require on-site units in for- sale projects. The principal way in which the equivalent inclusionary percentage can be estimated from the nexus analysis is by taking the total number of households requiring affordable housing (for each prototype) and dividing this number by the number of total units in each prototype. The analysis indicates that the nexus-based inclusionary percentage rate is much higher than the City’s existing inclusionary policy. Therefore the results of the nexus analysis support the current inclusionary requirements. In fact, the results of the nexus analysis indicate that inclusionary rates of 39 percent and higher (depending on the prototype) are supported by the nexus analysis. Palo Alto Housing Impact Fee Nexus Study -56- VII. FEASIBILITY AND POLICY CONSIDERATIONS There are a number of policy considerations that can be taken into account when jurisdictions consider adopting an affordable housing impact fee on new market-rate development. These may include factors such as the likely impact of the proposed fee levels on local housing development, the competitiveness of the city in attracting development relative to neighboring jurisdictions, the impact of the proposed fee on existing city fee level, and the role of the proposed fee in meeting the city’s overall affordable housing objectives. This section provides a discussion of some of the key financial and policy questions for Palo Alto. FINANCIAL FEASIBILITY ANALYSIS Summary of Residential Prototypes As discussed in more detail in Section III of this report, this nexus analysis is based on four residential prototypes: for-sale single-family detached, single-family attached and condominiums, and rental apartments. Figure VII-1 summarizes the characteristics of the four development prototypes that were tested for financial feasibility. These prototypes are representative of the types of market rate housing development projects that can reasonably be expected in Palo Alto. All residential prototypes are Type V wood frame construction. The single-family detached units have an attached garage and a density of 6 units per acre. On average, the net residential area is 3,000 square feet per unit. The single-family attached prototype building has podium parking and a density of 11 units per acre, with an average net area per unit of 2,100 square feet. The condominium prototypes have underground parking, a density of 30 units per acre, and an average net size of 2,100 square feet. The apartment prototype building has podium parking and a density of 41 units per acre. The average net area per unit is 971 square feet. Most of the apartment units are two bedrooms, with a small number of one bedroom units. Figure VII-1. Residential Prototypes Building Characteristics Single-Family Detached Single-Family Attached Condominiums Apartments Building Type Type V Type V Type V Type V Total Residential Units (a) 30 10 35 70 Avg. Size Unit in Square Feet (SF) 3,000 2,100 2,100 971 Net Square Footage (NSF) 90,000 21,000 73,500 68,000 Parking Type Attached garage Podium Underground Podium Efficiency Factor (b) 85% 85% 85% 65% Gross Square Footage (GSF) 105,882 24,706 86,471 104,698 Floor Area Ratio (FAR) (c) 0.5 0.6 1.7 1.4 Land Area (SF) 211,765 41,176 50,865 74,785 Land Area (Acres) 4.86 0.95 1.17 1.72 Units per Acre 6 11 30 41 Notes: (a) Unit characteristics are described in more detail in Section III. (b) Ratio of leasable square footage to gross square footage. (c) Floor area ratio (FAR) measures density by dividing gross building area by total site area. Source: Vernazza Wolfe Associates, Inc. and Strategic Economics, 2015. Palo Alto Housing Impact Fee Nexus Study -57- Fee Levels In order to provide Palo Alto with some guidance on how proposed fees could impact development decisions, the Consultant Team conducted a financial feasibility analysis that tested the impact of different fee scenarios on developer profit. Given that it is unusual for local jurisdictions to enact an impact fee at its maximum nexus-based level, three additional fee scenarios were evaluated for each prototype. These calculations provide Palo Alto with an understanding of the impact of different fee scenarios on the financial feasibility of residential development projects. Figure VII-2 demonstrates the calculated fees per unit at different levels for each prototype. The fee scenarios can also be calculated on per square foot basis, which are shown in Figure VII-3. Figure VII-2. Fee Levels per Unit for Prototypes Net Residential Prototype SF per Unit Per Unit Fee Levels Tested Single-Family Detached 3,000 $150,000 $225,000 $285,000 $333,501 Single-Family Attached 2,100 $63,000 $105,000 $147,000 $189,037 Condominium 2,100 $52,500 $84,000 $105,000 $158,519 Apartments 971 $29,143 $48,571 $82,571 $101,906 Sources: Vernazza Wolfe Associates, Inc.; Strategic Economics, 2015. Palo Alto Housing Impact Fee Nexus Study -58- Figure VII-3. Fee Levels per Square Foot for Prototypes Net Residential Prototype SF per Unit Per SF Fee Levels Tested Single-Family Detached 3,000 $50 $75 $95 $111 Single-Family Attached 2,100 $30 $50 $70 $90 Condominium 2,100 $25 $40 $55 $75 Apartments 971 $30 $50 $85 $105 Sources: Vernazza Wolfe Associates, Inc.; Strategic Economics, 2015. Methodology Financial feasibility of the fee options was tested using a pro forma model that measures the residual land value of a given development project. Many pro forma models are structured to solve for the financial return for the developer or investors (internal rate of return). In contrast, the residual land value method of analysis solves for the value of the land. This method recognizes that the value of land is inextricably linked to what can be built on it, and that development potential is heavily influenced by zoning, lot size/configuration, neighborhood context, and other factors. The pro forma model tallies all development costs (minus land) including direct construction costs, indirect costs (including financing), and developer fees. Revenues from unit sales or rental leases are then summed. The total project costs are then subtracted from the total project revenues. The balance is the residual value, representing the price a developer would pay for the land if pursuing that project. The fee levels were then added as an additional development cost to measure the effect on the residual land value. Revenues To estimate income from residential development, the analysis uses the sales prices and monthly rents presented in Section III of this report and summarized in Figure VII-4. These revenue assumptions were based on a review of local and regional market data, including information on the type of development that has been recently constructed or is planned or proposed in Palo Alto; and current sales prices and rental rates of recently built residential development in Palo Alto and neighboring cities. For ownership projects (single-family detached, single-family attached, and condominiums), the revenues are calculated by multiplying the unit count by the sales price. For rental projects, the revenues were estimated using an income capitalization approach. This valuation approach first estimates the annual net operating income (NOI) of the apartment prototype, which is the difference between total project income (annual rents) and project expenses, including operating costs18 and vacancies. The NOI is then divided by the capitalization rate (cap rate) to derive total project value. Figure VII-5 summarizes the calculations and data source used for estimating the value of the apartment prototype. 18 Operating costs were calculated based on the Institute of Real Estate Management Survey of Apartment Buildings in the San Francisco Metropolitan Statistical Area (MSA). Palo Alto Housing Impact Fee Nexus Study -59- Figure VII-4. Sales Prices and Rents for Prototypes Number Net Area Unit Sales Price/ Monthly Price or Rent per Prototype Unit Type Single-Family Detached (For-Sale) of Units (SF) Rent SF Type V wood frame 6 units per acre 5 BD/4 BA 30 3,000 $3,043,000 $1,015 Attached garage Net Residential Area (Net SF) 90,000 Single-Family Attached (For-Sale) Type V wood frame 3 BD/ 4 BA 10 2,100 $1,666,000 $793 11 units per acre Podium parking Net Residential Area 21,000 Condominiums (For-Sale) Type V wood frame 4 BD/3 BA 35 2,100 $1,390,000 $662 30 units per acre Underground parking Net Residential Area (Net SF) 73,500 Apartments (Rental) Type V wood frame 1 BD/ 1 BA 20 795 $3,247 $4.09 41 units per acre 2 BD/2 BA 50 1,114 $4,191 $3.76 Podium parking Net Residential Area 68,000 Average Net SF per Unit 1,063 Sources: Strategic Economics & Vernazza Wolfe Associates, Inc., 2014. Figure VII-5. Apartment Revenue Calculations Apartment Revenues Calculation Total Gross Annual Rental Income (a) Gross annual rents $3,294,184 Operating Expenses (b) 30 percent of income ($988,255) Vacancy (c) 5 percent of income ($164,709) Annual Net Operating Income (c) Income less expenses and vacancy $2,141,219 Capitalization Rate (d) 5 percent 5.00% Capitalized Value Project value $42,824,386 Notes: (a) Average monthly rents multiplied by 12 months multiplied by unit count for each unit type. (b) Institute of Real Estate Management, San Francisco MSA Apartment Properties, 2011. (c) Assumes a vacancy rate of 5 percent in a stabilized rental market. (d) According to DTZ's San Francisco Real Estate Forecast 2015, the cap rate for apartments is approximately 5 percent. Sources: IREM, DTZ, Strategic Economics, 2015. Palo Alto Housing Impact Fee Nexus Study -60- Development Costs Cost estimates for the residential prototypes include direct construction costs (site work, building costs, and parking), indirect costs, financing costs, and developer overhead and profit. Development cost estimates for the pro forma analysis are based on RS Means and project pro formas for recent projects in the region. Soft costs and developer overhead/profit were calculated based on a review of similar project pro formas in the Bay Area. City fee calculations were provided by City staff. Each of the cost factors used in the analysis is summarized in Figure VII-6. Figure VII-6. Development Cost Factors Development Costs Metric Direct Costs (a) Single-Family Detached $155 Per NSF Single-Family Attached $150 Per NSF Condominiums $225 Per NSF Apartments $210 Per NSF Indirect Costs (b) A&E & Consulting Permits & Fees (Excl. Housing) (c) Taxes, Insurance, Legal & Accounting 6.00% 3.00% of direct costs estimated by City of direct costs Other (d) 3.00% of direct costs Contingency 5.00% of indirect costs Total Indirect Costs Financing Costs (b) Loan to Cost Ratio (LTC) 80% of total costs Loan Interest Rate 6% annual rate Compounding Period Construction/Absorption Period (e) Utilization Rate 12 12 to 24 55% months months of loan Loan Fees 2% of loan Developer Overhead & Profit 12% of total costs (excl. land) Notes: (a) Direct costs include site work, building construction, and parking costs of $30,000 per space for underground parking and $25,000 per space for podium parking. Costs estimates are based on review of Bay Area pro formas for similar projects and data from RS Means. (b) Based on review of similar project pro formas in the Bay Area and interviews with developers. (c) Permits & fees are a generalized estimate of costs based on prototypes, calculated by City staff. Permits and fees for actual projects vary depending on many factors. (d) Other soft costs include marketing, personal property, environmental studies, etc. (e) Absorption periods are estimated at 12 months for condominiums and single-family attached units; 18 months for single- family detached subdivisions; and 24 months for apartments. Sources: RS Means, 2014; Similar pro formas; City of Palo Alto, 2015; Strategic Economics, 2015. Land Value In order to understand what the different fee levels indicate regarding financial feasibility, the residual land values for each fee scenario can be compared with the market value of residential land in Palo Alto. If the residual value is higher than the market value, the project is feasible. If the residual value is lower than the market price, then the project is infeasible. To determine the land value of sites zoned for lower density uses (single-family detached and single- family attached) and higher density multi-family residential uses (condominiums and rental apartments), the Consultant Team analyzed recent sales transactions in Southern San Mateo County and Northern San Mateo County, and reviewed third-party property appraisals. Figure VII-7 illustrates the results of the land value analysis for lower density single-family detached and single- family attached residential uses, while Figure VII-8 shows the value of properties zoned for higher density multi-family residential uses. For lower density residential uses, values range considerably Palo Alto Housing Impact Fee Nexus Study -61- depending on location and size, from $50 per square foot for the lower quartile, to $172 per square foot for the upper quartile. For higher-density multi-family housing, the range is between $96 and $228 per square foot, with a weighted average (accounting for lot size) of $167. The majority of the sales shown in Figures VII-7 and VII-8 were transactions that occurred earlier than 2014; today’s land values are likely to be higher. Therefore, for this analysis, the estimated land value is estimated at between $150 and $250 per square foot for higher density multi-family development, including condominiums and apartments. For all prototypes, the market value of land is presented as a range because the land value of properties is likely to vary depending on location, size, and other conditions. Palo Alto Housing Impact Fee Nexus Study Figure VII-7. Recent Single-Family Land Sales Transactions in Palo Alto and Neighboring Cities Site Address Location Sale Price Lot Area Price/ SF of Land 10655 CORDOVA RD CUPERTINO CA 95014-3911 $880,000 14,000 $62.86 CUPERTINO CA $1,605,000 8,373 $191.69 21730 RAINBOW DR CUPERTINO CA 95014-4827 $1,312,500 79,432 $16.52 STEVENS CANYON RD CUPERTINO CA 95014 $1,700,000 36,155 $47.02 10231 HILLCREST RD CUPERTINO CA 95014-1081 $1,121,500 11,985 $93.58 CUPERTINO CA $1,960,000 46,043 $42.57 CUPERTINO CA $1,200,000 22,390 $53.60 22711 SAN JUAN RD CUPERTINO CA 95014-3932 $1,668,000 16,000 $104.25 12810 DEER CREEK LN LOS ALTOS HILLS CA 94022 $1,650,000 59,242 $27.85 12060 ELSIE WAY LOS ALTOS HILLS CA 94022-3388 $2,800,000 49,223 $56.88 WESTWIND WAY LOS ALTOS HILLS CA 94022 $6,000,000 37,462 $160.16 MILLER AVE LOS ALTOS CA 94024 $1,975,000 7,623 $259.08 W SUNSET DR LOS ALTOS HILLS CA 94022 $8,645,000 52,349 $146.82 W SUNSET DR LOS ALTOS HILLS CA 94022 $8,645,000 6,534 $146.82 WILDCREST DR LOS ALTOS HILLS CA 94022 $2,765,000 89,300 $30.96 24560 RUTH LEE CT LOS ALTOS CA 94024 $2,700,000 20,168 $133.88 26310 ESPERANZA DR LOS ALTOS HILLS CA 94022-2653 $2,530,000 43,560 $58.08 12501 ZAPPETTINI CT LOS ALTOS HILLS CA 94022-6316 $2,140,000 51,401 $41.63 181 ALVARADO AVE LOS ALTOS CA 94022-1220 $500,000 21,746 $22.99 969 SHERWOOD AVE LOS ALTOS CA 94022-1327 $480,000 4,960 $96.77 NIBLICK AVE LOS ALTOS CA 94022 $2,050,000 13,504 $151.81 25755 CARADO CT LOS ALTOS HILLS CA 94022 $1,730,000 44,350 $39.01 10 PASA ROBLES AVE LOS ALTOS CA 94022-1235 $1,850,000 6,200 $298.39 26400 ESHNER CT LOS ALTOS HILLS CA 94022 $3,400,000 55,321 $61.46 ALTA VIS LOS ALTOS CA 94022 $4,000,000 18,900 $211.64 ALTA VIS LOS ALTOS CA 94022 $4,000,000 31,147 $128.42 FREMONT RD LOS ALTOS HILLS CA 94022 $2,040,000 54,886 $37.17 12030 ELSIE WAY LOS ALTOS HILLS CA 94022-3388 $2,150,000 49,223 $43.68 LANTIS LN LOS ALTOS CA 94024 $1,950,000 11,326 $172.17 24600 RUTH LEE CT LOS ALTOS CA 94024-4750 $3,053,000 55,050 $55.46 HAPPY ACRES RD LOS GATOS CA 95032 $1,343,000 7,405 $181.36 OAK RIDGE WAY LOS GATOS CA 95032 $2,150,000 8,800 $244.32 BELLA VISTA AVE LOS GATOS CA 95032 $60,500 1,300 $46.54 101 COSTANCES CT LOS GATOS CA 95032-4845 $785,000 7,883 $99.58 17059 PINE AVE LOS GATOS CA 95032 $1,275,000 32,234 $39.55 403 MONTCLAIR RD LOS GATOS CA 95032 $785,000 15,304 $51.29 COLORADO CT LOS GATOS CA 95030 $900,000 40,075 $22.46 SUN RAY DR LOS GATOS CA 95030 $1,049,000 7,650 $137.12 16227 MAYA WAY LOS GATOS CA 95030 $2,638,500 43,680 $60.41 217 ALEXANDER AVE LOS GATOS CA 95030-5202 $1,450,000 7,500 $193.33 26 ALPINE AVE LOS GATOS CA 95030-7131 $675,000 20,038 $33.69 BUSKIRK ST MILPITAS CA 95035 $390,000 910 $428.57 826 CALAVERAS RIDGE DR MILPITAS CA 95035-3445 $600,000 46,426 $12.92 2212 LELAND AVE MOUNTAIN VIEW CA 94040 $577,000 5,152 $68.25 2206 LELAND AVE MOUNTAIN VIEW CA 94040 $577,000 3,302 $68.25 1755 PEACOCK AVE MOUNTAIN VIEW CA 94043-4436 $475,000 6,460 $73.53 2240 COLUMBIA ST PALO ALTO CA 94306-1234 $2,115,000 6,175 $170.22 2250 COLUMBIA ST PALO ALTO CA 94306-1234 $2,115,000 6,250 $170.22 PALO ALTO CA $1,658,000 6,000 $276.33 370 LOWELL AVE PALO ALTO CA 94301-3811 $4,450,000 12,474 $356.74 Palo Alto Housing Impact Fee Nexus Study -63- Figure VII-7. Recent Single-Family Land Sales Transactions in Palo Alto and Neighboring Cities (continued) Site Address Location Sale Price Lot Area Price/ SF of Land 4075 ORME ST PALO ALTO CA 94306-3137 $2,175,000 16,830 $129.23 ASH ST PALO ALTO CA 94306 $1,275,000 3,049 $418.17 1620 WEBSTER ST PALO ALTO CA 94301-3851 $6,000,000 20,000 $300.00 569 SAN ANTONIO RD PALO ALTO CA 94306 $6,250,000 30,943 $201.98 297 BEL AYRE DR SANTA CLARA CA 95050-2004 $855,000 17,424 $49.07 1476 MONROE ST SANTA CLARA CA 95050 $1,299,000 2,704 $480.40 VILLA OAKS LN SARATOGA CA 95070 $4,280,000 14,846 $288.29 SARATOGA-SUNNYVALE RD SARATOGA CA 95070 $1,300,000 18,800 $69.15 15651 ROBLES DEL ORO SARATOGA CA 95070-6430 $1,550,000 43,320 $35.78 HOWEN DR SARATOGA CA 95070 $1,670,000 10,169 $164.22 BROOKWOOD LN SARATOGA CA 95070 $1,650,000 18,050 $91.41 LAND ONLY SARATOGA CA 95070 $1,553,500 14,810 $104.90 14100 ALTA VISTA AVE SARATOGA CA 95070 $1,030,000 10,149 $101.49 SARATOGA VISTA AVE SARATOGA CA 95070 $1,300,000 12,760 $101.88 MERRIBROOK DR SARATOGA CA 95070 $1,822,000 4,136 $440.52 Summary Statistics Lower Quartile (25%) $49.07 Median Value $99.58 Upper Quartile (75%) $172.17 Source: CoreLogic, 2015; Strategic Economics, 2015. Figure VII-8. Recent Multi-Family Land Sales Transactions in Palo Alto and Neighboring Cities Property Location Sales Date Sales Price Site Size (SF) Average Sales Price/ SF Page Mill Palo Alto 2012 3,959,000 26,926 $147 389 El Camino Real Menlo Park 2012 $12,200,000 53,579 $228 1300 El Camino Real Menlo Park 2012 $24,500,000 148,165 $165 E. side of Tilton Avenue, N. of El Camino Real San Mateo 2012 4,505,000 33,572 $134 1275 El Camino Real Menlo Park 2014 $3,600,000 17,960 $200 3877 El Camino Real Palo Alto 2013 4,450,000 32,825 $136 536 N Wishman Rd Mountain View 2014 1,050,000 7,000 $150 1958 Latham St, Mountain View, CA 94040 Mountain View 2014 $1,600,000 16,600 $96 Value Range $96 - $228 Weighted Average Value per SF $167 Source: City of Palo Alto; Independent appraisals; Loopnet, 2015; Strategic Economics, 2015. Financial Feasibility Results Figures VII-9 and VII-10 provide the pro forma for the single-family detached, single-family attached, condominium and apartment prototypes. Below is a discussion of the findings. Single-Family Detached The feasibility analysis indicates that at current market prices, without the addition of new impact fees, the single-family detached prototype would have revenues of $91.3 million, with a total development cost of $24.5 million. The difference between the revenues and costs is the residual land value, which is estimated at $315 per square foot. This prototype, with no additional impact fees, yields a residual land value that is higher than what is required to be financially feasible. All of the impact fee scenarios were found to be financially feasible due to the very high value of single-family detached homes in Palo Alto. • The maximum impact fee of $111 per square foot raises development costs from $24.5 million to $34.5 million. This cost increase results in a residual land value of $268 per square foot. • An impact fee set at $95 per square foot increases development costs to $33 million. The residual land value under this scenario is $275 per square foot • An impact fee of $75 per square foot increases development costs to $31.2 million. The residual land value under this fee scenario is $284 per square foot. • A fee level set at $50 per square foot results in total development costs of $29 million, and a residual land value of $294 per square foot. Single-Family Attached According to the feasibility analysis, with no added nexus fees, the single-family attached prototype would have total development costs of $5.8 million and a sale value of $16.7 million. The residual land value, without nexus fees, is then estimated at $263 per square foot, and exceeds the threshold on financial feasibility, defined as between $50 and $175. All of the potential impact fee levels are financially feasible due to the high value of single-family detached units in Palo Alto. • The maximum impact fee of $75 per square foot brings development costs to $7.4 million. This cost increase results in a residual land value of $224 per square foot. A $50 per square foot nexus fee increases development costs to $6.9 million. Under this fee scenario, the residual land value is $237 per square foot. • With an impact fee of $40 per square foot, development costs reach $6.7 million. In this case, the residual land value is $242 per square foot. • A fee level set at $25 per square foot brings total development costs to $6.4 million, and the residual land value to $250 per square foot. Condominiums The feasibility analysis shows that, following current market prices and without new impact fees, the condominium prototype would have revenues of $48.7 million, with a total development cost of $26.5 million. The difference between the revenues and costs is the residual land value, which is Palo Alto Housing Impact Fee Nexus Study -64- estimated at $435 per square foot. The residual land value associated with this prototype is higher than what is required to be financially feasible. Given the high price of condominium units in Palo Alto, all of the housing impact fee levels were found to be financially feasible, as described below: • The full justified impact fee of $90 per square foot raises development costs from $26.5 million to $33.1 million. This cost increase results in a residual land value of $305 per square foot. • A reduced impact fee set at $70 per square foot raises development costs to $31.7 million. The residual land value under this fee scenario is $334 per square foot. • Setting the nexus fee at $50 per square foot results in development costs of $30.2 million, and a residual land value of $363 per square foot. • A fee level set at $30 per square foot results in a total development cost of $28.7 million, and a residual land value of $392 per square foot. Apartments For apartments, the financial analysis shows that under current market conditions, without a nexus fee on affordable housing, a prototypical apartment development costs approximately $25.5 million, with a total project value of $42.7 million. The residual land value on this prototype, excluding a nexus fee, is estimated at $231 per square feet, which is a higher value than what would be required to be financially feasible. The analysis shows that the maximum justified fee for apartments is not financially feasible to implement. However, reduced fee levels are financially feasible. The following describes the feasibility of potential housing impact fees at different levels for apartments: The maximum nexus fee of $105 per square foot brings total development costs up to nearly $32.6 million. This cost increase results in a residual land value of $136 per square foot, which is not financially feasible under current market conditions. • A nexus fee of $85 per square foot increases development costs to $31.2 million. The residual land value under this fee scenario is $154 per square foot, which is financially feasible. • With a housing impact fee level of $50 per square foot, development costs reach $28.9 million. The residual land value in this case is of $186 per square foot, which is financially feasible. • A fee level of $30 per square foot increases development costs to $27.5 million, creating a residual land value of $204 per square foot. This fee level would also be financially feasible. Palo Alto Housing Impact Fee Nexus Study -65- Figure VII-9. Pro Forma Model Results for Single-Family Detached and Attached Prototypes Single Family Detached Single-Family Attached Development Costs (Excl. Land & Nexus Fee) per Unit Total per Unit Total Direct Costs (a) Building & On-Site Improvements $465,000 $13,950,000 $315,000 $3,150,000 Building & Onsite per NSF $155 $150 Parking Incl. above Incl. above Incl. above Incl. above Total Direct Costs $465,000 $13,950,000 $315,000 $3,150,000 Total Direct Costs per NSF $155 $150 Indirect Costs (a) A&E & Consulting $27,900 $837,000 $18,900 $189,000 Permits & Fees (Excl. Nexus fee) (b) $158,808 $4,764,246 $138,777 $1,387,773 Taxes, Insurance, Legal & Accounting $13,950 $418,500 $9,450 $94,500 Other Indirect Costs $13,950 $418,500 $9,450 $94,500 Contingency $10,730 $321,912 $8,829 $88,289 Total Indirect Costs $225,339 $6,760,158 $185,406 $1,854,062 Financing Costs (a) $38,383 $1,151,485 $21,217 $212,172 Developer Overhead & Profit (a) $87,447 $2,623,397 $62,595 $625,948 Total Development Costs $816,168 $24,485,040 $584,218 $5,842,182 Total Development Costs (per NSF) $272 $278 Income Gross Income/Sales Proceeds $3,043,000 $91,290,000 $1,666,000 $16,660,000 Less: Operating/Sales Expenses & Vacancy Net (Operating or Sales) Income $3,043,000 $91,290,000 $1,666,000 $16,660,000 Capitalized Value/Sales Value (c) $3,043,000 $91,290,000 $1,666,000 $16,660,000 Residual Land Value Analysis Total Development Costs (TDC) Except Land With Various Levels of Nexus Fee Nexus Fee per NSF TDC incl. Nexus Fee Nexus Fee per NSF TDC incl. Nexus Fee $0 $24,485,040 $0 $5,842,182 $50 $28,985,040 $25 $6,367,182 $75 $31,235,040 $40 $6,682,182 $95 $33,035,040 $50 $6,892,182 $111 $34,475,040 $75 $7,417,182 Residual Land Value per Sq. Ft. at Nexus Fee Residual Land Nexus Fee Residual Land Various Nexus Fee Levels per NSF Value per SF per NSF Value per SF $0 $315 $0 $263 $50 $294 $25 $250 $75 $284 $40 $242 $95 $275 $50 $237 $111 $268 $75 $224 Current Land Values/ Threshold for Feasibility $50-$175 $50-$175 Notes: (a) See Figure VII-5. (b) This represents a generalized estimate of the fee and permit costs for each prototype, calculated by city staff. Actual fee and permit costs for development projects will vary depending on many factors. (c) See Figure VII-4. (d) Feasibility threshold varies by density of prototype. For single-family detached and single-family attached, the threshold is $50-$175 per square foot. For multi-family rental apartments and condominiums, the threshold is $150 to $250 per square foot Acronyms: SF: square feet NSF: net square feet TDC: total development costs Source: Strategic Economics, 2015. Figure VII-10. Pro Forma Model Results for Condominium and Apartment Prototypes Condominiums Apartments Palo Alto Housing Impact Fee Nexus Study -66- Development Costs (Excl. Land & Nexus Fee) per Unit Total per Unit Total Direct Costs (a) Building & On-Site Improvements $472,500 $16,537,500 $203,910 $14,273,700 Building & Onsite per NSF $225 $210 Parking $45,000 $1,575,000 $37,500 $2,625,000 Total Direct Costs $517,500 $18,112,500 $241,410 $16,898,700 Total Direct Costs per NSF $246 $249 Indirect Costs (a) A&E & Consulting $31,050 $1,086,750 $14,485 $1,013,922 Permits & Fees (Excl. Nexus fee) (b) $63,247 $2,213,657 $30,617 $2,143,169 Taxes, Insurance, Legal & Accounting $15,525 $543,375 $7,242 $506,961 Other Indirect Costs $15,525 $543,375 $7,242 $506,961 Contingency $6,267 $219,358 $2,979 $208,551 Total Indirect Costs $131,615 $4,606,515 $62,565 $4,379,564 Financing Costs (a) $27,522 $963,286 $20,913 $1,463,945 Developer Overhead & Profit (a) $81,196 $2,841,876 $38,987 $2,729,065 Total Development Costs $757,834 $26,524,177 $363,875 $25,471,273 Total Development Costs (per NSF) $361 $375 Income Gross Income/Sales Proceeds $1,390,000 $48,650,000 $46,971 $3,288,000 Less: Operating/Sales Expenses & Vacancy $16,440 $1,150,800 Net (Operating or Sales) Income $1,390,000 $48,650,000 $30,531 $2,137,200 Capitalized Value/Sales Value (c) $1,390,000 $48,650,000 $610,629 $42,744,000 Residual Land Value Analysis Total Development Costs (TDC) Except Land With Various Levels of Nexus Fee Nexus Fee per NSF TDC incl. Nexus Fee Nexus Fee per NSF TDC incl. Nexus Fee $0 $26,524,177 $0 $25,471,273 $30 $28,729,177 $30 $27,510,373 $50 $30,199,177 $50 $28,869,773 $70 $31,669,177 $85 $31,248,723 $90 $33,139,177 $105 $32,608,123 Residual Residual Residual Land Value per Sq. Ft. at Various Nexus Fee Levels Nexus Fee per NSF Land Value per SF Nexus Fee per NSF Land Value per SF $0 $435 $0 $231 $30 $392 $30 $204 $50 $363 $50 $186 $70 $334 $85 $154 $90 $305 $105 $136 Current Land Values/ Threshold for Feasibility $150-$250 $150-$250 Notes: (a) See Figure VII-5. (b) This represents a generalized estimate of the fee and permit costs for each prototype, calculated by city staff. Actual fee and permit costs for development projects will vary depending on many factors. (c) See Figure VII-4. (d) Feasibility threshold varies by density of prototype. For single-family detached and single-family attached, the threshold is $50-$175 per square foot. For multi-family rental apartments and condominiums, the threshold is $150 to $250 per square foot Acronyms: SF: square feet NSF: net square feet Source: Strategic Economics, 2015. Palo Alto Housing Impact Fee Nexus Study -67- ADDITIONAL POLICY CONSIDERATIONS While the nexus study provides the necessary economic analysis for the housing impact fees, it is up to policymakers to decide what percentage of the maximum fee to charge on new development. Financial feasibility is one important factor to examine. In addition, there are a number of other policy issues to consider, such as: • How much will residential development fees increase? • What are the residential impact fee levels in neighboring jurisdictions? • How does a housing impact fee fit into Palo Alto’s overall housing strategy? • How can the city decide other administrative issues? A discussion of each of these topics is presented below. Comparison to Existing Fees on Residential Development Figure VII-11 presents information on current city fees charged on the four residential prototypes included in this nexus analysis. It also demonstrates how total residential fee levels would change under the maximum fee and three additional residential impact fee scenarios. Currently, Palo Alto’s existing city permits and fees for the residential prototypes are estimated at $158,808 for a single-family detached unit, $138,777 for a single-family attached unit, $63,247 for a condominium unit and $30,617 for an apartment unit.19 Once the nexus-based residential impact fees at various levels are added to existing fees, the total fees increase as presented in Figure VII-11. The maximum fee scenario increases total fees between 200 and 400 percent, depending on the prototype, while the lowest fee scenario (Scenario 4) approximately doubles total city fees. Figure VII-11 is intended to be a resource for the policy discussion that Palo Alto will have when considering what fee level to select. A fee that is set too high could have a dampening effect on private development. On the other hand, a low fee does not fully mitigate all the affordable housing impacts from new residential development. 19 The fee estimates presented above represent the best approximations available from Palo Alto. Palo Alto Housing Impact Fee Nexus Study -68- Palo Alto Housing Impact Fee Nexus Study -69- Figure VII-11. Palo Alto Total Residential Fees under Selected Fee Scenarios Single-Family Single-Family Detached Attached Condominiums Apartments Existing Fees and Permits per Unit $158,808 $138,777 $63,247 $30,617 Existing Fees and Permits per SF $53 $66 $30 $32 Scenario 1: Maximum Fee per SF $111 $90 $75 $105 Nexus Fee Per Unit $333,501 $189,037 $158,519 $101,906 Combined Fees Per Unit $492,309 $327,814 $221,766 $132,523 Combined Fees per SF $164 $156 $106 $136 Scenario 2 Fee per SF $95 $70 $50 $85 Nexus Fee Per Unit $285,000 $147,000 $105,000 $82,571 Combined Fees Per Unit $443,808 $285,777 $168,247 $113,188 Combined Fees per SF $148 $136 $80 $117 Scenario 3 Fee per SF $75 $50 $40 $50 Nexus Fee Per Unit $225,000 $105,000 $84,000 $48,571 Combined Fees Per Unit $383,808 $243,777 $147,247 $79,188 Combined Fees per SF $128 $116 $70 $82 Scenario 4 Fee per SF $50 $30 $25 $30 Nexus Fee Per Unit $150,000 $63,000 $52,500 $29,143 Combined Fees Per Unit $308,808 $201,777 $115,747 $59,760 Combined Fees per SF $103 $96 $55 $62 Comparison to Neighboring Jurisdictions Figure VII-12 compares the fee scenarios for Palo Alto with the current housing impact fees and in- lieu fees in other nearby cities. If either the maximum housing impact fee levels (Scenario 1) or the second-highest fee levels (Scenario 2) were adopted in Palo Alto, they would significantly exceed the residential impact fees charged in the neighboring jurisdictions in San Mateo and Santa Clara Counties listed in Figure VII-12. However, San Francisco has adopted fees ranging from $199,000 to $522,000 per unit, depending on the unit size, which are somewhat similar to the maximum fee levels calculated for Palo Alto. If Palo Alto were to adopt the recommended fee levels its fees would be higher than most other cities in San Mateo and Santa Clara Counties, but lower than the housing impact fees in San Francisco. Palo Alto Housing Impact Fee Nexus Study -70- Figure VII-12. Comparison with Impact Fees and In-Lieu Fees in Neighboring Jurisdictions Single Family Detached Single Family Attached Condominiums Apartments Date Fee Was Adopted Palo Alto Fee Scenarios Scenario 1 (Maximum) Per SF $111 $90 $75 $105 N/A Per Unit $333,501 $189,037 $158,519 $101,906 Scenario 2 Per SF $95 $70 $50 $85 N/A Per Unit $285,000 $147,000 $105,000 $82,571 Scenario 3 Per SF $75 $50 $40 $50 N/A Per Unit $225,000 $105,000 $84,000 $48,571 Scenario 4 Per SF $50 $30 $25 $30 N/A Per Unit $150,000 $63,000 $52,500 $29,143 Impact Fees Cupertino $15/SF $16.50/SF (a) $20/SF $25/SF 2015 Daly City $14/SF $18/SF (b) $22/SF $25/SF 2014 East Palo Alto $22/SF $22/SF $22-$44/SF (c) $22/SF 2014 Mountain View N/A N/A N/A $15/SF 2015 San Carlos (d) $23.54-$43.54/SF $20.59-$42.20/SF $20.59-$42.20/SF $23.54-$43.54/SF 2010 San Francisco (e) $199,698-$522,545/unit $199,698-$522,545/unit $199,698-$522,545/unit $199,698-$522,545/unit 2015 San Jose N/A N/A N/A $17/SF (f) 2014 Sunnyvale N/A N/A N/A $17/SF (g) 2015 Inclusionary Policies and In-Lieu Fees Palo Alto 15%-20% 15%-20% 15%-20% N/A Mountain View 3% of Sales Price 3% of Sales Price 3% of Sales Price N/A 2015 San Jose (h) 15% or $17/SF in-lieu fee 15% or $17/SF in-lieu fee 15% or $17/SF in-lieu fee N/A 2014 Sunnyvale 7% of Sales Price 7% of Sales Price 7% of Sales Price N/A 2015 (a) This fee applies to small lot single family and townhomes. (b) This fee applies to townhomes. (c) Fee ranges from $22 per square foot for for-sale housing without structured parking to $44 per square foot for housing with structured parking. (d) Fees shown as ranges. Actual fees charged depends on project size. (e) Fee charged depends on unit size (number of bedrooms). (f) Fee goes into effect in 2016. Developments approved by July 2016 are exempt with a longer exemption for downtown development. (g) Fees for projects that are between 4 and 7 units pay 50 percent of this fee. (h) Inclusionary policy and in-lieu fee apply to for-sale developments of more than 20 units. Sources: The Non-Profit Housing Association of Northern California; City of San Carlos Municipal Code; Vernazza Wolfe Associates, Inc; Strategic Economics, 2015. Palo Alto Housing Impact Fee Nexus Study -71- The potential fee scenarios can also be compared with existing housing impact fees in other Bay Area cities for regional context. This list is not an exhaustive inventory of all Bay Area cities with housing impact fees, but it provides information about many cities that have fees on rental, ownership or both types of housing. As shown in Figure VII-13, housing nexus fees in other Bay Area cities vary significantly from city to city. None of the fees presented in Figure VII-13 are as high as the maximum justified fee in Palo Alto. However, some of the cities, such as Berkeley and Fremont, have impact fees that are similar to the lowest fee scenario evaluated for Palo Alto. Palo Alto Housing Impact Fee Nexus Study -72- Figure VII-13. Existing Housing Impact Fees in Bay Area Cities City Project Type Amount Fremont For-Sale and Rental Development $19.50 per habitable SF $22.50 per habitable SF for single family homes on lots 6,000 SF or greater. Santa Rosa For-Sale and Rental Development 2.5% of sale price of for-sale units. Based on SF for rentals Livermore For-Sale and Rental Development Based on type of dwelling produced Pleasanton For-Sale and Rental Development Single Family (over 1,500 SF): $10,880 per unit Single Family (1,500 SF or less) and Multi-family (Apt. or Condo): $2,696 per unit Adjusted annually based on CPI Napa For Sale and Rental Development Single Family: $ 2.20 per SF Condo: $2.20 per SF Rental: $3.75 per sq. Emeryville Rental Residential Projects $20,000 per dwelling unit Berkeley Rental Development $28,000 per unit Note: City of Berkeley Resolution No. 66, 015 authorizes $8,000 discount for eligible projects Sources: The Non-Profit Housing Association of Northern California, Strategic Economics, and Vernazza Wolfe Associates, Inc, 2015. Palo Alto Housing Impact Fee Nexus Study -73- Role of Fees in Overall Housing Strategy The City currently charges a commercial linkage fee of $19.31 per square foot on all new non- residential development. These fees are payable at the time that the building permit is issued. The city also has an inclusionary housing program that requires that 15 percent of the units in market-rate developments consisting of five or more housing units must be sold at below-market rate (BMR) prices. The inclusionary requirement increases to 20 percent for larger projects on five-acre and larger parcels. Two-thirds of the BMR units are to be affordable at the 90 percent AMI level households and the remaining one-third are to be affordable at the 110 percent AMI level. City policy generally requires that the BMR units be provided in the project. In some cases, developers have the option of paying an in-lieu fee of between 7.5 and ten percent of the sales price or fair market value, whichever is greater. The developer must also pay a fee for fractional units. Revenues from the BMR in-lieu fee and commercial linkage fee programs are deposited into the City’s Affordable Housing Fund. The Affordable Housing Fund is a local housing trust fund established by the City Council of Palo Alto to provide financial assistance for the development of housing affordable to very low-, low- and moderate-income households that live or work within the City. It is largely made up of two sub-funds: the Commercial Housing Fund and the Residential Housing Fund. While both rental and ownership units are eligible for assistance, in practice all units assisted thus far have been rental units and almost all have been affordable to very low- or low- income households. The revenues to be collected from the residential impact fee, if adopted, could provide an important additional source of local funding; however, local fee revenues do not generally cover the entire funding gap encountered by sponsors of new affordable housing. Additional funding from a variety of sources will remain critical. These funding sources typically include public subsidies from Santa Clara County, equity from the Low Income Housing Tax Credits, and financing from conventional lenders. Potential for Overlap between Residential and Commercial Fees The City is also undertaking a housing impact nexus study simultaneously, and may soon adopt a housing impact fee in a parallel process to the commercial linkage fee considered in this report. One issue that may arise if a City considers the adoption of both fees is whether there is any overlap between the two impact fees, resulting in potential “double-counting” of impacts. The commercial linkage fee study examined jobs located in new commercial buildings including office/ R&D/ medical office buildings, retail/ restaurants/ services, and hotels. The nexus analysis then calculated the average wages of the workers associated with each commercial building to derive the annual income of the new worker households. The analysis determines the area median income (AMI) level of the new worker-households to identify the number of worker-households that would require affordable housing. The housing impact fee nexus analysis examined households buying or renting new market rate units in the jurisdiction. The household expenditures by these new residents have an economic impact in the county, which can be linked to new jobs. The nexus analysis quantified the jobs linked to new household spending, and then calculated the wages of new workers and the household income of new worker households. Each worker household was then categorized by area median income (AMI) to determine the number of households that require affordable housing. There may be a share of jobs counted in the commercial linkage fee analysis that are also included in the residential nexus analysis, particularly those in the service sector. Other types of jobs counted in the residential nexus analysis are unique to that analysis, and are not included in the commercial Palo Alto Housing Impact Fee Nexus Study -74- linkage fee analysis (for example, public sector employees). The commercial linkage fee analysis is limited to new development in private sector office/ R&D/ medical office buildings, hotels, and retail/ restaurants/ services space. There is potential that some jobs could be counted in both analyses, and that the two programs may overlap in mitigating the affordable housing demand from the same worker households. Each of the proposed fees is required to mitigate no more than 100 percent of the demand for affordable units by new worker households. In order to reduce the potential for overlap between the two programs, it is advisable to set both the commercial linkage fees and housing impact fees at below 100 percent of the nexus-based maximum. In this way, when combined, the programs would mitigate less than 100 percent of the impact even if there were overlap in the jobs counted in the two nexus analyses. Administrative Issues When adopting a Housing Impact Fee, there are several administrative issues to consider. First, does the City want to encourage smaller units? By charging lower fees for smaller units, it is possible that it could encourage development of smaller units. Secondly, similar to any impact fee, periodically it will be necessary to adjust the housing impact fees. Adjustments may be needed due to possible changes in the affordability gap. However, the connection between new residential construction and growth in employment derived from the IMPLAN3 Model is unlikely to change in the short run. It is advisable that the City adjusts its housing impact fee annually by using an annual adjustment mechanism. An adjustment mechanism updates the fees to compensate for inflation in development costs. To simplify annual adjustments, it is recommended that the City select a cost index that is routinely published. While there is no index that tracks changes in Palo Alto’s development costs, including land, specifically, there are a few options to consider. • The first option is the Consumer Price Index (CPI) Shelter component. The shelter component of the CPI covers costs for rent of primary residence, lodging away from home, owner’s equivalent rent of primary residence, and household insurance. Of the total shelter index, costs associated with the owner’s equivalent rent of primary residence constitute 70 percent of total costs entered into the index. • A second option to adjust the fee for annual inflation is the construction cost index published in the Engineering News Record (ENR). This index is routinely used to update other types of impact fees. Cost index information for the San Francisco region, the smallest geographical area available for this purpose, is available on an annual basis. The ENR cost index measures inflation in construction costs, but it does not incorporate changes in land costs or public fees charged on new development. Because these indices are readily available, reliable, and relatively simple to use, it is recommended that Palo Alto use these indices for annual adjustments. However, because both understate the magnitude of inflation, it is recommended that the City base its annual adjustment mechanism on the higher of the two indices (CPI or ENR), using a five-year moving average as the inflation factor. In addition to revising the fee annually for inflation, the City is encouraged to update the housing impact study every five years, or at the very least, update the housing affordability gap used in the basic model. The purpose of these updates is to ensure that the fee is still based on a cost-revenue structure that remains applicable in the Palo Alto housing market. In this way, the fee will more Palo Alto Housing Impact Fee Nexus Study -75- accurately reflect any potential structural changes in the relationships between affordable prices and rents, and development costs. Palo Alto Housing Impact Fee Nexus Study -76- VIII. GLOSSARY OF TERMS AND ACRONYMS GLOSSARY OF TERMS Affordable Housing: Under state and federal statutes, housing is defined as affordable if housing costs do not exceed 30 to 35 percent of gross household income. Annual Adjustment Mechanism: Due to inflation in housing construction costs, it is frequently necessary to adjust impact fees. An index, such as the Consumer Price Index (CPI) or a published construction cost index (for example, from the Engineering News Record) is used to revise housing fees to reflect inflation in housing construction costs. Assisted Housing: Housing that has received public subsidies (such as low interest loans, density bonuses, direct financial assistance, etc.) from federal, state, or local housing programs in exchange for restrictions requiring a certain number of housing units to be affordable to very low-, low-, and moderate-income households. Boomerang Funds: Monies returned to the City by the State of California, after dissolution of redevelopment agencies in the State. Consumer price index (CPI): Index that measures changes in the price level of a market basket of consumer goods and services purchased by households. Employment Densities: The amount of square feet per employee is calculated for each property use that is subject to a commercial development housing linkage fee. Employment densities are used to estimate the number of employees that will work in a new commercial development. Household: The US Census Bureau defines a household as all persons living in a housing unit whether or not they are related. A single person living in an apartment as well as a family living in a house is considered a household. Households do not include individuals living in dormitories, prisons, convalescent homes, or other group quarters. Household Income: The total income of all the persons living in a household. Household income is commonly grouped into income categories based upon household size and income, relative to the regional median family income. Housing Affordability Gap: The affordability gap is defined as the difference between what a household can afford to spend on housing and the market rate cost of housing. Affordable rents and sales prices are defined as a percentage of gross household income, generally between 30 percent and 35 percent of income. Palo Alto Housing Impact Fee Nexus Study -77- For renters, rental costs are assumed to include the contract rent as well as the cost of utilities, excluding cable and telephone service. The difference between these gross rents and affordable rents is the housing affordability gap for renters. This calculation assumes that 30% of income is paid for gross rent. For owners, costs include mortgage payments, mortgage insurance, property taxes, property insurance, and homeowner association dues. 20 The difference between these housing expenses and affordable ownership costs is the housing affordability gap for owners. This calculation assumes that 35% of income is paid for housing costs. Housing Subsidy: Housing subsidies refer to government assistance aimed at reducing housing sales prices or rents to more affordable levels. Housing Unit: A housing unit can be a room or group of rooms used by one or more individuals living separately from others in the structure, with direct access to the outside or to a public hall and containing separate toilet and kitchen facilities. IMPLAN3: A software model that is used to provide a quantitative assessment of the interdependencies between different branches of a regional (or national) economy. The latest model, IMPLAN3, was used in the nexus studies. The major input is household income, and the major output is direct and induced employment reported by industries Inclusionary Zoning: Inclusionary zoning, also known as inclusionary housing, refers to a planning ordinance that requires that a given percentage of new construction be affordable to households with very low, low, moderate, or workforce incomes. In-Lieu Fee: A literal definition for an in-lieu fee for inclusionary units would be a fee adopted “in place of” providing affordable units. For the purposes of operating an inclusionary housing program, a public jurisdiction may adopt a fee option for developers that prefer paying fees over providing housing units on- or off-site. A fee study is frequently undertaken to establish the maximum fee that can be charged as an in-lieu fee. This fee study must show that there is a reasonable relationship between the fee and the cost of providing affordable housing. Market-Rate Housing: Housing which is available on the open market without any public subsidy. The price for housing is determined by the market forces of supply and demand and varies by location. Nexus Study: In order to adopt a residential housing impact fee or a commercial linkage fee, a nexus study is required. A nexus requires local agencies proposing a fee on a development project to identify the purpose of the fee, the use of the fee, and to determine that there is “a reasonable 20 Mortgage terms for first-time homebuyers typically allow down payment of five percent; these terms require private mortgage insurance. Palo Alto Housing Impact Fee Nexus Study -78- relationship between the fee’s use and the type of development project on which the fee is imposed.” A nexus study establishes and quantifies a causal link or “nexus” between new residential and commercial development and the need for additional housing affordable to new employees. Linkage Fee: A fee or charge imposed on commercial developers to pay for a development’s impact on the need for affordable housing. The fee is based on projected household incomes of new employees that will work in newly created space. The fee varies according to the type of property use. Prototypes: Prototypes are used for residential and commercial developments in order to define housing impact fees. The prototypes generally represent new development projects built in a community and are used to estimate affordable housing impacts associated with new market rate commercial and residential developments. While the prototypes should be “typical” of what is built, for ease of mathematical computation, they are often expressed as larger developments in order to avoid awkward fractions. Residential or Housing Impact Fee: A fee imposed on residential development to pay for a development’s impact on the need for affordable housing. The fee is based on projected incomes of new employees associated with the expansion of market rate developments. Two steps are needed to define the fees. The first step is the completion of a nexus study, and the second step entails selection of the actual fee amount, which can be below the amount justified by the fee study, but not above that amount. RS Means: Data source of information for construction cost data. Palo Alto Housing Impact Fee Nexus Study -79- DEFINITION OF ACRONYMS AMI: Area Median Income CBIA: California Building Industry Association EDD: State of California Employment Development Department FAR: Floor-area-ratio FF&E: Furniture, Fixtures, and Equipment GBA: Gross Building Area HCD: Department of Housing and Community Development (State of California) NAICS: North American Industry Classification System NSF: Net Square Feet QCEW: Quarterly Census of Employment and Wages R&D: Research and development SF: Square Feet TDC: Total Development Costs FINANCE COMMITTEE ACTION MINUTES Page 1 of 3 Regular Meeting Tuesday, February 16, 2016 Chairperson Filseth called the meeting to order at 7:12 P.M. in the Community Meeting Room, 250 Hamilton Avenue, Palo Alto, California. Present: Filseth (Chair), Holman, Schmid, Wolbach Absent: Agenda Items 1.Utilities Advisory Commission Recommendation That the City Council Adopt a Resolution to Approve a Power Purchase Agreement With Hecate Energy Palo Alto LLC for up to 75,000 Megawatt-hours per Year of Energy Over a Maximum of 40 Years for a Total not to Exceed Amount of $101 Million. MOTION: Council Member Schmid moved, seconded by Council Member Holman to recommend the City Council adopt a Resolution to: 1.Approve a Power Purchase Agreement (PPA) with Hecate Energy Palo Alto LLC (Wilson Solar) for up to 75,000 Megawatt-hours (MWh) per year of energy for up to forty years at a total cost not to exceed $101 million; and 2.Delegate to the City Manager or his designee, the authority to execute on behalf of the City the PPA with HEPA, the three contract term extension options available to the City under the PPA, and any documents necessary to administer the agreements that are consistent with the Palo Alto Municipal Code and City Council approved policies; and 3.Waive the application of the investment-grade credit rating requirement of Section 2.30.340(d) of the Palo Alto Municipal Code; and Attachment E ACTION MINUTES Page 2 of 3 Finance Committee Action Minutes February 16, 2016 4. Waive the application of the anti-speculation requirement of Section D.1 of the City’s Energy Risk Management Policy as it may apply to this PPA. MOTION PASSED: 4-0 2. Utilities Advisory Commission Recommendation that the City Council Adopt a Resolution to Continue the Palo Alto Clean Local Energy Accessible Now (CLEAN) Program at the Current Contract Price of $0.165 per kilowatt-hour for Local Solar Resources and at the Avoided Cost Level ($0.081 to $0.082 per kilowatt-hour) for Local Non-solar Eligible Renewable Resources. MOTION: Chair Filseth moved, seconded by Council Member Schmid to recommend the City Council adopt a Resolution to: 1. Maintain the Palo Alto CLEAN contract price of 16.5 cents per kilowatt-hour (kWh) for local solar resources that have already submitted applications to the CLEAN program and reduce the CLEAN contract price for future local solar resources to their current avoided cost: 8.9 cents /kWh for a 20-year contract term and 9.0 cents/kWh for a 25-year contract term, and continue with a program limit of 3 megawatts (MW); and 2. Reduce the Palo Alto CLEAN contract price for local non-solar eligible renewable resources equal to their current avoided cost: 8.1 cents/kWh for a 20-year contract term and 8.2 cents/kWh for a 25- year contract term, and continue with a separate program limit of 3 MW. MOTION PASSED: 4-0 3. Commercial and Residential Impact Fee Nexus Studies and Recommend Affordable Housing Impact Fees. MOTION: Chair Filseth moved, seconded by Council Member Wolbach that the Finance Committee directs Staff to revise the recommendation and bring back an Ordinance with the objective of significantly increasing impact fees for commercial development in order to maximize affordable housing revenue. This includes the following considerations: ACTION MINUTES Page 3 of 3 Finance Committee Action Minutes February 16, 2016 1. Set the Impact Fee per square foot for office, medical and R&D at twice the amount as residential; and 2. Consider the extent to which the City can set the Impact Fee for office, medical and R&D somewhere between the maximum feasible fee and maximum justified fee. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion, “to also include the option of either a fee or inclusionary housing, which will allow the developer to construct units instead of paying the fee.” MOTION PASSED: 4-0 4. Approval of Amendment to Table of Organization by Adding 1.0 FTE Management Analyst in the Development Services Department. MOTION: Council Member Wolbach moved, seconded by Council Member Holman to recommend the City Council amend the Table of Organization by adding 1.0 Full Time Employee (FTE) Management Analyst in the General Fund, Development Services Department. AMENDMENT: Chair Filseth moved, seconded by Council Member Schmid to add a comment to the Finance Committee recommendation that the target headcount for 2017 Management Professional positions remain at 217.4. AMENDMENT FAILED: 2-2 Holman, Wolbach no MOTION PASSED: 4-0 ADJOURNMENT: The meeting was adjourned at 10:30 P.M. FINANCE COMMITTEE DRAFT ACTION MINUTES Page 1 of 2 Finance Committee Action Minutes June 21, 2016 Special Meeting Tuesday, June 21, 2016 Chairperson Filseth called the meeting to order at 7:04 P.M. in the Community Meeting Room, 250 Hamilton Avenue, Palo Alto, California. Present: Filseth (Chair), Holman arrived at 7:38 P.M., Schmid, Wolbach Absent: Oral Communications None. Action Items 1. Third Quarter FY 2016 Financial Report. MOTION: Council Member Wolbach moved, seconded by Council Member Schmid to recommend the City Council approve the Third (3rd) Quarter Financial Report. MOTION PASSED: 3-0 Holman absent 2. Review Updates to Commercial and Residential Impact Fee Nexus Studies and Recommend Framework for a Draft Ordinance to Adopt Housing Impact Fees for Residential and Commercial Construction. MOTION: Council Member Wolbach moved, seconded by Council Member Holman to recommend: A. Staff draft an affordable Housing Impact Fee Ordinance using the Staff proposal based on the Finance Committee recommendations found in Table 1 of the Staff Report; and B. Staff and Planning and Transportation Commission explore options which would allow Office, R&D and Hotels to proportionally reduce their impact fee payment by providing Below Market Rate housing onsite or offsite or by deed restricting existing units as affordable. DRAFT ACTION MINUTES Page 2 of 2 Finance Committee Action Minutes June 21, 2016 AMENDMENT: Council Member Schmid moved, seconded by Council Member XX that the market rate rental housing fee be set at $30 per square foot. AMENDMENT FAILED DUE TO LACK OF A SECOND MOTION PASSED: 3-1 Schmid no Future Meetings and Agendas Adjournment: The meeting was adjourned at 9:23 P.M. City of Palo Alto July 27, 2016 Page 1 1 ===============MEETINGS ARE CABLECAST LIVE ON GOVERNMENT ACCESS CHANNEL 26================= This agenda is posted in accordance with Government Code Section 54954.2(a) or section 54956. 2 3 Wednesday, July 27, 2016 Regular Meeting 4 6:00 PM, Council Chambers 5 6 7 Call to Order / Roll Call: 6:05PM 8 Vice‐chair Gardias late 9 10 Chair Fine: Welcome to the meeting of the Planning and Transportation Commission (PTC) for 11 July 27th. Robin if you would please take the roll? 12 13 Robin Ellner, Administrative Associate III: Commissioner Alcheck, Commissioner Downing, Chair 14 Fine, Vice‐Chair Gardias, Commissioner Rosenblum, Commissioner Tanaka, Commissioner 15 Waldfogel. Six present. 16 17 Oral Communications 18 The public may speak to any item not on the agenda. Three (3) minutes per speaker.19 None 20 21 Chair Fine: Thank you. Are there any Oral Communications or cards from the public on issues 22 not agendized? 23 24 Robin Ellner, Administrative Associate III: No. 25 26 Chair Fine: Thank you. 27 28 Agenda Changes, Additions, and Deletions 29 The Chair or Commission majority may modify the agenda order to improve meeting management.30 Items 1 and 2 switched. 31 32 Chair Fine: And I believe now it's time to talk about any agenda changes, additions, or deletions. 33 34 Jonathan Lait, Assistant Director: Yes. So Commissioners the consultant for the first item on 35 your agenda is running about a half an hour late and so we would request that you initiate your 36 conversation on the study session as to you until the consultants able to arrive. 37 38 Chair Fine: Great, thank you. So we’ll switch Items 1 and 2. 39 40 41 PLANNING & TRANSPORTATION COMMISSION MINUTES Attachment F City of Palo Alto July 27, 2016 Page 2 City Official Reports 1 Assistant Director Lait provided an update on the theater. 2 3 Chair Fine: And then I believe we have the Assistant Director’s report. 4 5 Jonathan Lait, Assistant Director: Great, thank you. The only item I wanted to report there's 6 been a lot of publicity about CineArts Theatre. We've learned that the tenants has given notice 7 to the property owner that their plan is not to continue the lease for the theater. That may, 8 that means that the theater will, could close really soon, within the month I would think. And 9 this is a property that was subject to a Planned Community (PC). It is a requirement of the 10 development that a theater be placed there. This is not though a public benefit, but if there 11 was an interest of the property owner to remove the theater replace it with something else it 12 would have to go through a public hearing process that would come before the Planning 13 Commission and then ultimately to the City Council, but there has been no such application 14 filed. In fact a meeting with the property owner today indicated that their interest in that they 15 were going to have a continued conversation with the tenant to see if there were other 16 opportunities to help them stay at the site. So more to be… when we have more information 17 we will share that with the Commission. 18 19 Chair Fine: Ok, thank you very much. While we wait for the Vice‐Chair and before we get 20 started on the items I'd just like to give Commissioner Downing a moment. 21 22 Commissioner Downing: Thanks, Adrian. I wanted to let you all know that I will be resigning 23 from the Planning and Transportation Commission (PTC) and that this will be my last session 24 with you. It has been a privilege and honor to serve with such excellent Commissioners who 25 have devoted so much of their time to this Commission and who strive to always make a better 26 life for Palo Altoans. I also wish to thank the staff whose efforts during my time here on the 27 Commission have been absolutely Herculean considering the limited resources available to 28 them. Thank you for all of that you do for us. 29 30 My family will be moving to Santa Cruz and we spent a lot of time trying to figure out financially 31 how to stay in Palo Alto. As many of you know we are renters. We have been renting with 32 roommates. And we have thought hard about the sort of community we want to raise our 33 children in. We wanted them to go to school with people who weren't millionaires. We 34 wanted a future where we weren't staying up at night worrying about how we were going to 35 pay the bills. We wanted a community that was still growing, where young people could still 36 come and could still live, a community that was still adding interesting new hangouts and 37 where independent shops could still exist. We thought about which communities were actively 38 thinking about how to be a better place. Which would add artist space, live music, rooftop 39 lounges, and sadly the answer is no longer Palo Alto. I will miss all of you and I'm deeply 40 honored to have worked with you. Thank you. 41 42 Chair Fine: Thank you, Commissioner Downing. Thanks, Kate. It's been an honor to serve with 43 you as well. I think you have done an amazing job on this Commission digging deeply into the 44 issues and providing us all with research and thoughts that many of us had not thought of 45 before you brought them up. Particularly on this topic tonight Accessory Dwelling Units (ADU) 46 City of Palo Alto July 27, 2016 Page 3 you’ve really helped move the ball forward for the City and I think all of us to be grateful to you 1 for that. Just personally for myself as well it's been a pleasure serving with you, getting drinks 2 with you occasionally at the Nut House and learning what you think and how the City can move 3 forward. I also just want to open it up to any other Commissioners who may have something to 4 say. 5 6 Commissioner Tanaka: Yeah, Commissioner Downing I'm going to miss you. To be honest, I am 7 kind of surprised, but I think you'll be missed and we appreciate your work on this and I think 8 whichever community you move to they’ll be thankful for your service. So thank you. 9 10 Commissioner Alcheck: That's a bummer. I think before I knew you I was just really excited that 11 Palo Alto appointed a woman to this Commission, but after having the opportunity work with 12 you I think that you are extremely, you take this role very personally and I think that's a really 13 great thing because you approached the decision making process as if these decisions were 14 reflections of our own personal values. And I think that you will be missed for that. I think that 15 your vision of what Palo Alto could do to improve the way that it utilized its land was a 16 aspirational one and it was good, it was great to have someone who was that passionate about 17 those sort of values on the Commission. And I think the City will miss you. We will miss having 18 someone who took it so seriously and personally and passionately because this is the sort of job 19 that I think sometimes can get… it's difficult to commit as much energy to a job like this, but 20 you really did it and I'm sad. I'm really sad to see that you're leaving, but I guess we will visit 21 you in Santa Cruz. Maybe we’ll see you on that Planning Commission. 22 23 Commissioner Downing: Thank you all so much for your kind words. I really appreciate it and I 24 really have enjoyed serving with all of you. You all have come with such interesting points of 25 view, such attention to detail, such perspectives that have really opened my mind about how to 26 look at things, how to analyze things. It's been a deeply rewarding process and I thank you all 27 for that. 28 29 Chair Fine: Thank you. So I think we should move on to our action items. I know a few people 30 have walked in, just for the public to know we are switching Items 1 and 2. I do know there's a 31 lot of cards for the impact fee issue, but we're waiting on the consultant for that. 32 33 Action Items 34 Public Comment is Permitted. Applicants/Appellant Teams: Fifteen (15) minutes, plus three (3) minutes rebuttal. 35 All others: Five (5) minutes per speaker. 36 37 2. Planning and Transportation Commission Study Session on Second Dwelling Units 38 39 Chair Fine: So let's kick it off with the continued study session on Second Dwelling Units (SDU) 40 and if staff has a report let’s go through that. 41 42 Chitra Moitra, Planner: Good evening, Commissioners. I am Chitra Moitra, Planner, Long Range 43 Planning. Tonight staff comes before you for the second study session on this item. To give 44 you a brief history this item was first initiated by the City Council memo in a colleague's memo 45 format to the Planning and Transportation Commission (PTC) in October of 2015. Council 46 City of Palo Alto July 27, 2016 Page 4 through that memo directed PTC to find greater opportunities to create more SDUs and to 1 figure out ways how to bring the non‐compliant SDU to compliance. Our first study session was 2 earlier this year in January of 2016 and it was a very well attended meeting with a lot of public 3 input and we the staff report discussed a lot of topics many relating to SDUs: the benefits of 4 them, some of the constraints which the Palo Alto regulations provide, and then some of the 5 best practices of neighboring cities. Staff has received a lot of good input from PTC in that 6 meeting and the PTC input can be classified into three tasks and these where changes to the 7 existing development regulations, exploration of new ideas, and examine ways how to bring the 8 non‐compliant second units into compliance. 9 10 Staff over the last few months have done some research and today is bringing to you the 11 findings. The staff report today consists of some of the best practices of the neighboring cities, 12 some of the constraints which the City of Palo Alto regulations have, and it consists of two 13 surveys; Survey 1 and Survey 2. Survey 1 is to solicit general community’s input on this subject 14 and Survey 2 is to find out more about SDU which have been already permitted in the City. The 15 next, the survey, the next two slides describes in details the reasoning behind the questions for 16 each of each of the questions and the surveys would be put up on the City’s website for two to 17 three weeks. Once we get your input and once we make the recommended changes we would 18 put it up on the City's website. And the timeframe might be mid‐August. Survey 2 aims to 19 collect more information on the existing permitted SDU. City has building permit records of 20 approved units from 2002 and we want to see the characteristics of these units how their sizes, 21 their occupants, their affordability, what are the ownership type, and then the occupants 22 parking habits, etcetera. So this survey would be mailed to the 55 plus permitted SDU owners 23 we have in Palo Alto. 24 25 The staff report in addition to the surveys also discusses the constraints. And these are 26 minimum lot size requirement, parking requirement, unit size requirement, and height and 27 setback requirements. Staff has done preliminary research and it's still in the process of adding 28 more information to it, which we would bring in the following PTC discussions. Staff has also 29 provided as an Attachment C a frequently asked questionnaire on this subject matter which we 30 will be putting up on our website which we are working on right now. And Attachment A of the 31 staff report also provides the state laws on SDUs. So with the above information provided to 32 you tonight staff thinks we will have a good discussion on the constraints discussion and other 33 items provided to you. This is my brief presentation and I would think we’ll have a good 34 discussion on this item. Thank you. 35 36 Chair Fine: Thank you very much. Do we have any cards on item, on this item? None? Ok. So 37 just to my fellow Commissioners as you know this is a continuation of our discussion from 38 January. At that time we'd asked staff to consider what regulations currently restrict Accessory 39 Dwelling Units (ADU) or SDUs and how we might change them and what impact it would have 40 on the number of SDUs to be built. There are a number of those changes explored in this 41 report and also a lot of comparisons to nearby communities the four main areas we've looked 42 at so far: minimum lot size, parking requirements, unit size requirements, and height and set 43 back issues. So staff is asking us to kind of look at their work and see if we have any other 44 additional comments, but then particularly we'd like to give some comments to staff on the two 45 surveys. The first survey is a general survey to the public about SDUs and the second survey is 46 City of Palo Alto July 27, 2016 Page 5 for current SDU owners, those 55 that are currently permitted. So I'm just going to open it up 1 to a round of questions or comments, however you want to go through it. Vice‐Chair. 2 3 Vice‐Chair Gardias: Thank you and good evening everyone. Sorry for being late. The question 4 that I have here is about comparability. Items that you put in the, in your presentation. So you 5 selected a number of cities and of course this, this document will go… well or it will expand 6 toward presentation to the City Council and our follow up meeting. This, my comment about 7 those municipalities that you selected is although they are very interesting I don't find all of 8 them to be comparable to Palo Alto. When I, when I'm going through the list and when I think 9 about our neighbors I think that probably Menlo Park is the most comparable from the 10 perspective of the ADUs. So giving this my question is could you either replace some of those 11 with some other comparable municipalities in the Bay Area or maybe beyond or if you want to 12 stick to them maybe you can expand the list with other towns that are like Palo Alto. 13 14 Ms. Moitra: The reason behind selection of these cities was mainly these are the cities which 15 went through their ordinance update recently. City of Mountain View just finished it. Menlo 16 Park did it last year. Redwood City did it I think 2014. East Palo Alto (EPA), San Rafael, and 17 Santa Cruz are the examples of those cities which have done outstanding jobs in changing their 18 code and bringing in new ideas, so that was the reason why we selected these cities. 19 20 Vice‐Chair Gardias: Right and it's clearly stated in your document, but in terms of us bench 21 marking ourselves to some others maybe you can have at least one or two other examples. 22 23 Ms. Moitra: Sure we can. 24 25 Vice‐Chair Gardias: Like Menlo Park. At least from my perspective those are municipalities that 26 are closer to this, what we are doing here in Palo Alto. 27 28 Jonathan Lait, Assistant Director: So Vice‐Chair we’re happy to study any city that you want us 29 to study. If you can, if you have specific ideas we do have Menlo Park on there, but there's 30 other cities that you have in mind or Commissioners please let us know and we can, we can 31 research that. 32 33 Vice‐Chair Gardias: I don't have, but I thought that you could expand the selection with some 34 others, right? That we could benchmark. 35 36 Mr. Lait: Yes, the idea of comparability is a bit of a challenge. There's no other city quite like 37 Palo Alto. 38 39 Vice‐Chair Gardias: With the respect to the neighbors, right? I still think that there are some 40 others, right, in California. 41 42 Mr. Lait: Again, we’re happy to study any city and get that information. 43 44 City of Palo Alto July 27, 2016 Page 6 Vice‐Chair Gardias: Ok, very good. Thank you. And the second question I say about the survey. 1 So is this survey that you're planning to distribute will it be done on the statistical basis or it will 2 be sent out to all the potential, all potential owners of the SDU? 3 4 Ms. Moitra: Survey Number 1 would be put up on City’s website and anybody can, prospective 5 SDU owners or regular current owners can fill out the survey even any community members 6 can fill out that. And Survey Number 2 would be made to the 55 SDU owners whose records we 7 have obtained from the building permit records. 8 9 Vice‐Chair Gardias: Ok. The reason that I'm asking this question is pretty much that I think that 10 there will be economic interest and looking at our neighborhoods and I'm sure that there will 11 be some at least there will be probably different economic interest between North and South 12 and then there may be different economic interests between different neighborhoods. So I 13 would be interested that you identify in your survey the location of the respondent. 14 15 Ms. Moitra: There is one question in the survey I think it's question number… at the end of the 16 survey with the map which asks the respondent to fill out like which area you are from and I 17 have divided the city into sections. 18 19 Vice‐Chair Gardias: Right, but it only just shows like you're talking about this one? 20 21 Ms. Moitra: Yes. 22 23 Vice‐Chair Gardias: Those four quadrants, right? So I was hoping for more if it's possible. It just 24 they can select from a down, pull down menu then the neighborhoods if it's online. 25 26 Elena Lee, Interim Planning Manager: So we're working with Stanford University actually on this 27 survey to get their help in doing statistical analysis of these surveys and also to craft these 28 surveys. So they've also helped us on the Comprehensive Plan outreach. So we’ll be working 29 with them to help refine the surveys and I'm also working with them as well as other 30 organizations to get the word out on the survey to get as comprehensive response from the 31 public as possible on this. 32 33 Vice‐Chair Gardias: Exactly. And then probably, if we're in the same we're in the same group of 34 questions, of identification. Probably would like to know if that person is an owner. Or is a part 35 of the family or maybe is the, and if he occupies the property. Because we would like to 36 differentiate between those that lease out the property against those that live on the property. 37 38 Ms. Lee: Right, so yes we will work with Stanford to try to refine those questions. We just need 39 to be careful in crafting the survey to not accidentally lean it towards one subset versus the 40 other to make sure that all individuals feel that the survey is worth their time and valid for their 41 interest. 42 43 Vice‐Chair Gardias: Right, but I'm just raising this consciously because when you look at this 44 SDU the different regulations there is a many municipalities specifically allow for expansion for 45 the owner occupied property as opposed to for the leasor so for this reason, if you ask me, I 46 City of Palo Alto July 27, 2016 Page 7 would be inclined just to have the same language in our pronouncement because those from 1 our perspective those are probably two different parties. 2 3 Ms. Lee: Yes, we can definitely incorporate that in. 4 5 Vice‐Chair Gardias: Thank you. 6 7 Chair Fine: Commissioner Rosenblum. 8 9 Commissioner Rosenblum: Thanks for coming back with some additional detail after our study 10 session last time. So two parts. First the additional detail and then talk about the survey a little 11 bit. On the additional detail last time part of the discussion is around this paradox which is 12 some people say well, you're not going to get many units built anyway, so if you look at the 13 number of units that are eligible and look at the economics of building a place in Palo Alto and 14 look at the amount you can charge for rent it's just you’re not… this is a tool that simply is not 15 going to add much housing stock. On the flip side you have people saying oh, but it's going to 16 do terrible things to our parking and traffic congestion so it's, it goes both ways. Some people 17 think that it's going to cause problems because you evidently will have so many units and 18 others say you'll never get that many units. 19 20 Some of the additional information answers question one, which is how many units will be 21 eligible? And so you helped define how many units are eligible under different scenarios of lot 22 size. I think that the piece that we're still missing is there essentially what we're looking at is 23 what restrictions would we relax and then what would the results be? And so it has to do with 24 parking restrictions, minimum lot restrictions primarily I think are the two kind of variables 25 you're playing with. And then you looked at a number of cities as comparables. And so my ask 26 is a little bit different from my colleague although it’s related, which is when picking cities to 27 compare not just to see what the regulation was, but what the effect was. So do the 28 applications increase by certain amount? And then what was the key lever that was pulled? So 29 were parking requirements reduced? Minimum lot size reduced? So you have Santa Cruz for 30 example, which did have a it seems like the primary tool they used move from their previous 10 31 percent of total lot size restriction to a 500 square foot number which would seem to be a 32 lessening of that restriction. It's less strict now. So what did that have as a result in terms of 33 applications for SDUs? I think that will help answer question number one, does anyone actually 34 want this? 35 36 Question number two, which is around the traffic, etcetera impact I think is a function of 37 question one. If a lot of people want it then we have to look at the impact of traffic, etcetera 38 and part of that I think we'll, you’ll get some answers from your survey. And that's my only 39 comment on the new information. I think it's moving the right direction, but again as 40 Commissioners the main thing we're asking about is if we lessen certain restrictions what do we 41 think will happen? And so I'm interested in any city, not just neighboring or California cities, 42 just the impact of lessening SDU restrictions on applications. 43 44 On the surveys themselves I have no input on the survey content. I think it's excellent. I think 45 you'll get the right demographic information even on the getting an address I thought about 46 City of Palo Alto July 27, 2016 Page 8 that too. You have a quadrant in the city verses an address and I’m trying to think what would I 1 do with an address that I can't do with a quadrant. And I can't really think of anything. So I 2 think the quadrant is probably an easier format to answer versus you guys having to have a look 3 up tool against addresses, but I leave that up to the experts that build surveys. I think the 4 content looks good. 5 6 The other thing I would say is that on the present owners of secondary units your mailing list to 7 a total of 55 people I think, right? So there's 55 current units. And so given average response 8 rates to these things which I don't know what they are, but like direct mailing responses are 9 two percent. Other kinds of surveys you may get up to five percent. So you're going to get like 10 two people that respond to this and so the thing there around the methodology I'm not sure if 11 you have resources to actually I know this is annoying, but like follow up with a call or have 12 other ways to market to the individuals that have SDUs. But you're not to get data back and 13 you developed like what I think is a good survey and somehow I think you need to think harder 14 about how to get to these people. That's it. 15 16 Chair Fine: Thank you. Commissioner Waldfogel. 17 18 Commissioner Waldfogel: Thank you. And again thank you for coming back. Let me just make 19 one comment to Commissioner Rosenblum. I think I can reconcile your paradox possibly, which 20 is that even if this is not particularly productive in creating units which it may or may not be and 21 we’ll find out I think that it has a potential to create winners and losers. If you happen to be the 22 neighbor or on the block where it is successful you may feel like a loser even if the by and large 23 doesn't produce many units. So just I think we have to be somewhat sensitive to that. 24 25 Which leads to my comments I have some general comments and just request of things we 26 should try to learn. And then one suggestion for the survey which overall I think is nicely 27 crafted. And what I’d like you to do if possible is you've done a great job of looking at the kind 28 of physical constraints lot size, parking, etcetera and saying hey, if we at least relax this 29 constraint then there'd be so many more eligible units. It would be great if we could also layer 30 on just a little bit of economic analysis on how many units we think we have produced or 31 whether we think that I mean just what are the economics of creating them? Because we want 32 to know whether we're going to accomplish the goals of creating affordable housing or whether 33 we'll just create lots of Airbnb opportunities or kind of what the, what it is we're going to make 34 by doing this. So, it would be great to try to figure out a way to analyze that. And as we look at 35 things like stay in place opportunities we're actually kind of fortunate that our property values 36 are so high that tools like reverse mortgages could be better tools for people to stay in place 37 then building an SDU, but it’s just something I think we have to understand because people 38 have alternatives when they think about how to deploy their capital. 39 40 The specific ask is I think it's Q9 in your survey when you ask about purpose, what would your, 41 who would your SDU be occupied by. It’d be great if you could add the category of sort of 42 nobody, like a home office or something like that, because in some of our neighborhoods I think 43 that's a fairly prevalent I mean if you just look at our productivity of SDUs I wouldn’t be 44 surprised if a large fraction of them have been produced basically as surge space for people to 45 work at home. So let’s just understand that because if that's what's going on I'm actually not 46 City of Palo Alto July 27, 2016 Page 9 that enthusiastic about relaxing the rules to create a lot of surge space. But if it's truly for 1 affordable housing then I would love to know that. 2 3 Chair Fine: Thank you. Commissioner Alcheck. 4 5 Commissioner Alcheck: I can’t stand that sound. I lost my train of thought… I remember having 6 this discussion last time. We talked about a lot of interesting ideas including subsidizing. I 7 know that I brought up the idea of subsidizing costs or permit fees for SDUs, especially ones 8 that could theoretically be marketed towards individuals who work in our community, in our 9 public institutions like school teachers and firemen and such and such. I hope this doesn’t 10 upset you, but I'm a little surprised that we're surveying. The colleagues’ memo suggested that 11 they wanted us to have a study session and initiate a discussion on SDUs and facilitate the 12 following: increase opportunities to create SDUs with minimum impact on the community, 13 consider steps which depending on who you ask may not even be possible, consider steps to 14 bring existing non‐compliant SDUs in compliance and any other relevant… I don't know that we 15 recommended a survey. I mean did somebody on this panel recommend… I don't know. 16 Frankly, I agree with Commissioners on this panel that have suggested that this probably won't 17 get much of a response. That's number one. 18 19 Number two, I don't think it's relevant to know all the answers to these survey questions. I’ll 20 give you a good example, who would your SDU be occupied by? That isn’t going to affect 21 whether or not I think, whether or not this Commission is willing to have, is willing to make a 22 recommendation to the City Council on whether or not we should number one be innovating in 23 that space or encouraging SDUs. We've already been told by the City Council that they would 24 like us to come up with ways to increase the number of SDUs. I don't know, if this survey is 25 designed to provide political cover for either doing something or not doing something then I 26 understand it. I'm not asking for that political cover. Maybe City Council has suggested that 27 we'd like to have the citizens respond to a survey so that when we make this decision we can 28 stand behind it, but as far as my perspective is, I feel like their decision has been made that 29 they want us to start evaluating how to encourage the increase in the number of SDUs. I feel 30 like what we're doing right now is we’re evaluating a survey that is intended to take the 31 temperature of individuals in the community on whether or not they think this is a good idea. 32 And that is not really how I read the colleagues memo. And I don't mean to sound critical, but I 33 guess I have a question. Where did this idea come from? If it didn’t come from this panel or 34 this Commission then why are we in the process of survey? Why are we in the process of 35 building a survey? 36 37 Ms. Lee: Thank you. So the survey idea did come from staff and part of it is because we just 38 want to engage in public outreach. We do realize that what the Council's memo, colleagues 39 memo, is asking for and we are working towards that and identifying and that’s part of the 40 research that Chitra is engaged in, but the other part of this is also to get community feedback. 41 And through all the efforts that we're going through with the Comp Plan update and all the 42 various different activities one of the key components that we've been directed to is to also 43 obtain feedback just from the public. It's not going to affect what we're going to come up with 44 necessarily, but it is part of the complete picture that we feel that we need to provide. And if 45 City of Palo Alto July 27, 2016 Page 10 the direction from the Commission is to not move forward with the survey we can certainly do 1 that, but that was the intent to do that. 2 3 Commissioner Alcheck: Alright, well I appreciate the answer. I get it. I get that we want to get 4 like as much information, but I think one of the things that came out of this discussion the last 5 time we had it and I can't remember the number, but I feel like at one point we were 6 wondering how many SDUs had been built in the last year or two, three or four and the number 7 was astonishingly low. Like so low that it's single digits. And then we had a discussion on what 8 we could do to encourage it and there was this I believe because I didn't read the minutes 9 tonight. I didn't read the minutes of our last meeting ahead of tonight, but I believe there was 10 some theorizing about whether or not these changes would lead to a dramatic increase in the 11 number of SDUs that got built even if we did go really, even if we did create really dramatic 12 policies to encourage SDU would it even really result in more than the single digit increase in 13 SDUs. 14 15 And so considering the sort of skepticism about even how effective these policies could be 16 based on what we have, what we have space for, right, because the limiting even if you 17 eliminate for example I mean there's a short discussion of sort of options here. One of them is 18 eliminating the minimum lot size requirement. So we eliminate the minimum lot size 19 requirement, is that suddenly going to result in eight SDUs getting built next year? And I, it 20 would be my recommendation that we abandon the survey tonight and we proceed with an 21 ordinance that resembles I guess my recommendation would be I would like to know which of 22 our neighboring cities Palo Alto thinks has succeeded in encouraging the largest development 23 of SDUs since they adopted a change in their SDU policy. So Mountain View has eliminated the 24 lot size requirement. Did that end up resulting in an increase in SDU development? If the 25 answer is no then that wasn't enough and if we need to adopt even greater policies to 26 encourage it like for example, waiving permit fees as we suggested last time or even subsidizing 27 the cost of some of this development I think we could create a draft ordinance that we could 28 pass to City Council and then City Council can sit doing one of their meetings and have a 29 discussion on whether or not they think PTC’s recommendation to use public funds to subsidize 30 the development of SDUs is good. But you get my point, if we do this survey we're going to 31 meet back in eight to nine months, we'll have maybe at best 150 responses that would be 32 shocking, and we will have not really taken the ball down the road. 33 34 I think with respect to this issue the real information I want to know is what difference did the 35 policy changes that our neighboring cities made and maybe it's not a neighboring city maybe 36 we have to look at Portland or maybe there's another city out there that did adopt some 37 serious policies encouraging SDUs and succeeded in actually making a difference in the 38 development and then let's recommend that and let's just, let's get this done. So I know this is 39 a study session, but that would be my recommendation and if my colleagues agree then let’s 40 abandon the survey and let's just get a draft ordinance out that I mean, hold on. Let's have 41 instead of allocating any time to survey let's have staff just determine how dramatic the 42 difference was when policy changes were made. That's really what's relevant. If we come back 43 and say because minimum lot size requirements were eliminated in Mountain View that there 44 was a 100 percent increase in SDU development and they go wow, that really did make a 45 dramatic effect. If there's another city in our nation that waived permit fees and that made a 46 City of Palo Alto July 27, 2016 Page 11 dramatic difference I mean I think my take away from the colleagues memo that City Council 1 provided was let's do something to encourage SDU development. And maybe I'm reading 2 between the lines here, but I sort of walked away from that going they’re ready to experiment. 3 4 There is an acknowledgement housing crisis is upon us, right? I don’t need a survey to know 5 whether or not people would make use of these. It's abundantly clear no one can afford to live 6 in this city so let's get some more housing. And so I think from that perspective they're ready to 7 experiment if they're ready to experiment I think I'm ready based on some of the research that 8 you guys could do that would be helpful to make a recommendation to pursue some of those 9 measures. Alright, I’ll end there. 10 11 Chair Fine: Thank you. Commissioner Tanaka. 12 13 Commissioner Tanaka: So thanks for your work on this report. I think the comments that 14 Commissioner Rosenblum made about really looking at other cities and seeing what the effect 15 was I think that's actually one of the biggest values we could do. Is really, because it’s hard to 16 predict what's going to happen, but we can look at neighboring cities or and actually when I 17 was looking at the list of cities, cities like EPA or Redwood City I think actually what's probably 18 more important is not local cities, but comparable cities. So like maybe Santa Monica instead 19 of EPA because maybe that’s more similar social economic profile to Palo Alto. I think and I 20 think several other Commissioners also echoed that comment so I’m not going to belabor it, 21 but I think that's actually one of the biggest things that we could do. I realize it’s a lot of work. 22 You have to go through all these other, you have to go through other cities data and it could be 23 kind of hard to navigate, but I think that’s… it’d be well worth it to do it. 24 25 Now in terms of whether we should do the survey or not in general I like to be data driven, but I 26 do know how hard it is to do a really good survey and I don't know what kind of budget we 27 have for this and how extensive and all the survey techniques. But to really get good data is 28 actually pretty hard because what might be happening is when you get the survey back it might 29 be just people who feel strongly one way or another versus a true representative sample. So I 30 don't know how rigorous you guys are going to be on this, but maybe you could talk about what 31 you're planning to do? Can someone on staff comment on that? 32 33 Ms. Lee: Thank you. We're still working with Stanford to try to figure out the best outreach and 34 part of the reason and we're working with them to get as much data, relevant data from the 35 respondents to make sure that we have good statistical analysis. So the answer, short answer is 36 that we're working with Stanford to make sure that we get a survey that is as useful as possible. 37 38 Commissioner Tanaka: Ok, because the survey is pretty long and kind of the problem with long 39 surveys is the longer it gets the worse quality answers you get, so that's kind of unavoidable. 40 And one key question that I don't, I didn’t see in the survey maybe it's there, but I was like 41 what's the size of the lot right now of the people you're asking. Since you don't have the 42 addresses we don't know what size lot you're talking about. So that's something or is it there or 43 did I miss it? 44 45 City of Palo Alto July 27, 2016 Page 12 Ms. Lee: No it's not there because the purpose of the first survey is really for anybody whether 1 they own property or not. Certainly we can add that if they have a property and then certainly 2 for the second survey that would be really relevant to add that in there. 3 4 Commissioner Tanaka: Ok, and then is there a plan to do more community outreach to have 5 like let's say… can you talk about that? 6 7 Ms. Lee: Sure. We are actually planning on reaching out to stakeholder groups. So following 8 this goal the intention was that after the survey after we have the initial data then we would 9 reach out to the different stakeholder groups in the city, working with Palo Alto Neighborhood 10 Association (PAN) and other organizations also partnering as well with other groups that have 11 done this kind of work just to get as much data as possible. 12 13 Commissioner Tanaka: Ok, well I think it's not just data, but also just to get involvement 14 because this can be a controversial issue and so I think it's important to get buy in. 15 16 Chair Fine: Thank you, Commissioner Tanaka. I'd like to make just a few comments before 17 going for another round. On the substantial issues I think would be helpful for us and for 18 Council next time this comes back to get a little background on some of the planning principles 19 behind some of these tradeoffs. I was looking at the lot size coverage and I was trying to figure 20 out like which is, what are the pros and cons of square feet versus percentage of minimum 21 coverage. I don't actually know and we could research it. So that would be kind of helpful in 22 terms of looking at the metrics and the different tradeoffs, what were like the planning 23 principles behind that? What's the best practice around that? 24 25 I think also staff’s done pretty good work in terms of looking at some of these levers. I agree 26 with my colleagues we need to balance them against the impacts. We are missing one part of 27 the colleagues memo which is about bringing existing SDUs into compliance and so there's not, 28 it’s pretty thin on terms of what is the current situation and how we might bring those into 29 compliance, how we even reach out to those folks. 30 31 I share some of Commissioner Alcheck’s concerns about the survey. It may be a good way to 32 reach out to folks who are not in compliance and maybe figure out how they might be willing to 33 do so, but when I read the survey I was a little confused about is the survey trying to garner 34 support for changing these regulations or is it to discover what the public feels, is it ok to 35 change? I'd like to think it's more informative for Council that kind of matrix that we proposed 36 in terms of what regulation levers we pull and what the impact is on SDUs and impact on the 37 community. I also want to echo what Commissioner Tanaka said about special interests who if 38 the survey’s on the public website you may get a lot of folks just piling on to it who have one 39 position or another that they'd like to push and just keep on taking the survey over and over. 40 So there are some worries for me there. 41 42 If we do proceed with the survey one thing I might recommend is showing examples. I think a 43 lot of folks may not be completely aware or knowledgeable about the different types of SDUs 44 that exist whether it's internal, attached, detached and I think one nice strategy might be to 45 show folks what these are. If they're local examples whether it's Palo Alto or nearby cities just 46 City of Palo Alto July 27, 2016 Page 13 kind of letting folks know this is what it is, this is what they're used for, this is how you might 1 get one in your house, and providing some background about the current situation that this 2 many lots are excluded from building SDUs, this many are included, Council has directed us to 3 look at those numbers. So those are my comments for now. Vice‐Chair. 4 5 Vice‐Chair Gardias: Thank you. So since we talk about survey I will add my three cents. I think 6 that we should proceed with our discussion and survey should not be stopping us. Having a 7 survey it's not a bad idea given that it's not your focus and priority and so I for this reason I 8 totally agree with my colleague, Mike Alcheck, just to proceed. But I think that it's not a bad 9 idea just to do the survey in parallel because it will show the community that this is the focus of 10 the, of our work and also may elevate to us some risk. So this survey and any other documents 11 that we're going to issue will ultimately steer some comments in the community which will be a 12 good idea because it may alarm us about attitudes towards this potential change. So, but none 13 of the less I believe that we should proceed with our discussions, internal discussions about the 14 regulation. 15 16 There is the second comment I have is pretty much is about the data that you’re gathering. 17 Ultimately what we should have, we should have pretty much it’s so this is what you're doing 18 just by looking at other municipalities, studying the lot size, meaning lot size decrees and 19 potential minimum size or the maximum size of the SDU. This should result ultimately with 20 some regression analysis and then we should just pretty much have a mathematical equation 21 that would allow us just to plug in the numbers and just tell us ok with this number of the 22 change we will have that many units extra and that would be with a different change you will 23 have another. And so that's pretty much if you work already with some statisticians from 24 Stanford that's maybe extra work for them so they could address us and then different factors 25 may be taken into consideration that my colleagues already addressed. Thank you. 26 27 Chair Fine: Commissioner Rosenblum. 28 29 Commissioner Rosenblum: Yes after hearing the argument from Commissioner Alcheck I think I 30 agree that the survey doesn't feel like it should be a top priority and if the… again, you have 31 your own budget and you guys know how to spend your budget. My recommendation would 32 be not to do it. It doesn't seem like it gives us additional information for this this particular 33 decision. Particularly the survey towards those who already have a second unit because the 34 sample size is so small, but even the first survey asking people essentially do you support or do 35 not support, which is gauging community support, I think there are other ways to gauge 36 community outreach versus a citywide survey. Particularly the methodology used, which is 37 posting on the website which becomes sort of a contest of voices. 38 39 I was thinking about the earlier discussion though around the key piece of information we need 40 I think is if we relax regulations what do we think the result will be? So how many units will get 41 built and what will the problems be that emerge from those units being built? And so it so 42 happens that the San Francisco Bay Area Urban Research Center is doing a lot of research on 43 this right now. So that's highly relevant. They’re based locally; San Francisco, Oakland, and San 44 Jose. Berkeley is undergoing an ordinance right now. Oakland just did. San Francisco did in 45 2014 and San Jose is also working on this. They cited in their report that Vancouver and 46 City of Palo Alto July 27, 2016 Page 14 Portland are the two cities to watch that have been most aggressive in this. And Vancouver in 1 particular that 30 percent of rental properties are ADUs. So my ask would be to have staff 2 basically use this great resource. So this is something they're actively researching and probably 3 a few steps ahead of us in terms of the cause and effect of ADU regulations versus what 4 happens. 5 6 Chair Fine: Thank you. Vice‐Chair Gardias. 7 8 Vice‐Chair Gardias: Thank you, so one more thought if you don't mind. So just when I’m 9 thinking about this there is there should be ultimate goal in all this what we're doing. At the 10 end of the day there should be a no or negligible change to the neighborhoods. However we 11 going to just do it, whatever regulations we change, whatever we permit there's ways up from 12 the user's perspective from the neighborhood’s perspective and citizen’s perspective there 13 should be the change should be very minimal because otherwise it may backfire on all this 14 effort. So I think that if it's in the survey or if it's in the regulations we should just think about 15 this just having this ultimate goal that change should be very small. Thank you. 16 17 Chair Fine: I believe our last comment is Commissioner Alcheck. 18 19 Commissioner Alcheck: Yes, I just want to add in anticipation of the next study session on this 20 topic or the next meeting on this topic I can't find it, but I feel… it was my sense that staff sort 21 of came to the conclusion that the parking requirements were either perceived or are in fact 22 very restrictive. I don't know where my where the other Commissioners are in this, but in 23 moving forward I would suggest that our proposal make that requirement less onerous. I know 24 there's sort of discussion about what that means, but I would suggest that we should the next 25 the draft version of whatever we're going to recommend or whatever staff will put forward that 26 we can discuss at our next meeting to push on to City Council should essentially eliminate the 27 parking requirement altogether so that we can again create a dramatic incentive and see if we 28 can push the needle a little bit. And I make this suggestion because I think what will happen is 29 that whatever we recommend will be discussed by City Council and likely dialed back a little bit. 30 And so I think giving them sort of what I would call like the dramatic recommendation on every 31 potential lever will allow them to pick and choose the ones they're most comfortable with in 32 the political climate in which they operate and achieve the goal that they set out which is to 33 encourage the development of best use, right? 34 35 So again I want to just bring this back to I would like very much that by the end of 2016 we have 36 actually given our City Council a draft ordinance that suggests the changes that we have 37 identified as most likely to dramatically increase the development of SDUs and then they can go 38 down the list of changes and debate them as to whether which ones they're willing to adopt. 39 Does that make sense? That's where we should be at the next meeting. I mean yes, fine. You 40 want to do the survey? Do it. Do it concurrently, but I think at the next meeting let's just get 41 that proposal up and push it push it forward. 42 43 Chair Fine: So I tried to cut the discussion off too quickly. Vice‐Chair. 44 45 City of Palo Alto July 27, 2016 Page 15 Vice‐Chair Gardias: Thank you. I think that maybe at the end of the day we should just give 1 staff just a clear direction on the survey because I think that some of us spoke differently. So 2 unless they already have the feeling how they should proceed, but I wanted to talk about 3 something else. So when we are addressing this colleague’s memo because of the constraint 4 on the housing, but when you think about the secondary units throughout the world they are 5 used not only for housing purpose but also for the business purpose. And I just want to make 6 this comment because although it’s a little bit outside of the scope, but it will maybe just trigger 7 some thoughts for the next meeting when we're going to discuss this regulation. 8 9 So secondary units are very valuable for us for housing businesses of certain professions: 10 doctors, architects, artists, and so forth, right? And they are throughout different 11 municipalities giving the regulations. So when we talk about this subject we can just maybe at 12 opening the use of those SDUs for the business purpose. And they are of course benefits like 13 for example, easing up traffic. If people don't have to go to certain places where their 14 businesses are located where they can have the business with the respect to their neighbors, of 15 course. That reduces number of trips. Then it distributes number of trips evenly throughout 16 the neighborhoods because not everybody goes to the same location where thousands of 17 offices are. So that's another benefit. And then of course there is number of other benefits 18 that you state. If you are a business owner is stay closer to your family, if you really conduct 19 yourself with respect to the neighborhood it may bring more interest to the vicinity where you 20 live. I just wanted to make this comment because it may become relevant once we are 21 discussing secondary units. Thank you. 22 23 Chair Fine: Commissioner Waldfogel. 24 25 Commissioner Waldfogel: Thank you. I just want to say I'm not unhappy with the track that 26 we're on. I mean I think that getting the best information is a good idea. I certainly 27 acknowledge a lot of the comments that my colleagues have made about how hard it is to 28 create a high quality survey with meaningful results, but I'm sure that you'll do your best to 29 generate meaningful results. And I think that I'd be pretty excited at just seeing some 30 sensitivity analysis on what different changes will generate. I mean I don't want to just go to 31 the close and say let's just relax all the parking requirements, which could have a double 32 whammy effect in some cases if a garage gets converted. And if a primary residence garage 33 gets converted into an SDU then we're losing parking for both units and that potentially some 34 impacts. Let’s just understand the impacts, let's understand the sensitivity on those impacts, 35 impact on the neighborhood. If these become home offices those can also draw traffic, and I 36 mean an architect has clients who come to visit. And all these things just play off shifts in 37 neighborhood use patterns. So let's just be very methodical and thoughtful about disclosing 38 what those effects are so that everybody can make rational choices about what tradeoffs that 39 we want to accept. So let's not just jump to the close, let's line up all the ducks, get the 40 information, and then make some good decisions with that. 41 42 Chair Fine: So just to sum up I think the general feeling up here is we would love to see a bit 43 more as Commissioner Waldfogel just mentioned sensitivity analysis on the regulatory tools 44 that we have at our disposal and that we can show for Council. There's a couple specific issues 45 folks would like looked into. I think the Vice‐Chair’s question about we should be given 46 City of Palo Alto July 27, 2016 Page 16 guidance on the survey is a good one, but I want to ask staff do you guys care or you're just 1 going to do it because doing civic engagement and public outreach is the right thing to do? I 2 mean do you want feedback on that or? Yes, and so I guess another way of asking it is: would 3 you be able to do the survey on time by winter so that we can still get this to Council and give 4 them some choices to make in terms of what they want to do with SDUs? 5 6 Mr. Lait: So… sorry. I tried to do two things at once here. So regarding the survey, we received 7 your feedback and there may be another follow up question that I have for you on that. I don’t 8 know that the survey is really holding us up and producing some more work. We do have a 9 little more data to collect. It's not going to take eight or nine months. We're going to, we plan 10 on coming back I think in October with what we would anticipate is the next more substantive 11 hearing on this issue with some more data which admittedly is not, we’re not bringing forth all 12 the data that we have at this meeting. I don't think we're going to be usually impacted whether 13 we do the survey or not. We think it could be helpful. We're trying to find ways to get more 14 data, but I share the concerns that we heard. I mean there's going to be self‐selecting survey. 15 People who have an interest in this one way or the other will opt in and for one of the surveys 16 the data set will be small and I don't know at the end of the day what kind of conclusions we’ll 17 be able to draw from it, but we won’t be able to draw any conclusions if we don't do it. That I 18 know. 19 20 Chair Fine: Ok. I guess I would say if you can do it concurrently, but still keep the ball moving in 21 terms of writing the ordinance and figuring out those different levers that would be helpful for 22 us and for Council. Commissioner Alcheck. 23 24 Commissioner Alcheck: Yes, I just really quickly. When you're at your first show over the first 25 time you spoke mentioned office and then the second time we spoke you mentioned it again 26 and I didn't know where it came the first time and then the second time after sort of looking 27 through here I see there's a question in the survey that says something like what is the purpose 28 of your SDU used for and one of the options is for personal home business. I guess I'm a little 29 sensitive to that because we're really talking about affordable housing here and increasing 30 housing supply. And the notion that someone's building office space and then opening up their 31 architect’s business and hosting… is there, is that a concern? I see that is there's one bulleted 32 question that sort of asks that and I'm wondering if there's a reason that staff has a concern 33 about commercial businesses setting up in these ADUs. 34 35 Mr. Lait: Well that happens actually today. I mean we do have code enforcement cases where 36 homes are being used for offices. I mean it is an issue and I think what we're trying to get at is 37 there could be a number of reasons why an individual may choose to create a new SDU. We’re 38 just trying to understand the universe of what that might be. I mean I guess we're interested in 39 affordable (interrupted) 40 41 Commissioner Alcheck: I get it. I don't mean to interrupt, but there could be a number of 42 reasons why they would create an ADU, but a lawful one would not be to use it as an office, 43 right? That would be a code violation in which case there would be a code enforcement issue. 44 45 City of Palo Alto July 27, 2016 Page 17 Mr. Lait: Let me just back… so yes, I mean you can’t do an office use in a residential area unless 1 it’s a home occupation. And you could do say an architect's office in a you know, like that, but I 2 would also say you don't need to create an accessory dwelling unit with a full kitchen and bath 3 facilities to create that unit. You could do that today in your home or in an accessory building. 4 5 Commissioner Alcheck: Right. 6 7 Mr. Lait: So they’re apples and oranges a little bit. 8 9 Commissioner Alcheck: So let me just rephrase. The reason why I'm saying that is because I 10 think that it's particularly harmful to this discussion to suggest that we would somehow be 11 allowing our parcels to develop some sort of commercial office space. And I say that because if 12 the public sort of walks away from this discussion tonight with a fear that their neighbors are 13 going to open up startups in these ADUs that may result in some political opposition to this 14 again this notion of creating additional housing. And for all intents and purposes when we talk 15 about developing affordable housing units by permit we would be talking about units that were 16 really specifically set up to house people which would have a kitchen, an operable kitchen, 17 right? It would have essentially everything you need to live. And so I just if that, I wonder if 18 that question isn't problematic because it's asking somebody if they would use an ADU in a way 19 that we're actually not contemplating such a use. That's not to say that they couldn't do it, but 20 it's like on that television (TV) show Silicon Valley and they have this feud between this 21 neighbor who's basically running some sort of what does he call it? Yeah, yeah. That's not 22 what this is about. This is about sort of coming up with incentives to house your parents or to 23 potentially house as an individual who works in this community or wants to live in this 24 community and can’t afford to, but they could afford to potentially rent a 400 or 500 square 25 foot unit. I just I don't want to sort of lose sight of that and I certainly the notion isn't to relax 26 parking standards so that somebody who is operating some sort of architect's office and I'm not 27 talking about a solo architect working out of his garage on an easel I'm talking about a real… I 28 just want to make sure that we're not encouraging some sort of fear in our survey of that sort 29 of result. Sorry. 30 31 Chair Fine: Thank you, Commissioner Alcheck. Staff is there anything else we can answer for 32 you/provide help with? 33 34 Mr. Lait: We're good. Thank you for your thoughtfulness and we’re planning on coming back 35 again in October with a more robust discussion. 36 37 Chair Fine: Excellent. Well, thank you so much. Let's close this item and let's go to Item 38 Number 1. Good point. Let’s take a five minute break. And thank you all for your patience I 39 know we flipped the items. Thanks. 40 41 The Commission took a break. 42 43 Chair Fine: I'd like to apologize. We accidentally skipped someone for their comment on the 44 SDUs. So Vice Chair if you wouldn't mind, let’s get this comment on the record. 45 46 City of Palo Alto July 27, 2016 Page 18 Vice‐Chair Gardias: Of course. Sorry for this omission. And we have Doria Summa that’s going 1 to just extend her comments to us on the topic that we just discussed of SDU. Thank you. 2 3 Doria Summa: Thanks. Thanks, Chair and Planning Commission. No worries. And just a 4 disclaimer, I'm President of the College Terrace Resident’s Association and I'm also on the 5 Citizen Advisory Committee (CAC). And I do not live in R1, but so I wanted you to know that. 6 7 I wanted to thank staff for the report and I understand this is an ongoing event and you're still 8 gathering data and community feedback which I really appreciate. ADUs are already legal of 9 course, but have site and design requirements, setbacks, etcetera so that the accessory units 10 won't become a problem for neighbors mainly. I don't believe the correlation between building 11 more accessory units and more affordable units, meaning lower rent, has been established. I 12 think our understanding of the accessory existing ADUs might be understated as there are 13 many non‐conforming units exist in most of these probably are garage conversions. So in that 14 sense they do affect parking and I don't think that making those units legal will either will 15 increase the number of units. I support staff's approach to getting a lot of community feedback 16 on this as I do think it is kind of a political issue of interest to neighbors. 17 18 Finally I do not believe that relaxing the standards for ADUs should be used as a workaround to 19 diminish the qualities of R1 zoning. I think many people want to live in R1 zoning. I don't, but I 20 don't live in R1 zoning, but I respect that many people do and it's a standard for a community 21 like this. I agree with many comments of the PTC that staff should continue to gather real data 22 with impacts before a decision or recommendation is made. Thanks. 23 24 Vice‐Chair Gardias: Thank you very much. 25 26 Chair Fine: Thank You. 27 28 Commission Action: No action taken, Commissioners provided comment and suggestions. 29 30 31 1. The Planning and Transportation Commission will Consider a Recommendation to the City 32 Council for Adoption of a Draft Ordinance to Update the City’s Below Market Rate Program 33 and Adopt Affordable Housing Impact/In Lieu Fees for Commercial and Residential 34 Construction by Repealing Municipal Code Sections 16.47 (non‐residential projects) and 35 18.14 (residential projects) and Adding a new Section 16.65(Citywide Affordable Housing 36 Requirements) and Direction on Future Corresponding Changes to the Housing Element. 37 The Proposed Ordinance is Exempt From the California Environmental Quality Act (CEQA) 38 per 15378(b)(4) and 15305. 39 40 Chair Fine: So let's move on to the second item or previously the first item and this is our 41 consideration of a recommendation to Council for the adoption of a draft ordinance to update 42 the City's Below Market Rate (BMR) program and adopt affordable housing impact/in lieu fees 43 for commercial and residential construction. So this is a potential ordinance update to the 44 City's BMR program and the impact fees. In short it's consolidating the commercial and 45 residential fee programs into one so it's a citywide program. As I'm sure you all know this is a 46 City of Palo Alto July 27, 2016 Page 19 big deal. Let’s take our time and do our diligence and if staff wants to kick this off with their 1 report. 2 3 Eloiza Murillo‐Garcia, Senior Housing Planner: Thank you, Chair Fine and Commissioners. My 4 name is Eloiza Murillo‐Garcia and I’m the City's Senior Housing Planner. And I also have Sujata 5 Srivastava from Strategic Economics who is our City's consultant on the Nexus studies here 6 tonight and will be discussing as you said the commercial and residential housing impact fee 7 ordinance. So the purpose of today's hearing is to conduct a public hearing and receive public 8 input on the topic before you as well as to review the commercial and residential Nexus study 9 conclusions. Also to review the proposed fees that are described in the staff report and to 10 review the draft ordinance and make a recommendation to the City Council. 11 12 Just to give you a bit of background on this, the City currently has a 15 percent inclusionary 13 requirement for residential for sale development with five or more units. And in this situation 14 in lieu fees are applied to fractional units or when building affordable units is deemed 15 infeasible. The City currently charges commercial impact fees based on a 2002 Nexus study. 16 Thank you. And part of the reason that we've now updated our Nexus studies is because the 17 Housing Element that was adopted in November of 2014 called for updated Nexus studies. It 18 also called for considering an impact fee on rental housing and also called for inclusionary 19 requirements on developments of three or more units. 20 21 The City entered into a contract with Strategic Economics and Vernazza Wolfe Associates in 22 2014 piggybacking on a countywide collaboration in San Mateo County known as 21 Elements. 23 As part of this effort the City received two drafts or final drafts of the studies in November of 24 2014 and there are two studies. There’s a commercial and residential. The results of the Nexus 25 studies were presented to the Finance Committee on two separate occasions on February 16th 26 and June 21st earlier this year. And with the Finance Committee’s direction we have prepared 27 a draft ordinance that reflects the Finance Committee's direction. I'm going to turn it over to 28 Sujata now who is going to discuss the methodology for the two Nexus studies. 29 30 Sujata Srivastava, Strategic Economics: Good evening. So our analysis actually first began by 31 defining what types of commercial development would be most likely to happen in the City 32 based on market trends and discussions with staff. So we looked at office, Research and 33 Development (R&D), medical office uses as well as hotel uses for the linkage fee update. We 34 had to make some determinations about what the likely employee densities were so that the 35 whole idea of the linkage fee analysis is to be able to demonstrate that new workers occupying 36 newly built space some percentage of them will have a demand for affordable housing because 37 their wages are not sufficient for the household to be able to afford market rate housing. So 38 we start by quantifying how many workers occupy the space. We look at wage data to 39 establish what household incomes would be and how many of them would fall in the very low, 40 low, and moderate income categories. We also measure what the gap is between what those 41 types, those households at those income levels can afford to buy or rent relative to what it 42 costs to build a unit in Palo Alto. And so when you apply this gap to the worker household 43 needs you determine what that total, you quantify basically what that total demand is. 44 45 City of Palo Alto July 27, 2016 Page 20 And that demand can then be divided by the square footage of the space that's being built. In 1 this case we used 100,000 square feet (sf) for simplicity and that leads you to a fee per square 2 foot. And that's the maximum fee that can be charged on new development. In almost all 3 cases we don't recommend jurisdictions adopt the maximum feet for a variety of reasons 4 including financial feasibility. So we conducted some analysis to see how these fees would 5 affect a developer’s bottom line at different levels, and we also looked at other fees in other 6 jurisdictions in the Bay Area to provide some context, and looked at kind of the existing fee 7 structure in the City. So bundling all this together led us to the recommendations that you see 8 here. 9 10 On the Residential Nexus study methodology this is not, you do not currently have a housing 11 impact fee. Our methodology first begins with looking at again what types of development are 12 likely to occur and at what price points. The housing impact fee methodology is a series of 13 indirect linkages between the housing that is built, market rate housing, in a particular 14 community and the household spending that results from those renters and buyers that are 15 occupying the market rate housing. So somebody comes into the community as a new 16 household and is putting money into the economy in the form of purchasing goods and 17 services. This generates demand for new workers many of which are in service occupations or 18 other types of jobs that may be low wage jobs. So that relates to a demand for affordable 19 housing. So you first look at what's the household income of residents, how much spending are 20 they generating in the local economy, how does that translate into jobs indirectly? And then 21 based on those jobs we look at how many again using occupational wage data how many of 22 them would be very low, low, and moderate income households. We apply that same 23 affordability gap number that I mentioned before to calculate the total cost or the total need. 24 And then that is then can be translated on a per unit or on a per square foot basis based on 25 what the size of the units are. 26 27 Again we did some feasibility analysis for all the prototypes which I should mention include 28 single family detached, single family attached or townhouses, and condominiums and 29 apartments. And our fee recommendations are based on the results of our feasibility analysis 30 as well as comparison of fees in other cities and a look at what your existing fee structure looks 31 like as well as understanding how it compares to your existing BMR policy. 32 33 Ms. Murillo‐Garcia: So to give you a summary of the recommended fees on the commercial 34 side, this table the first column has the City’s existing fees for the three prototypes. We 35 currently only have one fee for all of the prototypes and the existing fee is currently $20.37 per 36 square foot. As a result of the Nexus study the recommendation in February when staff went 37 to the Finance Committee was to increase the fees for office and R&D took $35 a square foot, 38 increase the fee for a hotel to $30 a square foot, and maintain the retail, restaurant, and other 39 at $20.37 per square foot. Based on the Finance Committee's recommendation at that meeting 40 the recommendations were revised a bit. So the office and R&D recommended fees based 41 again based on the Finance Committee direction were increased to $60 per square foot. Hotel 42 and retail remain the same as the February proposal. 43 44 And on the residential side the City as Sujata said we don't have impact fees. There is an 45 inclusionary program that has in lieu fees and the existing fees are 7.5 to 10 percent of the sales 46 City of Palo Alto July 27, 2016 Page 21 price for each unit for single family detached, single family attached, and condo. And there are 1 currently are no fees on rental housing projects. The February proposal to the Finance 2 Committee was $95 a square foot and $50 for all the other prototypes. Based on Finance 3 Committee's recommendation at that meeting the fee was revised to $50 a square foot for a 4 single family detached. So it’s $50 a square foot for all of the different prototypes. 5 6 And also based on the Finance Committee's direction a draft ordinance was prepared and the 7 draft ordinance consolidates both the commercial and residential fee programs into a single 8 uniform ordinance codified in a new Chapter which would be 16.65. And it repeals the current 9 Municipal Code Sections 16.47 on the nonresidential projects and 18.14 for the residential 10 projects. The ordinance also gives the City the ability to charge an impact for rental housing. In 11 2009 you may be familiar with the Palmer decision. The California Court of Appeal held that 12 requiring inclusionary housing in new rental housing projects violates the Costa‐Hawkins Act. 13 So jurisdictions were no longer able to require inclusionary housing on rental projects. The 14 ordinance also gives the developers the opportunity to build affordable units rather than pay 15 the fee even for mixed use commercial development projects. And on the commercial 16 development side it differentiates the fee structure so there's different fees for different uses. 17 So there's as I mentioned before there is a fee for hotel, one for office, medical, and R&D, the 18 other for restaurant, retail, and other uses. 19 20 The draft ordinance also simplifies the in lieu fee for residential development. It's simplifies it 21 in the fact that there would be a fee charged per square foot rather than 7.5 percent of the 22 sales price. The ordinance also clarifies which projects would be exempt from commercial 23 impact fees. It adjusts the threshold for inclusionary units from projects with five units or more 24 to projects with three or more units. And this was something that was, that is stated in our 25 Housing Element and Program H 3.1.1. The ordinance is not proposing to increase the existing 26 inclusionary housing requirements to adjust the percentage of affordable units required at this 27 time. That is something that can be looked at a later date. 28 29 So the next steps after tonight's hearing, discussion, and recommendations are to go to Council 30 for their consideration of the draft ordinance along with the Commission's recommendations 31 and a concurrent consideration of a draft ordinance to establish the fees at the levels described 32 in the staff report. And that Council date is tentatively scheduled for September the 6th. We 33 are available to answer any questions that you might have. 34 35 Hillary Gitelman, Planning Director: Thank you Eloiza. Just add one thing, I’m Hillary Gitelman 36 the Director and I wanted to thank everyone at the table here for working on this long and 37 hard. It's been a long time coming. We did get a number of letters as you know from 38 interested parties and this is a public hearing. We'd love you to open the public hearing and 39 hear the testimony and then we’re available to answer the Commission's questions and 40 respond to any questions that you might have after you hear that testimony. 41 42 Chair Fine: Thank you very much. I believe we have a number of speakers, let’s kick it off with 43 them. 44 45 City of Palo Alto July 27, 2016 Page 22 Vice‐Chair Gardias: Yes, Mr. Chairman we have six cards submitted to us. So we would like to 1 hear from Lauren Bigelow who will be followed by Bonnie Packer. You have five minutes. 2 3 Lauren Bigelow: Good evening, Planning Commissioners, and thank you for giving me the 4 opportunity to speak tonight. My name is Lauren Bigelow and I am the BMR Administrator for 5 Palo Alto Housing. As you may know Palo Alto Housing administers the BMR program for the 6 City of Palo Alto and has done so for over 40 years. We are very happy to hear that the City is 7 interested in incentivizing developers to create more BMR housing. Most would agree that our 8 city needs more housing. However, as Palo Alto Housing is also one of the leading developers 9 for affordable housing in Palo Alto we are deeply concerned that the numbers proposed in the 10 ordinance will not incentivize more units. It is our belief that this ordinance will discourage 11 developers from building in Palo Alto when the fees are significantly lower in neighboring 12 jurisdictions. At that point we lose BMR units onsite and we lose the Affordable Housing Fund. 13 14 The Affordable Housing Fund plays a critical role in building affordable housing as we can 15 leverage the public funds to house more families. With BMR units onsite a property adds on 16 average between three to seven units to Palo Alto’s inventory. With the Affordable Housing 17 Fund we can build a larger project that serves even more people. For example, when we built 18 Tree House in 2011, it's a beautiful 35 unit affordable housing building, we were able to 19 leverage the Affordable Housing Fund to successfully compete for low income housing tax 20 credits and thus build the project. Otherwise construction would have stalled out completely. 21 We need both BMR units and the Affordable Housing Fund to fight the housing crisis. Should 22 the City be interested in talking through our concerns our door is always open and we're happy 23 to work with you to find the best solution or solutions to the problem of affordable housing in 24 Palo Alto. Thank you so much. 25 26 Vice‐Chair Gardias: Thank you, ma’am. We have Bonnie Packer followed by Jeff Levinsky. 27 28 Bonnie Packer: Good evening, Commissioner Fine and Planning and Transportation 29 Commissioner (PTC) Commissioners. My name is Bonnie Packer and I'm currently President of 30 the League of Women Voters of Palo Alto and I'm speaking on the League's behalf tonight. And 31 in this letter when I say the League I mean the League of Palo Alto. 32 33 The League applauds the City’s continuing efforts to provide mechanisms for the provision of 34 housing for those with very low, low, and moderate incomes. The League has historically 35 supported both Palo Alto’s inclusionary housing program and the assessment of housing impact 36 fees on nonresidential development for the Affordable Housing Fund. These programs have 37 provided many BMR rental and for purchase homes and have been a valuable source of funding 38 for very low, low, and moderate income housing developments in Palo Alto. 39 40 We are in a housing crisis. The City needs to create opportunities for far greater numbers of 41 housing units for those with very low, low, and moderate incomes than ever before. What is 42 the best policy to do this? To encourage the development of units for those with very low and 43 low incomes should the City encourage housing impact trees for a robust Affordable Housing 44 Fund rather than encouraging market rate developer provided on or off site units? Or to 45 encourage the development of units for those with moderate incomes should the City 46 City of Palo Alto July 27, 2016 Page 23 encourage those market rate developer provided on or off site units rather than collecting 1 housing impact fees? The staff report states that the ordinance before you is designed to 2 create incentives for developers to provide units on or off site rather than paying the very high 3 housing impact fees that are being proposed. The League is concerned that this would mean 4 less funds for units with those with very low or low incomes. 5 6 While the League supports policies that allow for the provision of units for those with moderate 7 incomes where it is feasible for the developer to do so the League notes that this ordinance 8 may have the consequence of producing much less cash for the Affordable Housing Fund. 9 Today cash from this fund can be leveraged to obtain other sources of funding; for example, 10 through the federal tax credit program for the development of many more units than those 11 with very low and low for those with very low or low incomes than can otherwise be provided 12 when a developer is asked to provide units on or off site rather than paying the housing impact 13 fees. Thus this proposed ordinance may have the effect of creating tension between the need 14 for units for those with low or very low incomes versus those with moderate incomes. Is this 15 the policy the City wishes to implement? 16 17 In reviewing this proposed ordinance we urge you to consider the following: will the levels of 18 the housing impact fees on both office and residential development in the proposed ordinance 19 generate sufficient cash for the Affordable Housing Fund to support the development of many 20 more units for those with very low and low incomes? Are the requirements for determining the 21 infeasibility of providing units versus paying the fees too onerous? We note that the 22 methodology does not include the loss to the developer of income from sale or rental when 23 they are asked to provide the BMR units. Are the fees so high and the infeasibility 24 requirements so onerous as to discourage all types of development and thus reduce the 25 sources for these funds and units? Will the cost burden of the fees and/or the cost burden of 26 providing the units be passed on to the renter or purchaser thus increasing the market rate 27 rental for office or residential and purchase prices even more? Will the proposal to impose fees 28 on rental housing cause the high rates in Palo Alto become even higher thus making it even 29 more expensive to live here? Thank you for considering these critically important policy issues 30 tonight. 31 32 Vice‐Chair Gardias: Thank you, ma’am. We have Jeff Levinsky followed by Peter Chu. 33 34 Jeff Levinsky: Good evening, Commissioners and staff. I have a handout for the Commissioners 35 if I could give that to someone? Thank you. First of all I'd like to thank Council Member Filseth 36 and the staff for looking at my comments about math errors in the report that was given to the 37 Finance Committee and then to this Commission. I generally agree with their conclusion, but 38 there they did not change the number about the cost of a condominium which shows and they 39 figure as you can buy a 2,100 condominium for under $1.4 million dollars which I don't think is 40 really the case. There's a typo as well, but I won't go into it. 41 42 The main critical point in my letter remains unaddressed and that is that the policies that were 43 being proposed still undercut providing the City policy of onsite BMRs. So I put together 44 numbers for the Maybell project and I used numbers from the staff and I'll explain as we go. 45 The cost to the developer and staff said for providing the 15 percent onsite units comes to a 46 City of Palo Alto July 27, 2016 Page 24 little under $7 million dollars there and that assumes the fractional unit pays $700,000. The 1 current 7.5 percent in lieu fee for that we agree would be $4.2 million dollars. So by claiming 2 infeasibility the developer basically took away $3 million dollars from BMRs. Who lost that $3 3 million dollars? Well the losers are the people who would have gotten $3 million dollars’ worth 4 of affordable units. They lost by this what happened over this issue. It would have gone to 5 create some affordable homes on the site as well as the $700,000. 6 7 The Finance Committee advocating switching to a $50 per square foot approach as you see 8 here I calculate that at it would generate only $2.1 million. I differ from staff because I believe 9 the ordinance says that existing square footage would not have to pay the fee and there is 10 existing square footage on that and most sites. So I subtracted for that I estimated so I come 11 out a little lower than the staff estimate for that, but as you can see it's basically half. So by 12 adopting the Finance Committee recommendation you would be again cutting the money for 13 affordable housing down. The Staff proposal mentions that you could go as high as $95 per 14 square foot and by my calculation that comes out to still a little under $4 million dollars. 15 16 So what's happening here is basically that the City policy is to encourage onsite BMRs. And 17 there are many reasons for that. One is that when you build the BMRs elsewhere you're 18 creating segregated communities. You're saying we're not, we don't want people who need 19 affordable units to live in the same place as people who can afford market rate. I don't think 20 that's really great city planning and I think that should be part of your discussion. 21 22 Secondly, when the money is given to a fund or something to develop BMRs elsewhere they 23 have to go out and find land and get permission to build elsewhere and as you know that can 24 be very, very hard. In fact Maybell is the perfect example of that of course. So those additional 25 costs aren't factored in to the equation here and for that reason I come up with a suggestion 26 that if you're not going to be able to build the onsite then you should pay more in lieu or per 27 square foot then otherwise. So my suggestion would be look at a 15 percent in lieu fee and 28 that would raise $8.4 million which would exceed the $7 million that it would cost them to build 29 onsite. 30 31 And finally I think it's wrong to have rules allowing developer to claim something isn't feasible 32 and then save millions of dollars. I hope that the ordinance changes will prevent that, but it 33 breeds distrust and lowers respect for our City government. And it's unfair to developers who 34 have been playing by the rules. So for all the reasons I've covered I urge you to advocate 35 upping the fee when onsite BMRs aren't built in developments where units are being sold. 36 You'll be helping both those who are eligible for the BMRs and our City as a whole. Thank you. 37 And I'm going to have to leave soon, so. 38 39 Vice‐Chair Gardias: Thank you. We're going to have Peter Chu followed by Rebecca Byne. 40 41 Peter Chu: Thank you, Commissioners. My name is Peter Chu, a 30 years plus residents of Palo 42 Alto. I wanted to cite several things just to add to the discussion. Is, the first one is I think is 43 most important that is a single family and multifamily housing helps the housing versus job 44 imbalance rather than hurts unlike the commercial developments of the office building and 45 high tech. So they should not have to pay for the BMR in the first place. Now I think somehow 46 City of Palo Alto July 27, 2016 Page 25 that has been forgotten and then we just keep referencing to this old rule of whatever, 9.5 1 percent. And that is fundamentally wrong in the first place, ok? So given that. Also if you recall 2 the whatever the percentage on the existing rule that includes the land price. As you know 3 land price increases until the builders cannot afford it. That's how the land price was 4 determined. So if you convert that into this 95 percent, $95 a square foot if you compare it to 5 the real cost of people trying to give their family a better place to live that is the improvement 6 price rather than the total price. That come out to be roughly in my calculations 25 percent to 7 35 percent increase of their real cost. Just imagine if somebody buy a piece of land and trying 8 to improve it by building a new house that is very popular in here and that would basically kill 9 this whole idea. 10 11 So that go back to another a question on what we are trying to address. What kind of people 12 we are trying to address the focus has been on low and moderate income people, but the real 13 homebuyer residents are middle to high or low sort of middle higher income people who are 14 employees or a small business owner or have they have some stock therefore they have some 15 equity they can buy into it and then you wanted to increase their price, their cost even further. 16 I don't know how you can do that. And then also I read this residential part of this report saying 17 that a detached single family house you say ok, the income to be able to afford that is like 18 $535,000 per year. What kind of people is that? Is that almost like a Chief Executive Officer 19 (CEO) of a mid‐sized company or a university president and how many people are actually like 20 that? That means the fundamental concept is this I mean is people who can afford to buy a 21 regular market rate house in here have some equity built up and their income is far less than 22 that. So somehow you wanted to extract their disposable income to such an extent that they 23 would just say hey, Palo Alto is too expensive. 24 25 So what I want to say is not only you need to pay attention to affordability of lower income 26 people, but the middle class people. You don't want to kill the whole culture of Palo Alto so 27 that you end up with billionaires and venture capitalists and big developer only. That is not the 28 vision we want to go to. And also just look at the Facebook latest deal with Menlo Park, it 29 average to be $6.55 per square foot. And that is a reference on what the deal they can put 30 together. So if you just add 15 times of that, that fails the smell test. Thank you. 31 32 Vice‐Chair Gardias: Thank you. So we have Rebecca Byne. If I pronounce this correctly? Is she 33 on the floor? Followed by Herb Borock. We don't have Rebecca Byne on the floor, right? She 34 must have left. So Mr. Borock, please. 35 36 Herb Borock: Chair Fine and Commissioners I believe we should retain the current method of 37 calculating the in lieu fee by having it be a percentage of the sales price. And you should also 38 add language to the zoning code to implement Housing Program H point… H 1.2.1 says that 39 when a loss of rental housing occurs due to subdivision or condominium conversion approval of 40 the project shall require 25 percent BMR units. The equivalent in lieu fee should be 12.5 41 percent. That's what should've applied to 567 Maybell, but there was no implementing 42 language that staff could use to require that higher fee. However, if you choose a per square 43 foot BMR fee it should be applied to all the floor area built rather than just the floor area 44 counted against the allowable floor area amount. The consultant’s report relies on a fictitious 45 prototype rather than actual sales prices per square foot. 567 Maybell subdivision example 46 City of Palo Alto July 27, 2016 Page 26 relies on fictitious house sizes rather than the house sizes that will be built and also uses a 1 fictitious sales price rather than actual sales prices per square foot. 2 3 The Palo Alto Weekly this year's spring real estate edition shows that the average per square 4 foot sales price for a single family home is $1,536. That compares to the consultant's report of 5 $1,014 and the example for Maybell of $1,167 per square foot. Consultant’s report also shows 6 per square foot prices for attached single family of 900 of $793 per square foot and for 7 condominiums of $662 a square foot, neither of which are comparable to actual sales. For 8 example, compared to the $1,536 average for last year there are two single family homes sales 9 reported in today’s paper at 1413 Dana of $1,560 per square foot and at 2572 Webster of 10 $1,547 per square foot. Seven and a half percent of $1,536 is $115 per square foot. And that 11 price and the sales is escalating faster than any escalation factor you would put on a per square 12 foot fee that's being proposed by staff and the Finance Committee. 13 14 Also 567 Maybell assumes a 3,000 square foot house size. The average house size based on the 15 lots in that 60 unit subdivision is 2,529 square feet of allowable floor area. So that would be 16 basements averaging 471 square foot. Typically those basements would be half of the 17 allowable, at a minimum half of the allowable floor area. So you'd really get a house size about 18 3,800 square feet instead of 3,000 square foot. And the disparity before between calculating a 19 BMR fee based on sales price rather than the per square foot that's being proposed would be 20 even larger than is being shown in the examples. 21 22 Also in terms of single family subdivisions historically there have never been inclusionary zoning 23 for single family subdivisions that have BMR units comparable to the for sale units. When the 24 school district had single family subdivisions on surplus school sites they did the BMR 25 requirement by providing a duplex BMR and the rapid escalation in price of market rate housing 26 compared to those BMR units that are restricted in escalation indicates that it may be time to 27 focus BMR fees that would be used either to preserve existing affordable housing or to 28 purchase land that would be used for 100 percent affordable housing. 29 30 The original Council adopted guidelines for setting the price of BMR units in multiple family for 31 sale housing was to base the price on the incremental cost of building, constructing the unit, 32 and having all the land cost and soft core supply to the market rate units. But under the 33 previous City Manager Planning staff started setting the prices of BMR units based upon the 34 income guidelines which essentially gives developers profit on BMR units. So I think it may be 35 time to go back to the original one which is basing it on the incremental cost of constructing the 36 unit so that the land price is based solely upon the market rate units rather then also upon the 37 BMR units. The setting of the percentage sale price for a BMR fee was always been based upon 38 100 percent of the cost of building units rather than the developer’s much smaller investment. 39 And to get a comparable amount of money based upon the sales price sources building BMR 40 units you should go back to actually calculating it based upon the investment, a return 41 investment rather than assuming it's a 100 percent investment. Thank you. 42 43 Vice‐Chair Gardias: Thank you, Mr. Borock. So just want to make a comment, we established a 44 best practice with Mr. Chairman for this year to respond to the comments of the citizens and 45 City of Palo Alto July 27, 2016 Page 27 the response should follow up immediately the comment that you just heard. So are you ready 1 to respond to Mr. Borock’s comments? 2 3 Ms. Gitelman: Yes, why don’t I start out; first, I want to respond to Mr. Borock's suggestion that 4 we implement that Program H 1.2.1 he cited about the loss of rental housing. And that's 5 actually in the proposed ordinance. It's on packet Page 219, Section 16.65.030 A3. So we can 6 check that one off. I think we carried that forward and that's a good comment and I'm glad 7 we've included that. 8 9 We had number of other comments as you heard maybe not all of them, some of them 10 expressing opinion that that maybe we don't need to respond to, but I wanted to make an 11 observation that we did hear two sides of an argument in the commenters. We heard from one 12 commenter that they would prefer that we collect fees rather then get inclusionary units onsite 13 in some cases because with the money that you get you can probably build more units at a 14 lower affordability level than you would if you just got the inclusionary units onsite. So that 15 was one perspective expressed. We also heard the opposite perspective from commenters 16 who wanted the units onsite even if they were very costly units the thought that a bird in hand 17 is worth more than a bird… then whatever that expression is. Anyway I wanted to point that 18 out. I also thought that we've heard from a number of commenters in writing and this evening 19 that their main concern was not the methodology and sort of what we're proposing, but the 20 actual fee amount. That we’re going far above other jurisdictions and that's a notable 21 comment I think. 22 23 The other thing that I just wanted to point out, Herb brought this up and I think this was 24 inherent in Jeff’s comments too, this methodology that we use currently about a percentage of 25 the sales price it is really hard to administer. I think one of our big objectives in going to a per 26 square foot fee is it makes all, first of all it makes all the fees we implement all the fees in the 27 same way and we implement them at the time a building permit is issued. So there's no 28 uncertainty about when the money's going to be collected, whether we're going to remember 29 to collect the money, whether we got the right amount of money. It's just pretty 30 straightforward you look at the plans how many square feet, you look up the fee, you charge 31 the fee, and you get the fee before the permit is issued. So that's one of our inherent goals 32 here. 33 34 So I think I got most of the questions except for the question about why we did this based on 35 prototypes instead of market data. If you want Sujata to go into that we could, we could do 36 that. 37 38 Vice‐Chair Gardias: Yes, please if you don’t mind. Just because there were just number of the 39 comments from Mr. Borock, right, about some discrepancies and (interrupted) 40 41 Ms. Srivastava: Sure. 42 43 Vice‐Chair Gardias: Examples that he provided. 44 45 City of Palo Alto July 27, 2016 Page 28 Ms. Srivastava: I mean I think first there's mentioning that the data was collected in 2014 and 1 the market has changed. And this is kind of a constantly moving target when you're looking at 2 sales prices and rents particularly in this market. So the purpose of setting the sales prices and I 3 think I heard the comment that we're looking at $1,000 per square foot for single family 4 detached and today it’s something closer to $1,500 for certain properties. We actually did do a 5 survey of recent transactions at the time, so it's not based on just one or two transactions. It's 6 actually based on what we were able to collect for that period of time, but the purpose of 7 collecting that information is to then be able to run an economic impact model that will then 8 measure what those households are spending in the local economy. So the results are actually 9 more conservative in terms of the maximum fee which puts you in a stronger position in terms 10 of being able to implement that without facing potential challenges. So we typically take a 11 conservative approach and we set the prices that these fees are based on so that we're not 12 overstating the market. Understanding that the market is constantly changing we don't want 13 to set things at the peak market conditions, but rather something that can be a little bit more 14 moderated. 15 16 Vice‐Chair Gardias: Thank you, this concludes the hearing. 17 18 Chair Fine: Thank you. Thank you to all the speakers. That was very helpful. Do we need to do 19 disclosures on this one? 20 21 Cara Silver, Senior Assistant City Attorney: This is a legislative matter so you don't legally have 22 to do disclosures. 23 24 Chair Fine: No? Ok. I’ll just say I did speak with somebody from Silicon Valley at Home about 25 some of these issues, but it was all in the email they sent as well. Let's open it up. Let's start 26 with questions. Just go around. I know there’s going to be a lot. And then we'll get more into 27 comments. So the first light was Commissioner Downing. 28 29 Commissioner Downing: So one question I have is with regard to the Nexus studies and what I 30 want, what I would like to here is when you do Nexus studies for both commercial development 31 and residential development how do you afford, how do you deal with double charging? 32 Because on the one hand you're charging people on the commercial side for the jobs that 33 they're creating and the housing which those people in those jobs will then, but at the same 34 time on the residential side you are yet again counting the housing and then the jobs that will 35 create and then the housing that that will need. How do you not get stuck in an endless loop 36 when you were doing this data? 37 38 Ms. Srivastava: That's an excellent question. There is some potential for overlap if you were to 39 charge the maximum fee for both of both the housing and the commercial linkage fees because 40 then you're really doing 100 percent of each. There's a potential that you are counting two jobs 41 for both sectors particularly I think this may happen for certain types of service jobs in the retail 42 sector and restaurant sector perhaps. Many of the jobs that are associated with hotel or office 43 and R&D would not overlap as much as the ones that may be associated with retail and 44 restaurants. And we're not looking at retail and restaurants for this particular Nexus study so 45 that's another area where we’re minimizing overlap, but one of the reasons we don't 46 City of Palo Alto July 27, 2016 Page 29 recommend the maximum fees for either, any of these prototypes, is to be able to minimize the 1 potential for overlap. 2 3 Commissioner Downing: Ok. And then I want to make sure I’m really getting this point correct, 4 but with respect to market rate rentals like an apartment building, with respect to their impact 5 fee there's nothing they can do about that. There's no escaping that impact fee, right? 6 Because they can't offer BMR instead can they? 7 8 Ms. Gitelman: I think there are alternatives that they could pursue if they chose to in the 9 alternative section. So there's a basic requirement that’s the fee, but then in Section 16.65.080 10 there are alternative means of compliance. So they could choose to provide some units onsite, 11 provide some units off site or take advantage of one of these other alternatives. 12 13 Commissioner Downing: For rental they could provide? 14 15 Ms. Gitelman: Pardon me? 16 17 Commissioner Downing: Like BMR rentals they can provide onsite? 18 19 Ms. Gitelman: Correct. 20 21 Commissioner Downing: Ok. And what are those numbers look like? 22 23 Ms. Gitelman: Pardon me? 24 25 Commissioner Downing: What are those numbers look like? Are we also looking at the same 26 percentages as for sale properties? 27 28 Ms. Gitelman: Well, I’d have to look at that. It's on packet Page 224. Oh no, sorry. It's in this 29 whole section so I’d have to think, I'd have to look carefully at what the alternatives look like 30 and what that would mean. If you want to give me a minute I’ll… 31 32 Commissioner Downing: Yeah, yeah. You do that we’ll go to some other question askers. 33 34 Chair Fine: Commissioner Rosenblum. 35 36 Commissioner Rosenblum: Thank you. First question, what was the goal of the proposed 37 ordinance? I’m not talking about the Nexus study per se which I understand, but what is the 38 stated goal? And a couple possibilities would be are we trying to maximize City revenues from 39 the impact fees to fund more affordable housing or are we trying to make it more difficult to 40 build housing and offices in general? Do we think there's just too much and this is a way of 41 restricting additional growth? What is a stated goal and so what is the function we're trying to 42 maximize? 43 44 City of Palo Alto July 27, 2016 Page 30 Ms. Gitelman: I think we're trying to increase the funds for affordable housing and we're trying 1 to increase the stock of affordable housing. So we're also trying to make this fee program 2 easier to administer rather than the current in lieu fee program. 3 4 Commissioner Rosenblum: Ok. So this is to me the main thing that's missing from the 5 calculation is that we are substantially raising the fees in most cases and there's the fear that 6 you will just get no or very little new development and therefore will decimate the total fee 7 base. And so it's hard to gauge from the study because the study uses words like between 2013 8 and 2015 the City received an average of $1.65 million annually from Commercial Housing Fund 9 and then makes an assessment it says, but of course this will have to do with the desirability 10 developing under these scenarios. And so it's difficult to estimate what you think will actually 11 happen under these fee structures. So first just noting that to the extent that I have a 12 recommendation and our colleagues will have other questions a big one is sort of elasticity of 13 building demand given these fee structures. My gut is because we now are it's level so much 14 higher than neighboring communities the total level of development on both commercial and 15 residential will go down and the calculation has taken into account. 16 17 So then my second question is related to the answer on the goals. So the goals of the program 18 is to maximize total impact fees, maximize affordable housing, and simplify. Is that? 19 20 Ms. Gitelman: I didn't say maximize. 21 22 Commissioner Rosenblum: Ok. 23 24 Ms. Gitelman: I said increase. I mean I think the way the Nexus study is structured they've 25 actually calculated what the total justifiable fee would be and we're not suggesting that. 26 They've done a subsequent analysis of what the maximum feasible would be taking into 27 account the world according to the developers’ perspective and they've also done a comparison 28 to adjacent jurisdictions. So those additional analyses have informed the recommendations. 29 30 Commissioner Rosenblum: Yes, I'm struggling with that one a little bit because I understand 31 that if you say our goal is just to increase then the level is just any… a dollar above today, but it 32 does feel from the study that what we're trying to do, what would be a reasonable thing to do 33 is to try to get the maximum funds to help build affordable housing and that would include the 34 impacts. So in terms of the desirability to build in this area would be taken to account. So if the 35 maximum fee that was supported by the Nexus study was not recommended for that reason 36 that you wouldn't get anyone or it would be very difficult to get anyone to actually build 37 anything, but I was actually asking about something a little bit different which is did you 38 distinguish between residential and commercial from a policy standpoint? Meaning we're 39 trying to address an issue of lack of housing stock and in particular lack of affordable housing 40 stock and so was the desirability of increasing development fees on any housing development 41 in particular rental housing development an issue of discussion with staff? And if so I’d love to 42 hear a bit about your thoughts there. Because one thing that struck me is if we are concerned 43 about affordability of the region that anything that lowers desirability to develop housing 44 should be called, should be subject to scrutiny. And in raising development fees for rental 45 housing or any housing, market rate housing also increases more market rate housing, more 46 City of Palo Alto July 27, 2016 Page 31 housing stock, increases the affordability of the region not just for low income, but for all 1 income. So my question is: was there consideration not to impose development fees for 2 housing because we're in a housing crisis? 3 4 Ms. Gitelman: That raises some interesting thoughts. First the Finance Committee spent quite a 5 bit of time talking about both residential and nonresidential and particularly how they should 6 be balanced. On the nonresidential side there was really a concern that the more we add 7 employment and people and increase housing demand those new projects with new 8 employment should be paying for their impacts. So there was a real desire to have robust fees 9 on the nonresidential side. 10 11 Commissioner Rosenblum: Yeah. 12 13 Ms. Gitelman: And then the committee had a concern about sort of the balance between 14 residential and nonresidential fees. They wanted the residential fees to be quite a bit less than 15 the nonresidential fees and that's why you saw the fee for single family detached go down from 16 February to the Finance Committee recommendation from $95 to $50 a square foot. 17 18 But let me get to the question about whether charging impact fees to rental housing increases 19 the cost of rental housing. We were talking about that before the hearing this evening because 20 several of the written comments make this point or raise this question. And I'll let Sujata speak 21 to it a little, but I wanted to point out that we kind of know something about this relationship 22 because of what happened with the Palmer decision. We used to be able to impose an 23 inclusionary requirement on rental housing. So 15 percent of the market rate projects had to 24 be BMR units and that provision was eliminated by the courts in 2009 or thereabouts and we 25 did not see the cost of rental or the rents go down as a result. So I think the opposite is true; if 26 you impose a fee on rental housing it's going to affect the cost of the land, but we're not 27 necessarily going to see the rents go up just as we didn't see the rents go down after Palmer. 28 So Sujata do you want to add to that? 29 30 Ms. Srivastava: I think we’ve heard this from developers as well that when they look at a site. 31 They're calculating what the maximum rents or revenues are that they can generate from that 32 site and then they’re subtracting the cost. So this if you increase the costs which in fact this is 33 what you're doing here the way that we model it is that what when you subtract the costs from 34 the revenues you end up with what the effective value of the land is. So developers have told 35 us when they look at potential projects they're factoring that into what they think that they'd 36 be able to offer for a property. So as long as that land value is consistent with what current 37 market value expectations are in a community then you could consider that that fee would be 38 financially feasible to implement. So that's really what we're modeling. 39 40 I think I would also point out that I think for rental housing you are implementing a new fee 41 that doesn't currently exist, but for the ownership housing we actually did a comparison to the 42 existing cost of either providing the units onsite or paying the in lieu fees. And the fee levels 43 that are being proposed are actually not an increase over those existing policies. 44 45 City of Palo Alto July 27, 2016 Page 32 Commissioner Rosenblum: Yes, but my main concern is imposing a fee for market rate rental 1 housing. So I would like for my colleagues to also be able to ask their questions and voice their 2 concerns, but so I asked a couple of questions. The concern I have already is given the goals of 3 the project or this whole program it seems counterproductive to me to impose a new fee on 4 market rate rental housing and it feels counterproductive to increase fees to the extent that we 5 are proposing even for office/hotel because I think that will be counterproductive. It seems 6 suspicious to me that we can get away with charging multiples of our neighboring communities 7 and expect that we will still have development here which is what fills the coffers right now of 8 the Affordable Housing Fund. But let me I'll stop there and let my colleagues take... 9 10 Chair Fine: Thank you, Commissioner Rosenblum. Vice‐Chair Gardias. 11 12 Vice‐Chair Gardias: Thank you. So of course we are just discussing the numbers of the 13 recommended fees and I just want to ask about the legality, right? I mean because specifically 14 this number of $60 per square foot stands out. Is it really legal just to impose any fee that 15 actually it's not supported by any substance? What it seems to me because there was a 16 proposal from the consultants was $35 a square foot which must have been based on some 17 economic analysis just looking at the name of your company and then we have the 18 recommendation from the Finance Committee pretty much just to double it. So I would like to 19 understand the reason. There must be some reason behind this, right? Which would be 20 supported with some economic analysis that would be the reason and, but if there is no reason 21 can we just charge any fee? What about, what's the why 60 not 70 or 80. What about a 22 hundred. 23 24 Ms. Silver: Yes, thank you; Cara Silver, Senior Assistant City Attorney. So I think you're referring 25 to the $35 a square foot for office and R&D that was recommended originally by staff and it 26 was increased to $60 a square feet on the recommendation of the Finance Committee. That 27 $60 came from the Nexus study. It is supported by the Nexus study. It is the amount that is 28 justifiable and so when you go through all of the full analysis of all of the costs you come up 29 with a total justifiable amount of $60 a square foot. Oh, justifiable is even higher? Ok, ok. Ok, 30 I’m sorry. 31 32 So the $60 is the feasible amount. So actually the Nexus study recommended or provided 33 evidence to support an even higher fee. And so that is certainly the baseline. You can’t impose 34 a fee that is higher than that which is supported by the Nexus study. What we'd like to see 35 though is a fee that is not only supported by the Nexus study, but also is actually feasible. So 36 when a developer comes in they can make a profit and that addresses some of the comments 37 that Commissioner Rosenblum made about supporting the overall need for housing in the 38 region and the comment that Commissioner Downing made about double counting. So once 39 you… you need to take into account those types of things and so we hover around the feasible 40 fee. And of course you can also charge a fee that is less than the feasible fee. 41 42 Vice‐Chair Gardias: Of course, but that's interesting. So thank you very much for this 43 clarification, but that's interesting piece of information that you offer. So it seems to me that 44 here there is a column that's missing in this presentation because apparently there was a Nexus 45 I mean in the Nexus study which is of course in the body of the attachment, but it would be nice 46 City of Palo Alto July 27, 2016 Page 33 to pull it out and just show it to us. There should have been a column that would be saying that 1 that Nexus study recommended this and this fee. So then we would be able to compare truly 2 what is the economic analysis for this fee and then that's Finance Committee recommended fee 3 would be of course at their discretion, but it would be benchmarking against those analysis. So 4 could you just show us the page were those numbers are? 5 6 Chair Fine: Page 17 of the packet. 7 8 Ms. Gitelman: And if you'd want to just kind of cut to the chase in the staff report itself on 9 packet Page 185 or staff report Page 5 we kind of summarize the methodology and the 10 conclusions of the commercial Nexus study and report the maximum justifiable as well as the 11 feasible and the original recommendation. It's on the top of page, packet Page 185. 12 13 Vice‐Chair Gardias: I am also looking at Page Number 5 which is 17 of 237 that shows that 14 maximum justified fee for office and R&D is $264, right? So pretty much from this benchmark 15 the Finance Committee truly elected just to go with $60. 16 17 Ms. Gitelman: That's correct. And it’s because $60 was calculated as the maximum feasible. So 18 it’s the point at which the developer would still get a return on investment. And we advocated 19 as staff strongly that we not go above that amount or we'd end up in the situation that 20 Commissioner Rosenblum pointed out which is you just won't have any development and you 21 won't get any fees. So the committee recommended that highest amount. 22 23 Now I should say that all of this is policy decision so the Council could ultimately go lower than 24 any of these fees that have been recommended. And in fact it wasn't a unanimous vote at the 25 Finance Committee. One of the Finance Committee members wanted to go lower on the 26 residential rental fee. Instead of $50 they wanted $30, but it was a 3‐1 vote and the 27 recommendation of the committee as a whole was $50. 28 29 Vice‐Chair Gardias: Understood, but my expectation was that this $264 a square foot would still 30 provide the return reasonable rate of return on investment for developer. 31 32 Ms. Gitelman: That is not the conclusion of the Nexus study. The Nexus study says it's $60 33 where the developer would still get a return. 34 35 Chair Fine: Just a comment to kind of answer that as far as what I've studied. The justifiable fee 36 is the total impact to the community in terms of affordable housing that the project generates. 37 The feasible is what developers could support in the current environment. So we could charge 38 the $264, just nobody would built anything, right? We could charge I've heard actually from 39 other parties on the street who charge more than $264. You're just going to get sued. 40 41 Vice‐Chair Gardias: Great, thank you very much for the clarification. 42 43 Chair Fine: Do I have any lights down this way? Commissioner Waldfogel. 44 45 City of Palo Alto July 27, 2016 Page 34 Commissioner Waldfogel: Thank you. It's a great study. I mean I think at some point we should 1 consider having a study session on methodology behind these kind of studies because I think 2 there are a lot of other things we could build into it, but I don't want to quibble about 3 methodology today. Not the right time or place. 4 5 A couple things, I'm a little puzzled by Jeff Levinsky’s comments. Unfortunately he just left the 6 room. Timing is imperfect, but he seems to be suggesting that the $50 per foot proposed fee 7 would generate less revenue than in this example than what we would get with the current fee 8 structure. Can you… is there anybody who can comment on that? Or am I understanding him 9 correctly? 10 11 Ms. Gitelman: Yes, you are. And in fact that's the subject, one of the subjects of the at places 12 memo that we provided. We have a slightly different calculation then Jeff, but it reaches a 13 similar conclusion that at $50 a square foot the project we're using as our guinea pig here 14 would generate less in fees than the current 7.5 percent of sales price methodology. But if we 15 use the $95 a square foot and remember we're talking about the single family detached 16 prototype. So if we use the $95 that was originally recommended by the Nexus study we would 17 be higher we believe than the current calculations. 18 19 Commissioner Waldfogel: But the $95 is largely off the table or at least that’s not what Finance 20 forwarded to us. 21 22 Ms. Gitelman: Correct. The Finance Committee wanted the $50. 23 24 Commissioner Waldfogel: Wanted the $50. Ok, so the assertion that this will discourage 25 development doesn't seem to be true if this, if Jeff’s analysis is right. 26 27 Ms. Gitelman: Well again Jeff is talking about the for‐sale housing projects and they are 28 currently required to meet this 15 percent inclusionary requirement. So that's an existing 29 requirement and you're right if we transition to a $50 per square foot fee they're actually going 30 to ultimately pay less. 31 32 Commissioner Waldfogel: We did that project already. 33 34 Ms. Gitelman: If they get approval for to pay the in lieu fee. Now the ordinance sets a pretty 35 high bar and I think Jeff referred to this as well. You're required to provide those 15 percent 36 units onsite unless it's infeasible to do so. And in the current ordinance there's not a good test 37 about what's feasible or not. And we've tried to strengthen that in this ordinance so it's easier 38 for the City to say uh uh, we want the units onsite and the developer really has to demonstrate 39 that it's infeasible to do so. So I can find that section of the ordinance (interrupted) 40 41 Commissioner Waldfogel: That's ok. I don't, I think there's a lot of detail here to wade through, 42 but I think that's helpful. I'm looking at some trends on office, on per square foot office sale 43 prices. And over the last couple of years, I don't know exactly what this is measuring, but this is 44 this is Palo Alto statistics, Santa Clara County. Office sale prices have gone for $250 a foot 45 according to this staff to $400 a foot and yet there seems still seems to be demand for office 46 City of Palo Alto July 27, 2016 Page 35 space. So I'm not as worried that these kind of numbers, $50, $60 a foot of fees will 1 dramatically change the desirability of developing in this community. I mean I think that when 2 the business cycle shifts we’ll have a lot of people pointing at this as an excuse, but that's the 3 way that these things go. 4 5 But I am struck by one other thing which is the justifiable number shows $264 a foot of impact 6 of affordable housing impact and if we accept this then best case we're still spewing out $204 a 7 foot of impact for every square foot of office that we develop. That's what this shows. We're 8 showing (interrupted) 9 10 Commissioner Rosenblum: That's not. That's if you have 100 percent of the people all living 11 here. That’s how they calculate it. 12 13 Commissioner Waldfogel: But that's what this study shows. We’re not here to debate the 14 methodology tonight. And if we accept the methodology this methodology shows $204 a foot 15 of impact is caused by each square foot of office. And so that's why I think we should have a 16 study session on the methodology. But I mean that's what we're discussing and this isn't 17 counting traffic impact, it's not counting other types of impacts that these square feet of office 18 can be causing. So it's this is actually really startling. So $60 is a pretty darn good deal for 19 mitigating $264 of impact. Anyway that's all I’ve got to say about this. 20 21 Chair Fine: Commissioner Rosenblum can you give a counterpoint that you were… I'd like 22 (interrupted) 23 24 Commissioner Rosenblum: I just I think it's important clarify because I spent a lot of time 25 looking at the methodology and I think you've misinterpreted a bit what they're doing. So they 26 have an assumption that says what if 100 percent of the people that are in this office will live in 27 our city. Under that scenario how much housing given assumptions about variability of income 28 would we need to provide? And that's how they come up with the maximum number. And 29 they say well, not 100 percent. And correct me if I'm wrong on this, I believe this is the 30 methodology. Clearly we have a lot of studies about what proportion of people who work in 31 Palo Alto live in Palo Alto and it's not even close to 100 percent. In fact I think it's less than a 32 third. So then they adjust it to that and then look at developer return on investments to try to 33 set the feasible number, but the maximum justifiable number says if you assume the maximum 34 number of people from this project that could live here, here is that number. And so it's purely 35 a math exercise. It's not saying we believe these projects will cause $270 worth of impact, but 36 (interrupted) 37 38 Commissioner Waldfogel: I would like to hear, I’d like to hear the consultant comment about 39 that. 40 41 Ms. Srivastava: I think that it's true that you are making an assumption that those workers are 42 going to demand housing within the jurisdiction and so the maximum justifiable fee is based on 43 the idea that the development occurs in your jurisdiction is also the workers are being housed 44 inside your boundaries, but we didn't do any adjustments to that. Our reductions are based on 45 City of Palo Alto July 27, 2016 Page 36 what we think that the market can bear. What a developer could provide and that's a reduced 1 feasible fee. 2 3 Commissioner Waldfogel: But if they’re not provided in our jurisdiction are we just saying we'll 4 lay this problem off on our neighboring jurisdictions around the Bay Area? I mean at some level 5 this has to get, this has to balance. 6 7 Ms. Srivastava: I think that's an interesting point that came up because as you may have been 8 aware this was part of a 21 elements for all the jurisdictions in San Mateo County as well that 9 you all kind of joined in on partly with the idea that this was a collaborative approach. And so 10 we took 100 percent for every one of those jurisdictions. We didn't reduce anything with an 11 assumption that a smaller number of residents would demand housing within each of the cities 12 partly because we understood it to be a regional issue. 13 14 Chair Fine: Commissioner Tanaka. 15 16 Commissioner Tanaka: So I have kind of more of a broader question which is can staff go over 17 what are the current impact fees? So this is just one of many. So can staff talk a bit about kind 18 of like what are the overall different impact fees involved and how have they changed because I 19 noticed that some of these development fees changed in 2014 in Palo Alto. So I would be 20 interested in hearing staff’s kind of because what I’m trying to think about is what is the 21 cumulative impact of all these impact fee changes? Can staff talk a little bit about that? 22 23 Ms. Gitelman: Thank you, Commissioner Tanaka. I think you're talking about just the cost of all 24 the fees that are currently charged and we have that in one of the exhibits. I think it's in the 25 packet Page 233 is a table that shows existing fees and permits by prototype. So its showing 26 based on the prototypes we've analyzed the existing City fees and permits then the commercial 27 linkage fees and total combined City fees and permits by scenario. Is there anything I could add 28 on that? 29 30 Ms. Srivastava: Are you looking at the residential or the commercial? 31 32 Ms. Gitelman: I was looking at the commercial. Did you did you find that? So this is in one of 33 the attachments, Attachment F. 34 35 Commissioner Tanaka: Ok, so these are all the fees that the City is charging development to 36 mitigate impacts, correct? 37 38 Ms. Gitelman: This is also permit fees. 39 40 Commissioner Tanaka: Ok. 41 42 Ms. Gitelman: So just processing fees, user fees, and impact fees. 43 44 Commissioner Tanaka: Ok. Are there fees around school impacts? 45 46 City of Palo Alto July 27, 2016 Page 37 Ms. Gitelman: Pardon me? 1 2 Commissioner Tanaka: School impacts. 3 4 Ms. Srivastava: There is a school impact fee, yes. 5 6 Commissioner Tanaka: Because I don't see it on this list here. 7 8 Ms. Gitelman: I think they're grouped in a line that says total combined fees. We didn't call 9 them out separately. 10 11 Ms. Srivastava: Right, so the second line in that table is called “Existing City Fees and Permits” 12 which does not include any existing linkage fees that the City has in place on for affordable 13 housing. So we're just looking at all other impact fees and cost of development within the City. 14 So it includes schools, it includes infrastructure, includes any traffic impact fees, etcetera. 15 16 Commissioner Tanaka: Ok. And so how many feet, how many of these fees are already 17 updated, how many of them plan to be updated in terms of… I’m just trying to understand what 18 are the plans, what are the current changes and where are the ones that are coming up again 19 that are going to be updated in terms of they’re going to be increased or changed. Do we 20 know? 21 22 Ms. Gitelman: The City has a practice of reviewing its fee schedule every budget cycle and so 23 we typically will increase our fees to reflect the cost of living with the adoption of an annual 24 budget. So we just went through that process in addition just this past year on the, in the 25 Planning Department we did a separate fee study and adjusted some of our user fees. So it 26 happens on a regular cycle and this examination of impact fees again we haven’t done this on 27 the commercial side since 2002. So it's a little overdue on the commercial side and on the 28 residential side I don't know what the last time frame was. 29 30 Commissioner Tanaka: Ok. So I guess what I’m trying to understand is because I’m just trying to 31 think of it in terms of what all the developed what are all the impact fees are changing where 32 are they right now? Like which ones are fully updated, which ones aren’t, and what is the rate 33 of increase? Do we have a table like that somewhere? Or can you speak about it? 34 35 Ms. Gitelman: We don't have a table like that, but we do as I say adjust all our user fees and 36 impact fees on an annual basis to reflect cost of living increases. 37 38 Commissioner Tanaka: I thought you just said there was an impact fee that wasn’t updated 39 since 2002. 40 41 Ms. Gitelman: That's the last time we did a comprehensive study and adjusted our commercial 42 linkage fees, but since then every budget cycle we review our fee schedule and the Council 43 typically adopts an increase based on the cost of living. 44 45 City of Palo Alto July 27, 2016 Page 38 Commissioner Tanaka: Ok. I just want to make sure I heard this correctly. So basically the fees 1 have been updated year by year by year and there hasn’t been any fee that hasn’t been 2 updated since 2002. 3 4 Ms. Gitelman: I apologize for not explaining this correctly. I mean if you want to do a kind of in‐5 depth examination of your fees and prepare a Nexus study it allows you to take a kind of 6 comprehensive look at the impact that you're trying to mitigate and set a fee. 2002 is the last 7 time we did that for commercial linkage fees. We’re doing it again here. In the intervening 8 years you can adjust that fee to reflect cost of living increases and we've done that. 9 10 Commissioner Tanaka: Ok, I see. I see. So we've done kind of minor cost living adjustments, 11 but this hasn't been looked at in several decades? Ok. Understood. Thank you. 12 13 So can you speak about like which fees have increased and which like and by how much? 14 Because I'm trying to understand because right now we’re looking at one impact fee in isolation 15 and I kind of want to understand the bigger picture here in terms of what have all impact fees 16 been doing. Do we have a picture of that? 17 18 Ms. Gitelman: I would have to research. That would take a bit of research to give you the full 19 picture. 20 21 Commissioner Tanaka: Because I think when we look at impact fees and we look at them in 22 isolation because this is just one of a big list of stuff that they're changing. It would be very 23 helpful to know like what are all the… how do all these fees add up? So that's what I'm trying 24 to understand. 25 26 Ms. Gitelman: Yes, well that is shown in this table. We’ve calculated all those fees and we 27 haven't outlined exactly what they are, but they're all (interrupted) 28 29 Commissioner Tanaka: No, no. I guess what I’m trying to understand though I see ok so for 30 instance I may be looking at the wrong page. It’s 233? Is that right? 31 32 Ms. Gitelman: Yes. 233. 33 34 Commissioner Tanaka: Of 237? Is that the right page I’m looking at? 35 36 Ms. Gitelman: 233 of 237. That's right. 37 38 Commissioner Tanaka: Ok and it shows like a prototype, a 10,000 square foot prototype, right? 39 40 Ms. Gitelman: Right, right. 41 42 Commissioner Tanaka: Ok, so I'm looking at my page then. So what I don't understand though 43 is how it's been changing over time. Like have these fees been like this since the beginning of 44 time? Has it just changed yesterday? Are we going to change it tomorrow? Like that's what I 45 don't get. 46 City of Palo Alto July 27, 2016 Page 39 Ms. Gitelman: Ok, so it changes periodically. For example, last year the City instituted a public 1 facilities fee. We hadn’t had a public facilities fee in the past. Last year the Council adopted 2 one. It's now included in this number. So on occasion we update our fees. 3 4 Commissioner Tanaka: Ok. 5 6 Ms. Gitelman: And then on a regular basis we adjust them for the cost of living. 7 8 Commissioner Tanaka: Because I mean my point is I get a static snapshot of one point in time 9 right now, but I don't have any historical context. 10 11 Ms. Gitelman: That’s correct. 12 13 Commissioner Tanaka: I don't see what it's done before and I don't see what it’s projected 14 going forward. 15 16 Ms. Gitelman: That's correct. We've given you the baseline of today and what it would look like 17 in the future. 18 19 Commissioner Tanaka: Because we're trying to make a decision here in terms of what the fee 20 should be and we're looking at just one… and maybe you could do the math for me. What in 21 terms of all the fees that are paid on a project what is what percentage is this fee compared to 22 the rest of the fees? 23 24 Ms. Gitelman: We can answer that based on the data in this table if you give us a few minutes. 25 26 Commissioner Tanaka: Sure, if you guys tell me what it is. 27 28 Ms. Gitelman: Yes. 29 30 Ms. Srivastava: Well, yes, if you look at your existing let's do this on a per square foot basis 31 because that's easier. 32 33 Commissioner Tanaka: Sure, what’s 100,000 (interrupted) 34 35 Ms. Srivastava: [Unintelligible] numbers. 36 37 Commissioner Tanaka: One decimal point over. 38 39 Ms. Srivastava: So your existing fees are about for office and R&D and medical office excluding 40 your linkage fee is $37 per square foot, so $3.7 million. If you add in the linkage fees and these 41 are outdated they don't include that cost of living adjustment the CPI Index. 42 43 Commissioner Tanaka: Well I think when we look at these fees we should look at (interrupted) 44 45 Ms. Srivastava: Right. 46 City of Palo Alto July 27, 2016 Page 40 Commissioner Tanaka: Like what it is right now. 1 2 Ms. Srivastava: Well let's say $20, right? Because they're it's $20 and thirty something cents. 3 $20.37. So if you add that to $37 that's a $57 that would be your existing that’s your existing 4 fees on Office/R&D $57 per square foot. So with your potential increase to $60 per square foot 5 you would now be going from $57 to $97 dollars per square foot. 6 7 Commissioner Tanaka: So what percentage is that of the total fees today? 8 9 Ms. Srivastava: So that's what a 40… 60 percent increase? I'd have to… 10 11 Chair Fine: I just want to combine a couple comments I've heard here per Commissioner 12 Tanaka’s comments I think it would be helpful to see trend lines of all these fees broken out: 13 school fees, the new public facilities fee, things like that. But then also I want to kind of bring 14 back Commissioner Rosenblum's point about the elasticity of demand that there may be some 15 relationship here between the amount of square footage built and affected by these fees over 16 time and we may be able to begin to tease out what that elasticity is based on these, based on 17 those two lines, right? So one is the trend line of these impacts fees on different levels and the 18 other was kind of the built space over those years. 19 20 Commissioner Tanaka: I think the other thing that would be good to understand is this like, like 21 someone, like you said no real comprehensive study has been done since 2002 so maybe some 22 of these are really out of whack. Maybe some of these aren't really recovering the cities cost or 23 maybe some of these are just way over what it cost us. I don't know, but it would be really nice 24 to know like where does it lay because when we’re adjusting this fee which we're talking some 25 pretty big changes here it would be really good to understand the context of what else is going 26 on with other impact fees. 27 28 Ms. Gitelman: I take your point. I mean we could certainly see what we could do about 29 developing some trend data. I'm not sure how easy that's going to be, but we can look at that. 30 I just want to make sure that we're clear that we are talking about impacts fees here so we're 31 not talking about the cost of delivering service. Those fees are also adjusted on a regular basis, 32 but where it comes to impact fees you're right. The longer between the study, the Nexus 33 studies, the more kind of “out of whack” you are in terms of what you're charging compared to 34 the level of the impact that's being generated. So the fact that it's been since 2002 is a real 35 signifier that we're due for some kind of adjustment. 36 37 Commissioner Tanaka: Sure, I think that's clear. I guess the thing is that I'm just trying to make 38 sure that we don't, we're looking at one fee here, one of many fees and I just wanted to make 39 sure of we're not missing the forest by looking at just a tree. And that's what I’m trying to 40 understand what else is going on here and I understand on 233 we have kind of the example, 41 but it's hard to really know what's going on by just looking at this static picture, this one 42 snapshot in time, which some of our consultants say is not fully updated either. So it's hard to 43 fully appreciate how will this change… because I think for the I think probably from the 44 developers point of view they probably look at this not in isolation. They tend to think about it 45 in terms of all the cumulative fees that add up towards a project. They don't just think of well 46 City of Palo Alto July 27, 2016 Page 41 ok, just affordable housing impact fee. They probably think about all the fees, right? Am I 1 misunderstanding this or are people exempt from some fees and not others? I'm sure 2 everyone has to pay all these fees, right? You can’t just pick what fee you’re going to pay. So I 3 think from that context I think it's super important before we make big decisions about this to 4 understand all of that. 5 6 Ms. Silver: So I can provide some historical backdrop on the fees. We have several categories of 7 fees. We have our community service, libraries, and park fee. And we did recently have a 8 consultant look at those fees and the consultant determined that those fees were even though 9 the Nexus study had been done quite a while ago the fees were still reflective of market 10 conditions and didn't recommend doing a Nexus study to update those. Then as Hilary 11 mentioned we did a Nexus study for public safety building fee and that just has recently been 12 implemented. Public safety building and I think other government buildings. And then the 13 third major category of fees are transportation impact fees. And I think that we are looking at 14 some of those fees and we have a consultant on board that is going to look at those, but that is 15 that the transportation fee is the one area that is probably due for update and other than the 16 housing impact fees. So I think that you're taking an action on the housing impact fee is very 17 helpful and we will also be bringing back the transportation impact fee in the near term. 18 19 Commissioner Tanaka: Ok, that's helpful. I'm just trying to make sure we make the right 20 decision just, but we I think we have to understand what else is going on because it seems like a 21 lot of other fees are getting updated and it would be good to know like so which ones are super 22 old which ones are kind of fresh, and it's not clear by looking at this table which is which. And I 23 realize we’re just looking at one fee, but I think the danger of looking at just one fee in isolation 24 is that you may think you have a lot of room on it but not if all of the other fees also just jump 25 up suddenly, right? So I think that I personally would love to get this kind of data before we 26 make some major decisions here. 27 28 Chair Fine: Thank you. Commissioner Alcheck. 29 30 Commissioner Alcheck: So a lot has been said. I’ll just try to summarize some of the issues that 31 I that I think are worth repeating. In a city like San Francisco where there's a tremendous 32 amount of multifamily luxury housing being developed and not a lot of affordable housing 33 being developed you get the impression that increasing market rate housing fees would be a 34 productive way of creating some capital that could be used to develop affordable housing units 35 should those developments not wish to pursue the kind of development that would include 36 affordable housing onsite. I think the concern that Commissioner Rosenblum raised about a fee 37 and having increasing the fee for market rate housing, multifamily market rate housing 38 development is worth consideration because we don’t actually have that sort of scenario. We 39 are not developing in our City lots of multifamily housing. 40 41 One of the, one of the changes which would be modifying the requirement so that it’s triggered 42 when there are even fewer units being developed that to me is very productive. Because what 43 I think we've seen is housing developments that they literally shrink the number that they could 44 do just so that they don't fall into that group. And I think we’ve gone down to three and maybe 45 two is just like impossible, but it always seems like a shame when you see a development that if 46 City of Palo Alto July 27, 2016 Page 42 this if that if the rule was eight would they have built eight? And the answer is probably yes. 1 How do we get that and then so they decide we're just going to build five and they're making a 2 calculated assessment there that foregoing the benefits of building more housing is worth the 3 headache of not having to deal with the impact fees or the requirement or the encouragement 4 of having onsite affordable housing. 5 6 Look, I think there's a misconception, I think that there is in the public there's a misconception 7 that whatever we don't take from the developer he takes. And I don't think that's what's 8 happening in the marketplace. I think landowners are benefiting because they see the action in 9 the market and when they see the product the final product go for X like for example, we had a 10 speaker tonight talk about 1500 named sites that were sold for specific square footage 11 numbers. When people in the marketplace see that they go wait a minute the cost to develop 12 per square foot of let's just say these are single family homes that were used for the example so 13 I’ll use the single home example. They will do their own math, ok? Well if it’s $400 or $500 to 14 develop a single family home then my land’s worth $1,000. So I think what's happening is 15 property, the market, the notion that developers are reaping massive rewards makes the 16 assumption that the developers have the land for longer than they have and they haven't. And 17 so what we're really talking about is when new when new development is evaluated in this 18 current market space they're looking at a land acquisition cost and then they're trying to figure 19 out how to develop it to the greatest extent they possibly can to maximize the risk they're 20 taking, right? 21 22 I appreciate the comments that were made regarding the concern for or the like the concern 23 about the likelihood that the funds will do will diminish. So my background’s in land use 24 development and I have a lot of exposure to I've had a lot of interaction with developers in my 25 field and there's this they often make this example about how you don't require your local 26 supermarket to have an aisle of food like imagine your cereal aisle, right? That this half of the 27 aisle has the same carton of Frosted Flakes, but this one is half the price if you qualify as a lower 28 income individual, right? The supermarket doesn't bear that burden of providing its goods at a 29 lower price for individuals who can’t afford the higher priced good, right? And they make that 30 argument to suggest that we’re requiring on the private side the responsibility of bearing the 31 burden of creating housing at a lower cost. 32 33 Not very many people have sympathy for that argument understandably, but I think that maybe 34 there is maybe in this discussion and maybe in this draft ordinance there is space for us to 35 recommend some greater level of subsidization by the City to promote affordable housing, to 36 subsidize this fund that theoretically may or may not be depleted by the increase in fees. And 37 this is a, this isn't something that was put on the table tonight, but how do people with lower 38 incomes afford food? They have a food stamp program. That food stamp program is paid for 39 by all the citizens in a community based on taxes, right, tax revenues. So I do feel like as a city 40 we could potentially participate in a greater way regardless of the impact fee collection in the 41 subsidization of affordable housing. 42 43 I don't know who the members are on the Finance Committee and I don't know how the City 44 Council will review this, but I think it would be worth their consideration to suggest that if for 45 example we in effect this ordinance at these rates there be an automatic review within 12 or 46 City of Palo Alto July 27, 2016 Page 43 maybe 24 months where if we've seen depletion of our Affordable Housing Fund dramatically 1 that either the City subsidize the difference which would not be cheap, but would be a clear 2 indication that we give a darn about affordable housing. Because again, we are not really 3 developing that much multifamily here and if we aren't paying more than lip service to this 4 discussion then I think we have to not only be concerned about the fund, we have to do both. 5 We have to promote onsite development and we have to in theory create a greater source of 6 revenue, but if that fails we should come right back to the drawing board. 7 8 So we've had that before. We’ve had sunset provisions in our ordinances which require us to 9 come back. It doesn't, this isn't going to be something that like can get away from us for 10 10 years and we've done nothing to address it and our fund has lost all this money. So I think, I 11 think instead of sort of going down the road of saying we're very likely to destroy our fund let's, 12 I would encourage us and I would encourage City Council to basically create a fallback situation 13 where we would either subsidize half of the difference and potentially roll back the increase if 14 the result was dramatic. I think that's we all have a little bit of a fear here because we don't 15 know what's going to happen. And I think part of this is fueled by the fact that feasibility and 16 likelihood of development are not the same thing and I think part of this has to do with the 17 general sense that maybe we are approaching a moment in time where development is about 18 to slow down and if that happens then we're talking about then the word crisis is going to be an 19 understatement for the housing situation, right? 20 21 So if for example, come November or December or 2017 whatever people are projecting 22 there's some sort of plateau then what happens? I think that's I would be concerned about 23 that too if I was… let me just say this, in the event that things are really uncertain and the 24 market plateaus that would be a good thing for non for profit affordable housing developers. 25 They are waiting for the market to slow down a bit because they can barely compete in this 26 marketplace for land. And so they need the private developers to get a little skittish and go ok 27 and then they can come in and maybe they can get with their subsidized grants some sort of 28 development. But it would be a shame if at that same time they had no more money. 29 30 And so I think one way that we can accomplish the goal of raising these impact fees and not feel 31 like we're dooming the system is by creating a sunset clause that requires either in‐depth 32 review of what has happened to the fund within 12 months or 18 months’ time and then even a 33 suggestion could even suggest returning to the previous impact fees until such time as we have 34 demonstrated that we have in fact increased our affordable housing supply stock in that 35 timeframe or we have increased the relative size of the funds that have been collected as a 36 result. That sort of language I think would go a long way to sort of appeasing some of the 37 concerns regarding the uncertainty of the result. 38 39 So one of the, I think other takeaways that I just want to say is this suggestion that we can't 40 really enforce onsite affordable housing development. And one of the bullets is to sort is 41 introduce other provisions to encourage developers to provide affordable housing rather than 42 pay the fees. I think in a city like Palo Alto that is an appropriate goal. And I'm wondering if 43 there are, is it diverse would be a little bit more concrete do we have anything more concrete 44 than just the conception for how we can do that in a day I mean we've all we basically reduced 45 the number of units that would qualify. I think that's a very good thing because now you're 46 City of Palo Alto July 27, 2016 Page 44 now somebody who's now somebody who's looking at an opportunity to build maybe they 1 could have built eight units and they that they're going down to five is a lot more appealing 2 than going down to three. So I think that's a good start, but I'm wondering if there is more in 3 your mind that we can do to also encourage onsite development? 4 5 Ms. Gitelman: Well clearly for sale housing we're trying to perpetuate our requirement for 6 onsite except in the case where that's infeasible and making it much more clear what we mean 7 by infeasible. So that's reflected in this ordinance. In terms of incentives for rental housing and 8 for mixed use or nonresidential projects to build units onsite instead of offsite we have this 9 whole section on alternatives that lays out some options for developers instead of paying the 10 fees. I don't know how many of them, I don't know how attractive they'll be, but we are kind of 11 flexible. We talk about building units offsite. We talk about the potential for deed restricting 12 rehabilitating and deed restricting existing units as affordable. So a developer, a commercial 13 developer could buy or have existing market rate units that they agree to deed restrict as 14 affordable and meet the requirement. And there's some potential for a developer to be kind of 15 creative and propose a plan in some instances reflected in this ordinance so that that's how we 16 try to address that. 17 18 Commissioner Alcheck: Ok so I have sort of one additional question. I would because not all 19 commercial projects come through this Commission or commercial projects in particular come 20 through this Commission I feel like we have a good grasp of this, but I think it would be helpful 21 if we understood better how much multifamily residential housing has been built in the last 22 decade in Palo Alto. Because I think the number is very low. I don't count five units as 23 multifamily because that is the amount that they could build without subjecting themselves to 24 the requirement. I think it used to be five, right? That was the number that you could get away 25 with building without being subject to these affordable housing fees and that was… that's like 26 I'm building something I might as well build five units because I'm allowed to do that without 27 actually being affected by it. So I'd be interested to know how many five plus six plus 28 multifamily developments have been built in the last 10 years not including by our housing 29 company. Because if that number is really low then I think we know we can get a sort of a 30 sense for what to expect and I think it would that would help me. I think, I don't know that 31 we're going to meet again on this before it goes to City Council, but maybe they could be 32 presented with that information and they could see like they can know well here's what we're 33 talking about. Ok, thank you. 34 35 Chair Fine: Thank you. I want to take a few minutes. There's been a lot of good comments 36 about impact fees in general about how we encourage onsite affordable. Those are all good 37 discussions, but I do want to keep us focused on the specific policy which is the commercial or 38 residential linkage fee. I'm going to start with the big one which I'm not sure I’m comfortable 39 making a decision of a certain fee giving a thumbs up or thumbs without kind of knowing that 40 elasticity issue. And so my question is what do other cities do in terms of judging that? If 41 you're in Milpitas and they're upping it from $17 to $18 like how do they make that decision? 42 43 Ms. Srivastava: It's really typical for folks to do a pro forma financial analysis similar to what we 44 have done in our study. They also often look at what their neighbors are charging and compare 45 themselves to other places. So we have provided that information. The other thing that they 46 City of Palo Alto July 27, 2016 Page 45 do is they look at how much they're increasing total fees overall. So to go to the point of how 1 do you contextualize this within the your existing cost structure which we also have provided 2 here so that you understand how much your total fees would go up, which is 70 percent by the 3 way, if you were to adopt a $60 per square foot commercial linkage fee. So I think that those 4 are the types of analyses that they do which is, but I think that ultimately it tends to be more of 5 a policy question and then it is because as I think Cara mentioned the Nexus justifies a fee that 6 is much higher than what is being recommended here. 7 8 Chair Fine: Right. I mean with all due respect that's just not very satisfying. I'd like us to have a 9 bit more of a guide in terms of determining how we do I think Hillary laid it out pretty well in 10 terms of we want to support affordable housing funding. We also want to support onsite and 11 you want it to be administratively more simple. Like those are all good guiding North Stars I 12 just don't have a way of balancing those first two, right? The administrative thing like I get it, 13 sure if you move to this new regime it's a little easier for the department and City to administer 14 and estimate what's going to come in. I don't see us having good data on determining what the 15 Affordable Housing Fund will look like or what will be built onsite and I think those are both 16 important goals for the City. I also want to echo what Commissioner Alcheck said is like we are 17 likely approaching recession and that changes the game here too. So that's something I just 18 want to lay out there, I think we need more data there and I'm on the fence about moving this 19 forward. 20 21 A couple other comments and questions in different areas; one, I'm in general in support of 22 some of the stakeholder feedback about phasing in the fees over the time whatever we do. 23 That was one of the points so maybe over a couple years I don't know what's standard practice 24 there, but that seems to make sense in terms of stepping them up slowly. I'm wondering if the 25 City could also further segment office, R&D, and small business development on Page 20 it 26 shows San Francisco does that. That San Francisco looks at a number of different more 27 granular fees based on the type of use. That may be helpful for Palo Alto and I think that also 28 kind of addresses the issue of that the Housing Element isn't looking to… it's not looking to look 29 at the generation of construction out right it's more looking at the employment generated by 30 construction, right? And these different uses vary pretty radically. So I mean it's nice to see 31 hotel broken out, but office, R&D, and medical like those are all really different. I think it would 32 do us well to look at those and see what the different segments are. 33 34 On top of that there's also the issue of the employment densities and if they're correct. I 35 believe they're based on federal and then region wide averages. So I just put it to my 36 colleagues that maybe those are appropriate for Palo Alto, maybe not. I think it was like 333 37 square feet per employee in office. At least my experience and my work at a tech company 38 that's probably not that's probably too generous. I don't have that much space. I wish I did. 39 40 Ms. Srivastava: It’s a conservative assumption. 41 42 Chair Fine: Yes. 43 44 Ms. Srivastava: Because I think if you used a higher density you'd have higher demand and 45 result in higher fees. 46 City of Palo Alto July 27, 2016 Page 46 Chair Fine: Right. And one other question that would be nice (interrupted) 1 2 Ms. Gitelman: I’m sorry; I just wanted to link that back to your other comment about 3 differentiating. It's also higher than we're used to because office, R&D is lumped in with office 4 in this instance. And if we wanted to desegregate those and medical office we'd really have to 5 revise the Nexus study. We’d have to sort of redo this calculation to pull to tease that apart. 6 7 Chair Fine: Yep, which the City may or may not do. Another comment I'm kind of in agreement 8 with Commissioner Rosenblum that charging impacts fees to housing projects is questionable. 9 There's like a weird feedback loop as Commissioner Downing pointed out and it's also just it's 10 raising the cost of housing, right, overall across the market. There's a few more lights here, but 11 I would like to sort of hear from folks, it’s nine o'clock whether we think we have an idea about 12 how we'd like to move this forward, whether we are looking for a more data in terms of things, 13 but anyways let's go through the newest lights. Commissioner Downing. 14 15 Commissioner Downing: I want to start with a couple of kind of specific points and then talk a 16 little bit more to the general issues that have been raised by this Commission. So one of the 17 specific points I’d like to make is I’ve been on this Commission for almost two years. I don't 18 think I've ever seen a housing project come in front of me that's purely housing. I don't think I 19 had, we’ve had a housing project that has come before me and then my time on the 20 Commission. I have only ever seen mixed use projects come here. I've never seen a building 21 that's just plain apartment buildings or just plain condo buildings. I haven't seen it. It hasn't 22 happened. So what I have seen is mixed use projects where in order to avoid all these fees and 23 avoid extra requirements what they're doing as part of mixed use is they're building 24 penthouses. They're building 3,000 square foot apartments. And I don't think that's going to 25 go away even with these regulations especially combined with our parking requirements. 26 We're going to see more of that. 27 28 So one recommendation that I have is if we’re going to reduce the number of units, if we’re 29 going to say oh this applies when three units happens that's probably not going to work unless 30 we also have minimum density requirements, right? If you're 15 RM then that's what you build. 31 If you if there's a density that can be allowed you can build it apartment buildings and that's 32 what you have to build. I think those two things have to be paired because otherwise this 33 doesn't work. It doesn't actually get us more housing. It doesn't actually get us more 34 affordable housing. So that's one point I would make. 35 36 The other point I would make is that picking a number like $50 is really problematic because 37 you don't do automatic adjustments for the economy. As the economy wanes, as things get 38 worse, right, you're still asking for $50 a square foot, but without regard for where the 39 financing now is. Without regard for how much that unit will actually sell for. You're putting 40 yourself in a position where you may get to a point where with that fee you're just going to 41 have empty units because the developer can't sell it at the price that it would take him to 42 recoup his fees. And you're going to get distortions happening in the market. If you guys don't 43 want to go back to like the percentage because that's too hard to calculate there needs to be 44 an automatic adjustment within the ordinance to change that $50 number up or down 45 depending on the economy. And I think you just have to write it in. Like that should be just 46 City of Palo Alto July 27, 2016 Page 47 something that you calculate every time you take that fee. It shouldn’t be something the 1 Council has to come and update every month. You can create formulas for this. You can tie 2 this to the markets. There are rates you can use just like the banks use to do this. So that's my 3 other kind of specific on this. 4 5 I want to talk about sort of the broad policy that's being expounded here and I do want to talk 6 about the purpose. Because ostensibly we're here to talk about affordable housing and about 7 affordable housing fees and supposedly all this is so that we can raise affordable housing fees 8 so we can build more affordable housing. But honestly I'm looking at the fee increases and just 9 looking at how massive and aggressive they are I just can't help but feel like everything in this 10 packet is actually about how do we not build any more housing ever again in Palo Alto. That's 11 what this is actually about. And why do I say that? I say that because if you are actually truly 12 interested in maximizing the number of funds we have for affordable housing the answer is to 13 allow people to build higher, the answer is to allow people to build more square feet, right? 14 More sf gets you more money into Affordable Housing Fund, but that's not being proposed. 15 That's not on the table. There's not even a whisper of that anywhere here. And in fact I think 16 you have a major problem when the people who actually administer affordable housing are 17 here in the room telling you that this is going to decimate their fund. I think that's outrageous. 18 19 And I'll go back to say it again, we don't build housing in Palo Alto. I haven't seen an actual 20 housing project here in two years and we definitely don't build affordable housing in Palo Alto. 21 Within the last Regional Housing Needs Allocation (RHNA) cycle, so seven year cycle, we built a 22 total of 156 units for low income people. That was 12 percent of our target, ok? 12 percent. 23 So 156 units over a population of 65,000 people, ok? So my point on this is that even if you 24 raise all the affordable housing dollars in the world I have a very hard time imagining that we're 25 actually going to build a significant amount of housing with that money. We have a City Council 26 that trembles at the thought of a four story apartment building, ok? So even with all the money 27 in the world I do not find it credible that we will actually spend it on affordable housing. And I 28 don't see the Council actually talking about potential sites for this affordable housing, potential 29 places where they could up zone for it, where they could allow it for. I've never heard that 30 conversation happen in all the time that we've been talking about these fees. So where that 31 housing is going to go and whether or not this Council is actually going to approve it I find that 32 all very dubious. 33 34 And then I’ll say more about this, the supply of affordable housing even with everyone's best 35 intentions even if this Council was doing everything they could possibly do to actually add 36 affordable housing, which I don't believe is the case here, but even if they were it would still be 37 extraordinarily limited. Every time there's an affordable housing project that's built up and 38 down the peninsula there are literally thousands of people who apply for every single unit. 39 Thousands of people who apply for every single unit. So what does that tell us? That tells us 40 that the vast majority of people who are lower income individuals they live in market rate 41 housing. They pay market rate prices. So let's talk about what that means, right? So let's talk 42 about 1,400 square foot condo. That's a moderate sized two bedroom condo, right? At the 43 fees that you guys are proposing, not you guys, the Council. At the fees that they're proposing 44 that's an extra $70,000. So you're talking about people who are already barely making it who 45 are already scraping to get by, right? And you're asking for another $70,000. That's enough to 46 City of Palo Alto July 27, 2016 Page 48 buy you an entire house in other states. So and you're asking for this extra $70,000 from the 1 people who can already barely afford it and you're calling that affordable housing. I don't really 2 see what's affordable about that. 3 4 What you're doing is you're decimating the middle class. That's what you're doing, right? And 5 you're ensuring that the only people who can come here and who can afford that extra $70,000 6 are super rich people. And then of course on the other side when it comes time to actually 7 build something with that Affordable Housing Fund we’re going to see the City not actually 8 build it and not actually approve it. So I struggle. I struggle with Palo Alto’s sincere regard for 9 affordable housing while on the other hand Palo Alto continues to take actions that make sure 10 that more and more of its residents are going to require handouts instead of standing on their 11 own two feet. I find this problematic. I don't like the fee increases. I don't like the legislation 12 that's being proposed here and I find it… I find it unthinkable in a time of housing crisis. 13 14 Chair Fine: Thank you. Commissioner Rosenblum. 15 16 Commissioner Rosenblum: I have a little bit of different, I usually agree with Commissioner 17 Downing, but I think I’m approaching this slightly differently. I agree with most of the 18 sentiments, but around this, this is about the fee structure so just concentrate on that fee 19 structure in this more narrow task. I think we've all had a round of questions so it's ok I just 20 wanted to give some input where I'd like to see this go. 21 22 So the first is I do think that the formula we should be trying to is we should be trying to 23 maximize funds for affordable housing. So to the extent that there's an analytical framework 24 that we're using it should be maximize funds to build affordable housing. That's my 25 recommendation. I know that wasn't what the objective was, but I think it's a good objective. 26 So with that in mind in order to do that you would need some sort of I guess supply elasticity 27 analysis in order to do that. So you have set the optimal point where you think for each 28 category the decrease in development desirability will be offset by the increase of fees to 29 maximize the pot. So that would be my ask is that when this gets developed further if it does 30 there needs to be some assessment of where the maximum point is before your coffers decline. 31 Do you understand what I'm asking? 32 33 Ms. Srivastava: I'm just trying to understand how that would be different from a feasibility 34 analysis. 35 36 Commissioner Rosenblum: Yes, I believe the feasibility analysis took two things to account. One 37 was the maximum justifiable impact fee which we already had a discussion about. And the 38 second was an assessment for developer return on investment where a reasonable return could 39 be expected for the developer. That's different from the maximum point where developers 40 would want to apply for additional development dollars. So the methodology used for example, 41 you could say well it's reasonable we’ve calculated a 7.2 percent return or whatever the cost of 42 capital that you guys use. I forget exactly what you use for as your assumption, but seven or 43 something percent return on capital for (interrupted) 44 45 Ms. Srivastava: It depends on the product type. 46 City of Palo Alto July 27, 2016 Page 49 1 Commissioner Rosenblum: Ok, yeah. And it would be a reasonable return, but that's not 2 necessary the maximum return. Meaning what is there’s some point where the maximum 3 number of units being built times the expected value of the impact fees is at its maximum. And 4 so I'm asking for that, an assessment of that number. If you believe it's the same, first it's weird 5 to me that would be the same, but if your answer is it's probably the same or we just don't do 6 this then that's another matter. But my ask and again in the interest of time I'm just going to 7 say I would ask that that be included, some sort of analysis of what the maximum point is for 8 filling the coffers for affordable housing. 9 10 Then next I’m going to steal an idea from Commissioner Alcheck, which is that we're worried 11 that if you set the fees too high that no one will build anything and then you won't have money 12 for affordable housing. And so my additional request is if there is a way for the City to 13 guarantee funds for affordable housing and so basically saying well, if we set these fees really 14 high and therefore we didn’t get any development we will guarantee that the Affordable 15 Housing Fund shall not go below this number which was set based on 2016 levels. So that 16 would address Commissioner Downing's concern that this is all like a Trojan horse to stop all 17 development for example. That if in the case there is no development the City then has to fund 18 affordable housing directly. I'm not sure if there is such a mechanism, but this would certainly 19 address some of that concern that we're setting these irrationally. 20 21 And then finally around the actual fees for each like I said I think to many of us this fee is 22 important. I think setting any fee for rental, for residential rental doesn't make sense given the 23 goals of this whole program. That's a new fee and it's the kind of housing that we probably 24 need most. And so again my personal recommendation would be that that not be considered. 25 26 And then finally just a question and then probably response to it depending on the answer: the 27 analysis that Mr. Levinsky gave is interesting. He has the 15 percent of onsite as BMRs 28 calculated as cost of $6.96 million. My question there is: is it the case that when you have a 29 BMR unit as part of this 15 percent carve out are they equivalent to the non BMR units? So 30 Herb Borock made the point that in for example I used to live on Ortega Court when we had our 31 duplex there that was the BMR unit. It was not identical to the other units that have been 32 constructed the street. So is it the case that he assumed an average price of $3.5 million per 33 house which is how he came up with the $7 million of value. Is the case that the 15 percent set 34 aside are identical to the others and therefore this is a fair assumption? In which case his math 35 seems to be right which is that the current method seems to maximize value in terms of just 36 pure housing value. 37 38 Ms. Gitelman: There is a provision in the ordinance related to the comparability of the BMR 39 units. I think originally it said that they have to be comparable, but there are some product 40 types in which a smaller unit is allowed. 41 42 Commissioner Rosenblum: Ok. 43 44 Ms. Gitelman: And I’ll have to find it in the ordinance, but there is some flexibility. 45 46 City of Palo Alto July 27, 2016 Page 50 Commissioner Rosenblum: Ok, so then I’ll finish my comments with actually either way it's a bit 1 perverse, like you don't necessarily want BMR to have I would much rather have 10 smaller 2 more affordable units than two $3.5 million houses. And so in that case I still favor the in lieu, 3 but I also recognize that anything the formula that reduces the value is also suboptimal. And so 4 again, the current 7.5 percent in lieu fee seems to be a better situation than the proposed $50 5 fee. 6 7 Ms. Gitelman: The provision that I mentioned is on packet Page 221 and 222. It's talking about 8 the standards for the affordable units that are provided and it says they are going to be, they 9 have to be comparable in exterior appearance and overall quality and then paragraph two is 10 the size has to be comparable, but it says that in except in a single family detached 11 development where the Council or the decision making body may allow smaller affordable units 12 or duplex units. 13 14 Commissioner Rosenblum: I see. 15 16 Ms. Gitelman: If permitted by the zoning. 17 18 Commissioner Rosenblum: Ok, well then I guess to finish that off the certain terms of the fee 19 structure it seems like the 7.5 percent in lieu fee offers both the flexibility to find and build 20 appropriate housing for folks like Palo Alto Housing Corp or others and has the maximum value 21 compared to the $50 dollar per square foot or $95 per square foot based on that, the model 22 used. And so anyway so just to wrap up my comments if we are asked to weigh in on the 23 different fee structure possibilities that seems to balance the flexibility of where you can use 24 the funds with the maximum dollar amount which is like I said I think the function we’re trying 25 to solve for is to get the maximum amount into the coffers for affordable housing. That’s it for 26 me. 27 28 Chair Fine: Thank you. Vice‐Chair. 29 30 Vice‐Chair Gardias: Thank you. So when I first spoke about the fees in that table I'm going to 31 just come back to this comment that I made. So those fees and my colleagues just address it, 32 they were addressing different things, but they touched up on this numbers. They just pretty 33 much when you look at the numbers like 50, 60 what else? And 9, 50, 60, and 30. They, the 34 numbers just they look too round to be true, right? That’s the first thing. If you dilute the 35 numbers, right, you know that this is got to be true. So for this reason, but I understand that 36 you just did some scenarios and those numbers are pretty much reflected in the scenarios. You 37 didn't do the true analysis because the number could be falling somewhere between, the real 38 number, the true number that would maximize the return on the investment. You just have 39 certain distinct scenarios. 40 41 Ms. Srivastava: Yeah, we created some fee scenarios. 42 43 Vice‐Chair Gardias: Exactly, yes. So you're going to be leaving some money on the table, right? 44 Or just pretty much or you decentivize developers if you have a gap, right? 45 46 City of Palo Alto July 27, 2016 Page 51 Ms. Srivastava: I think it's that's possible. I also think that a pro forma analysis like this is just a 1 tool to help you get close to what we could, would consider an economically reasonable 2 number. But as you know the prices shift constantly. There are constant fluctuations. So I 3 think it would be I don't think it would represent the analysis accurately for me to say that you 4 could solve down to the last cent exactly what that number should be. 5 6 Vice‐Chair Gardias: Right, but that's not what I said. I mean these numbers are too rounded I'm 7 not asking about a cent. I'm just asking you to develop the real number. So and then when you 8 look at your analysis the great document that you created. That there should be a first page of 9 this should be really just showing us the maximizing the funds fees or I would rather set not the 10 fund, maximizing the fund, but maximizing the stock of the below markets units per some 11 markets fee that provides developers with the competitive rate of the return which also looking 12 at your when I read your paper you disclose that pretty much just hiking the fee to $60 and I'm 13 talking about the office puts us at a competitive disadvantage against other municipalities. So 14 developers in seeking their return they would be going to Menlo Park. What John Carlton did 15 and everybody would be gone and the others would be going to Mountain View because there 16 were, this is where they can build. They would not be coming to Palo Alto to develop. So the 17 first cover sheet of your study should just show us the linkage between the maximizing the 18 funds or the stock of the below market units, market rate units, and the fees that you would be 19 proposing. So that's just an observation that I have in general. 20 21 I would like to just spend a moment on the other items. There is in terms of the and I just don't 22 expect that the answer it seems to me that we may return to another session because there 23 were so many different observations that we may need to have farther input before we just 24 make recommendation to the policy. So let me just give you a couple of study points. So in 25 terms of the office and R&D fees we have two different types of the office locations. One is the 26 Stanford Research Park where large corporations are located and then there is anything else 27 where there is lots of small business. I would like to know if we can differentiate the fees to 28 sustain this small property owners and make sure that they can develop the properties within 29 their means from the large corporations that can scale and then can develop their facilities 30 based on different economic models. So that's my comment to this office $60 a square foot. 31 32 In terms of the retail I believe that correct me if I'm wrong, but I think that the retail if we have 33 a retail in the ground floor and then office upstairs that pretty much is that the total fee is a 34 composite of the separate of separate fee based on the ground square footage for retail and 35 the office on the upper floors. So what I would like to understand having our interest on the 36 that was expressed in the prior sessions and couple of resolutions that we had, can we change 37 the fee for retail development to allow to incentivize more retail space that we truly need on 38 the ground floor level in certain zones especially along El Camino corridor and some other 39 commercial districts. So my first guess would be maybe as opposed to keeping at the same 40 level maybe it should go down. So that's the question that I would have for another session. 41 42 And the last point was on (interrupted) 43 44 Ms. Silver: Commissioner Gardias? 45 46 City of Palo Alto July 27, 2016 Page 52 Vice‐Chair Gardias: Yes. 1 2 Ms. Silver: Just one point on that last comment. The ordinance currently has an exemption for 3 smaller retail businesses of less than 1,500 feet. 4 5 Vice‐Chair Gardias: Ok, so it's already addressed. So thank you very much. So then skip this 6 item. I thought it was still an interesting observation. So yes, so let me just stop at this and I’m 7 sure that my colleagues have other comments. Thank you. 8 9 Chair Fine: Thank you, Vice‐Chair. Commissioner Tanaka. 10 11 Commissioner Tanaka: I was just thinking that of this list to my fellow Commissioners and it 12 seems like everyone has there are still some open questions given the data that we have right 13 now and I was just thinking about whether we think we can actually arrive at a coherent motion 14 or recommendation or whether we should at this point in time given the time whether we 15 should give staff some clear direction on what kind of homework they could do to make this a 16 easier decision on our part. So I wanted to just put that out there because I know I for one 17 could use some better information to make a good decision. And it sounds like almost at least 18 from what I've heard everyone else also would like that as well. So I think we have a choice of 19 we could go for the marathon session tonight to try to use what limited information we have or 20 maybe give some homework to staff to try to develop this into a better shape so that when it 21 goes does go before Council they are better informed as to what decisions you're making. 22 23 Chair Fine: I'm in agreement with that and I want to take a quick crack to set this up for folks. I 24 think the major thing this Commission would like to see is how the impact fees will affect the 25 ultimate outlays for the Affordable Housing Fund and onsite housing production. There was 26 also some interest in whether the City can guarantee affordable housing fees or sunset these 27 fees if they're not working out for us in the right way. There were a few questions about 28 exemptions, about employee density figures, whether we can further segment these fees by 29 location or different use types. I had my comment about phasing the fees in over time. Am I 30 missing anything? 31 32 Commissioner Tanaka: I mean just what I was started with at the beginning which is I just want 33 to understand how to do these fees fit in with all of the other fees happening and just like you 34 said trend lines. I just I want to make sure we see the bigger picture because if we're stacking a 35 bunch of new fees on top of really fees that are going to bump up again I think that's super 36 important to know. 37 38 Chair Fine: So I think I’m willing to make a Motion to have staff look into these issues. 39 40 Ms. Gitelman: Chair Fine. Can I just try and clarify because what we obviously want to get this 41 to the Council. It's long overdue and they're very interested in the subject as I appreciate you 42 are. And I want to give you the information you need. I just want to be realistic about what we 43 can do and what is maybe not possible. So I think we can give you some additional assessment 44 about how we think the recommended fees would affect the housing funds and the production 45 of housing. So we can do a little more on that. Again, you're going to get our opinions based 46 City of Palo Alto July 27, 2016 Page 53 off assumptions and we'll do our best. And we can also do our best to develop some 1 information for you on the last I don't know five years or so of our fees at the City and how 2 they've changed over time. Would do you think going back five years would be sufficient? 3 4 Commissioner Tanaka: You know more the better and I think it would also be good if you could 5 break these fees out so we could see… 6 7 Ms. Gitelman: We can do that. 8 9 Commissioner Tanaka: Yes, and the percentage of each. Just so it's really clear and easy for us 10 to see where the trends lie on. 11 12 Ms. Gitelman: Yes. 13 14 Commissioner Tanaka: And also like when things got updated because like if you’re planning a 15 major increase tomorrow it’s really good to know about that. 16 17 Ms. Gitelman: Yes, ok. So we can do a little more research on that. I think we can also take a 18 look at the feasibility analysis that we did in light of Commissioner Rosenblum's comments. I'm 19 not sure that it's really that much different than what you're asking, but let us give that some 20 thought and see if we can go deeper there. 21 22 I think I can tell you right off the bat we're not going to be able to differentiate by use any 23 further than we have without redoing the study. We also, I think can't really provide you with 24 any more information about triggers or phasing or what, but I thought that someone on the 25 Commission suggested that we pursue a phase in and then that would give the Council or the 26 City the opportunity to that basically stop the train. If after phase one you see detritus results 27 and you don't want to go any further you cannot implement phase two. You can stop the 28 phase in. That might be an alternative to a mechanism to backfill the… I just didn't see how we 29 could build something in to backfill with General Fund revenues that starts to get super, super 30 complicated. So maybe when we bring this back the Commission could recommend to the 31 Council some kind of phase in strategy and this was on the table at the Finance Committee. 32 They never really focused on it, but it's an idea that's been out there and you could advance 33 that as part of your recommendation without us having to do a lot of additional work. 34 35 I think we can also provide the Commission with some background information on or just the 36 City’s track record of units produced. I'm not sure we can get to the level of detail of how many 37 were in projects of less than five units, but we'll see what we have. And did I miss anything on 38 your list? 39 40 Chair Fine: I think that would be pretty good and some of those other ones we've mentioned 41 could be as recommendations to Council to look into. As you mentioned some of them are a bit 42 more complicated and messy and kind of ancillary to this in a way. 43 44 Ms. Gitelman: I did want to point out that with the exception of the yes/no on whether to 45 charge fees for rental housing almost all of the issues that you're talking about have to do with 46 City of Palo Alto July 27, 2016 Page 54 actually setting the fees rather than the ordinance that we put in your packet for your review 1 this evening. The ordinance actually doesn't have the fee amounts in it. That's going to be in a 2 separate table that's adopted by the Council in a separate ordinance. The ordinance really talks 3 about administration of the in lieu program, administration of the impact fee program, what 4 applies to mixed use projects, what applies to for sale, what applies to rental. So I just make 5 that observation that when we come back together again we may want to separate these two 6 ideas because we've spent 95 percent of our time on the fees and 5 percent on the kind of 7 procedural structural things that are just addressed by the ordinance. 8 9 Chair Fine: Ok. Thank you. Commissioner Downing I see a light. 10 11 Commissioner Downing: I think we would be remiss if we left this session today and didn't 12 strongly send a strong message about housing fees on market rate rental housing. We know 13 those fees are going to be directly passed off onto renters who are in fact the most vulnerable 14 people in our community. So I'm not sure how we can leave here and not send a strong 15 message on that. Lots of people on this Commission have talked about that tonight. That 16 should be in writing. That should be in our Motion. 17 18 I also think that we really like the idea of a security package for the affordable housing. If the 19 true intention of this ordinance is to increase Affordable Housing Funds then I like the idea of 20 asking the Council to make up the shortfall if this policy decision doesn't end up being a good 21 bet. It’s the poor and the lower income in Palo Alto shouldn't be paying for that bet, it should 22 be the City. So those are two things I would add to our Motion and there's two things I'd like to 23 see happen before I leave tonight. 24 25 Chair Fine: Thank you. So I’m going to open the floor to Motions. I've always found it’s always 26 open and willing to entertain... Commissioner Tanaka. 27 28 MOTION 29 30 Commissioner Tanaka: I’d like to make a Motion for us to continue this item to a date 31 uncertain. 32 33 SECOND 34 35 Vice‐Chair Gardias: Second. 36 37 Chair Fine: All right, so we have a Motion on the floor to continue to a date uncertain with a 38 second. I believe staff has a fair read on what we'd like to see at the next session. Any 39 comments? Would you like to speak to your Motion? 40 41 Commissioner Tanaka: I think I already said my piece so I’m fine. Thank you. 42 43 Chair Fine: Speak to your second? 44 45 City of Palo Alto July 27, 2016 Page 55 Vice‐Chair Gardias: Yeah, I think that given the amount of the comments it's self‐explanatory; 1 although, I still would like to just get some at least approximation about my request for 2 differentiating of these fees between Stanford Research, large corporations, and the rest of 3 Palo Alto. But otherwise I think that there was for the amount of the material that we would 4 expect from the staff so for this reason it would be nice to have another session. 5 6 Chair Fine: Commissioner Alcheck. 7 8 Commissioner Alcheck: I just want to make a quick comment why I think this is a good idea. I 9 understand that they're waiting for it. It's not often that we get a lot of feedback in this room. 10 But this is a big deal and I will assume that the reason why we are not hearing from any private 11 developers tonight is because they're either very busy or on vacation. I just it's just struck me 12 as a bit odd that we didn't get a lot of we didn't get a significant number of emails on the topic 13 and we didn't really have a lot of speakers here tonight considering the impact of the change. 14 And I think that despite I know your goal to sort of move this down the road I think there's a 15 part of us that I think that what you're seeing here is that we need a little bit more time to deal 16 with this. I would have appreciated more feedback from the development community in 17 understanding this. 18 19 I really appreciate all the effort that our hired consultants have provided, but I hope that this 20 will be somehow acceptable that we can at least have another session to get into more depth 21 on some of these issues and hopefully get a little bit more feedback. One of the things that we 22 don't, one of the things that we're not going to have, I hope that the individuals that spoke 23 tonight that had concerns will come to our next session and address some of the suggestions 24 we've made and how those relate to their concerns. Whether that appeases some of the 25 concerns or whether you've got some other suggestions on how we could move this forward 26 because unfortunately that doesn't get to be a conversation. So I would like to know if some of 27 the suggestions we've made are making a difference in the eyes of the individuals who have 28 expressed concern. And that would be nice if there was a little bit more input. I think that 29 would help. So hopefully this won’t (interrupted) 30 31 Ms. Gitelman: I just want to make sure that you have we should have probably done this at the 32 beginning, run through the list of the letters that we received prior to this meeting. We did get 33 a letter from the BIA and we did get a letter from another development center. So we’ve had 34 some input from the development community. It was interesting to me that their comments 35 focused mostly on the amount of the fees suggesting that the $60 is too high that we should be 36 more in line with adjacent jurisdictions. 37 38 Commissioner Alcheck: There are a few developers in our local community who are very active. 39 They’re self‐interested, but they're very, very active, right? I feel like in the Planning 40 Department you can probably think of two names that have developed over 10 parcels in 41 Downtown Palo Alto alone, right? I just wonder this goes hand in hand with the comment that 42 Commissioner Downing made and sort of my request for understanding how many multifamily 43 developments have we had in the last 10 years. I'd be interested if we… look it's not our jobs to 44 reach out to them for input, but it would be, I would have been interested to hear from 45 individuals in our community who are a little active in this space. I know NAIOP (National 46 City of Palo Alto July 27, 2016 Page 56 Association of Industrial and Office Parks) I'm very familiar with NAIOP but they're regional I 1 mean they’re more than regional. But it would just be interesting to speak to a few of the, to 2 have a few of the developers in the space. Maybe they would not give you the feedback that 3 you want to hear, but at least it would give perspective. And I'm not suggesting that we need 4 to wait for that. I'm just saying I think that having another session would have, will be 5 beneficial for that purpose and that's why I’m going to support this. 6 7 Ms. Gitelman: We did have a stakeholder meeting that was very well attended by some local 8 folks and we sent them notice of this. We sent them a link to the staff report, notices of this 9 meeting so they're aware of it. I should mention too that there are a bunch of projects in the 10 pipeline which is part of the reason that the Council is interested in getting this ordinance 11 sooner rather than later and I'm not begrudging the Commission the need for another hearing. 12 I think we should give you the information that you need, that you've requested, and we'll do 13 our best to do that expeditiously. But the Council is eager I think to (interrupted) 14 15 Commissioner Alcheck: When you say pipeline you mean apply or (interrupted) 16 17 Ms. Gitelman: Well there, there’s at least one rental housing project in the pipeline. There's 18 the for sale housing project that was discussed this evening that was recently entitled and 19 there's some nonresidential development in the pipeline that could pay these higher fees if 20 they are enacted. 21 22 Commissioner Alcheck: Ok. I imagine those people in particular would be interested in this 23 discussion. Ok, so I don't want to slow this down. I just, ok. 24 25 Chair Fine: Vice‐Chair. 26 27 Vice‐Chair Gardias: Just in the same perspectives I would like to just ask Ms. Bigelow, thank you 28 very much for staying that long and Chairman allowed me just to reopen this communication 29 because we typically just close the public hearing at some point of time. But you made a 30 comment when you spoke that there are some tax credits or there are some credits. And I 31 think that we didn't discuss this in depth, but we would be interested if you could just for the 32 follow up session if you could gave some perspective on those credits to the staff and to 33 consultants so maybe when they are just updating their models they could also account for 34 those stock credits or some other credits from your perspective would they would help in 35 building of the stock of the below market units. Thank you. 36 37 Chair Fine: All right. I think we're ready to vote. The Motion (interrupted) 38 39 Jonathan Lait, Assistant Director: I’m sorry Chair. If you, we think will be ready by August 31st. 40 So if you can continue to a date certain, August 31st, that would be helpful. 41 42 Commissioner Tanaka: For me it’s really staff’s work. I mean I think what's most important is 43 for this Commission to have a really high quality work product so that Council can make a good 44 decision. So it’s really if staff thinks I mean I think just about every in fact every single 45 Commissioner had kind of a ask from a staff and there was a lot of asks. So I just want to make 46 City of Palo Alto July 27, 2016 Page 57 sure that staff has enough time to kind of fulfill these asks because I think we don't want to do 1 is slow things down and I think it’s important that we've got a lot of comments from just about 2 every single Commissioner about more information for this. I think if August 31st is you guys can 3 do it I think that’s great, but if you guys can't I think it's good to pick a date that you guys can do 4 this because otherwise this this will cause delays. We’ll have another meeting and there will be 5 the things that we've asked for wasn't done and it will cause more so I just I guess just I'm not 6 so hung up on a date. I don't know how my other fellow Commissioners are in terms of a date, 7 but I don't want to make staff like if you guys can't do it by then I don’t want like… 8 9 Ms. Gitelman: Well I think we're saying that we'll try and do it by then. Obviously if we don't 10 get it done we'll ask for you to continue it rather than hold the hearing. 11 12 Commissioner Tanaka: Well I’ll leave that up to the Chair in terms of like when you guys maybe 13 during your, you guys agendize items you guys can see and make sure it’s ready. 14 15 Chair Fine: Ok. 16 17 Commissioner Tanaka: So that we don't use our time, we use our time wisely as well. 18 19 Chair Fine: Ok. I think let’s trust the August 31st date. If it doesn't work out that’s too bad, but 20 it’s soon but if staff can do that that would be great to move it forward quickly. 21 22 Ms. Gitelman: And if Commissioner Tanaka’s concerned about it maybe we should confirm 23 once again the additional information we're bringing back because I mean I know there's work 24 here, but I didn't see it as maybe as complicated as you, as you were suggesting. I mean we 25 we’re going to do some additional thought about let's just make sure we're on the same page if 26 you don't mind? 27 28 Chair Fine: Sure. 29 30 Ms. Gitelman: So we're going to give some additional thought to how the fees will affect the 31 fund balances and housing production generally; just some more thoughts on that. We're going 32 to look at the trends of fees that have been adopted by the City over the last five plus years if 33 we can. We're going to (interrupted) 34 35 Commissioner Tanaka: Actually I’d like to just add maybe also in comparison with other cities. 36 So we could see a trend line. 37 38 Ms. Gitelman: I'm not sure that we can do that. I mean that is that ton of work to go back to 39 these other cities and we've done that twice so to go back and look at their track record I think 40 would be an extraordinary ask. Do you really think that that is a necessary? 41 42 Commissioner Tanaka: I guess it's kind of like we're not Palo Alto’s not Island, right? We have 43 what we do here also kind of affects what people do in other places and so if we look at our 44 City in isolation I think we don't have the complete picture. So like for instance if everyone else 45 was charging $1 in impact fees and we’re charging $100 that's kind of meaningful. So I guess 46 City of Palo Alto July 27, 2016 Page 58 that's why it's good to have a complete picture about what's happening. I'm not talking about 1 like all the cities in California, I was talking about like the local ones so we could see that how 2 we're doing, how everyone else is doing, and also like when certain fees are getting updated or 3 which ones are really old which ones are 2002 vintage? Which ones are (interrupted) 4 5 Ms. Gitelman: I'm just being honest with you. We have that information for today and so you 6 have a comparison to adjacent communities to go backward in time for those other 7 communities is an extraordinary amount of work and we just have to allocate our resources in a 8 smart way. I just I mean if the majority of the Commission feels like that's a critical piece of 9 information we can try, but that certainly means that August 31st is not going to work. 10 11 Commissioner Tanaka: Yes, I mean for me it's I think it's important, but I would love to get other 12 Commissioners opinions as to whether that's important or not. If not then that’s fine as well. 13 14 Commissioner Rosenblum: I'm personally not as concerned with that as a [unintelligible]. I'm 15 actually more to me the two things are a honest attempt at what I'm calling supply elasticity. 16 So basically where they think the maximum point for filling the coffers would be. And then 17 second I think that you were dismissive of this, but I do want to throw it back out. Staff should 18 figure out if there is a mechanism for the City to give some guarantee for housing funds. So this 19 is the concern we have here is that we're going to raise fees to an extent that we end up with 20 no development and then no fees. And so if that can be taken off the table that fear then I 21 think people are much happier. 22 23 Chair Fine: I'm going to chime in that I think the fee schedule in general for the City is helpful. It 24 would be nice to have other communities, but it's not critical to me. 25 26 Ms. Gitelman: Just to continue on the summary. This question of elasticity of supply I think 27 we'd like to talk to you briefly after the meeting to make sure we understand because we’re, 28 we kind of feel like the feasibility analysis we've done is getting at that same issue. So maybe 29 we could just talk offline for a minute and make sure we understand. 30 31 With regard to the idea of backfilling I mean I guess we can give that some more thought about 32 how that might look like. It's I don't really know how we would do that. And then you also 33 asked for the track record of units produced and projects over the years. And we can scrounge 34 that up too. Did I get everything? 35 36 Commissioner Downing: I would like to make a brief comment on the sort of research we’re 37 being, we’re asking the Council to do. So it makes me think about your comment when you 38 talked about the Palmer decision and you said we got rid of these BMR restrictions on 39 apartments, housing prices didn't get cheaper. Ok, but the problem is at the same time we 40 weren’t building anything and hundreds of thousands of people were coming to California. So 41 you're going to like whatever analysis they do is going to tell you the same thing. Like the fee 42 impact you're not going to be able to disambiguate from the fact that supply compared to 43 demand has not lined up. That the housing shortage has gotten more and more dire. So you're 44 not going to get any data that you want from that, from the impact fee analysis. Do you 45 City of Palo Alto July 27, 2016 Page 59 understand what I'm saying? Because it's all going to be confounded by the shortage. So I 1 don't know, take that into account. 2 3 VOTE 4 5 Chair Fine: Alright. I think we have a Motion on the floor. It's almost 10:00. So this is a Motion 6 to continue to August 31st with a number of points for staff to look into as Hillary's outlined 7 and we will try to help you in terms of understanding what we'd like in the elasticity issue. So 8 everybody ready to vote? All in favor? That passes unanimously. Thank you very much. That 9 closes that item. 10 11 MOTION PASSED (7‐0) 12 13 Commission Action: Commissioners provided comment, moved to date certain of August 31, 14 2016. Passed unanimously 15 16 Study Session 17 Public Comment is Permitted. Five (5) minutes per speaker.1,3 18 19 20 Approval of Minutes Public Comment is Permitted. Five (5) minutes per speaker.1,3 21 1. June 29, 2016 22 23 Chair Fine: We have approval of minutes from June 29th. Do I have a Motion? 24 25 MOTION 26 27 Commissioner Rosenblum: I move to approve the minutes. 28 29 Chair Fine: Thank you, Commissioner. And… 30 31 SECOND 32 33 Vice‐Chair Gardias: Second. 34 35 VOTE 36 37 Chair Fine: We have a second. All in favor? Everyone. Thank you. Let me just write this down. 38 39 MOTION PASSED (7‐0) 40 41 Commission Action: Commissioner Rosenblum motioned to approve the Minutes of June 29th, 42 Vice‐chair Gardias seconded the Motion. Motion approved unanimously. 43 44 Committee Reports 45 46 City of Palo Alto July 27, 2016 Page 60 Chair Fine: In terms of committee reports Citizen Advisory Committee (CAC) is still going along. 1 I think we all want to get home tonight so nothing major, but… 2 3 Vice‐Chair Gardias: No, in terms of CAC I think that we going to have an update at the following 4 meeting, right? On the CAC. We talk about this at the pre‐Commission meeting that at the 5 next meeting we would have the schedule of all elements coming up to our, to the Planning and 6 Transportation Commissioner (PTC). 7 8 Jonathan Lait, Assistant Director: Right. We can give you a schedule for that. Our next 9 summary update on the Comp Plan which will include a CAC discussion is I think scheduled for 10 September, but we can provide some information about where we are relative to the elements 11 being reviewed by the CAC. 12 13 Vice‐Chair Gardias: Very good, thank you. And one minor comment I think that we may remove 14 the midtown connector study from the subcommittees based on the Council's decision, this 15 body I think naturally dissolved. 16 17 Chair Fine: Good point. Thank you. 18 19 Commissioner Member Questions, Comments or Announcements 20 21 Chair Fine: So no questions/comments, but Kate I just want to thank you again for everything 22 you've done this Commission. We've all enjoyed serving with you. We will miss you and there’s 23 some cake in the back so maybe we can talk about elasticity of these impact fees over some 24 cake if you guys are interested. 25 26 Commissioner Downing: That's a fine send off. 27 28 Chair Fine: Good point. Thank you all. This meeting is adjourned. It's 9:50. 29 30 Adjournment: 9:50PM 31 Planning & Transportation Commission Action Agenda: August 31, 2016 City Hall / City Council Chambers 250 Hamilton Avenue 6:00 PM Call to Order / Roll Call: 6:02 pm 1 Commissioner Alcheck absent 2 3 Chair Fine: Order this meeting of the Planning and Transportation Commission (PTC) for August 4 31, 2016, at 6:02. And Robin if you wouldn't mind taking the roll for us please? 5 6 Robin Ellner, Administrative Associate III: Commissioner Alcheck, Chair Fine, Vice-Chair Gardias, 7 Commissioner Rosenblum, Commissioner Tanaka, Commissioner Waldfogel. Five present. 8 9 Chair Fine: Thank you very much. 10 11 Oral Communications 12 The public may speak to any item not on the agenda. Three (3) minutes per speaker. 13 David Carnahan, Deputy City Clerk – made announcement regarding recruitment vacant 14 positions on the various Commissions and Boards. 15 16 Chair Fine: Ok, we have one speaker card. 17 18 David Carnahan, Deputy City Clerk: Good morning, Chair. Good morning. Good evening, Chair 19 Fine and Commission; as you know David Carnahan in the City Clerk's Office and when I am 20 here the City is recruiting for boards and commissions including this Commission. We have 21 three terms that are going to be up shortly on this Commission and we're hoping that those 22 that are interested in reapplying reapply, but most importantly we would like you the members 23 of the community here or those watching from home to help spread the word throughout the 24 community. 25 26 We're looking for people to apply for three positions on Historic Resources Board (HRB), four 27 positions on the Parks and Recreation Commission, three on Planning and Transportation, and 28 two positions on the Storm Drain Oversight Committee. These are fabulous ways for members 29 of the community to give back and help chart the future of Palo Alto. Most of these terms are 30 for three years. The PTC terms and the Storm Drain Oversight Committee terms are four years. 31 Applications are due on September 14th, 5:30 p.m. Applications are available online on the City 32 Clerk's web page. We're going to leave a couple flyers here and then we just hope that emails 33 that you received you’ll share with the community for anyone that you think is interested or 34 organizations that might be able to find interested folks. Thank you and have a fabulous 35 meeting. 36 Chair Fine: Thank you very much. A lot of openings and I'm sure we'll all be sure to share them 1 with our networks. Do we have any… we have no more speaker cards? Ok. 2 3 Agenda Changes, Additions, and Deletions 4 The Chair or Commission majority may modify the agenda order to improve meeting management. 5 None 6 7 Chair Fine: Any agenda changes? There’s one item tonight so I don’t think so. 8 9 City Official Reports 10 Assistant Director Lait provided an update on City Council items. 11 12 Chair Fine: Reports from the City? 13 14 Jonathan Lait, Assistant Director: Thanks, Chair Fine. Just thought I’d let you know that the City 15 Council gave us direction on scenarios to study, Scenarios 5 and 6 with some modifications. 16 We’ll be taking that direction and doing that analysis and returning. The on Tuesday next week 17 the City Council will be taking up the Residential Preferential Parking (RPP) Phase 2 update and 18 following that on the 12th the City Council will be considering the Planning and Transportation 19 Commission (PTC) and Architectural Review Board (ARB) recommendations on the update to 20 the AR findings. There is also a prescreening application going before the City Council regarding 21 2755 El Camino that might be of interest to the Commission even though you've not had direct 22 involvement in that this time. Just as a reminder your Commission representative for 23 September is Commissioner Tanaka. So if there's an interest in being present to that meeting 24 that would be encouraged. 25 26 Action Items 27 Public Comment is Permitted. Applicants/Appellant Teams: Fifteen (15) minutes, plus three (3) minutes rebuttal. 28 All others: Five (5) minutes per speaker. 29 30 1. The Planning and Transportation Commission will Consider a Recommendation to the City 31 Council for Adoption of a Draft Ordinance to Update the City’s Below Market Rate Program 32 and Adopt Affordable Housing Impact/In Lieu Fees for Commercial and Residential 33 Construction by Repealing Municipal Code Sections 16.47 (non-residential projects) and 34 18.14 (residential projects) and Adding a new Section 16.65(Citywide Affordable Housing 35 Requirements) and Direction on Future Corresponding Changes to the Housing Element. 36 The Proposed Ordinance is Exempt From the California Environmental Quality Act (CEQA) 37 per 15378(b)(4) and 15305. For more information, contact Eloiza Murillo-Garcia at 38 Eloiza.murillogarcia@cityofpaloalto.org Continued from July 27, 2016 39 40 Chair Fine: Alright, so we've got one item tonight and then some approval of minutes. So the 41 first item is a discussion again of the draft ordinance to update the City's Below Market Rate 42 (BMR) program and affordable housing impact or in lieu fees for commercial and residential 43 uses or construction. I think let's first do we want to go for the report first and then public 44 comments? Sure. Let’s do that. 45 Hillary Gitelman, Planning Director: Thank you, Chair Fine and Commissioners. Hillary Gitelman 1 the Planning Director and I’m being joined again by my trusty companions Eloiza and Sujata 2 who are going to help describe where we are with this item, how we've responded to your 3 request at the last meeting, then we'd love to hear any additional public comment and your 4 comments on these, on the ordinance before you. 5 6 Eloiza Murillo-Garcia: Good evening, Chair Fine and Commissioners. I'm just going to give you a 7 really brief overview of what we discussed last time just to jog your memory on what was 8 discussed. As you know this item was discussed was continued from July 27th. And the two 9 main items on which we asked input on are to review the proposed fees that were described in 10 the staff report and to review the draft ordinance and make a recommendation to the City 11 Council. 12 13 And here are the recommended fees that we described the last meeting. Office and Research 14 and Development (R&D) the recommended fee is $60 a square foot, hotel is $30 a square foot, 15 retail, restaurant, and other is $20.37 a square foot. On the residential side the recommended 16 fee is $50 a square foot for all product types. 17 18 And these are some of the key issues on the draft ordinance. The draft ordinance consolidates 19 the commercial and residential fee into a single uniform ordinance. That's codified in a new 20 chapter which is 16.65. It gives the City the ability to charge an impact fee for rental housing. It 21 gives developers the opportunity to build affordable units rather than pay the fee. It 22 differentiates the fee structure for commercial development so there is different fees for 23 different uses. 24 25 The ordinance also simplifies the in lieu fee for residential development. So the fee will be 26 changed to a, based on a per square foot basis rather than a 7.5 percent of sales price which is 27 what the City currently has. It clarifies which projects should be exempt from commercial 28 impact fees and adjusts the threshold for inclusionary units from projects with five or more 29 units to projects with three or more units as stated in Program H3.1.1 of the Housing Element. 30 The ordinance is not proposing to increase the existing inclusionary housing requirements to 31 adjust the percentage of affordable units required. 32 33 At the last meeting there was some additional analysis that was requested of staff and that is 34 also included in the report. The additional information that's in the report is how the proposed 35 commercial and residential impact fees combined with other City impact and development fees 36 have changed over time and that can be found in Attachment I which is packet Page 342. There 37 was also information on your units produced in the last two Reginal Housing Needs Allocation 38 (RHNA) cycles and that is Attachment J or packet Page 345. There is also a discussion on how 39 proposed impact fees will affect the Affordable Housing Fund balance and unit production and 40 that’s in packet Page 11. 41 42 And finally there is an analysis of the maximum residential impact fee required to generate 43 funds without decreasing development or the elasticity of demand and that is in Attachment K 44 which is packet Page 349. And in moment Sujata will give some more detail on that 45 attachment. I'll now turn it over to Hillary who's going to talk about feedback that we've 1 received from stakeholders. 2 3 Ms. Gitelman: Yes, thanks Eloiza. I just wanted to add a few thoughts about some of the input 4 we've gotten both in the run up and at the last meeting we held and just in the last couple 5 weeks in advance of this meeting. I think a lot of the commenters have suggested that the City 6 would be well served to set fees that are more in line with other jurisdictions. If you read 7 through the written comments we got from a number of groups prior to the last meeting and I 8 think at the testimony we heard at the last meeting that was kind of a theme and we did 9 present in one of the attachments that you had last time and it's reproduced in the packet a 10 listing of what other agencies are charging when it comes to residential and commercial impact 11 fees. 12 13 Another thought that we've or another comment we've gotten just in the last few days has to 14 do with the desirability in some cases for in lieu fees rather than inclusionary units. As you 15 know the City has an inclusionary program so where there is for sale housing we require 15 16 percent of the units to be affordable. Generally that creates moderate, units that are 17 affordable to moderate income households. And so some of the stakeholders of said hey, 18 that's great, but what if we want to get low or very low income housing for lower income 19 population? In that case it would be better to get the money instead of the units and we can 20 take that money and fund affordable housing projects that yield units that are affordable to low 21 and very low income populations. So what we did in this ordinance and the kind of direction 22 we took with the Finance Committee was to actually set a pretty high bar for when an 23 inclusionary project could pay the fee instead of building the units. And so the ordinance that 24 we're proposing and want your recommendation on says feasibility is the test and it has a 25 couple of different definitions of feasibility and it's only if providing the units on site is 26 infeasible that the developer can pay the fee instead. And so the comment we've heard is hey, 27 maybe this should be more of a discretionary thing where there are instances or housing types 28 where instead of providing the inclusionary units on site we want the money to build the units 29 off site. So that's a thought that just came in in the last few days. 30 31 The other comment we got in one of the late comments tonight and in the last few days was 32 about this issue that if you're using tax credits to build affordable housing projects you can only 33 deed restrict the units for up to 55 years. Currently our ordinance suggests that units have to 34 be deed restricted for 99 years. It's not really an issue in our inclusionary program because 35 those units that are produced through the program are going to have tax credits, but if 36 someone were to take advantage of one of the alternative compliance mechanisms that are 37 outlined in the ordinance this might be an issue. And so Cara and we have been talking about 38 how we might make a slight adjustment to the ordinance to address that issue and maybe she 39 can speak to that later if you're interested. Those were the three issues that I wanted and 40 maybe Sujata now can take you through her analysis of the feasibility of these various fees and 41 how that relates to what you identified last time as an issue with elasticity. 42 43 Sujata Srivastava, Strategic Economics: I think that the request was to prepare a supply curve 44 that would show the impact of fees on how much housing would be built in Palo Alto. We don't 45 really have sufficient information to be able to project the number of units that are built in the 46 future. There are many variables involved in that that have nothing really to do specifically with 1 these fees, but what we can do is show you some graphs that illustrate how these different fees 2 are likely to affect the development feasibility of certain types of projects. We've done some 3 analysis that's in our full reports showing what the development costs and revenues or value, 4 values are generated for each of these housing types and this graph on the screen is just really 5 showing that. The blue is showing you the revenue side in terms of the sales or capitalized 6 value and then the orange is showing you costs and basically the difference between those two 7 is really what's left to pay for the land and any additional impact fees if you decide to 8 implement them. So that's really the margin that we're talking about and for certain product 9 types it's a bigger difference than others and that's because there are different cost structures 10 for different types of building types. 11 12 So the next graphic summarizes what that looks like for single family detached prototypes. 13 Yeah. And what we've done here is we've modeled it based on what's the land value that's left 14 for a developer to purchase the land when you implement these fees at these different levels. 15 On the Y axis is the, we've got the residual land value per square foot. So this is the value of the 16 land per square foot. The higher the value of the land the more you can afford to pay the land 17 owner. And then the impact fees are on the X axis, the horizontal axis. So as the impact fees 18 increase you would expect the residual land value to decrease and that's what you're seeing 19 here. There are two dotted lines, the gray dotted line at the bottom is sort of the minimum 20 value of what the typical transaction is for a single family detached project and then the blue 21 line is what the maximum value is in Palo Alto for single family detached. So really anything 22 within that band we would consider feasible. 23 24 Now because the fee the maximum Nexus fee was $111 per square foot, I wonder if that’s me? 25 We’d actually recommended something much lower than that at $50 per square foot. And you 26 can see that both of those fee levels would be feasible because they're kind of above that range 27 of what we would consider the minimum values for land in Palo Alto currently. 28 29 So the same type of analysis was done for attached single family townhouse prototypes and 30 again, because of the high value of these types of homes in the City and the high revenues that 31 are generated you see that there's still quite a big margin between the fees that we have 32 recommended and what the value of the land is in the City. For multifamily housing the 33 minimum threshold is higher, but that's because multi… parcels that are zoned for multifamily 34 have a higher price. They, you can do more with those parcels and therefore they're about, 35 they're more valuable. So those are between $150 and $250 per square foot. And for condo 36 prototype again we found that the maximum Nexus justified fee and the recommended fee 37 were both kind of yielding a land value that is above what the current market value is for land. 38 39 And then apartment prototype is one that looks a little bit different from a financial feasibility 40 perspective. And that is because this is a higher cost product to build. So this graphic is 41 showing again that multifamily land values in Palo Alto are between $150 and $250 per square 42 foot. At the maximum Nexus fee of $105 per square foot you're actually getting a residual land 43 value that is below $150 dollars per square foot so we would not consider that to be financially 44 feasible. In fact, anything higher than $89 per square foot is not financially feasible if you have 45 this expectation of being able to purchase the land for $150 dollars or more. 46 1 Our $50 per square foot recommended fee really is in between the maximum and minimum 2 market value of land. So that's what you're kind of seeing visually depicted here. So I think that 3 the conclusion to take away from this is that if you were to be able to implement a fee of $50 4 per square foot you're still, you still have a bit of a margin to work with in terms of what the 5 minimum market value for land is in Palo Alto. 6 7 Ms. Gitelman: Thank you. We'd be happy to hear the public comments and Commission 8 questions. 9 10 Chair Fine: Thank you very much. This is helpful. I'm sure there will be some questions from 11 the Commission, but let’s start with public comments. 12 13 Vice-Chair Gardias: We have two speaker cards and first one is from Lauren Bigelow followed by 14 Herb Borock. 15 16 Lauren Bigelow: Good evening, Planning Commissioners and thank you for giving me a minute 17 to speak. My name is Lauren Bigelow and I am the BMR Administrator for Palo Alto Housing. 18 As I mentioned at your last meeting we are concerned that should the impact fees proposed to 19 be too excessive and not in line with neighboring jurisdictions that combined with restrictive 20 zoning and regulations will discourage all development all together. When we have no new 21 development we have no money for the Affordable Housing Fund and we have no new onsite 22 BMR units. Both are necessary to fight the housing crisis because they serve two different 23 populations. With onsite units we’re able to serve those who fall into the low to moderate 24 income category. With the Affordable Housing Fund we can serve the extremely low to low 25 income population. 26 27 There are some instances when there are significant number of units where it makes sense to 28 build the onsite BMR units. When there are two, three, or four units provided onsite we would 29 prefer to have the fees because the fees from one property can be leveraged at the tax credit 30 level to provide three to four times the number of units. Tax credit is a majority source of 31 funding for 100 percent rental affordable housing and they want to see the City commit public 32 funds. Without this City committing money from the Affordable Housing Fund we cannot build 33 any affordable housing at all. Thank you so much for your time. 34 35 Vice-Chair Gardias: Thank you. Mr. Borock. 36 37 Herb Borock: Chair Fine and Commissioners the staff report before you on packet Page 115 38 refers to the court case in San Jose that upheld inclusionary zoning, but it doesn't say what the 39 court case said. It said there was a legitimate purpose to increase the number of affordable 40 housing units in the City in recognition of the insufficient number of existing affordable housing 41 units in relation to the City's current and future needs. And now I know one current need are 42 the Association of Bay Area Governments (ABAG) numbers that we have to satisfy. The 43 decision also said that assuring that the new affordable housing units that are constructed are 44 distributed throughout the City by placing them as part of mixed unit, mixed income 45 development multiple family developments provides the benefit of having the mixed income 46 and the affordable units throughout the City rather than having them confined to just a low 1 income development. And so there were those purposes and the other thing you have to 2 understand is that it was based on the need for units and not on the need for money. The cities 3 and the court decision was based upon affordable units being built and as an alternative getting 4 cash. The staff report and the consultant said just the opposite direction. It says, it gives the 5 developer the opportunity to build affordable units rather than pay the fee and I believe that's 6 backwards. In San Jose ordinance a higher percentage is required off site than on site. 7 8 In regard to the previous speaker's comments since the Reagan administration instead of the 9 federal government through the Housing and Urban Development Department (HUD) providing 10 low interest loans long term to develop properties essentially it's set up to write income for 11 people who get limited equity tax credits. So that whole idea of having that money and using 12 that kind of a program the principal benefit are the people who are getting those tax benefits as 13 opposed to the residents who would be living in those units. The, setting the fees based on 14 other cities [set] doesn't make sense. That's not how developers determine where to develop. 15 They make their decision based upon where they can get the most profit and I think they do 16 rather well in Palo Alto considering the escalation in prices. And that escalation in prices is 17 related to establishing a fee that is the current fee has not kept up with the what can be 18 required to be built. In other words you can't get as much out of the current 7.5 percent BMR 19 fee compared to actually providing units on site and the $50 fee that is being proposed 20 provides even less money. 21 22 One of the reasons for the current fee not being appropriate is that it was based on an idea of 23 the developer not borrowing any money to build. So it's based on the total investment in total 24 property cost, construction cost rather than the actual return on investment. And the 25 prototypes are based on past sales, not the most recent sales. And as you know with the 26 escalation in prices that they don't give you a real number and they also give you another 27 reason for getting a fee that's much too low. Thank you. 28 29 Vice-Chair Gardias: Thank you. Would staff like to provide a response to Mr. Borock’s 30 comments? 31 32 Ms. Gitelman: Yeah, I think Cara can respond to the legal decision that was referenced. I'm not 33 sure I understood all of what Mr. Barak was saying, but at least in his conclusion his conclusion 34 is that you would have the potential to set some of these fees higher then are proposed and 35 that is true based on the Nexus study. You could go somewhat higher in the case of some of 36 these fees and that's a policy decision that you could make. I think we're hearing from most of 37 the stakeholders that they're high enough or maybe too high. So we've heard both sides on 38 that issue and I think we can we can respond if the Commission has specific questions about the 39 Nexus study and what kind of flexibility it provides in terms of making that decision or 40 recommendation. Cara? 41 42 Cara Silver, Senior Assistant City Attorney: Thanks, Cara Silver, Senior Assistant City Attorney. 43 So this is a very complicated area of the law and I think the staff report goes through the 44 evolution of the case law and does describe the San Jose case. As we mentioned in the staff 45 report the San Jose case was pending at the time we commissioned the Nexis study. We 46 commissioned the Nexus study sort of in an abundance of caution and out of concern that the 1 San Jose case would come out against cities. That said, the San Jose case actually came out in 2 favor of cities and upheld the city's ability to impose inclusionary housing requirements in 3 ownership housing and commercial projects under the city's general land use authority. And so 4 it is important though to distinguish between the commercial developments and ownership 5 housing where we do have that land use authority where we clearly can impose inclusionary 6 housing requirements and the rental housing area. And in that area the San Jose case really 7 didn't address rental housing. 8 9 And in the rental housing arena we have another set of statutory restrictions and that's known 10 as the Costa-Hawkins Act that limits a city's ability to impose inclusionary housing on rental 11 projects. So the way our ordinance is structured is that we impose fees, impact fees under AB 12 1600 and that's why the Nexus study was commissioned, but the ordinance allows the 13 developer as an option to paying those impact fees to instead provide inclusionary units. So it's 14 the reverse really of the ownership model in the ordinance which prefers inclusionary housing 15 units, but allows fees if the inclusionary units are not found to be feasible. So we have really 16 two different distinctions primarily in the residential feel. 17 18 Chair Gardias: Alright, thank you so much. Let’s open it up to a round of questions from the 19 Commission and I’d also like to get… another question? 20 21 Vice-Chair Gardias: I believe that you were also going to speak about the tax credits for the 22 developers? For the developers? 23 24 Ms. Gitelman: Yes. 25 26 Vice-Chair Gardias: This was the comment that Director… that I’m sorry, we’re in the election 27 period. That Director Gitelman was talking about the difference between the timing of the, of 28 99 years versus 50 years I believe. This was the difference. 29 30 Ms. Gitelman: Yes, yes, thank you. So yes there was a comment made by Palo Alto Housing 31 that the ordinances requirement to deed restrict housing units for 99 years could conflict with 32 federal tax credit requirements which impose a 55 year requirement. And so we would suggest 33 some revisions to the ordinance that say something like if the affordable unit is funded through 34 federal tax credits or other similar funding the Director may reduce the affordability period to 35 55 years to comport with funding requirements. So we would propose some language like that 36 and we would work with Palo Alto Housing on that language to make sure that it meets their 37 needs. 38 39 Vice-Chair Gardias: But this is just a tax credit or it's not funding isn't it? It's a tax credit so how 40 you want to? 41 42 Ms. Silver: Well a tax credit is a form of affordable housing funding and so we would reference 43 that exact tax credit statute. 44 45 Vice-Chair Gardias: Right, and (interrupted) 46 1 Ms. Silver: To make that restriction very narrow. 2 3 Vice-Chair Gardias: And just for our information is it for any entities? Any legal entities, 4 corporate entities or it is for the tax is related to the development types. How is it being 5 applied for? If you could just tell us more besides those just two eliminates, right, of the 6 timeline so we can understand applicability of the tax credit. Is it for the corporate entity of a 7 certain registration or is it for the size of development or some other attributes? 8 9 Ms. Silver: Right. So you know Palo Alto Housing may have a little bit more information on tax 10 credits, but in general the way a tax credit transaction works is that a nonprofit partners with a 11 for profit entity and that for profit entity will take the tax credit and becomes monetized and 12 the tax credit is then used to fund the affordable housing project. But it is the corporate 13 partner that receives that the actual tax credit as part of that overall transaction. 14 15 Vice-Chair Gardias: Corporate partner? 16 17 Ms. Silver: Yes. 18 19 Vice-Chair Gardias: That is it's a partner of a nonprofit entity, right? 20 21 Ms. Silver: Yes, yes. Because nonprofits don't need a tax credit (interrupted) 22 23 Vice-Chair Gardias: Of course, yes. 24 25 Ms. Silver: So they have to partner with a profit for profit entity. 26 27 Vice-Chair Gardias: Right. 28 29 Chair Fine: Ok, so let's go to questions from the Commission and as I was saying I'd also like to 30 hear your all take on whether this is ready to move forward to Council. A nice guide is kind of 31 on the, let me find it quickly, the first and second page there is executive summary with seven 32 bullet points. I think we probably should check through each of those and then add any others 33 or take them off as we need. The first light I see is Commissioner Rosenblum. 34 35 Commissioner Rosenblum: Is it appropriate to ask one of Ms. Bigelow some questions based on 36 her is that from a… is that permissible? Hi, I’m wondering… I have I just have a couple of quick 37 questions for you and then I also have some questions for staff. It might be easiest if you use 38 the microphone up here. So while you’re coming up the question I have is you listed a desire 39 for both inclusionary units and for in lieu fees that will give you the option of building more 40 flexibly and in lieu or inclusionary I suppose because it represents a different income group and 41 also because the units will be scattered throughout the City versus concentrated in one area. 42 But proportionally is there one of these categories that you're lacking more than the other? So 43 the explicit goal of this ordinance and I quote, is “adopting high in lieu fees for market rate for 44 sale housing would reflect the City's preference for seeing units constructed on site minimizing 45 the use of in lieu fees to truly special situations and fractional units.” I'm wondering if Palo Alto 46 Housing has a preference in terms of where you have a desire to push the balance one way or 1 the other? 2 3 Ms. Bigelow: Oh, am I comfortable answering that question? So I'm really familiar with the 4 BMR program because that's the program that I run and the development side of things is 5 another section of our nonprofit. So I can speak a little bit to what they do. We have currently 6 have 22 projects all across Palo Alto. Each of them maintains their own waiting list which are 7 long. They're very long. So there's clearly a need there, but the same could be said for each of 8 the BMR units at the new sites. It's… you need them both because they do address different 9 income populations. 10 11 Commissioner Rosenblum: Ok. 12 13 Ms. Bigelow: One without the other is you're missing sections of the population that need help. 14 15 Commissioner Rosenblum: Do you happen to know or someone from City staff happen to know 16 we have been missing our goals as a city as mandated by RHNA on every category of housing I 17 believe, but some probably worse than others. So in this construct if the in lieu fees generally 18 go for very low income whereas the inclusionary units are more appropriate for slightly higher 19 income, but still moderate to low and where is the gap the largest? And I apologize I could look 20 this up too, but I just I hadn’t thought of it until Ms. Bigelow was giving her opinion. 21 22 Ms. Gitelman: You know maybe Eloiza can confirm this, but I recall when we updated the 23 Housing Element last we actually had a bigger gap in the moderate income category. And I just 24 wanted to step back and clarify for a moment with the ordinance and the fees before you all of 25 the resident the residential rental fees and all of the commercial fees are go directly into the 26 fund which is used to provide money to low income housing developers and generally net low 27 and very low income units. It's just the ownership residential side where the ordinance has a 28 preference for getting the units onsite and it's on packet Page 224 is the section of the 29 ordinance that says that you can pay a fee instead of providing the units onsite if we can find 30 that it's not feasible to provide them onsite. 31 32 We also do get some fees from ownership projects because of fractional units or in this 33 ordinance for the first time we'll be charging fees for the first and second unit provided in 34 mixed use developments. So currently we only charge… we have an inclusion requirement that 35 applies to projects of five units and above. With the ordinance we're imposing that 36 requirement on projects of three units and above and for the first time we're charging an 37 impact fee when units number one and two are in a mixed use project. And it's really because 38 we've seen a lot of development proposed Downtown whether it’ll be like one or two 39 penthouse units and we're thinking like jeez, those the Nexus study clearly shows those have an 40 impact on affordable housing and we should be able to capture the impact fees from those 41 units. 42 43 So there are there's no question that with the fees that are proposed in the structure of all of 44 this we are going to net funds into the Housing Fund that could go towards the provision of low 45 and very low income units. We are also going to continue to have an inclusionary program that 1 generally will net moderate income units. That make sense? 2 3 Commissioner Rosenblum: I’m having trouble actually [unintelligible] 4 5 Ms. Gitelman: Ok. 6 7 Commissioner Rosenblum: And so I’m going to [unintelligible]. I think it’s incumbent maybe on 8 me to like go through [unintelligible]. I find the explanation to be a little circuitous and it's hard 9 for… because ultimately I guess if I ask the question a slightly different way. There are two 10 things that I think would be really useful. If it is the case that in lieu fees and inclusionary units 11 service two different groups then in your summary presentation I think that something that 12 would be really good is first outline the goals of the program. So with this ordinance we want 13 to do what? And it seems like last time we had this discussion you said, well, we'd like to raise 14 the total amount available for affordable housing and based on this ordinance the paragraph 15 that I saw it seems like there is an attempt to shift or to have a preference for sites built or units 16 built onsite and so part of the analysis would be to show why. Why there is that preference 17 and what need it's addressing. 18 19 Now the other piece of that if you are trying to actually raise the total amount of money 20 available in some way that is my second question. So I wanted to confirm it is staff's opinion 21 that raising the impact fees by this level will increase the amount of money that is available for 22 affordable housing. So once this goes into effect your belief is that next year there will be 23 enough projects times this new impact fee amount that will equal a greater amount of money. 24 And that's your considered opinion. Is that correct? 25 26 Ms. Gitelman: I think because we're raising the fees our feeling is that ultimately it will net an 27 increase in funds for affordable housing. Now as we pointed out in the staff report it always 28 depends on the economic cycle and how many projects you get of what type. So it's hard to 29 predict exactly what (interrupted) 30 31 Commissioner Rosenblum: Yeah. 32 33 Ms. Gitelman: Next year will look like or the year after that or 10 years from now. But 34 (interrupted) 35 36 Commissioner Rosenblum: Yeah, but this is like when we talk about like 100 year floods versus 37 10 year floods. So like barring an act of God sort of thing, like based on standard assumptions 38 that next year will look like this year, you believe that raising these impact fees if we assume 39 the next five years are like this year for example that the total amount coming into the coffers 40 of Palo Alto Housing will increase based on these fee increases. 41 42 Ms. Gitelman: That's right and in the in the staff report on Page 11 we talk about if we produce 43 the same number of units next year with these new fees that we did last year we’d get $2 44 million more in the fund. 45 46 Commissioner Rosenblum: Yeah. By the way this is a criticism of the analysis that I have and 1 just to be really blunt about it the elasticity is not at all in the elasticity analysis and you've 2 admitted that and said it's very hard to do it, but it is just a graph showing that if $2 are added 3 to impact fee then you take $2 away from land value and so it's not very revealing. But that 4 comment to just again to be very direct on it is the same. Saying assuming we build exactly the 5 same number of units we'll make this much more because we’re multiplying by a higher 6 number, but the entire point is that there's a fear that when we raise that the impact fees this 7 much that people won't want to build and so that that's the crux of the matter. And so you 8 know these are my questions. 9 10 So I wanted to understand a couple yeah, I'm sorry about that. I called you up. That was my 11 only question. I apologize. 12 13 And so I think that this is still I appreciate that some graphs were added, but I don't think it gets 14 the crux of the matter. And when this goes back to Council I don't know if there are cycles for 15 additional analysis, but the way that I would do it is clearly cities occasionally adjust their 16 impact fees. And so when a city adjusts its impact fee by a giant amount if that ever happens, 17 so we're proposing in some cases tripling the impact fee, what happens to building 18 applications? And so that would be the closest thing to what I'm talking about. So if there is 19 any regional city that suddenly took their impact fee from $20 to $60 something per square 20 foot what happened? And so that would be the sort of thing that people say ah yeah, it does 21 turns out doesn't really change that developers make so much money anyway that they still 22 develop. And so that would be a nice thing I think for Council to be able to have a rational 23 discussion on this because otherwise of course if everything remains the same in terms of 24 number of units being built times a higher number will result in higher number, but the fear is 25 that will decimate our Housing Fund. And I think it's a real fear like it's something that doesn't 26 really make sense to me that we can get away with just raising our fees by that much and not 27 expect that it affects the desirability of development. And I get in that impact fee analysis that 28 it shows a return on capital that seems acceptable. 29 30 Ms. Gitelman: In addition to that I would add that the impact fees are such a small percentage 31 of total development costs that while it might factor into someone's decision it's a I guess in our 32 opinion it's not the make or break for a project going forward or not. There are so many other 33 factors that a developer would take into consideration. The other thing I'll point out I don't 34 know if this got to the Commission we got a very late comment before this evening's meeting 35 from the Silicon Valley at Home (SV@Home) organization and they actually made a suggestion 36 about monitoring and evaluation and staggering the fees. So if you’re going to raise the fee a 37 high amount phase them in and then monitor and evaluate after a they're suggesting after a 38 three to five year period to see if they've had the intended effect. So that might be one thing 39 for the Commission to consider recommending. 40 41 Commissioner Rosenblum: I just had, this is a little bit of a one off question. Your slide on Page 42 10 I'm just wondering if you can explain it to me because I'm not sure I get it. So for example, 43 single family detached the blue bar is $90 million and the orange bar is $25 million. Then SF 44 attached townhouse is $17 million. I don't get these numbers are. 45 46 Ms. Srivastava: They are based on the prototypes that we looked at. So… 1 2 Commissioner Rosenblum: Is this per unit like a single (interrupted) 3 4 Ms. Srivastava: No. The single family detached I don’t know if I can look up the exact number is 5 a 30 unit project and I think the single family attached is smaller. It's 10 units. And the 6 condominium is 35 units I was so they're all different. They're all different sizes. And I only did 7 this to be able to show you what we look at as variables when you do a financial feasibility 8 analysis and kind of what the theoretical approach is. And so the blue line is showing you if you 9 sold those all of those units those single family detached units what is the total revenue, the 10 total cash that on the revenue side. And the orange bar is showing you what’s the total 11 development cost which includes the cost of construction, the cost of other permits and fees 12 the City already has in place, and other types of soft costs and financing and developer profit. 13 And now the reason I wanted to show you this graphic was just to show you that there's a big 14 spread between those two that is intended to cover the price of purchasing the land as well as 15 any other types of fees that you may impose. So that's really the room that you have to work 16 with or as a developer. 17 18 When we've spoken to developers about how they think about impact fees they've said we 19 factor it into the cost of the land. So if a jurisdiction were to raise their impact fees it would 20 affect how much the land is valued at for a specific developer. So they would either the 21 landowner would be able to sell that property and see it as a fair price or they would not. So 22 when we do those graphics and we show you those land value thresholds that's really what 23 we're trying to show is what is a reasonable amount that landowner can be expected to let go 24 of his land for? 25 26 Commissioner Rosenblum: Ok, good. Thank you so much. 27 28 Chair Fine: Thank you. Vice-Chair. 29 30 Vice-Chair Gardias: Thank you. By the way on this on the same graph that we just discussed 31 there is no value and costs for non-residential units. So I don't know if there is another slide for 32 that, but it was… 33 34 Ms. Srivastava: We did we did not do the analysis for commercial. That's correct. 35 36 Vice-Chair Gardias: Just you know if I may just ask couple of questions because it's interesting 37 graph, but I was wondering how many units of each type are being developed? I would 38 probably expect that that provide the benefit of that of the fee to the to the BMR Fund that 39 probably it would just shed some light on this how much money each category is making today 40 to the City. So you may maybe you can just provide the answer about the commercial units or 41 maybe you can just update this graph with the office units or commercial units so when it goes 42 to the Council there will be a better visibility. But I just want to go to the to your analysis so 43 when I look at this I have similar feeling that my colleague Commissioner Rosenblum has that 44 it's not very convincing. It doesn't tell me truly what is the rational decision here? It just 45 doesn't give me any pros and cons and it just looks like we can just go with any fee between the 46 blue bar and the gray bar if I’m interpreting this correctly and we’ll be fine. So we can just 1 maximize the fee to pretty much any way we want. 2 3 Ms. Srivastava: May I answer? 4 5 Vice-Chair Gardias: Of course. 6 7 Ms. Srivastava: Ok, well I think that the issue in Palo Alto that's probably unique to this City is 8 that the values of particularly for for sale homes are so high for new products that the financial 9 feasibility… these fees I think Hilary said very well don't make or break a project. The 10 imposition of these particular impact fees and so we did these analyses and I think they don't 11 tell you what fees you should set these impact fees at because our analysis is showing you that 12 those impact fees don't really move the needle that much in terms of whether or not a 13 development can be profitable. 14 15 On the apartments there is some policy guidance I think when you look at the results of the 16 analysis because you can see that the maximum feasible fee, I'm sorry the maximum Nexus fee 17 that we calculated that you that really captures the full impact would not be financially feasible 18 to implement. And so we have recommended a fee that is significantly lower than that in order 19 to not jeopardize the ability for development to move forward. So I think that that is where 20 there is a little bit more sensitivity to these impact fees because the cost and revenue structure 21 of an apartment project is significantly different. 22 23 Vice-Chair Gardias: I understand, but so when the last time when we when we had this review 24 with you we were of course looking for the optimal value of those fees so we can generate we 25 can increase the amounts that flows into that fund as much as possible. But also there was 26 some other element that I was expecting and I hope that your presentation would provide and 27 I'm sorry just to say it, but it doesn't provide this answer that would be rational disregarding 28 any maximization of the of the inflow of the of the dollars. I was looking for a rationale to 29 justify this or any other price. And I just need to say that it really doesn't provide this guidance 30 to me at least. I don't know what my colleagues would be saying, but you know so for this 31 reason I would be really hesitant to recommend to the Council this or any other fee because I 32 have no really basis, scientific basis, just to make this judgment. 33 34 I was expecting that you would provide some sort of like if you remember we had on the Econ 35 101 tax utility graphs that was showing us how much of the increase or decrease in the tax 36 because this is just a tax, right? What would increase or decrease revenue to the to the 37 Treasury coffers. So that's the same, that's the same exercise as tax utility curve. So that's just 38 talking about general view of this analysis and I hope that you will be… so again I will repeat this 39 what I said, right? So I will be really hesitant to recommend this to the Council. This will be my 40 stand when we're going to take a vote. We'll go go through the ordinance, but in terms of just 41 me justifying and just providing a vote for this I just don't have any basis, sorry. 42 43 But there's a couple of other items that I would like to discuss with you. So there is in terms of 44 the I would like to make this comment that in terms of the although there is a room as your 45 graphs show to pretty much to decrease those fees or to increase those fees and then just 46 listening to Director Gitelman that saying that it's not significant value in the overall 1 expenditure for developers there is always in the financial analysis there is a idea of an 2 increment that may at some point of time may stop some development or some expense 3 because that slight increment it just happens at any time and then pretty much burdens the 4 whole organization that would be developers organization or some other housing organization. 5 So I totally disagree with the suggestion that from the percentage value it's it may not have an 6 impact because there is a knowing financial analysis sometimes the small increase in the total 7 expenditure it just causes that developer may jump from the one category of the expenses into 8 a larger category of the expenses and that small incremental value may make a difference. Just 9 to give you a picture, say that developer’s budget is below $10 million and he operates below 10 $10 million line. If that fee is going to just increase his cost to $10.2 million that's going to be 11 totally different category. Thank you. 12 13 Ms. Gitelman: Yeah, I just wanted to acknowledge that this is a difficult policy area for any 14 governing body or commission to weigh in on. And I think the Finance Committee of the 15 Council struggled with this as well. We've done these Nexus studies that provide bookends for 16 you. I mean they at one end they have the existing fees. You know we currently have fees not 17 for rental housing, but for commercial uses. And we have the in lieu, we have the in lieu fees 18 and the inclusionary program for for sale units. So that's one end of the bookend. On on the 19 other end of the bookend the Nexus study identifies the maximum justifiable fee based on the 20 impact that's been identified. And then below that the maximum feasible fee that we think we 21 could justify based on the economics of developing these projects. And then the 22 recommendation of the Finance Committee was somewhere between the maximum feasible 23 and the existing fee in most cases. 24 25 And that is as you say it's a policy call. It's not, there's no silver bullet. There's no like one 26 answer. And so this is something where you know we take public input, our thoughts and our 27 understanding of the development process and development cycle into consideration. And if 28 you feel like the fees are that we're recommending are maybe too high given the risk and 29 reward that many developers pursue you might want to recommend something on the lower 30 end of the scale, but we hope that you'll consider making a recommendation somewhere on 31 the spectrum between the two bookends. I think it would be really helpful for the Council at 32 least to hear what the Council's thoughts, what the Commission's thoughts are on this. 33 34 Chair Fine: Commissioner Waldfogel. 35 36 Commissioner Waldfogel: Thank you. Also I just want to thank staff for coming back with yet 37 another session on this and more information. I agree that it would be great to get valid supply 38 and demand curves for this, but I think that's a lot to ask for and was it thirty days? I think it 39 would take more than just examining a couple of data points to produce that so maybe 40 sometime in the future. 41 42 I mean I'm generally comfortable with the format I haven't heard any evidence that we are at a 43 knee in a supply curve with this pricing and that will shatter production of any of these forms. 44 And I assume that we're smart enough that if we did do that and we figured out that causation 45 was the fee and not the business cycle that we would step in and correct that. I would caution 46 us not to just overreact to business cycle though because I think that some developers will 1 point to the fee as the reason why they're not developing even though it there's just no 2 demand at that point in the in a secular business cycle. 3 4 Just one suggestion and then there are couple things I’d just like to take people's temperature 5 on relative. I mean one suggestion is if we're looking at 55 year terms to align with tax credits 6 we might just want to simplify the language and just use 55 year terms across the board. I just 7 think it's having to having applicants to document that they're using one form of financing or 8 another may just be a level of complexity and compliance that we don't want to deal with, but 9 that's more in your court then ours. A couple things I just like to take temperature on, one is as 10 we think about fees on housing we've exempted I think first and second units from this and I 11 understand the politics of exempting first and second units, but I'm not completely convinced 12 it's a fair choice to impose a fee on say every townhouse development, but not to impose a 13 similar fee on somebody just building a single house. Clearly there's not inclusionary option for 14 a single house so if the hypothesis for the fee is that it’s a substitute for an inclusionary unit 15 then perhaps that argument doesn't hold water, but if we think it's feasible I’d just like to take 16 people's temperature on that question. 17 18 And then before I get to response on that the second one is when I think of commercial non-19 office I wonder if we need some discretion somewhere in the process, Director or Council 20 discretion? Because I mean just throw out some hypotheticals; suppose somebody came in and 21 said I want to build a bowling alley, right? Just to throw out a crazy one that the community 22 might sort of enjoy. That's something where I could imagine that that a fee might actually turn 23 it from economical to non-economical. So I don't know whether there's possibly an exemption 24 for some of those uses or if somebody came in and said I want to build a medium sized 25 supermarket I mean up to you know up to our code limits. Again, I'm not sure that the fee that 26 the retail fee that makes sense for a high end computer store is the same fee that makes sense 27 for a supermarket. So I just like to see some discretion if that's a possible thing to supply and I 28 just like to take people's temperature before we get… So that's all I've got. 29 30 Chair Fine: Commissioner Tanaka. 31 32 Commissioner Tanaka: So yeah also thank you for your further analysis on this. I'm actually 33 with my fellow Commissioners on this. I was actually hoping for more than we got here. And I 34 realize that it's hard to do a precise supply/demand analysis, but I have to agree with what was 35 said before that this is not very complete in my mind. And I think that without that analysis we 36 are basically just guessing. And I don't think guessing is good. I think we should we should do it 37 based off of more thought than has been done so far. 38 39 In regards to the most recent comment I think that is something we should talk about more. I 40 think that's those are some innovative ideas and we should consider and consider whether we 41 should do that because it could help shape what we want in the community. So I'm actually 42 open to discussing that more and I'm not sure if I'm completely sold on it, but I think if 43 implemented right it might make sense. So that's all I had. Thank you. 44 45 Chair Fine: Alright, thank you. I've got a couple questions. And then let’s kind of tack towards 46 the ordinance itself, maybe take a quick break before that. So I agree with my fellow 1 Commissioners that I think we didn't get quite what we asked for in terms of this elasticity 2 analysis. As Commissioner Tanaka said we are kind of just throwing a dart and seeing where it 3 lands in between two bookends, which doesn't seem smart and it's a bit of a warning sign to 4 me that we're three times we're just tripling our fee and going far above what other cities have. 5 6 A couple questions, so Commissioner Waldfogel I think you were just asking about impact fees 7 for single family units detached, is that correct? 8 9 Commissioner Waldfogel: Yes, including single units (interrupted) 10 11 Chair Fine: Ok. Does anyone else do that around here or across the country? 12 13 Ms. Gitelman: I can't speak to right around here, but I know that other jurisdictions do charge 14 impact fees. I’ve worked in a jurisdiction where most of the new housing stock was big homes 15 for wealthy people and we did charge an impact fee for the first unit if it was a net new home. 16 So we would never charge it for a replacement unit, but for a net new home we did charge that 17 impact fee. 18 19 Chair Fine: Ok, so I would say that is actually worth exploring. On Commissioner Waldfogel’s 20 other point about discretion for commercial non-office uses I'm interested in that. I think that's 21 probably a whole other discussion and that it's going to get into what's included what's exempt. 22 Maybe we can use some boilerplate that the City already has in terms of its retail ordinance and 23 things like that, but I think it's an interesting pass to go down. 24 25 A few of the questions; which other cities are currently charging impact fees for rental around 26 here? Do we know of any? 27 28 Ms. Srivastava: Many of your immediately neighbors are. Well and close by neighbors: 29 Redwood City, Mountain View, San Jose, Cupertino. They're actually all listed in the report. 30 31 Chair Fine: Can you tell me the page numbers? 32 33 Ms. Srivastava: Let me see if I can find a page… And you’re interested particularly in rental, 34 correct? 35 36 Chair Fine: Yeah. 37 38 Ms. Srivastava: Sunnyvale also. I can point you to page… 39 40 Chair Fine: Is it on Page 235? Is that it? 41 42 Ms. Srivastava: Page 170 of your packet. There's a table called Comparison with Impact Fees 43 and In Lieu Fees in Neighboring Jurisdictions, Figure 712. And if you’ll kind of look at towards 44 the middle of the table there's a header called Impact Fees and you’ve got Cupertino, Daly City, 45 East [unintelligible]. And on the far right side apartments and those are the fees that are being 1 charged in those jurisdictions. 2 3 Chair Fine: Ok, and so we're looking at $50 a square foot in most of these other cities are on 4 $25. 5 6 Ms. Srivastava: The exception would be San Francisco and San Carlos and East Palo Alto which 7 are a little bit closer. 8 9 Chair Fine: Different. Ok, one other thing we haven't talked about that's in the ordinance is we 10 talked a little bit about it last time so I want to ask my fellow Commissioners what do you all 11 think about changing the in lieu fees from a percentage to a square foot basis? I know part so 12 I’m going to ask you why Commissioner Rosenblum. I know part of staff's motivation there was 13 to kind of line these all up so they're measuring the same way and so you can essentially cost it 14 out before the project goes through. Is that why you’re in agreement with it? Others? Yes, 15 yes. Ok. 16 17 And then there was one comment I believe from the Housing Corporation or from SV@Home 18 about the feasibility test being too stringent. Could you just expand on those like what are the 19 feasibility tests? What would your discretion be for those? 20 21 Ms. Gitelman: That's the point we talked about earlier that there is this provision when it 22 comes to the ownership units that when our project is three or more units and they are 23 required to provide inclusionary units you can only pay the fee instead if it's infeasible to 24 provide the units onsite. And that was really kind of at the City Council's direction. I think the 25 City Council was interested in setting a clear bright line and kind of a high bar because of the 26 desire to get moderate income housing and units onsite dispersed throughout the City as Mr. 27 Borock indicated, but that can be found on packet Page 224. If you wanted to look at those two 28 sections it's at the top of that page, Numbers 1 and Number 2 is where that feasibility test is 29 located. 30 31 I did while I had the microphone want to respond to Commissioner Waldfogel’s suggestion 32 about we might have a non-residential use that where we want to waive the fees. There is a 33 provision in the exemption section, so that's one packet Page 218. Basically it lists all of the 34 things that are exempt from this and the very last one is any nonresidential project otherwise 35 determined to be exempt pursuant to City Council resolution. So if there was this great 36 nonresidential thing that we really wanted the Council could adopt a resolution and exempt 37 from the fee. 38 39 Chair Fine: Ok. 40 41 Commissioner Waldfogel: Thank you. I didn’t make it all the way to M. 42 43 Chair Fine: And then so Director Gitelman in your opinion are these feasibility tests overly 44 stringent? I mean will this really make it hard for developers to pay the in lieu fees and will 45 they really be pushed towards the onsite? 46 1 Ms. Gitelman: That is the intention. Yes, I think with this test it will be hard for someone to 2 justify paying the fee instead of providing the units. 3 4 Chair Fine: Ok. So then I'd like to call out to my Commissioners that will essentially segment 5 what we're spending our affordable on generally towards the higher spectrum of affordability, 6 less though to low incomes. That’s a policy choice, but I see a thumbs down from one 7 Commissioner. 8 9 I think we should take maybe a five minute break. Just for a short little clearing of the mind and 10 then we can get back to the actual ordinance and go through a few of the items [atop]. 11 12 The Commissioner took a break. 13 14 Chair Fine: I'd like to make a [reposal] as we do consider moving this ordinance forward or 15 tabling it however we do, the Vice-Chair had a good suggestion that roughly we can think of this 16 in two ways. One is look at the impact fees and make recommendations around the fees 17 themselves and the other is around the ordinance itself. So let's actually start with the 18 ordinance. Is that good? Yeah, we'll discuss it. I'm not making a Motion quite yet, but just as a 19 reminder as I highlighted in the beginning the executive summary on Page 1 and 2 really does 20 have the major changes. And the areas that I think we have some questions on so far, let me 21 type these out as I do them, so one is the 99 year deed versus 55 years. Two is the feasibility 22 requirements. I'm not sure it's for tonight, but one was the possibility of charging impact fees 23 for single unit single family homes. There were some questions last round about a new impact 24 fee for market rental and ours is going to be $50. 25 26 Ms. Gitelman: I'm sorry, a new fee for? 27 28 Chair Fine: Sorry, the institute a new impact fee for market rental housing. 29 30 Ms. Gitelman: I am sorry I still didn't hear you. For new rental housing? 31 32 Chair Fine: Yes. 33 34 Ms. Gitelman: Oh yeah. 35 36 Chair Fine: Yeah, yeah. And so currently we don't have it. This is and this ordinance will include 37 it. So those are the four I've got. Are there other major parts of the ordinance you all would 38 like to flag and if so please hit your lights. Vice-Chair. 39 40 Vice-Chair Gardias: Thank you. So I would like to highlight a different item that we have not 41 spoken about yet and once I'm going to raise it I'm sure that you're going to say that Vice-Chair 42 you voted for this two years ago and of course I would agree, but also my response would be 43 that the time when we were just going through the Housing Elements the issue, the significance 44 of three units was not discussed at the time. And now it's just clear to me and I would like to 45 just raise some doubts about this. So in the ordinance we just talked throughout the document 46 about three units as being a subject of the of either fee or 15 versus 25 percent of the of 1 dedication of the inclusionary units given 15 or 25 percent rates. So I would like to ask you a 2 question what is the significance of the three units from your perspective? And I would like to 3 offer you my perspective so if you don't mind just me asking you a question. What is the 4 significance throughout our regulations, Palo Alto regulations, of the three units? 5 6 Ms. Gitelman: Well again I think that this is a policy issue. When the Housing Element was 7 being prepared everyone understood the current requirement kicks in at five units and above. 8 And there was a desire to get more inclusionary units and so the suggestion was made and 9 incorporated into the Housing Element to modify that policy and get to three or more. Jon is 10 pointing out that our definition of multifamily housing in Palo Alto is also three or more projects 11 with three or more units. 12 13 Vice-Chair Gardias: Thank you. So let me just allow me to offer my perspective on this. So I 14 know from the license regulations that for example, a non-licensed professional in the State of 15 California can design a building with four separate units and doesn't that individual doesn't 16 have to have a license. That’s the licensure law in the State of California. So there is certain 17 exclusion of those units to pretty much allow folks that are not professional just to do develop 18 housing with four units at the lesser cost. That’s the intent of this law. So that’s one 19 perspective that I am aware of. There is some other thought that I would like to offer you and 20 with the intention of returning to the five and above units because I believe that first of all we 21 can it's really hard to designate one of the four units based on the 15 and 25 percent 22 inclusionary units a percentage out of the three units. It doesn't pretty much calculate, right? 23 You cannot just make one inclusionary units out of three having 15 percent and 25 percent the 24 threshold. So that's number one. So I think that we should just go with go back to the number 25 five units subject of the inclusionary unit requirement. 26 27 Also there is another reason to keep four units and below not a subject of this requirement. 28 There is number of the small property owners specifically along El Camino that we may impair 29 with this law for development of their properties and by imposing another burden upon 30 themselves. And then when you talk to those owners they have two strategies either just to 31 maintain their businesses and their properties at the current shape or being bought by another 32 big developer. I talked to some of them and I couldn't find anyone that would be thinking 33 about developing his own property, adding stories for rental or for sale giving the small size of 34 his lot. So that's another reason for keeping those four and below as we had in the last 35 ordinance. 36 37 Ms. Gitelman: So I just wanted to clarify one point is that when we have this ordinance reduces 38 the trigger from five to three. If there is a development that is taking three units obviously 39 given our 15 percent requirement those units will not be onsite, but because the ordinance 40 reduces the trigger to three units they will then have to pay the fee. 41 42 Vice-Chair Gardias: Yes. And I totally understand this, right? But I just think that we should have 43 certain interest in the retaining a number of the property owners that have been with this City 44 for many years. They have certain interest in the City. Their families live here. They may have 45 businesses, small businesses that they support and those giving our interest in retaining retail 46 and some other service space we would like to keep those because of their small scale they are 1 more flexible than larger corporations in maintaining those, that service area. 2 3 Chair Fine: Commissioner Tanaka. 4 5 Commissioner Tanaka: Yeah, I was wondering if staff could point me to where you guys have 6 like the different costs of construction for residential and commercial? Is it somewhere in this 7 book somewhere? Do you guys know? 8 9 Ms. Gitelman: Yeah, we’ll look up what we have on costs in the Nexus study. I know it's going 10 to be slightly older data that we used to evaluate the prototypes. 11 12 Ms. Srivastava: There's cost data and all of the development costs for single family detached 13 and attached are on Page 166 and 167. Well, yeah, 166 in 167 of your packets and then the 14 costs for… yeah. So 100, I'm sorry, 166 shows single family detached and single family 15 attached. And there's a page break problem here so on Page 167 you'll see the costs for 16 condominium and apartments. There are they have different costs because they are different 17 product types. 18 19 Commissioner Tanaka: Ok. [Unintelligible] 167 now can you tell me what is the cost per square 20 foot for construction? 21 22 Ms. Srivastava: So the development costs for a single family detached the direct costs or 23 construction costs would be $155 dollars per square foot for single family detached. 24 25 Commissioner Tanaka: So ok, hold on. So let me make sure this makes sense. So the 26 construction costs is $155 dollars, right? Per square foot, is that right? 27 28 Ms. Srivastava: That's just for building costs, yes. 29 30 Commissioner Tanaka: Ok and this is going the proposal like say for instance on Slide 4 for a 31 market rate single family attached is $50, right? That's the proposed (interrupted) 32 33 Ms. Srivastava: That's right. 34 35 Commissioner Tanaka: Ok, so basically the what you're saying here is that the recommended 36 fee is roughly 30 percent of the construction cost. Is that what you're saying? 37 38 Ms. Srivastava: For the single family detached. 39 40 Commissioner Tanaka: Is that my, is that a correct understanding? 41 42 Ms. Srivastava: That’s correct; however, that doesn't include a lot of other development costs. 43 44 Commissioner Tanaka: No, I understand. I'm just trying to get a feel. 45 46 Ms. Srivastava: And land. Yes. Yes. 1 2 Commissioner Tanaka: Ok. So the construction cost essentially is increased by a third. Do you 3 know what it is for the other types of products so to speak? In terms of what percentage of the 4 construction costs it is? 5 6 Ms. Srivastava: I believe that there is actually a table that shows you that. Let me see if I can 7 pull that up. It might be in the executive summary. We actually look at it as a percentage of 8 total development costs. 9 10 Commissioner Tanaka: Ok. I'm just trying to get a just to keep it simple like in terms of 11 construction (interrupted) 12 13 Ms. Srivastava: Yeah. 14 15 Commissioner Tanaka: Like how many dollars per square foot and how much is the impact fee 16 of that? 17 18 Ms. Srivastava: Right. I'm just the numbers that I have that are in front of me are as a 19 percentage of total development costs. 20 21 Commissioner Tanaka: Ok. 22 23 Ms. Srivastava: So it's not the same as total construction costs. I just found the one for 24 commercial. I'm trying to find one for residential (interrupted) 25 26 Commissioner Tanaka: So a really simplistic way of looking at this then is what would cost $150 27 per square foot to build suddenly becomes about $200 per square foot. That’s another way of 28 thinking about it. Is that a correct way of thinking about it? 29 30 Ms. Murillo-Garcia: I'm sorry, could you repeat that? 31 32 Commissioner Tanaka: So what would cost $150 dollars to build per square foot now becomes 33 $200 per square foot with this increase, correct? 34 35 Ms. Srivastava: It would be more than that because (interrupted) 36 37 Commissioner Tanaka: More than that. Ok. 38 39 Ms. Srivastava: Because there are other costs including soft costs and land costs. So I 40 understand your question, I just don't have that calculation exactly the way that you've posed 41 it. 42 43 Commissioner Tanaka: Ok, ok. 44 45 Ms. Gitelman: So Commissioner Tanaka if you look at that same chart so packet Page 166 you'll 1 see that the total direct construction cost is $155 for single family detached, but the total 2 development cost is $272 per square foot. So it's quite a significant difference and that doesn't 3 include the land cost which isn't calculated on a per unit basis so or a square foot basis. So 4 that's why we can't give you the total. 5 6 Ms. Srivastava: I think generally speaking our total development costs for at least for the 7 multifamily housing were over $500 per square foot when you factor in land and everything. So 8 that would be 10 percent for the multifamily housing. 9 10 Commissioner Tanaka: Yeah, but I the one thing I was just thinking about is it correct to think 11 about it in terms of land value or is it correct to think about it in terms of when you’re actually 12 starting the build? Because isn’t this paid not when the land’s acquired, but when you’re 13 actually developing. These are impact fees, right? So isn’t the correct perspective to have is 14 [unintelligible] you’re actually constructing verses when you're buying the land? Because your 15 perspective is saying when I acquire the land that’s when the fee should be tacked on, but is 16 that the right way of thinking about it? Because these are development impact fees, these 17 aren’t land acquisition impact fees, right? 18 19 Ms. Srivastava: I think it depends on the timing of when (interrupted) 20 21 Ms. Gitelman: Yeah, it depends on the timing of when you buy the land obviously and I think 22 Sujata did a good job of addressing this issue in the memo we provided. It's packet Page 349 23 and it talks about the effect of housing impact fees on housing prices. And it really talks about 24 that it's land cost. It's the seller who is selling a parcel for housing development who is going to 25 get less for their parcel if the impact fees raise the cost of construction. I'm paraphrasing that 26 horribly, but (interrupted) 27 28 Ms. Srivastava: Right. There are two ways to look at it either a developer makes less profit or a 29 developer is not going to build a project that they are not going to make money off of 30 presumably, right? They’re profit motivated individuals. So what happens is that it gets 31 capitalized into the value of the land. That's traditional economic theory and there are I did cite 32 some studies if you do want to do some research on what the impact has been of implementing 33 impact fees on housing production and on housing prices, but what they found was that in 34 many jurisdictions the adoption of either an inclusionary housing program or new impact fees 35 didn't actually have a negative effect on housing production. There were other factors such as 36 local land use policies or regulations that delay development or that create other types of 37 development hurdles that had a greater impact on whether or not housing was built. So 38 without having done that supply/demand analysis what we did do was we drew upon some 39 literature. 40 41 The other analysis that was done was a study was commissioned after the end of inclusionary 42 housing policies for rental housing and it showed that eliminating the inclusionary requirement 43 on rental housing did not result in reduced rents. So the imposition of inclusionary housing 44 doesn't necessarily result in increased housing prices or increased rents and removing 45 inclusionary requirements also didn't seem to have a downward pressure on rents. So just 46 wanted to provide a little bit of that context as well. 1 2 Commissioner Tanaka: I guess what I'm just trying to understand is what the right perspective is 3 whether you think about it as the total cost of the project or you think about it as like a 4 development fee, right? And you think about it as you're developing and what percentage of 5 development cost is it? I'm not a developer so I don't really have that perspective. That's why 6 I'm asking staff for this perspective because the lay person might think that you would think 7 about it when you're actually constructing and you think about a percentage of your 8 construction cost. And if your construction cost is $150 and suddenly goes up to $200 that 9 might make you think a couple times about whether you’re going to do it or not. 10 11 How about for hotels? The hotels are one of the big revenue generators in Palo Alto. So what 12 is the do you guys know what the construction cost is of hotels per square foot? 13 14 Ms. Murillo-Garcia: That can be found on packet Page 89. 15 16 Ms. Srivastava: So Commissioner Tanaka was your question about development costs or hotel? 17 18 Commissioner Tanaka: No. I want to know what is the construction cost of hotel per square 19 foot? 20 21 Ms. Srivastava: For construction cost for a hotel for our analysis this actually just shows the 22 total per room cost at $150,000 per room. 23 24 Commissioner Tanaka: So what's the per square foot cost? Because we're this is a impact fee 25 per square foot, right? So we've got to look at things per square foot otherwise you can't do 26 the math. 27 28 Ms. Srivastava: So if you see it's actually on Page 85 of your packet, Figure 64 [or 6-4?] direct 29 costs for building and onsite improvements are $200 per square foot on hotels plus the cost of 30 parking. So we look at parking costs separately. 31 32 Commissioner Tanaka: Ok. It's about $200. So this is in a sense going from $200 to $230, right? 33 That’s another way of thinking about it. 34 35 Ms. Srivastava: Although not exactly because you do already have an existing (interrupted) 36 37 Commissioner Tanaka: That’s true. 38 39 Ms. Srivastava: Commercial linkage fee of $20. 40 41 Commissioner Tanaka: That's true. So it’s like 10 percent or a $10 increase. Ok. Yeah, I think I 42 still think doing a supply/demand analysis makes the most sense here. And I for me I think it's 43 good to think about it from the development point of view versus acquiring the land point of 44 view because I think that's I'm not sure that's the perspective that people have when they 45 actually develop. Because like for instance a lot of commercial properties they don't even buy 46 the land, it's just a ground lease and the land never changes value per se or never changes 1 hands. So I think it might be wise to actually look at from that perspective as well. You look 2 confused. 3 4 Ms. Gitelman: No, I'm I respect your opinion that there's a supply/demand relationship here 5 that we're not explaining and I guess all I can say is we didn't have the data to do that kind of 6 analysis and I just I don't think there is one answer here. I think there is a range of possible fees 7 that we could set. We don't know exactly what the impacts and revenue generation will be, but 8 we're hoping that you will make a recommendation that you think is a good kind of middle 9 ground between the bookends we've articulated and then if you're insecure that it might have 10 unintended consequences recommend in the ordinance how we can make sure to monitor and 11 adjust as needed over time. 12 13 Chair Fine: So I think we all appreciate that. I think whatever we do tonight it seems like this 14 Commission is going to be pushing for this elasticity analysis we've asked for, but I'd like to 15 suggest a few ways of looking at it if it is a very difficult thing to analyze. One, we could look at 16 recent cities which have raised their fees and kind of map those out based on the number of 17 square footage by different types. So if San Carlos for instance doubled their hotel impact fee 18 and hotel building dropped like we would see that. And I know that's not all else being equal, 19 but at least give an idea there. And so I would just float to my fellow Commissioners whatever 20 we do tonight it seems like that’s going to be part of this analysis. Commissioner Rosenblum. 21 22 Commissioner Rosenblum: Yeah, I want to move to a couple suggestions and then see what 23 staff thinks of these suggestions and then maybe this hopefully my fellow Commissioners might 24 see this as a basis for action on it. So the first is there's a lot of consternation around well what 25 if this just decimates development and therefore decides the Housing Fund. So the first is could 26 we stagger the fee year over year? In the memo that was submitted by Pilar which I find quite 27 a good document in general there's suggestion of doing this on a yearly basis. It feels like 28 development pipeline projects take longer than that and so I wanted to get staff’s recantation 29 that if there is a staggered, if the point of staggering is to see what happens so you raise the 30 impact fee by five percent per period do you have a sense for what a good period the City is for 31 understanding if the impact fees are having a chilling effect on development or not? Based on 32 your experience in planning is it something where well year by year you're not to learn 33 anything, but if you if you raised it every three years then you’d have enough data to say well 34 that hasn't really had a chilling effect whatsoever. Let's go with the next rationing of five 35 percent. Do you have an opinion of the [peer to city]. 36 37 Ms. Gitelman: Well let me let me step back for minute. I mean there are so many factors that 38 determine kind of how much development is going to happen and the fees we charge are part 39 of that, but the cost of financing, land cost, market conditions, rents you can charge, I mean 40 there are so many other things. Oh and legislative changes around parking requirements and 41 the height limits, I mean there's so many ways that (interrupted) 42 43 Commissioner Rosenblum: Yeah, all due respect I'm trying to find a way out of us saying we're 44 trapped because we're just guessing. 45 46 Ms. Gitelman: Yeah. 1 2 Commissioner Rosenblum: And so I think what we're trying to say well if our concern is that 3 we've completely misunderstood the market and therefore there's a slower curve. What I'm 4 asking for input on I understand it’s just… I understand that you're saying there isn't an answer 5 for that either. And so in this case I’m trying to throw everyone a lifeline to say if there is a 6 rationing is the periodicity logical to be per year or based on your experience having worked in 7 longer planning cycles is a year too short? 8 9 Ms. Gitelman: I completely understand your point. Typically we would phase fees in with an 10 annual increases and I've what I've had experience doing is annual increases taking over two or 11 three years to get to the total increase. I think Pilar’s suggestion that you look at the 12 effectiveness and impacts of the fees in a kind of three to five year window is probably good 13 because it'll take some real analysis to determine if there's been a downturn in the economy 14 and we aren't seeing as many units as we did in the past or as much money in the fund. It'll 15 take some analysis to determine what the cause of that was and what role the fees played in 16 that or didn't. See what I mean? 17 18 Ms. Srivastava: And also I would think that most development projects take at least about three 19 to five years from the time that they've been conceived of to when they're actually built. That's 20 typical for most Bay Area communities. So you'd want to give it some time to actually see the 21 real market performance. 22 23 Commissioner Rosenblum: I think that the relevant feedback mechanism though isn't the 24 construction of the building itself, it’s the application. So you'll get feedback. So you’ve raised 25 fees and then someone has to go and propose a project and then they put in an application. 26 And so based on a drop in applications you would be able to say well it seems like we've had a 27 downturn that has not affected it versus the time it takes to actually construct it. So based on 28 your experience, what is the delay between there's a whole process before an application goes 29 in. People have to arrange financing. They have to do a concept plan and I'm not a builder so I 30 don't know this. Is this something that you have experience with? So based on building 31 pipeline time periods how long is the average between concept and financing to application 32 going in? Is that a short period like i.e. generally within one year or is it a long period i.e. 33 generally multiple years? 34 35 Ms. Gitelman: Well it's generally multiple years and people will have a concept and they'll go 36 through the planning entitlement phase which in Palo Alto can take a year or more and then 37 they'll line up their financing, pull building permits, and start construction. So it is a multi-year 38 process. 39 40 Commissioner Rosenblum: Ok. So my first proposal would be then that that this does get 41 ratcheted. It feels like the proposal that is in the memo is short, meaning three to five years 42 and what you said normally you would raise it to the max to the proposed maximum within a 43 couple years. That feels very short because the planning cycles in buildings are probably quite 44 long and so if your whole purpose is to see if this had a negative impact you wouldn't get that 45 feedback. I don't know what the periodicity should be, but that's something that I would say 46 when this goes forward I would like to see some analysis to say this is the right period of ramp, 1 but the three year to full ramp seems low. Seems short. 2 3 Then the second issue is around what we're trying to incentivize. And I think there's also 4 concern around are we trying to incentivize more in lieu fees or in this case more onsite units 5 and then what that addresses. And we did a quick during the break we looked at the 6 proportion of RHNA commitments that the City has met and it's abysmal in the middle, for low 7 income for very low it's also abysmal, but less abysmal, and for moderate it's also abysmal, but 8 also less abysmal. So we fulfilled something like 23 percent of our commitment on very low, 3 9 percent of our commitment on low, and 20 percent of our commitment on moderate. So it's all 10 quite poor, but in the middle it's decimated. And so the second piece is to the extent that 11 we’re shifting at least based on the statement that was made in the beginning of this where I 12 think is aligned with the statement that Pilar has made around depth of affordability that there 13 should be concurrent with this ordinance some way to make units be affordable to households 14 earning 50 or 60 percent of the area median income seems to address this missing middle area. 15 And so that was the second area that I felt maybe some discomfort up here and so the proposal 16 would be to look at the depth of affordability as stated by Pilar as a as something to put within 17 this ordinance. 18 19 And then my final area is around the mix of fees. So I think what people are trying to address in 20 Palo Alto in general is lack of housing. And extreme area of that is lack of affordable housing, 21 but we have a lack of housing; we have a lack of market rate housing, we have a lack of BMR 22 housing. And so the final thing I would say is to the extent that we're monkeying with fees I 23 have no problem raising the fees for commercial developments over time and seeing what 24 happens, but I would suggest that concurrently we lower fees for residential developments and 25 see what happens. So in particular you seem to have in your analysis the most profitable unit 26 within residential would be single family units at least based on that bar chart that you showed 27 by far and yet we need smaller units in Palo Alto. And so I would suggest that we zone for what 28 we want. And so if we want more housing then we should be lowering impact fees on housing, 29 but specifically on multi-family or smaller units, rentals and do that concurrent to raising fees 30 on a commercial. 31 32 So those are my three areas. So again the speed with which we ramp, so ramp and then figure 33 out the speed. Number two is work on the affordability depth. And number three is consider 34 lowering the fees on housing while raising the fees on commercial. 35 36 Chair Fine: Other comments or Motions on this? 37 38 Ms. Gitelman: I just wanted to say you know acknowledge those comments. I think those are 39 insightful suggestions that could be part of a recommendation. The phase in, the objective that 40 if someone is building units instead of paying fees in those alternative mechanisms that are laid 41 out in the ordinance that we try and get the hit the sweet spot the low income units that we're 42 not getting any other way. And then the third point about lowering the impact fees on 43 residential I just want to make sure we're clear that currently we have no impact fees on rental 44 housing. So it's at zero. We can't lower it. On for sale housing we have the inclusionary 45 requirement and I didn't know whether you were suggesting that we lower that or we keep 46 that for for sale housing. 1 2 Commissioner Rosenblum: Yeah the recommendation includes fees for rental, yeah? 3 4 Chair Fine: $50. 5 6 Ms. Gitelman: Yeah, currently we don't charge a fee for rental and we're proposing to charge a 7 $50 per square foot fee. It would be a new fee. 8 9 Commissioner Rosenblum: Yeah, so it's a good point. I was I was anchoring on that. So my 10 proposal would be that we continue to charge zero for rental and for any other residential I also 11 want to see this get lowered over time. Now it's a the total amount of linkage fees so there are 12 other fees as well, the total amount of linkage fees on any housing I'd like to see go down while 13 the commercial goes up. So if our hypothesis is that this will increase the total amount of 14 housing funds available then we should be able to see an offset. Meaning we should be able to 15 get more if our guess or if our hypothesis is correct that total development won't go down then 16 it should be able to be offset and it would be more attractive for developers to be developing 17 housing versus commercial. So any rate if this is where we're going then I'd like to see the 18 funds come from commercial versus from residential. 19 20 Chair Fine: Commissioner Waldfogel. 21 22 Commissioner Waldfogel: Sorry, just a quick clarification question. I broadly support what 23 you're recommending, but if a developer were to release a building as rental and then 24 subsequently convert to condo would the impact fee be charged at the conversion? 25 26 Ms. Gitelman: There's an in lieu I mean I'm sorry inclusionary requirement when a building 27 converts to condo of 25 percent and I could find it in the ordinance or maybe Cara can help me. 28 29 Commissioner Waldfogel: Yeah, I just want to make sure that we're not creating a loophole 30 here if we go down this track. 31 32 Ms. Silver: It’s on Page 219 Section 16.650303. 33 34 Ms. Gitelman: There it is. So it says that for projects that convert existing rental housing to 35 condominiums or that remove existing rental housing 25 percent of the dwelling units in the 36 project shall be made affordable at sale price to very low, low, and moderate income 37 households. 38 39 Commissioner Waldfogel: So that's actually a higher threshold if the developer releases his 40 rental and then subsequently converts than if they release as condo. Is our intent? So it looks 41 like under this ordinance let's say you build a building with 40 units and Scenario 1 is that you 42 release them all as for sale units then you’re subject to the $50 square foot under the staff 43 proposal, but if I walk down this and that's actually it's $50 a foot whether it's rental or condo in 44 the staff proposal. In your proposal if we were to have a lower fee of something for condo 45 units, but no fee for rental units and then subsequently those rentals were converted to condo 46 the at the point of conversion there would be a 25 percent fee, 25 percent of those units would 1 be subject to I’m sorry. Yeah, “shall be made available at affordable sales prices.” So that's a 2 higher fee at a downstream conversion then at an initial release. I just want to be clear that 3 that's what we're talking about and I'm not sure that's what we want, but that's what's in front 4 of us. 5 6 Commissioner Rosenblum: Yeah, I don't know if you want me to respond to that? I haven't 7 thought that through. It doesn't seem bad to me, but it doesn't I haven't really thought 8 through this. 9 10 Chair Fine: I would say the question is if we want to keep them rentals then yes we make this 11 25 percent higher than the at sale. I don't know that's actually again a policy decision. If we are 12 removing this 50 foot per square foot thing we could just say and explore the possibility of 13 equalizing this 25 percent. 14 15 Ms. Gitelman: If I can interject Chair Fine? I think you're right. This is a policy question. This 16 actually comes from the Housing Element. The Housing Element has a policy that includes this 17 provision and I have to guess that it was put in because we wanted to discourage rental housing 18 from converting to condominiums. 19 20 Commissioner Waldfogel: Yeah and there's also the question of what existing means in this 21 language whether existing whether if something that's built subsequent to the development of 22 this of this ordinance I mean does existing mean at the point when the ordinance was passed or 23 existing at the point of conversion? 24 25 Ms. Gitelman: My attorney says at the point of conversion. 26 27 Commissioner Waldfogel: Thank you. It's wonderful to have an attorney. 28 29 Chair Fine: Commissioner Tanaka. 30 31 Commissioner Tanaka: Yeah, so I appreciate Commissioner Rosenblum’s ideas. I think the one 32 thing that I've heard from most of the Commissioners here so far though is that so far the 33 analysis hasn't been very thorough. At least certainly not to thoroughness that we expected, at 34 least the majority of us expected. And what I wonder is it's our duty as Planning Commissioners 35 to make sure that we give solid recommendations to City Council, right? That’s our duty. And I 36 wonder whether we're doing our duty if we just try to kind of wing it here or whether we 37 should really take the time to make sure that we're giving a solid recommendation. That we've 38 done our analysis, that staff has had time to do their homework so that when we make a 39 recommendation it's based on because a lot of the decisions are not as staff mentioned aren't 40 things that we could figure out. It's not like a website you could just edit every second or so, 41 right, and figure out what works. These are like decisions that take a long time to see what the 42 effect are and so it’s really hard to test and learn and we if we hadn't spent the time to do some 43 basic homework I'm concerned about whether the quality of our recommendation. So I just 44 wanted to throw it out there and get maybe other Commissioner’s feedback. 45 46 Chair Fine: Commissioner Rosenblum. 1 2 Commissioner Rosenblum: Yeah, I want to address that quickly and then I think I'd like to try to 3 make a Motion, but my opinion is actually most that the analysis has been pretty solid and 4 there's been a lot. And specifically the Nexus study is around the return on capital. And I think 5 that it's a or there's a number of variables that go in. It's pretty transparent, but to me that's a 6 great piece of analysis. 7 8 The only piece of analysis to me that’s missing and it's a big one is when you raise fees by this 9 much does the market for development normally collapse? And so I would like to see some, 10 you have a whole list of cities that introduced development impact fees and linkage fees and 11 what year. And so I think that at the very least saying what happened, just pulling the number 12 of development permits by year in the five years following their adoption of a new fee 13 structure. And I recognize that's not the same as actually statistically valid supply curve, but it 14 would be something where we can look and say oh, most of these cities actually it doesn't seem 15 to make that big of a difference. And I know the response will be well, you don't know what 16 even happened that the following year. It may have had an economic downturn or it doesn't 17 tell the whole story, but the very least we’re going to start to look at what happens when you 18 introduce fees. 19 20 So I just wanted to [unintelligible] because I think staff did great. Like this report is very good 21 and our understanding or at least my understanding of what the incentives are in development, 22 but where it doesn't really help me is it's not just a Palo Alto market, it's a regional market for 23 development. And so what happens when one city dramatically raises its fees? And so most of 24 my qualms would be addressed by graduated schedule and I think that then I don't have a lot of 25 fear. Like I feel like we can retract if things seem to be going off the rails. So I just want to look 26 at my fellow Commissioners, do we feel like we can start to build at least a series of 27 recommendations or do we still want to have more questions and discussion? 28 29 Chair Fine: I think we do have a pretty good consensus on the idea of staggering, on elasticity 30 data, looking at the depth of affordability. The two that I'm not so clear on yet, actually there's 31 three, so one is the deed restrictions whether it's 99 or 55. Two is whether we're charging the 32 $50 per square foot for rental. And then the last one and that we haven't touched on yet is the 33 feasibility requirements for onsite and whether they are too onerous. So I think I think we have 34 some consensus on two or three of items. There are two or three we still need to get through. 35 I think one of the easy ones hopefully is the deed restrictions. It seems like you know we could 36 leave it to the Director's discretion or we can just change it to 55, recommend a change to 55. 37 38 Commissioner Rosenblum: Yeah so with the Chair’s permission maybe I could try to knock out a 39 couple of the ones that seem less controversial. 40 41 Chair Fine: And then we can add to it. 42 43 Commissioner Rosenblum: And then get down to the ones that we want to discuss further. 44 45 Chair Fine: Please. 46 1 MOTION #1 2 3 Commissioner Rosenblum: OK, so the first recommendation or Motion is that we recommend 4 that the fee schedule be phased in from the current level. Well, let me just… a fee schedule for 5 commercial be phased in from or I’m sorry for non-residential be phased in from the current 6 level to the Finance Committee direction level over and I'm going to throw a number out here, 7 over a five year period in equal amounts. Anyone want to second? 8 9 Chair Fine: I’ll second that. But let's actually put a couple of these together and then we’ll... 10 11 Commissioner Rosenblum: So actually I'd like to just get this one out the way first. 12 13 Chair Fine: Ok. 14 15 Commissioner Rosenblum: I think it's going to get increasingly controversial. 16 17 SECOND, AMENDMENT #1 18 19 Chair Fine: Sure. Well, I would second that. I'm going to… are we just going to do this ad hoc I 20 guess? Yeah. I’ll add one about asking for increased analysis of the elasticity of these impact 21 fees. Whether it is what we just described in terms of looking at the cities that have raised their 22 fees and just a basic analysis of what the downstream effects have been. Do we have a second 23 for that? 24 25 SECOND 26 27 Vice-Chair Gardias: I second it. 28 29 Chair Fine: Ok. Commissioner Tanaka. 30 31 Commissioner Tanaka: Just a point of order. So we have a Motion on the floor so you can’t 32 make, you can’t… 33 34 Vice-Chair Gardias: If you don't mind I just I'd like to propose I mean there is a proposal from 35 Commissioner Rosenblum and in regards to this I'd like to just repeat his intention just to keep 36 this as a separate Motion and then just decouple it from the Motion, potential Motion on the 37 on the ordinance. It would just help us to agree. 38 39 Chair Fine: So you're saying if we've got a Motion and a second let's vote on this little piece? 40 Ok. So let's vote on this piece that we recommend the fee schedule for nonresidential phased 41 in from current level to the Finance Committee recommendations over a five year period in 42 equal amounts. Do you wish to speak to your Motion? 43 44 Commissioner Rosenblum: No. No further comments on the Motion. 45 46 Chair Fine: Ok, I was the seconder. I don't wish to speak for it. Any objections? Commissioner 1 Tanaka. 2 3 Commissioner Tanaka: Do you can we make comments? 4 5 Chair Fine: Yeah, yeah. Please. 6 7 FRIENDLY AMENDMENT #1 8 9 Commissioner Tanaka: Ok, so I think in general it makes sense, but the one thing that I'm 10 always concerned about is when like from the dais we’re trying to make a policy on the fly. And 11 we're throwing out five years, but it could have been three years. It could have been two years. 12 It could have and so I wonder whether this should really be something that staff can sit there 13 and think about, right, and come back with a recommendation versus us trying to like figure it 14 out right now? Because we don't we’re absolutely winging it right now, right? 15 16 And so I was wondering whether we could do like a friendly amendment so I’ll make a, I’ll 17 propose a friendly amendment that what we do is we instruct staff to come back to us with a 18 proposal that's well thought out and researched that we could evaluate and then recommend 19 versus us in 10 minutes trying to figure out what the phasing should be. So I want to offer that 20 as a friendly amendment. 21 22 Commissioner Rosenblum: So the quick response to it the reason I did five years is arbitrary, but 23 I would accept the family amendment with a the condition that their recommendation is no 24 less than five years. My fear is that they come back with the recommendation as stated that 25 these are normally in two to three years and I think development pipelines are a lot longer than 26 that. And so I have a fear that we're going to adopt this and it doesn't the whole reason we're 27 doing this graduated schedule is to avoid this kind of development apocalypse where no one 28 wants to develop and then we don't have housing fees and then we're in a pickle. And I think 29 that if you just phase this in very quickly that that is essentially the same as doing it all at once. 30 I don't think you have any advantage. I picked five years as an arbitrary date, but long enough 31 that I'm pretty sure we'll start to get feedback. And so it's not entirely arbitrary and so I don't 32 know if you wanted to on a friendly amendment basis have a min, but I think that might need a 33 minimum. 34 35 Commissioner Tanaka: The point of my friendly amendment is really to give staff time to make 36 the recommendation back to us. When they looked at the different options it might be five 37 years, it might be seven years, it might be three years, it might be whatever, but just something 38 where they can rationally have the time. Because we’re asking them on the spot to say 39 because they got a comment in which they we just got on our dais I don’t know, 20 minutes 40 ago. And so and so it’s a little bit unreasonable to expect staff to have a really well thought out 41 plan. So I guess my point is I'm fine with having a minimum of five years, but my main point is I 42 want staff to actually have a chance to think about it and then make a considered 43 recommendation back to us so they have time to do their homework. 44 45 FRIENDLY AMENDMENT #1 ACCEPTED 46 1 Commissioner Rosenblum: Yeah, so I accept the friendly amendment. So I’ll restate as I 2 understand it which is that we recommend that nonresidential impact fees be raised from 3 current level to Finance Committee recommended level over a period that shall be 4 recommended by staff at the next meeting. 5 6 Ms. Gitelman: Chair Fine if I can interject? I just want to be perfectly open about this. I think 7 this is a policy call. You're sending us off to do analysis that we can't do. We can tell you what 8 our experience is; I think I've already done that. We can tell you what the stakeholders think 9 the period should be and you have a comment to that effect, but there's no analysis that we 10 can do that will give you the answer to this question. It is really, it's really up to the 11 policymakers. And I think the Council would benefit from your recommendation. They might 12 benefit from a staff recommendation, but there's no one answer that we're going to be able to 13 give you. And I would urge you to just make a recommendation on this tonight without 14 referring it back to us on this question. 15 16 Chair Fine: Vice-Chair. 17 18 Vice-Chair Gardias: If I may in the same spirit that colleague Tanaka was speaking about so that 19 despite of our recommendations say that we are going to go with the proposal of 20 Commissioner Rosenblum, but that fee schedule it would be still a subject of a change given as 21 some discovery that we may have down the road. Is this right? 22 23 Ms. Gitelman: I think the suggestion is to phase it in over five years so that if we see something 24 go amiss or awry we could make adjustments. 25 26 Vice-Chair Gardias: Exactly, yes. And then that discovery would come back to this Commission 27 because we would have annual analysis as we were talking about and then this annual analysis 28 would be submitted to this Commission. We would look at that those analysis and those would 29 be providing us with the impact on the BMR stock in the City or number of the submitted 30 projects. 31 32 Ms. Gitelman: Well I think the Commission always has the ability to hold a discussion on 33 housing production and related issues in the City. Truthfully fees are set by the City Council so 34 I'm not sure that the question of whether the fee should be changed or the progression over 35 five years should be stopped would come to the Commission, but you could always ask us to 36 agendize a discussion of unit production and we provide you the annual report that we do 37 every April and we discuss whether we thought the fees were having any impact. 38 39 Vice-Chair Gardias: Well the reasons that I inquire about this, right, is because that we would 40 have a clear path toward raising or adjusting the rates. Five years it's a long period of time, but 41 it may just put us on some trajectory that we may not want just let’s say that recession is going 42 to kick in next year and we will be on the path toward raising the interest, I’m sorry. Not the 43 interest rates, but the fees which would be pretty much inappropriate giving this imaginary 44 condition of possible recession. So for this reason there would have to be a change to stop 45 raising those fees, right, immediately if we see the signal from the market that it's collapsing 46 because of the outside reasons or because of the internal reasons. 1 2 Ms. Gitelman: And I'm agreeing that the Commission would be obviously interested in that 3 issue, what's happening in the marketplace. You would ask us to provide you with data on 4 housing production. We would come and have a discussion and you could make a 5 recommendation to the Council that we stop the phase in order or to make some other 6 changes to our entitlement process. 7 8 Chair Fine: Commissioner Waldfogel. 9 10 FRIENDLY AMENDMENT #2 11 12 Commissioner Waldfogel: Thank you. I just want to point out that could you go back to Slide 3 13 in the presentation because this is what we're discussing right now. So we're talking… if you 14 look at the categories the phasing here is retail, restaurant, other. The five year phasing is $0 15 dollars per year. So that's easy to calculate. The hotel phasing is what is that? Two bucks a 16 year, a little less. The office phasing is the one that matters; however, we have to realize that 17 this is a marketplace where office is renting for $10 a foot per month triple net and so I mean 18 sort of having this argument about whether we’re looking at five year phasing or three year 19 phasing against those kind of rents just seems that really doesn't factor into rate of return for 20 any kind of office project that's taking place in this environment in my opinion. So and I 21 support some idea phasing, but I'd actually like to see I mean what I would suggest is maybe 22 jumping up to the $35 proposal in year one and then phasing off of that so that we at least get 23 something going. 24 25 Because I think we've seen from the Nexus study and from other data that staff have presented 26 that this is not going to send office development into a tailspin. I mean the general economy 27 might do that. I mean demand may drop. And if demand drops then no one will develop 28 anyhow regardless of the fee and we shouldn't change the fee if there's no demand. You know 29 that would be kind of silly, but it just seems to me that we're leaving money on the table. And 30 as a reformed sometimes running sales organization guy I hate leaving money on the table and 31 it just feels like we're leaving a lot of money on the table if we phase this in that slowly without 32 taking anything that we can sooner because we're just talking about this one category. So I 33 don't know. Would you accept a friendly amendment to at least jump it up to the February 34 [two sixteen] proposal in year one and then phase it off of that so that we at least get a little bit 35 going and don't leave as much on the table? 36 37 FRIENDLY AMENDMENT #2 REJECTED 38 39 Commissioner Rosenblum: No, I don't. I don't I just disagree with your analysis that we've been 40 shown that these fees will have no impact on the development of office. And so I agree that 41 we're talking a fairly narrow thing. It’s really office R&D and we’re talking about five years to 42 get up there. So in year one would be 1/5th of this so it’d be you get up to $28 versus your $35. 43 In terms of money left on the table the whole point is that we don't know if the if adding these 44 impact fees will lower or raise the total amount we raise. 45 46 Commissioner Waldfogel: But the point is conversely we don't know that they will that this will 1 have any impact. I mean it could be that raising it to $100 has zero impact. I mean we we’re in 2 this state of it’s not quite blissful ignorance because we've been presented a lot of data, but I 3 don't think there's I don't think we’ve seen any evidence. I mean all that we have is kind of 4 Reagan era anecdotal economic thoughts that when you raise prices people buy less of 5 something, but that's kind of unsophisticated economic analysis. I mean it really depends on 6 the shape of the supply and demand curves and you have the demand curve is just driven by 7 the economy and by the availability of venture capital and supply curve is driven by willingness 8 to develop. 9 10 Commissioner Rosenblum: Yeah, so all due respect because we don't know the supply curve I 11 disagree with the assertion that we're leaving money on the table. We don't know which way 12 the money goes. And so I reject the friendly amendment. 13 14 Chair Fine: Commissioner Tanaka. 15 16 Commissioner Tanaka: It's I think moot because it got rejected, but anyways I guess one 17 thought I had I don’t want to send us on too many different threads is one of the items on the 18 table is also whether we should really get that sensitivity analysis that we’ve asked for last time 19 and we all kind of really want this time as well. So, but anyways I think maybe we could talk it 20 out later, but that's something that is something that because I think a lot of us feel strongly 21 about wanting to have that. So if that's the case I think even though staff has mentioned that 22 they want us to make on the fly decision right now it may, it works I think this current Motion 23 as currently amended. Probably means that we could also do this and save the analysis as well. 24 25 Chair Fine: So I think that would be the second item, but we are planning to make a set of 26 recommendations and so it seems like we've come to some agreement about the phasing in of 27 the fee schedule over no less than five years in equal amounts. 28 29 Ms. Gitelman: I think the… I think the Motion on the table was Commissioner Tanaka’s though 30 that we that you wouldn’t make a recommendation, you would ask us to do some additional 31 analysis on this issue which as I indicate I'm not sure we can do. 32 33 Commissioner Rosenblum: I'm comfortable with that. You despite your pushback and I respect 34 the pushback, but I think that this is the most arbitrary piece which is that I recognize that it's 35 difficult to come back with a recommendation, but I'd still like to support this. Meaning City 36 staff has a lot more information that hasn't been presented over the length of time that it will 37 take to see the effect of a rise in fees and based on your considered opinion I think that would 38 be, it would be useful to say we think that the phases that it should be phased in for N years 39 because this is normally how long it takes to bring projects through to application and to have 40 some logic for the phasing. Because I could have picked you know 10 years or 5 years. 41 Commissioner Waldfogel made an argument to say well, let's take one chunk of it off the table 42 at least one year and the only reason I’m uncomfortable with any of those is I just want to have 43 the time period that seems like we'll get a feedback loop. And so I am asking for your input 44 even though I know it's difficult. And so I think that the Motion is with Commissioner Tanaka’s 45 friendly amendment is that for nonresidential that we begin a graduated schedule from existing 46 fee to the Finance Committee recommended fees over a period as that will be determined after 1 the recommendation of staff, but that we work on a graduated basis and that we are going to 2 decide the time period after seeing recommendations from staff. 3 4 Ms. Gitelman: You know you of course can make this recommendation and decide that you're 5 going to send it back to us to do something that I'm telling you we really can't do other than 6 give you our opinion which we've tried to do here tonight, but (interrupted) 7 8 Commissioner Rosenblum: You haven't given any opinion tonight on the length. 9 10 Ms. Gitelman: Well I’ve indicated that in my experience fees are usually phased in over one or 11 two years. I think you've heard that it takes multiple years to get a project through the 12 entitlement phase in Palo Alto although I don't really understand how that relates to the phase 13 in period that you're suggesting other than that you don't want someone to experience a 14 change in the middle of their process. And I think this is a policy call. I mean it's like do you 15 want to raise the fees quickly and get more money sooner or do you want to take have a longer 16 period so you can evaluate the potential impacts over time? And either one is ok. 17 18 Chair Fine: Vice-Chair. 19 20 FRIENDLY AMENDMENT #3 21 22 Vice-Chair Gardias: So I'd like to just offer friendly amendment actually two. So the first one 23 would be similar to this what my colleague was proposing and I understand was rejected by the 24 Motion person. The friendly amendment would be that we would raise the fee in the [stepwise 25 moat] as proposed by Commissioner Rosenblum subject of revision after the annual review by 26 staff with Planning and Transportation Commission (PTC). So that's the first Motion [Note-27 friendly amendment]. 28 29 FRIENDLY AMENDMENT #3 ACCEPTED 30 31 Commissioner Rosenblum: Yeah, I accept that. That it will be subject to annual review. 32 33 FRIENDLY AMENDMENT #4 34 35 Vice-Chair Gardias: Thank you. The second the second item is that I'd like to propose a friendly 36 amendment to include in this step wise to start a market to impose fees on the market on the 37 rental housing at the level of the adjacent municipalities and then start increase from that level. 38 39 FRIENDLY AMENDMENT #4 REJECTED 40 41 Commissioner Rosenblum: So we're still just talking about nonresidential for this Motion. And 42 so I want to keep that, I’m trying to keep that clean. So if this is a friendly amendment then no. 43 Let's do that as a separate, let's get through this one first. 44 45 Vice-Chair Gardias: Ok. I put it on the shelf. 46 1 Commissioner Rosenblum: Ok. 2 3 Vice-Chair Gardias: For the time being. 4 5 Commissioner Rosenblum: So I just would like to ask the Chair for advice because I do accept 6 the friendly amendment from the Commissioner Tanaka; however, staff has said they just can't 7 provide that. And so at this stage I would say probably if we withdraw the friendly amendment 8 and change it to Council, we ask Council to ask staff to give a reasonable time period for phase 9 in of I would say a minimum of five years, but that would be maybe a way around this. But I 10 think from my perspective I don't love just picking an arbitrary number. I would like Council to 11 consider a number that makes sense for a given the length of time it takes to plan and put an 12 application (interrupted) 13 14 Chair Fine: So I think if Council doesn't like the number we give them they’ll change it. I think it 15 is helpful for us to give some number and from what I'm hearing from Director Gitelman it's 16 one or two years, from some of these folks who wrote in it's up to about three years, so to me 17 the sweet spot seems two or three years. If we want to be safe maybe we do three years? Or 18 we just choose five. 19 20 Commissioner Rosenblum: Again, I just to speak to my Motion because I didn't really do it the 21 first time because I didn't think that this would be that controversial. I think when people talk 22 about phasing in of policies and you talk about one to two years to phase in a policy correct me 23 if I’m wrong, but that's like an average policy. It's not talking about impact fees for commercial 24 developments specifically, right? This is just when you have a policy phase in that you generally 25 would do it over a couple of years. 26 27 Ms. Gitelman: Well for example we raised our development not our impact fees, but our fees 28 for service planning fees this year and we phased some of them in over two years. 29 30 Commissioner Rosenblum: Yeah. Ok, so that's a direct comparable. So my whole purpose in 31 doing this, the only reason why we're trying to do this because we don't have a supply curve 32 and so if we're trying to say we're trying to protect affordable housing fees, but we're unsure 33 how to do that because we don't know what the impact of these new fee structure would be 34 the way to get comfortable is say well it's going to take some time and therefore we can pull 35 back at any time. If we do this over a period of one to two years then it's the same as doing it 36 all at once to me. We’re going to learn nothing new after year one. And by year two we're 37 already at full fee and then it’s the horse has left the barn. And so if we are picking a number I 38 would ask to withdraw the friendly amendment and I would go back to my original five years. If 39 we're picking a number and letting Council decide if that's too long or too short. 40 41 Chair Fine: Ok. Commissioner Tanaka. 42 43 Commissioner Tanaka: Ok, so what I think you also have the option to reject the friendly 44 amendment and actually now that I think about it is I don’t think the seconder of the Motion 45 actually accepted it either. So in terms of protocol (interrupted) 46 1 FRIENDLY AMENDMENT #1 REJECTED 2 3 Commissioner Rosenblum: So I would just reject the friendly amendment and go back to my 4 original Motion so then if there are no more friendly moments it is (interrupted) 5 6 Commissioner Tanaka: Actually can I? So I guess one thing I wanted to ask staff and it’s 7 something which I asked last time and I don't know if you guys were able to do more 8 homework, but have you guys been able to ask or talk with developers about what they 9 thought about this and what the feedback was? 10 11 Ms. Gitelman: Well we obviously we heard from nonprofit affordable housing developers. You 12 heard from Palo Alto Housing Corporation this evening and we had a stakeholder meeting, but 13 it was prior to your last meeting and included in the staff report a summary of some of the 14 input we got from that meeting and then there was some subsequent correspondence that you 15 got at your last meeting. Since your last meeting we haven't had any additional discussions. 16 17 Chair Fine: Ok, so at the moment we have a Motion on the floor to recommend a fee schedule 18 for nonresidential be phased in from current levels to Finance Committee recommendations 19 over a period no less than five years. Are we still keeping the subject to annual review? Yes. 20 Vice-Chair. 21 22 FRIENDLY AMENDMENT #5 23 24 Vice-Chair Gardias: Just for clarity, so you accepted? Ok, thank you. I'd like to just have another 25 friendly amendment. We're talking about commercial only, right? So the friendly amendment 26 would be to lower, let me just restate it, to remove fees for known restaurant retail. Currently 27 they are you keep them flat. They are at $20.37 per square foot. There isn't that I'm proposing 28 this because it would be would go along the spirit of preserving retail in the City. I mean not 29 preserving, developing in this sense. Because I think that we if there is anything being 30 developed it's just a restaurant space. So if we get any development of the retail that pretty 31 much that’s the reason just to for giving them an opening. 32 33 FRIENDLY AMENDMENT #5 REJECTED 34 35 Commissioner Rosenblum: I agree with the logic. I haven't thought about it and I'm not sure 36 how to accept it because I literally have given it zero thought, but I know that I agree with logic. 37 I can’t accept it though simply because I haven't really thought much about this. I apologize. 38 39 Vice-Chair Gardias: Yeah, I haven’t thought about this much as well to be honest, but it was 40 reconciling with the conversations that we had on the retail. So I understand my colleague’s 41 comment. So what I would propose that and I don't have any other arguments, we don't have 42 analysis for this, right? Because there may be multiple questions so let's revisit this subject. I'm 43 going to take it off the table right now, but let's keep in mind when we hopefully going to meet 44 in some period of time we can revisit the subject how retail is being impacted by the current 45 fees and if we can just provide the opening for more retail non-restaurant retail development if 46 we pretty much zero out those fees. Thank you. 1 2 Chair Fine: Ok, yeah. Any other comments on this one or should we vote? Commissioner 3 Tanaka. 4 5 Commissioner Tanaka: I think the problem though is with the current Motion on the table it 6 would because I think Vice-Chair actually has a really good point about retail. I also haven't 7 thought about it. I just heard about it a minute ago. I don’t think any of us had a chance to 8 think about it, but I think this is another reason why this should go back to staff and the staff 9 actually thinks about it and tells us the pros and cons of why we should or should not do this, 10 but I in general I support the Vice-Chair’s idea. It's actually quite, it’s a good one. 11 12 Chair Fine: I think we're all probably going to think it's a good one actually. 13 14 Vice-Chair Gardias: If I may just add, right? This is just for the record, right? Not that we’re 15 going to just do anything today, but this there may be different areas that we would consider in 16 the future because surely we would not like to subsidize the Stanford Shopping Center or any 17 retail area in the Stanford Research Park. This would be mainly around the commercial centers 18 of Palo Alto and Mayfield as we pretty much this would not go beyond the boundaries to the 19 big guys, but it would be to pretty much protect the retail or develop retail within the interest 20 of the Palo Alto citizens. Thank you. 21 22 Ms. Silver: Yes. Thank you, Chair. So I did want to point out that the existing ordinance does 23 have an existing small retail exemption, so exemption for retail under 1,500 square feet 24 already. So that may serve some of the need. 25 26 Chair Fine: Ok. Commissioner Waldfogel. 27 28 Commissioner Waldfogel: Thank you. I think there are a lot of really good ideas that are coming 29 out here although I really don't want to design the fee structure on the fly because without 30 having some kind of spreadsheet that even with a static model that looks at revenue 31 production I think we could easily zero it out. And I also don't think that we have to be careful 32 not to zero out fees say for high end computer stores versus say shoe stores or something like 33 that. So we really have to consider the situation. 34 35 And I just want to say I mean I'll support the Motion as it's presented. I think five years is too 36 long, but I think that the Council will step in with their wisdom on what the right phase in 37 period is and I just think I would like to just make progress and push something along. 38 39 VOTE 40 41 Chair Fine: Ok. We can have more Motions after this one. Let's vote to recommend the fee 42 schedule for nonresidential be phased in from current levels to Finance Committee 43 recommendations over a period of no less than five years in equal amounts subject to annual 44 view. All those in favor? All those against? One. Ok. 45 46 MOTION #1 PASSED (4-1-1, Commissioner Tanaka opposed, Commissioner Alcheck absent) 1 2 Jonathan Lait, Assistant Director: Oh, I'm sorry, Chair? 3 4 Chair Fine: Yeah. 5 6 Mr. Lait: Just in the past you've given the dissenting vote an opportunity to speak. 7 8 Chair Fine: Sure. Sorry. Thank you for reminding me. Commissioner Tanaka. 9 10 Commissioner Tanaka: I think it's I kind of said it earlier, but I think we're winging it, right? I 11 think there's we've got some good ideas even on this current recommendation around retail 12 and it's really hard for us to kind of do this on the fly. These are ideas that we're thinking about 13 it and I think that we should try to make because these are some pretty big decisions and I think 14 it's for us it's important to make quality decisions or quality recommendations to Council. So I 15 just feel that in general actually I think it's probably not the Motion’s not headed in the wrong 16 direction, but I think that just in the process of the Motion there's been some ideas that 17 could've made it better. And I think you've got to imagine our Council is super busy, right? 18 They’re doing a lot of other things and it's really our job to do this kind of screening for them to 19 make sure that we do the hard work. I know it's hard for us to do that and staff it's hard for 20 them to get all the stuff, but I think it's really important for us to get our stuff together so that 21 when it goes to Council is fully vetted. Because if we kind of wing it and then expect Council do 22 it they're even, they have even less time than us. So that's why I think that we should really do 23 homework better. 24 25 Chair Fine: Thank you, Commissioner Tanaka. So the other issues I have on the plate that we're 26 going to talk about is the length of the deed, the feasibility requirements, and the elasticity 27 curve data roughly and residential, yep. So let's actually start with the residential side maybe 28 that's kind of connected to this. Can we go to the slide with the residential fees please? 29 30 And so the question here was given the City's jobs/housing balance do we want to recommend 31 increased fees in these residential uses? The new one of course being market rate rental 32 housing here it currently is at none and we're going up to $50 a square foot. So happy to 33 entertain discussion or Motions here. 34 35 MOTION #2 36 37 Commissioner Rosenblum: So I'd like to make just one discrete Motion which is that market 38 rental housing remain at zero and it we’ll take on the others as a package in a moment. Any 39 second on that Motion? And to speak to the Motion just quickly I think this is the kind of 40 housing we need. So if we are trying to first if the goals of this are to impact housing 41 affordability in number of ways then penalizing the development of rental housing seems 42 backwards. 43 44 Commissioner Waldfogel: I would support some number smaller than $50, but bigger than $0. 45 And the reason for that is that when I reflect on some of the projects that I've seen in the year 46 that I've been on this Commission we've seen things like four bedroom market rate rental 1 housing that doesn't really solve the problem and where it's to some extent it's just designed to 2 skirt around the fee structure. So I mean I think that it again we could have a more nuanced fee 3 structure. I don't think this is the time or place to design it, but I think that something smaller 4 than the other categories would be acceptable $10, $20, but I think $0 probably sends the 5 wrong signal since we're not being clear enough what we want to capture in that intent. I 6 mean if we were saying we want to capture small units, units under you know 800 or 1,000 7 square feet. I think that would be somewhat clearer, but again I just don't want to design that 8 on the fly tonight. 9 10 Chair Fine: Vice-Chair. 11 12 Vice-Chair Gardias: I was going to ask the same question that Commission Rosenblum just 13 asked. 14 15 Chair Fine: So I see a few lights. Commissioner Tanaka. 16 17 Commissioner Tanaka: So one that though that I had actually it was suggested by Commissioner 18 Waldfogel is what if we were to because there's a lot of really great ideas that we've all the 19 talking about, what if we were to assemble kind of a subcommittee of the Commission to 20 actually look at this in depth, kind of hash through a lot of issues, work with staff so that we 21 could get some really good progress, and then have a very solid recommendation for Council? 22 So anyways, but there's a Motion which I'm not sure had seconded yet, but that's something 23 which I’d like to also throw that out there. 24 25 Chair Fine: Vice-Chair. 26 27 Vice-Chair Gardias: So just from the formal perspective, we don't have a second? 28 29 Chair Fine: We do not yet. 30 31 MOTION #3 32 33 Vice-Chair Gardias: On this Motion so and I'm not willing to provide one. So if that means that 34 we don't have a Motion so I'd like to just propose another Motion. For the same for the same 35 line item to introduce a fee on the market rates rental housing at the level of adjacent 36 municipality which is Mountain View at the rate of $15 per square foot. 37 38 SECOND 39 40 Chair Fine: So the Motion of the floor is to introduce a fee for market rate rental housing at 41 level of adjacent municipalities around $15 per square foot. Before a second that let me look at 42 the table. I’ll second that. Do you wish to speak to your Motion? 43 44 Vice-Chair Gardias: Yes, so the reason behind this is pretty much that understanding the 45 intention that Commissioner Rosenblum provided I just think that there are some other reasons 46 here that we would be pretty much leaving ourselves out of the rental market by just being 1 noncompetitive because of different reasons. And then because everybody else around us has 2 the rental fee I think that we also because of the market forces we should include one as a 3 starting rate for eventual adjustment or some other increases as provided by the Finance 4 Committee. 5 6 Ms. Gitelman: If I can just ask a clarifying question? We're looking at the table in the report it 7 looks like Mountain View’s fee for apartments is $17 a square foot and Redwood City’s is $20. 8 So I'm just wondering if the Commission wants to choose one of those or (interrupted) 9 10 Ms. Murillo-Garcia: Yeah so that it’s on packet Page 235. So they were updated since the Nexus 11 study. There was a supplemental memo provided in I believe April and that’s in the packet. 12 13 Chair Fine: Mountain View $17. Redwood City $20. 14 15 Vice-Chair Fine: So in this case I would revise it to $17 as a pretty much introductory rate. 16 Starting this year. 17 18 Chair Fine: So although I am willing to support this. I think there is a good point made by my 19 colleagues here that we're kind of choosing numbers just based on our adjacent municipalities 20 and given that we weren't quite ready to look at restaurant non-retail we may want a 21 subcommittee on these things to essentially look at these different chunks that we think we've 22 got some consensus on the nonresidential side of things, but in terms of market rate rental 23 housing and non-restaurant retail it sounds like we're interested in exploring them more and 24 that may be a good place for a subcommittee for this Commission. 25 26 Vice-Chair Gardias: Yeah, I totally agree. I mean not only those two, right? We would just be 27 interested in all of them, right? 28 29 FRIENDLY AMENDMENT #1 TO MOTION #3 30 31 Chair Fine: Ok, so I'm going to make a friendly amendment then to explore the introduction of a 32 market rate rental housing impact fee via subcommittee. And let’s while we're at it do 33 restaurant nonretail. That was the one you proposed earlier (interrupted) 34 35 FRIENDLY AMENDMENT #1 FAILED 36 37 Vice-Chair Gardias: No, no, no. I would not accept retail and restaurant at this moment 38 because there may be this may be subject of a larger discussion. So I think it would be, hold a 39 second. Let me just take it back. The study should also look at the retail excluding restaurant 40 fee. So in terms of the research work yes I totally agree. 41 42 Chair Fine: So will the subcommittee include the? 43 44 Vice-Chair Gardias: Subcommittee research. 45 46 Chair Fine: Yes? 1 2 Vice-Chair Gardias: Yes. 3 4 Chair Fine: Will include both. 5 6 Vice-Chair Gardias: Would include both. 7 8 Chair Fine: Ok. 9 10 Ms. Gitelman: Commissioner Fine [Note-Chair] if I can just interject? I'm I think we're getting 11 the picture that the Commission does not want to make a recommendation to the Council this 12 evening, but we do have resource constraints. I mean you're looking at a staff team that's 13 really overburdened with a lot of work going on. So I think we can support a meeting of a 14 subcommittee, but if this is a long research project and multiple meetings of the committee I 15 think we're going to have a real problem giving you the kind of support that I think you're 16 looking for. 17 18 Chair Fine: Ok. I appreciate that. I just think we all feel this is not something to rush and you 19 know us painting numbers is a little dangerous given the impact of these impact fees. Can you 20 explain to me if there is any urgency within the City to pass these? I know there was a target 21 date for Council, but… 22 23 Ms. Gitelman: Yeah, well the Housing Element indicated that we would do this within the first 24 year or two of the Housing Element I think. I mean so we are overdue for this. We've been 25 promising to get this to Council for a year and it took longer than we thought at the Finance 26 Committee and we had to provide them with some updated information and then your this 27 Commission asked for updated information at the last meeting. So I mean we’re already 28 overdue and it's understandable if you want to take a little more time with this, but I think we 29 would like to move efficiently maybe one meeting of a subcommittee offline and get this back 30 to the Commission in short order would be good. 31 32 Chair Fine: We agree to that? Ok, I think you've got a consensus here from all of us. 33 34 Ms. Gitelman: Ok and I just to be honest there's not a lot of additional analysis we're going to 35 be able to do. We can of course bring to the subcommittee our professional judgment and 36 experience and have a further discussion of many of these issues. 37 38 Chair Fine: Ok, thank you. So the Motion here that we've got is to form a subcommittee to 39 explore the fees on the residential impact fees and on the retail non-restaurant. One meeting 40 subcommittee. All right, should we vote on that? Or do you want to speak to it or on it? 41 42 FRIENDLY AMENDMENT #2 TO MOTION #3 43 44 Commissioner Tanaka: While we’re at it I know staff feels like they cannot do anything 45 [unintelligible] analysis, but I think Commissioner Rosenblum has a really basic thing to do 46 which is look at neighboring cities. So maybe this is the subcommittee can also help get that 1 going as well so that when you come back to us again we're not like so where is the sensitivity 2 analysis or we have something, At least some data, something that something's better than 3 nothing at this point. So I’d like to make that a friendly amendment that we that’s another 4 thing the subcommittee could work on is getting some sort of and maybe [unintelligible] calling 5 [unintelligible] analysis is too much. Maybe look at what happened when the fees went up at 6 other cities. We don’t have to call it [unintelligible] analysis because that’s maybe too bold of a 7 goal, but let's look at what happened. 8 9 FRIENDLY AMENDMENT #2 REJECTED 10 11 Vice-Chair Gardias: So if you don't mind I would not accept it based on the same on this just to 12 pretty much align this work with the other work that staff would be doing. I think that this is a 13 valid request, but just not to piecemeal ourselves I would ask you just to have this request 14 aligned with the request that we had to the staff and just provide those analysis to us on the 15 annual basis. 16 17 FRIENDLY AMENDMENT #3 TO MOTION #3 18 19 Chair Fine: Ok. I'm going to make one friendly amendment that the subcommittee come back 20 to this Commission with a clear recommendation; so data behind it, analysis, reasoning, but a 21 clear recommendation that hopefully the Commission can just run with. 22 23 FRIENDLY AMENDMENT #3 ACCEPTED 24 25 Vice-Chair Gardias: Accept. 26 27 VOTE 28 29 Chair Fine: Ok. Any other comments? Alright, let's vote on this one. So we are recommending 30 we're going to form a subcommittee to explore the fees for residential and retail non-31 restaurant, a one meeting subcommittee to come back with a clear recommendation for this 32 Commission on those two items. All those in favor? Thank you very much. 33 34 MOTION PASSED (5-0-1, Commissioner Alcheck absent) 35 36 Ms. Silver: So chair will that subcommittee appointed by the Chair or do you want to have a 37 discussion of who should be on the subcommittee? 38 39 Chair Fine: Does anyone want to volunteer? Commissioner Rosenblum, Commissioner 40 Waldfogel, is that satisfactory to us? Ok, thank you. 41 42 So the items that I still see on my list and please remind me if we have more, there's the deed 43 restriction, there's the feasibility requirements, and there's the elasticity curve analysis. So I'm 44 just going to take one of these. The deed restrictions currently as it stands we're 45 recommending 99 years, but at the Director's discretion they can be lowered to 55 years for 46 low income housing tax credits. Is that correct? 1 2 Ms. Gitelman: Yes, I think that's what Cara suggested we add. 3 4 Chair Fine: Ok. And why did we choose 99 years? I’m just… 5 6 Ms. Gitelman: I think we were going for the longest duration of affordability that we could. 7 8 MOTION #4, SECOND 9 10 Chair Fine: Ok. So in order to promote the use of low income housing tax credits where 11 appropriate I’ll make the Motion that we recommend 55 years instead of 99. Do we have a 12 second? Seconded by Commissioner Waldfogel. I’m not going to speak to it. Would you like 13 to? 14 15 Ms. Gitelman: Chair Fine? Could I ask a clarifying question? 16 17 Chair Fine: Sure. 18 19 Ms. Gitelman: So is your intention that even the inclusionary units that are created in for sale 20 projects would only be restricted for 55 years or just that any units created as an offsite as an 21 alternative? 22 23 Chair Fine: So the deed restricted ones are, so the onsite ones are unlikely to garner low income 24 housing tax credits anyways, right? 25 26 Ms. Gitelman: That’s right. 27 28 Chair Fine: And given a rough building span of 50 years approximately I'm not sure it matters. 29 See I would say both. 30 31 Ms. Gitelman: Ok. 32 33 Chair Fine: Commissioner Waldfogel. 34 35 Commissioner Waldfogel: Yeah and just to something I don't know about these programs is 36 whether anyone ever refinances into those programs. Is this something that we have to think 37 about subsequent to the I mean are we setting it to 55 categorically? So that even a refinance 38 would qualify? 39 40 Ms. Gitelman: I'm not sure I understand the question. I think the Chair’s Motion is that the 55 41 year duration would apply whether it's an ownership unit that's built through the inclusionary 42 program or a rental unit that's built as part of an alternative (interrupted) 43 44 Commissioner Waldfogel: Ok, so we’re setting that across the board then at 55? 45 46 Ms. Gitelman: I think that's the Motion. 1 2 Commissioner Waldfogel: Yeah, ok. That's I’m good with that. 3 4 Chair Fine: I see a light from Commissioner Tanaka. 5 6 Commissioner Tanaka: Well my thought is since we formed a subcommittee why don't we just 7 have all these other items go to the subcommittee, have them hash out and figure out the 8 nuances? And maybe what we could use our time here to do is bring up other issues that we're 9 concerned about, want more exploration, and that way the subcommittee could work on those 10 items as well. 11 12 Chair Fine: So I think subcommittees are going to be helpful and I think in the past when it was 13 on this item though I think it's a pretty clear line where we're saying we want to be 55 so 14 projects can get low income tax low income housing tax credits. If we want those available for 15 projects here we need to make this change or they need to done at the Director's discretion. 16 So I'm I wouldn't support a subcommittee on this one, but I think there could be others actually 17 because I mean like what are we going to choose 54 or 56? It’s like 55 is what gets us what we 18 want and preserves the housing as long as possible. Is that fair? 19 20 Ms. Gitelman: I'm not sure what you're asking. I mean 55 is what was requested because that's 21 the maximum you can get and qualify for the tax credits. 22 23 Chair Fine: Right, right, right. So we wouldn’t do 56 here in Palo Alto. 24 25 Ms. Gitelman: No. 26 27 Chair Fine: And there's no point in us doing 54 really because then we're losing a year of 28 affordability. 29 30 Ms. Gitelman: Right. 31 32 Chair Fine: So 55 is pretty much the number. It’s that or (interrupted) 33 34 Ms. Gitelman: I think the two choices are you do 99 for the inclusionary program and 55 for 35 rental housing that's created in lieu of bank fees or you do 55 for both. 36 37 Chair Fine: So right now it's 55 for both? So should we vote on this? 38 39 Commissioner Tanaka: Chair can you restate the whole Motion just so that it’s all clear? 40 41 VOTE 42 43 Chair Fine: Sure. So we're changing the deed restrictions for both types for inclusionary and for 44 in lieu fees to a 55 year deed restriction. As it stands in the ordinance it said 99. And the 45 reason we're doing this is because of the need to garner low income housing tax credits. Good? 46 Alright, all those in favor? Five and O. Thank you. 1 2 MOTION #4 PASSED (5-0-1, Commissioner Alcheck absent) 3 4 Chair Fine: So the next items I've still got here are the feasibility requirements to produce to 5 pay in lieu fees instead of building it onsite and a increased analysis on elasticity curve. If 6 somebody wants to cue those up? Comments, questions, Motions. Vice-Chair. 7 8 Vice-Chair Gardias: Just giving the amount of the ask that we impose on the staff I would 9 suggest that this is part of the annual review that's going to occur after at the first review of 10 those fees. The request for the elasticity analysis would not be, we would not be asking staff to 11 provide soon. We would provide to, we would ask staff to provide us at the time of the first 12 annual review of the changed fees. 13 14 Chair Fine: I think the feeling and others should speak up was that before we choose those 15 targets of you know whether it's $50 or $60 we wanted to see that sensitivity analysis. I think 16 that was a feeling it may actually behoove us to look at each year again. I don't know if that's 17 too onerous for staff, but (interrupted) 18 19 Ms. Gitelman: Chair Fine if I can interject? I mean you did make this request at your last 20 meeting and we've provided you what we and our consultant can on the subject. I don't know 21 that we can give you what you're looking for. There would just be too many assumptions 22 involved in doing that kind of analysis and we just think it gets, it would not be fruitful and I'm 23 hearing from our consultant that she can't do it. 24 25 Chair Fine: Ok. 26 27 Ms. Gitelman: So I think alternatively what you've suggested that we poll other jurisdictions 28 who have raised their fees to see if they've noticed any change in their applications coming in 29 as a result of those fees and we can make some phone calls and see if we can glean anything 30 from them, but happy to do that, but that's short of the analysis I think that you're looking for. 31 32 Chair Fine: I think personally I think I would be a start. Commissioner Rosenblum. 33 34 Commissioner Rosenblum: Yeah. My recommendation would be it's not we’ll stop calling it a 35 supply elasticity analysis because I think that is a term of art and probably is beyond what is 36 achievable. In terms of what I would like as part of this new subcommittee in terms of the data 37 support it is a polling of jurisdictions that raised their impact fees and then a time series of say 38 the five years before and after. So for example, if you know a city X., Mountain View, adopted a 39 new 25 raise their impact fee for rental housing by $25 just making up these numbers in 2010 40 then I would want a time series of the number of rental unit applications that came on between 41 2005 and 2015. And on the Palo Alto City website I know not all cities are like Palo Alto, but we 42 have an open data portal and it has a number of applications by type by year. And so I've 43 downloaded that. I don't know how many cities have that available. I’m, well… yeah I literally 44 you know better than I do so if it doesn't exist, but it would be strange that it doesn't exist 45 because that is one of the functions of government is to get building approvals so or permits. 46 And so that is one of those numbers I'm sure every jurisdiction does have to have. And so 1 that's the minimum I'm just asking for is what was the raise of the fee in a time series that 2 brackets that raise five years before five years after. So and then I think Commissioner 3 Waldfogel and I will be more effective when we meet to discuss where we think a level should 4 be. We’ll at least be able to have points of comparison. Is that acceptable? 5 6 Ms. Gitelman: Well we can certainly contact the other jurisdictions and try and see if they have 7 the data available, can make that data available to us. I just don't know whether it's going to be 8 available or not. I also don't know whether you can draw causality conclusion from that that's 9 meaningful at all frankly. And maybe we'll get the data you'll see whether you can or you can’t. 10 11 Commissioner Rosenblum: So I don't know if we’re making a Motion on this, but I would be my 12 ask is that staff prepare a reasonable sampling of jurisdictions that have raised their impact fees 13 in the last 20 years and provide a time series of relevant building starts. So if the impact fee 14 was about rental housing then it's about rental housing permits five years before and five years 15 after as a time series. Is that or is this not something to bring to a Motion? I… it's a request. I 16 don’t know if it’s something that we want to make as a formal Motion. 17 18 Commissioner Waldfogel: [Unintelligible] that the Census has some building permit data. They 19 do, they do have some building permit data, but it may not be quite the granularity that we 20 want. It’s county level. 21 22 Ms. Gitelman: And just to clarify we're talking about the residential side here, right? The 23 residential rental or are you talking about other fees as well? 24 25 Commissioner Rosenblum: So it would be the type of development versus the type of fee. So if 26 a fee was adopted that affects office buildings in Mountain View then I'd like to look at office 27 buildings before and after. If it was [unintelligible] so similar to what we're doing we're having 28 a table of fees that we're adopting. So I want a match between the type of fee and the type of 29 permit. 30 31 Ms. Silver: So in my experience with when cities do increase their impact fees they don't tend 32 to increase individual fees. There's they generally hire a consultant, they look at all their fees. 33 So we're probably talking about 10 different impact fees going up at the same time and it's 34 going to be difficult to draw conclusions on which one of these impact fee increases caused 35 something. So that’s obviously something for the committee to consider, but I want to have 36 that expectation going in. Also I don't think we're going to find many cities that where that the 37 impact fees have gone up as significantly. You'll see something from a $1.37 a square foot to 38 you know $2.47 and maybe proportionately it's 100 percent increase or a 50 percent increase, 39 but it's just not going to have the type of impact on the development costs that could be 40 helpful. 41 42 Commissioner Rosenblum: Yeah I appreciate both points. It's a second point that concerns me. 43 Like if no one else does this, no one else just takes their fees and triples them in a year and so I 44 mean this by itself should be a big red flag to us and so this is part of if there is an impact even 45 from fairly minor fees then that would be another big red flag to me that it's not that you can 46 charge every you want within the limits of the studied return on capital and that it will all be 1 somewhat indifferent to a builder. But I appreciate the point which is we may not get out of 2 this what we want and it may still be inconclusive because no one compares to Palo Alto in 3 terms of the proposed raising of fees like the steepness of what we're proposing to do. It 4 maybe that no one does this. 5 6 Ms. Gitelman: And there are just so many variables. I mean the one area where we might be 7 able to glean something is the rental housing fee because no jurisdiction has been able to 8 charge a fee on rental housing and some jurisdictions have instituted them in the last couple 9 years. So and they've gone from so 0 to 17 or 0 to 20 and so that might be a fruitful 10 investigation although we'll only be looking at the two years since they did it or the one year 11 and a half since the jurisdictions have done it. 12 13 Commissioner Waldfogel: Well it may also turn out that land price increases are a good proxy 14 for this because the land prices have gone up substantially over the last couple of years and we 15 can look at whether that's had an effect on starts. I mean it's effectively the same thing. 16 17 Chair Fine: It’s close. 18 19 Vice-Chair Gardias: Yeah, but just sorry to interject, but I'm afraid that those analysis that we 20 may misdirect staff on to do some analysis that will be pretty much meaningless. I was hoping 21 and that's how I read Commissioner Rosenblum’s intention just to increase the fees in the 22 stepwise Motion that pretty much this will just test market to us, will give us the readout of the 23 market and will also allow us to provide to conduct those analysis. And for this reason when I 24 spoke before I just talked that let’s just ask the staff to do this after we raise the fees then this 25 analysis would be on our municipality and then they would be meaningful in this way. 26 27 Chair Fine: Commissioner Tanaka. 28 29 Commissioner Tanaka: Yeah, actually I had my light for another item so. 30 31 Chair Fine: Ok. So… 32 33 Commissioner Tanaka: But I did want to say one thing though is that if Commissioner 34 Rosenblum did want to make a Motion on that I would second it. 35 36 MOTION #5 37 38 Commissioner Rosenblum: Yeah, I would like support on this. I think Commissioner Waldfogel 39 and I are going to spend our time trying to figure this out. And so to the extent that staff can 40 make an attempt to poll a basket of jurisdictions to extent that time series is available I think 41 we would appreciate having the additional input even though we recognize that it may not be 42 decisive. But it's a big question in my mind to the extent that other jurisdictions have done fee 43 increases to understand what the what happens. I also by the way agree with Commissioner 44 Waldfogel. There may be another better data set which is just land prices in general as a 45 impact on development and we can look into that our own, but I would appreciate that staff 46 probably has connections with other jurisdictions that we don't have because we're not in this 1 business. So the Motion would be to ask for a bundle of cities with the with a time series of 2 permits. 3 4 SECOND 5 6 Chair Fine: All right. I think we've discussed on this one. So that's I’ll second that. So the 7 Motion is that staff prepares a reasonable polling of jurisdictions that have raised fees over the 8 past 20 years earlier, we’ll see. And include time series data for relevant development types. 9 That data will be provided to the subcommittee. All those in favor (interrupted) 10 11 Ms. Gitelman: I’m sorry you said 20 years? Is that what you said? 12 13 Commissioner Rosenblum: [Unintelligible] last 20 years. Doesn’t have to be comprehensive, 14 just saying that [unintelligible] more than 20 years old is irrelevant. 15 16 Ms. Gitelman: I'm sorry, can we get some clarification on this? This is turning into an enormous 17 analysis. I mean we have in the report all of the recent all of the jurisdictions that what their 18 current fees are. Many of them were just set or adjusted in the last couple years. And so I 19 think we could easily poll Mountain View and Redwood City going back the last few years to 20 find out how they changed their fees and what their applications were for office space and for 21 rental housing, but to go back 20 years (Interrupted) 22 23 Commissioner Rosenblum: The ask was not that it’s a comprehensive basket. The ask is that 24 there's a reasonably representative basket and that anything within the last 20 years to me 25 would be fair game so that if there were a relatively steep increase that took place 10 years ago 26 in that that I would be interested in. I’m doing this for your benefit actually to say that a 27 relatively large increase within the last N years would still be of interest. It addresses the issue 28 of things that just happened last year are going to be harder to draw conclusions from. So I'm 29 saying look at anything that's happened in the in the recent past. 30 31 Ms. Gitelman: We're happy to ask our peers in other jurisdictions. I don't know what it will 32 yield, but we’ll ask. 33 34 Commissioner Waldfogel: Can I just? I’m not sure we need a Motion for this. I mean I think 35 that we can really rely on staff to support the effort and you know, but let's just be reasonable. 36 37 [Commissioners off microphone agreeing] 38 39 Chair Fine: Alright so then the last thing I've got on my list unless you all have something else is 40 the feasibility requirements which from what it sounds like will make it harder to produce in 41 lieu fees and will incentivize development onsite. So I’m going to clear lights. Any thoughts? 42 This in my opinion this gets to Commissioner Rosenblum’s point that we haven't done great at 43 producing affordable housing in general, but this change will definitely shift it towards more 44 moderate spectrum of affordable housing since that's more reasonable to be built onsite. Is 45 that purposeful in this ordinance? I don’t know. 46 1 Commissioner Rosenblum: Yeah as a discussion point the ordinance says it is purposeful, right? 2 That the City has a policy of wanting to produce more onsite units so I think that is purposeful. 3 And again I would I be happy to also make a recommendation back as part of the subcommittee 4 that the two issues we take on is fee structure and the kind of balance of in lieu verses 5 inclusionary. I think is the second issue that I'm not sure I've had the depth to really say it's the 6 right balance or not. 7 8 Chair Fine: Other comments? So we're just giving that task to the subcommittee then and we 9 don't necessarily need a Motion here? 10 11 Commissioner Rosenblum: I want to ask Commissioner Waldfogel if he's comfortable with that 12 as an expansion of (interrupted) 13 14 Commissioner Waldfogel: Yeah, absolutely. I mean we may need a little bit of stakeholder 15 discussion to sort that out, but as long as we do that I think we're good. 16 17 Chair Fine: All right. Any other? Vice-Chair. 18 19 MOTION #6 20 21 Vice-Chair Gardias: Yeah so I would like to propose a Motion on the item that I spoke before. It 22 is pretty much to change from the below three units to retain the language that we had in the 23 current municipal code of five units and above. I already provided the reason. 24 25 Chair Fine: Is there a second there? Could you restate your reason? 26 27 Vice-Chair Gardias: So the reason was that pretty much so there are two reasons. One reason is 28 that building four units is recognized by some of the laws that I'm familiar with and I named one 29 which is allowing non-licensed individuals to design and build housing that has up to four units. 30 And this so that's one reason. The second reason is just to take burden of those property 31 owners that have small lots and then allow them to expand within the on lots that they 32 currently own and I think that there is number of the individuals that haven’t expanded for 33 years and I'd be happy to support their abilities to expand their property with adding units 34 because I think that they provide certain value to this municipality. And one of the example 35 was that pretty much some of those owners they have retail space that is flexible to variety of 36 different economic factors. 37 38 Chair Fine: So are you talking about somebody who owns a parcel and well what does it have to 39 do with the fact about the licensure? That's where I’m not sure. 40 41 Vice-Chair Gardias: So it's a the State law allows individuals, State law with this way allows for 42 individuals building up to four residential units to do this at the lower cost because it doesn't 43 impose regulations upon them. 44 45 Chair Fine: Ok, I got you now. So you’re saying essentially this allows a little bit of flexibility if 46 you're a land owner builder and you're doing yourself to build those four units without paying 1 the impact fee. 2 3 Vice-Chair Gardias: Yes you do this cheaper pretty much. 4 5 Chair Fine: Ok. So that I think actually is a good thing in a way, but the balance there is that I 6 think the City's purpose here in lowering from five to three is we don't want developers 7 shooting for four so they avoid the inclusionary impacts. And frankly I'm not sure how many 8 folks here in Palo Alto are doing what you're saying, building the four units. It's probably pretty 9 rare, right? I don't know unless you know of examples, but… 10 11 Vice-Chair Gardias: Yeah I don't know specific examples, but when I was talking about I just I 12 cited some conversations that I had with some owners of small properties and they were just 13 giving me the options that from their perspective they could either develop their properties on 14 their own, but that would be very hard giving variety of different constraints or be pretty much 15 be bought. So many of them are just waiting for the opportunity to be bought by the larger 16 developer that would have that has capability capacity to develop this property on the larger 17 scale. So for this reason I would like to just give them opportunity to keep developing their 18 properties if that would give them some opening to do so. 19 20 MOTION #6 FAILED 21 22 Chair Fine: Any seconds for that? Ok. So are there any other issues folks would like to send to 23 our subcommittee or back to staff here? 24 25 Ms. Gitelman: Chair Fine if I can interject? There was one issue that came up in the course of 26 the discussion that I thought was really great which was Commissioner Rosenblum’s suggestion 27 that when we get to the section of the ordinance about alternative methods to comply if 28 someone wants to build units instead of paying the fees that we focus those opportunities on 29 the low income range. And so that's a good recommendation that we could take to the Council 30 in your recommendation about the fee ordinance if you wanted to pursue that further. 31 32 Chair Fine: Can you go a little (interrupted) 33 34 Ms. Gitelman: Yeah, ok so the way the ordinance is drafted it requires onsite units for the for 35 sale part so the inclusionary program and it requires payment of fees for rental and then it 36 provides and payment of fees for the commercial and mixed use and it provides alternate 37 mechanism so if an office project didn't want to pay the fee they could build units off site. And 38 if a rental project didn't want to pay the fee they could build units onsite or off site. And so 39 there are a bunch of alternatives in the ordinance and we could specify or you could 40 recommend that those alternatives focus on the production of low income housing. Because 41 it's where the gap is. 42 43 Chair Fine: Yeah, ok. I get you. 44 45 Commissioner Rosenblum: Yeah this is what's referred to in the memo submitted by SV@Home 46 as depth of affordability. And this is addressing the donut problem. Yeah. And so this one 1 again her recommendation is that requiring a portion of the units to be affordable to 2 households earning 50 or 60 percent of the area median income. So she's trying to address 3 that. This one the reason I didn't bring it up again as Motion is that I'm not sure I understand 4 the policy lever. I know that it's I know this is an issue but I'm not sure I know what to 5 recommend exactly. So what the tool is. I don't know if my colleagues do and I don't know if 6 staff does. So what exactly is the recommendation here? 7 8 Ms. Gitelman: Well maybe Cara can help, but I think that it would be useful if the Commission 9 could say to the Council that in setting the fee structure for these alternative provisions and the 10 level of affordability required if you're going to provide units instead of paying the fee that our 11 priority is in the low income category. And we can when we come back we can bring you 12 maybe a recommended Motion on that. 13 14 Commissioner Rosenblum: Ok I would appreciate that. Yeah. And so the language here for my 15 colleagues would be at the stage that the Commission recommends that units formed as a 16 result of these impact fees be steered towards disproportionately towards low income so 17 versus very low and moderate. So fill in the gap where we've only hit three percent of our goal. 18 19 Chair Fine: Commissioner Waldfogel. 20 21 Commissioner Waldfogel: I'm sorry I just have a question because do we need to do more here 22 than to just send basically send the money to Palo Alto Housing and offer them their discretion? 23 I mean they seem to be the appointed agency to do (interrupted) 24 25 Commissioner Rosenblum: No there's an actual reason why they do it. They're not doing this 26 out of like there's a there are policy levers here in terms of where you get tax credits and where 27 incentives are. So that's what I'm saying that I don't know what the specific recommendation is 28 in order to reverse that incentive. There's an incentive issue at play. 29 30 Ms. Gitleman: Yeah. As I understand it there's a gap. The low income housing producers are 31 getting tax credits for very low income units and the in lieu program is generating moderate 32 units so there's a gap between those two. The inclusionary I'm sorry is getting moderate units 33 and the low income housing producers are getting tax credits for very low and so there's a gap 34 at the low income level. And so you would be saying that any alternatives to paying the fee 35 should focus on meeting that need. 36 37 Commissioner Waldfogel: Yeah it’s well, it seems like a good goal. I'm not just not quite sure 38 how to achieve it based on this discussion. We need to dig a little deeper because I don't want 39 to send something toward something that just doesn't that for market reasons can't exist. So 40 we need to sort that out. 41 42 Ms. Gitelman: Yeah. 43 44 Chair Fine: Ok. So I mean this is something I would empower you on the subcommittee to look 45 at also. Vice-Chair. 46 1 Vice-Chair Gardias: So I mean there is a language in the this is the Paragraph 16.6530 that 2 pretty much talks about the structure of the fees distribution and then there are it says 3 specifically that it just gives certain percentages or parts towards certain household earnings. 4 So that's the example of this of the market that we would be that we would have to address by 5 making potentially changes to this ordinance. 6 7 Chair Fine: So I guess this can be the part that the subcommittee focuses on? 8 9 Commissioner Rosenblum: Yes, we’ll take that on. So it said as far as I know we're looking at 10 three issues which is the propose fees, the incentive alignment between in lieu versus 11 inclusionary, and then this how to direct these funds towards addressing low income 12 disproportionate to very low and moderate. 13 14 Chair Fine: Agreed. Vice-Chair. 15 16 Vice-Chair Gardias: Yes that was exactly what I was trying to address by pointing to the specific 17 paragraph. There is one comment that I would like to make a because and I because I just want 18 to make sure that when our colleagues emerge from the discussion and provide their 19 recommendation they value they evaluate the potential they evaluate the units that we truly 20 want to subsidize. And I heard some comments here about different the size of the units that 21 we would be subsidizing and giving our discussions about the small units in Palo Alto I would 22 like to just make the statement that I'm not really sure if that is that this should be the true 23 objective of our analysis. There reason is that Palo Alto has a specific corrector and micro units 24 or very small units are not in the nature of this of this City. So I just wanted to make this 25 comment that if you're going to just provide make your analysis please just take a look at the 26 units that are being currently offered on the market as opposed to those that we eventually 27 would like to have because I'm not really sure if that discussion is truly a resolved. Thank you. 28 29 Chair Fine: Ok so it looks like we've reached agreement on two substantive things. So one is the 30 fee schedule for nonresidential phased in over five years. The other is changing the deed 31 restrictions to 55 from 99. But then our continuation of this item will be for the subcommittee 32 to explore these three items to find a clear recommendation on the fees for residential and 33 retail non-restaurant, alternatives that focus on the low income donut hole, and then also to 34 explore the fee structure plus the balance of inclusionary versus in lieu housing fees. Any other 35 comments or should we close this item for that for tonight and then those two subcommittee 36 members who are so graciously giving their time are Commission Rosenblum and 37 Commissioner Waldfogel. Thank you both. Hopefully when you guys come back we'll be able 38 to look at it quickly and say great let's pass on the Council. Any other comments on this item 39 tonight? I'm sorry we're not finishing it tonight. All right let's finish this item and then I think 40 we have just one more tonight. 41 42 Ms. Gitleman: Thank you, Commissioners. 43 44 Chair Fine: Thank you. 45 46 Commission Action: Motion to form a sub-committee consisting of Commissioners Rosenblum 1 and Asher. Motion approved 5-0-1, Commissioner Alcheck absent 2 3 Study Session 4 Public Comment is Permitted. Five (5) minutes per speaker. 5 6 Approval of Minutes 7 Public Comment is Permitted. Five (5) minutes per speaker. 8 2. August 10, 2016 9 10 MOTION 11 12 Chair Fine: So the last item is the approval of minutes from August 10th. Do we have a Motion? 13 Ok, I’ll move that we approve the minutes of August 10th. Do have (interrupted) 14 15 SECOND 16 17 Commissioner Rosenblum: Second. 18 19 VOTE 20 21 Chair Fine: Thank you. All those in favor? Ok, all in favor. Thank you so much. 22 23 MOTION PASSED (5-0-1, Commissioner Alcheck absent) 24 25 Commission Action: Motion by Chair Fine, seconded by Commissioner Rosenblum to 26 approve the August 10, 2016 Minutes. Motion passed 5-0-1 with Commissioner Alcheck 27 absent 28 29 Committee Reports 30 31 Chair Fine: I don't have any committee reports. Citizen Advisory Committee (CAC) has not met 32 for a few weeks now, not since our last meeting although Council did discuss the scenarios on 33 Monday night. All right thank you all so much. This meeting is adjourned 9:18. 34 35 Commissioner Member Questions, Comments or Announcements 36 37 Adjournment: 9:18 pm 38 Palo Alto Planning & Transportation Commission Commissioner Biographies, Present and Archived Agendas and Reports are available online: http://www.cityofpaloalto.org/gov/boards/ptc/default.asp. Call (650) 329-2603 to reserve a paper copy of the current agenda. The PTC Commission members are: Chair Adrian Fine Vice Chair Przemek Gardias Commissioner Michael Alcheck Commissioner Kate Downing Commissioner Eric Rosenblum Commissioner Greg Tanaka Commissioner Asher Waldfogel Get Informed and Be Engaged! View online: http://midpenmedia.org/category/government/city-of-palo-alto or on Channel 26. Show up and speak. Public comment is encouraged. Please complete a speaker request card located on the table at the entrance to the Council Chambers and deliver it to the Commission Secretary prior to discussion of the item. Write to us. Email the PTC at: Planning.Commission@CityofPaloAlto.org. Letters can be delivered to the Planning & Community Environment Department, 5th floor, City Hall, 250 Hamilton Avenue, Palo Alto, CA 94301. Comments received by 2:00 PM the Tuesday preceding the meeting date will be included in the agenda packet. Comments received afterward through 2:00 PM the day of the meeting will be presented to the Commission at the dais. Material related to an item on this agenda submitted to the PTC after distribution of the agenda packet is available for public inspection at the address above. Americans with Disability Act (ADA) It is the policy of the City of Palo Alto to offer its public programs, services and meetings in a manner that is readily accessible to all. Persons with disabilities who require materials in an appropriate alternative format or who require auxiliary aids to access City meetings, programs, or services may contact the City’s ADA Coordinator at (650) 329-2550 (voice) or by emailing ada@cityofpaloalto.org. Requests for assistance or accommodations must be submitted at least 24 hours in advance of the meeting, program, or service. Attachment G 2991 SHATTUCK AVENUE #203 | BERKELEY, CALIFORNIA 94705 | P: 510.647.5291 | F: 510.647.5295 | STRATEGICECONOMICS.COM Date: April 18, 2016 To: Eloiza Murillo-Garcia, City of Palo Alto From: Sujata Srivastava, Strategic Economics Project: Palo Alto Housing Impact Fee and Commercial Linkage Fee Nexus Studies (1401c) Subject: Supplementary Memorandum Report INTRODUCTION The City of Palo Alto is interested in adopting a new affordable housing impact fee on new residential development, and updating its commercial linkage fees on hotel and office/R&D/medical office development. The purpose of these fees is to mitigate the impact associated with new development on the need for affordable housing from new worker households. In February 2016, Strategic Economics completed draft nexus study reports for the commercial linkage fees and housing impact fees. This memorandum report is a supplement to the nexus studies, providing updated information and analysis including: • Existing city fees and permits for housing and commercial development prototypes in Palo Alto; • An updated table on existing linkage fees and housing impact fees in other jurisdictions; and • A comparison of the potential housing impact fees with Palo Alto’s existing below market rate (BMR) housing policy for ownership units. EXISTING CITY FEES AND PERMITS The City of Palo Alto has existing building permit and development impact fees on both residential and commercial development. Figure 1 compares the total existing permits and fees for the office/R&D/medical office development prototype with the residential prototypes. As shown, current city fees and permits for the office/R&D/medical office prototype, including the existing commercial linkage fees, are higher than for the residential prototypes. If the recommended linkage fees and housing impact fees for each prototype are applied, the total combined city fees and permits by prototype would be highest for single-family detached units ($13.3 million), followed by the office/R&D/medical office prototype ($7.2 million). Under the recommended housing impact fee scenarios, the total fees and permits for single-family detached, condominiums, and apartment prototypes would be much lower, ranging from $1.4 million to $2.2 million. DRAFT MEMORANDUM Supplementary Memo Report | April 2016 2 COMMERCIAL LINKAGE FEES AND HOUSING IMPACT FEES IN OTHER BAY AREA JURISDICTIONS A number of Bay Area jurisdictions have commercial linkage fees and/or housing impact fees in place. Figure 2 summarizes the current commercial linkage fees in cities in San Mateo County and Santa Clara County as of May 2016. Figure 3 shows current housing impact fees in Bay Area cities by housing type, as of May 2016. COMPARISON WITH BELOW MARKET RATE HOUSING POLICY For ownership units, Palo Alto has an existing Below Market Rate (BMR) Program requiring that 15 percent of the units in market-rate developments consisting of five or more housing units be sold at below-market rate prices.1 Two-thirds of the BMR units are to be affordable to households earning between 80 percent and 100 percent of the area median income (AMI) for Santa Clara County; one-third of the BMR units must be affordable to households earning between 100 and 120 percent of AMI. City policy generally requires that the BMR units be provided on-site, and that the BMR units are comparable to the market-rate units. In some cases, developers have the option of paying an in-lieu fee of between 7.5 and ten percent of the sales price or fair market value, whichever is greater. When the BMR percentage results in a fractional unit, the developer has the option of paying the in-lieu fee on the fractional unit. Figure 4 compares the cost of the housing impact fees for ownership products to the cost of either providing the inclusionary units on site or paying the in lieu fees. As shown, if a developer pays the in- lieu fees for the inclusionary units, the cost is between $17,000 and $40,000 per market-rate unit, depending on the prototype. However, under most circumstances, developers in Palo Alto build units onsite rather than paying the in lieu fees. The calculated cost to the developer of providing units onsite - known as the “foregone revenues” – is measured as the total gap between market-rate and affordable prices for the affordable units. The foregone revenues for providing units onsite are $460,000 per market- rate unit on single-family detached units; $307,000 per market-rate unit for single-family detached units, and $160,000 per market-rate unit for apartment units. The maximum and recommended housing impact fees per unit for all the housing prototypes are lower than the foregone revenues per market-rate unit if a developer were to build the required affordable units onsite. The housing impact fees at the maximum and recommended levels are significantly higher than the in lieu fees per market rate unit if a developer does not build the inclusionary units onsite. 1 The inclusionary requirement increases to 20 percent for larger projects on five-acre and larger parcels. Supplementary Memo Report | April 2016 3 Figure 1: Existing Palo Alto Fees and Permits by Prototype Total Fees by Prototype Office/R&D/ Medical Office Single- Family Detached Single- Family Attached Condo Apartment Prototype Size (Square Feet) 1 100,000 90,000 21,000 73,500 68,000 Existing City Fees and Permits 2 $3,745,450 $4,764,246 $1,387,773 $2,213,657 $2,143,169 Commercial Linkage Fees/Housing Impact Fee Scenarios Current Linkage Fees/ Housing Impact Fees $1,985,000 $0 $0 $0 $0 Maximum Feasible Fee Scenario $6,000,000 $9,990,000 $1,890,000 $5,512,500 $5,780,000 Recommended Fee Scenario (Nexus Study) $3,500,000 $8,550,000 $1,050,000 $3,675,000 $3,400,000 Total Combined City Fees and Permits by Scenario With Current Linkage Fees/ Housing Impact Fees $5,730,450 $4,764,246 $1,387,773 $2,213,657 $2,143,169 Maximum Feasible Fee Scenario $9,745,450 $14,754,246 $3,277,773 $7,726,157 $7,923,169 Recommended Fee Scenario (Nexus Study) $7,245,450 $13,314,246 $2,437,773 $5,888,657 $5,543,169 1 The Office/R&D/Medical Office prototype is expressed in gross square feet, while the residential prototypes are expressed in net square feet. 2 Estimate of Existing City Fees and Permits excludes the existing commercial linkage fee of $19.85 per square foot. Sources: City of Palo Alto, 2015; Strategic Economics, May 2016. Supplementary Memo Report | April 2016 4 Figure 2: Commercial Linkage Fees in San Mateo County and Santa Clara County Cities City Hotel Office/R&D/ Medical Office Date Adopted/ Updated Cupertino $10 $20 2015 Mountain View (a) $2.50 $25 2015 Oakland (b) N/A $5.44 2015 Redwood City (c) $5 $20 2015 San Francisco (d) $18 $16-$24 2015 Sunnyvale $7.50 $15 (e) 2015 Menlo Park (f) $8.45 $15.57 2015 Notes: (a) New gross floor area under 25,000 SF pays 50 percent of full fee. (b) Oakland’s fee applies to office and warehouse/distribution development over 25,000 SF. (c) The fee applies to projects adding more than 5,000 SF of new commercial space. The fee is reduced by 25% if all construction workers are paid prevailing wages. (d) The fee for R&D is $16.01 and the fee for office is $24.03. The fee for a small enterprise is $18.89. (e) The fee on the first 25,000 SF is discounted by 50 percent. (f) The linkage fees are applied to commercial developments of 10,000 SF or more that do not include on-site affordable units. Sources: City staff and websites; Nonprofit Housing Association of Northern California, 2015; Vernazza Wolfe Associates, Inc. & Strategic Economics, May 2016. Supplementary Memo Report | April 2016 5 Figure 3: Housing Impact Fees in Bay Area Cities Single Family Detached Single Family Attached Condominiums Apartments Date Adopted/ Updated Berkeley N/A N/A N/A $31/SF (a) 2016 Cupertino $15/SF $16.50/SF (b) $20/SF $25/SF 2015 Daly City $14/SF $18/SF (c) $22/SF $25/SF 2014 East Palo Alto $22/SF $22/SF $22-$44/SF (d) $22/SF 2014 Emeryville N/A N/A N/A $33/SF (e) 2015 Mountain View N/A N/A N/A $17/SF 2015 Oakland (f) $8,000-$23,000 $8,000-$20,000 $12,000-$22,000 $12,000-$22,000 2016 (proposed) Redwood City (g) $25/SF $25/SF $20/SF $20/SF 2015 San Carlos (h) $23.54-$43.54/SF $20.59-$42.20/SF $20.59-$42.20/SF $23.54-$43.54/SF 2010 San Jose N/A N/A N/A $17/SF (i) 2014 Sunnyvale N/A N/A N/A $17/SF (j) 2015 Notes: (a) Berkeley's affordable housing impact fee is $28,000 per unit. The per square foot fee is estimated based on the prototype unit size. (b) This fee applies to small lot single family and townhomes. (c) This fee applies to townhomes. (d) Fee ranges from $22 per square foot for for-sale housing without structured parking to $44 per square foot for housing with structured parking. (e) Emeryville's affordable housing impact fee is $28,000 per unit. The per square foot fee is estimated based on the prototype unit size. (f) Oakland's affordable housing impact fee for residential development are proposed only, with implementation beginning in 2018. (g) The fee applies to projects over 4 units, and is reduced by 25% if all construction workers are paid at prevailing wage. (h) Fees shown as ranges. Actual fees charged depend on project size. (i) Fee goes into effect in 2016. Developments approved before July 2016 are exempt with a longer exemption for downtown development. (j) Smaller projects with between 4 and 7 units pay 50 percent of this fee. Sources: City websites; Nonprofit Housing Association of Northern California; Vernazza Wolfe Associates, Inc. and Strategic Economics, 2016. Supplementary Memo Report | April 2016 6 Figure 4: Cost Comparison of Inclusionary Policy and Housing Impact Fees Single-Family Detached Single-Family Attached Condominium Prototype Description Number of Units in Prototype 20 10 35 Estimated Sales Price Market-Rate Unit $3,043,000 $1,666,000 $1,390,000 Average Unit Size (square feet) 3,000 2,100 2,100 Inclusionary Requirement Percentage Inclusionary Requirement 15% 15% 15% Number of Market-Rate Units 17 8 30 Number of Inclusionary Units Required 3.00 1.50 5.25 Number of Affordable Units Required (rounded) 3 2 5 Fractional Units1 - - 0.25 Cost to Developer if In-Lieu Fees are Paid Total In-Lieu Fees $684,675 $249,900 $521,250 In-Lieu Fee Revenues per Market-Rate Unit $40,275 $31,238 $17,375 Cost to Developer if Units Provided on Site Estimated Sales Price for Affordable Units2 $436,929 $436,929 $436,929 Foregone Revenue per Affordable Unit3 $2,606,071 $1,229,071 $953,071 Total Foregone Revenues $7,818,213 $2,458,142 $4,765,355 Total In Lieu Fees for Fractional Units $0 $0 $26,063 Foregone and In Lieu Fee Revenues per Market-Rate Unit $459,895 $307,268 $159,714 Cost to Developer if Housing Impact Fees are Paid Maximum Impact Fee per Market-Rate Unit (Maximum Justified Fee per Nexus Study) $333,501 $189,037 $158,519 Recommended Impact Fee per Market-Rate Unit $285,000 $105,000 $105,000 1 If the BMR percentage results in a fractional unit, the developer has the option of paying the in-lieu fee on the fractional unit. 2 The affordable unit price is assumed to be affordable to a 5-person household at 110% Area Median Income in Santa Clara County. 3 The foregone revenue per unit calculation is calculated as the difference between the market-rate sales price and the affordable sales price. Sources: City of Palo Alto, 2015; Vernazza Wolfe Associates, Inc. and Strategic Economics, 2016. Attachment H Figure 4: Cost Comparison of Inclusionary Policy and Housing Impact Fees Single-Family Detached Single-Family Attached Condominium Prototype Description Number of Units in Prototype 20 10 35 Estimated Sales Price Market-Rate Unit $3,043,000 $1,666,000 $1,390,000 Average Unit Size (square feet) 3,000 2,100 2,100 Inclusionary Requirement Percentage Inclusionary Requirement 15% 15% 15% Number of Market-Rate Units 17 8 30 Number of Inclusionary Units Required 3.00 1.50 5.25 Number of Affordable Units Required (rounded) 3 2 5 Fractional Units1 - - 0.25 Cost to Developer if In-Lieu Fees are Paid Total In-Lieu Fees $4,564,500 $1,249,500 $3,648,750 In-Lieu Fee Revenues per Market-Rate Unit $228,225 $124,950 $104,250 Cost to Developer if Units Provided on Site Estimated Sales Price for Affordable Units2 $436,929 $436,929 $436,929 Foregone Revenue per Affordable Unit3 $2,606,071 $1,229,071 $953,071 Total Foregone Revenues $7,818,213 $2,458,142 $4,765,355 Total In Lieu Fees for Fractional Units $0 $0 $26,063 Foregone and In Lieu Fee Revenues per Market-Rate Unit $459,895 $307,268 $159,714 Cost to Developer if Housing Impact Fees are Paid Maximum Impact Fee per Market-Rate Unit (Maximum Justified Fee per Nexus Study) $333,501 $189,037 $158,519 Recommended Impact Fee per Market-Rate Unit (Finance Committee Recommendation) $150,000 $105,000 $105,000 Recommended Impact Fee per Market-Rate Unit (PTC Recommendation) $285,000 $105,000 $105,000 1 If the BMR percentage results in a fractional unit, the developer has the option of paying the in-lieu fee on the fractional unit. 2 The affordable unit price is assumed to be affordable to a 5-person household at 110% Area Median Income in Santa Clara County. 3 The foregone revenue per unit calculation is calculated as the difference between the market-rate sales price and the affordable sales price. Sources: City of Palo Alto, November 2016; Vernazza Wolfe Associates, Inc. and Strategic Economics, 2016. City of Palo Alto (ID # 7525) City Council Staff Report Report Type: Action Items Meeting Date: 12/12/2016 City of Palo Alto Page 1 Summary Title: Development Services Cost of Services Study Title: PUBLIC HEARING: Adoption of an Ordinance Amending the FY 2017 Municipal Fee Schedule to Reflect Development Services Cost of Services Study and FY 2017 Annual Adjustment From: City Manager Lead Department: Development Services Department Recommendation Staff and the Finance Committee recommend that the City Council adopt an ordinance (Attachment A) to update the Fiscal Year 2017 Municipal Fee Schedule to adjust Development Services Municipal Fees, based on the completion of a Cost of Services Study (Attachment B) and adjusted by the annual inflator applied to Municipal Fees from Fiscal Year 2016 to Fiscal Year 2017. At the Finance Committee meeting of November 15, 2016, the Development Services Municipal Fee amendments were approved 4-0 without any recommended changes. Executive Summary The Development Services Department (DSD) initiated a Cost of Services Study in 2015 to evaluate development related service fees incurred by applicants seeking a construction related permit. These fees had not been reevaluated for many years, and the resulting recommendations -- if approved -- would increase fee revenues and lower General Fund subsidies consistent with the Cost Recovery Policy adopted by the City Council in May 2015. The proposed changes would amend the fee schedule to reflect current International Code Council (ICC) unit fee schedule structures and the City’s Green Building and Energy Ordinances by eliminating some fees, proposing new fees, consolidating or expanding others, and adjusting certain fees to a single flat-fee per permit. The City Council has the discretion to determine the level of cost recovery for each of these fees. However, under State law, fees cannot be set above the cost of service. The consultant report is discussed in detail below, and the proposed ordinance adopting fee changes (Attachment A) and the full text of the consultant report (Attachment B) are attached. City of Palo Alto Page 2 This study was completed based on FY 2016 data, therefore an annual inflation value of 5.5%, as recommended by the Office of Management and Budget for all Citywide fees in Fiscal Year 2017, has been included in the fees detailed in Attachment A as part of the final ordinance action for City Council consideration. Background In July 2010, the City Manager launched the comprehensive “Development Center Blueprint” (Blueprint) project to restructure and adopt more holistic approaches to integrated development review, permitting services, and staff coordination in order to improve organizational efficiencies and minimize unnecessary costs and delays to customers. Since the inception of the Blueprint, DSD has implemented new technologies, acquired additional space, upgraded the existing space, and consolidated into a central department, that consists of Building (formerly within the Planning department), Planning, Public Works, and Fire Prevention divisions. Development Services is now a “one-stop” shop, located in a leased space across from City Hall. Design development projects now have a single point of contact that facilitates the customers’ experience throughout the permitting and construction process. As part of the Fiscal Year 2014 Adopted Budget, and in efforts to better align the budget with the current operational structure, the City Council created the Development Services Department. Development Services embodies all development-related activities, including staff allocations, resources, and associated service fees across multiple departments. The operating budget currently relies on development review fees, permitting fees, and a subsidy from the General Fund. Though the fees have been adjusted annually for inflation factors, it has been at least five years since the fee schedule and structure were last subject to a full evaluation. The Development Services Department is made up of key representatives from four different departments including the Building, Planning, Public Works, and Fire divisions. These representatives are physically stationed at the Development Center (285 Hamilton Avenue) or elsewhere in the City, and provide development-related services to applicants seeking a construction-related permit. In the current budget structure, representatives are allocated proportionally to Development Services based on their time involved in the review process. Approximately 80 employees are fully or fractionally budgeted to the department, resulting in a total of 40 FTE. For example, Development Services has watershed protection representatives in the Public Works department and transportation planners in the Planning department City of Palo Alto Page 3 that review building permits. In addition to personnel costs, Development Services has specific overhead and indirect charges such as the rent, administrative functions, and city support services like Administrative Services, City Attorney, and Human Resources that must also be accounted for. As a department that operates based on fee revenues, the incoming fees must offset all expenses which include personnel, overhead, and indirect charges. On May 18, 2015 the City Council adopted the User Fee Recovery Level Policy (CMR 5735) that suggests levels of cost recovery (high, medium, and low) based upon policy considerations. As referenced in the table below, activities in which participants receive most or all of the benefit from the service provided (i.e. issuance of building permits), or which are regulatory in nature, fall within the “high” cost recovery level group. The City retained the services of Capital Accounting Partners (CAP) to complete a cost of services study to identify the total cost of providing services for which the City charges fees, Phase I of which is included as Attachment D. CAP has prepared hundreds of cost allocation plans for cities, counties and special districts throughout California, Texas, Washington and more. Some of their clients include San Diego, Glendale, Los Gatos, Santa Barbara, Burbank and Sacramento. Dan Edds is a project manager with CAP and has more than 15 years of experience consulting within the public sector. His operational improvement work has involved problem solving and process improvement opportunities for core business processes. CAP uses an activity-based costing model to calculate the cost of a specific service (detailed further in Attachment B), which identifies activities in an organization and assigns the cost of each activity with resources to all services according to the consumption by each. The model assigns direct and indirect costs to each fee, and therefore, calculates the cost of each fee at full cost recovery. As discussed below, Phase I of the study includes recommendations for the Department’s flat fees only. Discussion Fees and Fee Structure: Development Services fees are structured in two ways: flat or project valuation-based. Based on estimated FY 2016 revenues, approximately 75%, or $8.6 million, of departmental revenue is derived from project valuation-based fees. Major project valuation-based fees include the Building Permit and Plan Check fees. Industry practice correlates the valuation of a job to its complexity, in the aggregate, and building permit and plan check fees are then calculated based on a percentage of a project’s valuation. In contrast, flat rate fees are based on time and materials and activity levels. These fees comprise the remaining Development Services revenue. The following represents the projected breakdown of FY 2016 revenues evaluated as part of the fee study, at current fee levels: FY 2016 Development Services Projected Revenue City of Palo Alto Page 4 Fee Study Project Steps and Process: CAP was tasked to prepare a detailed cost analysis of its Development Services user fees with the objective of ensuring that the Development Services Department is fully accounting for all costs and recovering adequate revenues to cover expenses. Based on the current organizational structure, CAP developed a costing model to analyze the total cost of fee generating services and recommend adjustments necessary to reach full recovery. As the study progressed, it was determined that additional data points were necessary to recommend adjustments for valuation-based fee activities. Therefore, the report includes only a high-level assessment of aggregated building permit and plan check activities. Staff is currently in the process of implementing new data collection fields in the permit system and is expanding the existing study to include a survey of other comparable City valuation tables and alternative permit fee structures for what are currently valuation-based fees. The study conducted by CAP for all Non-Valuation-based fees, or “flat rate” fees, utilized an activity-based costing model to calculate the full cost of providing specific services. This methodology identifies activities in an organization and assigns the cost of each activity with resources to all services according to the consumption by each. The model assigns direct and indirect costs to each fee, where all proposed fees have been calculated at full recovery. A summary of how CAP builds cost structures follows: 1. Direct Costs Through meetings with staff, CAP identified all direct staff time spent on fee-related activities or services, where direct time is indicative of workers who are directly involved with activities of a specific fee or service. Average salaries and the City Standard productive rate of 1,600 hours/year were used for these calculations. Additionally, CAP identified other operational costs that are directly attributed to certain services, such as the Department’s use of on-call consultants for inspections in the Building and Fire divisions. 2. Indirect Costs (citywide administration) City of Palo Alto Page 5 These costs include processes that support, but do not directly apply to any specific activity or fee, such as the Citywide and Departmental Overhead. The Citywide overhead costs are allocated to departments based on the City’s Cost Allocation Plan. These represent expenses of supporting departments including the offices of the City Manager, City Attorney, City Auditor, City Clerk, Administrative Services, Human Resources, Information Technology, and Facilities Maintenance. 3. Overhead (departmental administration) Department Overhead is represented in two aspects: 1) Development Services as a whole; and 2) Divisional Overhead. Development Services overhead includes the salaries of the Director, the Director’s Administrative Assistant, and the Senior Management Analyst, as well as rent, and other supplies commonly used by all divisions of the department (Building, Planning, Public Works, and Fire Prevention). These are not assigned to any particular service, but are allocated to all fees since these professionals support all the activities of the department as a whole. The Divisional Overhead represents costs associated with managers, supervisors, and support staff and common purpose operational costs of the Public Works, Planning, and Fire Departments. For example, direct staff is allocated as a percentage of an FTE to Development Services based upon activity levels for Public Works, while divisional overhead which reflects the Public Works administrative costs such as budget, contract, and executive leadership costs are calculated as a rate that is applied to the salaries allocated to Development services and executed through a year-end adjustment. The rate assumes that the same level of administrative support provided to the Public Works Department is provided to the Public Works division within Development Services. These are not assigned to any particular service, but are allocated to all fees in the respective division. 4. Reserve A reserve fund provides a mechanism to finance future unanticipated events and other identified or planned needs of the department. For purposes of the calculation, the reserve amount is allocated to all fees, similar to Overhead. As part of the study, the consultant recommended that the City set a specific reserve policy, and included an illustrative calculation based on the common practice of building 6-12 months of operating expenses over a three year period. This is equivalent to a $2.3 million reserve within the annual cost structure of the department, and the study’s results show the full cost of fees with and without a reserve. However, due to the significant changes recommended to move closer towards cost recovery, and the anticipated future adjustments valuation-based fees, staff does not recommend the establishment of a reserve at this time. As such, the proposed fees presented in Attachment A do not include any assumption for reserve costs. Projections: The study indicates a total projected General Fund subsidy in FY 2016 of $1,787,985, excluding impacts of one-time activities, such as deferred revenue for large projects and expense savings. Once adjusted for one-time revenues, the net general fund subsidy in FY 2016 is approximately City of Palo Alto Page 6 $294,000. Drivers of Cost Recovery Variances: Staff believes the following to be key drivers for cost recovery variances within the Public Works, Planning, and Fire Prevention divisions: 1. Length of time since last comprehensive Fee Study. While fees have been adjusted annually for inflation factors, it has been at least five years since the fee schedule and structure were last subject to a full evaluation. 2. Fee levels in Planning, Public Works, and Fire have historically been set below full cost recovery. 3. As part of the creation of Development Services, the cost structure for Planning, Public Works, and Fire divisions has significantly changed. For example, divisions are now responsible for overhead allocations such as rent, Development Services managerial staff, and other commonly used operating expenses (e.g. scanning services, office supplies, etc.). Findings & Recommendations: Modifications to flat fees, representing approximately 25% or $2.7 million of departmental revenues, are representative of current resources, activities, and activity levels, as well as changes to California Building and Fire Codes, and/or state mandates. Recommended modifications to fees included re-naming fees, altering tiered fees and triggers, removing, and creating new fees. The proposed fees, including a description of changes where applicable, are included in Attachment A. Fire Prevention The largest impact of the Fee Study is anticipated in the Fire Prevention Division. Fire Prevention fees have historically been set below cost recovery, or were provided at no cost, and a complete fee study or evaluation has not been completed in at least five years. Further, as part of creating Development Services, all Fire Prevention staff and associated costs were moved to Development Services offices resulting in the need for additional space. Moving Fire Prevention entirely out of the Fire Department and into Development Services means that this division is now subject to a different cost structure that includes overhead allocations such as rent, Development Services managerial staff, and other commonly used operating expenses (e.g. scanning services, office supplies, etc.). All fees in Fire Prevention were calculated according to the consultant’s activity-based model, where fees have been proposed at full cost based on current activities, activity levels, and proposed resources. These proposed fees are included in the fee study and are proposed to be increased as recommended by CAP. City of Palo Alto Page 7 Public Works Public Works, like Planning, has a host of fees. However, many of their fees can be applied to both development and non-development-related work. The differentiating factor is that development-related work is entirely the result of private development. For example, a commercial developer has to apply for a street work permit to work in the right-of-way. That is entirely due to the impacts associated with their project. That work is driven by private interests and it has been the direction from Council to ensure that those fees are set at full cost recovery. Those fees are collected by and reside in Development Services as do the subsequent direct, indirect and overhead Public Works costs associated with providing those services. For purposes of this study, private development work is separate and distinct from non- development related work. Therefore, those services and fees are provided by Public Works as a whole, and the fees are set by Public Works as a whole through the Public Works departmental municipal fee schedule. Public Works, with direction from the City Council, decides how close to full cost recovery they should set those fees. The CAP study did include analysis of the Public Works Department, however, subsequent to the kick-off of the consultant study, updated analysis on staff allocations, time estimates, and fee volumes were obtained and staff was unable to incorporate this more current data into the consultant’s final results. Therefore, Public Works municipal fee proposals included as part of the development of the Adopted Fiscal Year 2017 Municipal Fee Schedule are reflective of a full cost recovery model, however, were not reflective of the specific methodologies and assumptions used in the CAP study. The FY 2017 Adopted Fees utilized the Questica Calculator launched by the Office of Management and Budget as opposed to those fees recommended in the CAP study. The Adopted amendments to Public Works’ fees in the Development Services Department represent significant recommended increases from the 2016 fees, and are expected to bring the Public Works fees much closer to cost recovery. As part of the FY 2018 budget process, the Office of Management and Budget, Development Services and Public Works will review these fees and ensure they are at full cost recovery and/or bring forward recommended adjustments to the fees and appropriate based on FY 2017 actual activity levels and estimated FY 2018 costs. Building Non-valuation fees were updated to reflect current ICC unit fee schedule structures, per California State code. Similar to Fire Prevention, a complete fee study or evaluation has not been completed in the last five years, and all fees are proposed at full cost according to the consultant’s activity based model and current activities, activity levels, and resources. The most significant changes recommended within the Building division are a result of restructuring Mechanical, Plumbing, and Electric Permit fees. These fees are charged in conjunction with the Building Permit and generally charge a Base Fee (representing administrative costs to process) and new or remodeled supplemental fee (based on square footage and representative of inspection costs). As a result of the study, current processing and inspection times have both decreased. At full cost, the base fee is proposed to decrease to $82, from $92, and the square footage fee to decrease to $0.02, from $0.11 per square foot. City of Palo Alto Page 8 Mechanical, Plumbing, and Electric fees can also be charged as stand-alone permits. These fees are structured as a Base fee (representing administrative costs to process) plus a supplemental permit fee (representing inspection costs). The base fee is proposed to decrease to $82 from $92 as stated above, where the unit of measure for the supplemental permit is proposed to change from “each” to “per permit”. The current unit of measure is reflective of time estimates for each incremental measure of an activity, such as the inspection of each individual light fixture or switch at $0.50/each. Determining the incremental unit of time is incredibly difficult, hard to justify, and is no longer a method promoted by ICC. As such, Development Services has revised these fees on a per permit basis, using time estimates of an average project (5,000 sq. ft.). In the case of the light fixture, the permit would be issued at a total cost of $82 for the Base Fee, representing administrative processing costs, plus $68 for the inspection of any number of light fixtures. Green Building Development Services continues to expand and develop the Green Building program in efforts to follow the City Council’s lead and maintain a leadership role in environmental sustainability. Fees were updated and new fees implemented to comply with State mandates, such as a Landscape review and permit management, as well as the current Green Building and Energy Ordinance. The cost structure of these fees includes consulting services associated with the integration and management of sustainable building practices and policies, Landscape review and permit management, as well as staff training, quality control, reporting, and informational outreach to the community. Use & Occupancy Use & Occupancy fees were included in the study; however, staff does not propose to adjust these fees at this time. These fees will be studied separately with the integration of the Business Registry fee where staff anticipates that drivers to calculate cost, such as activities and resources, will change as the program is developed. Next Steps: Development Services strives to operate as a revenue-supported department within the General Fund with the ultimate goal of being an enterprise fund. The ultimate goal of Development Services is to reach full cost recovery in all divisions and the adoption of the Fees outlined in Attachment A represents the next step towards this goal of full cost recovery. The department will continue to track revenues and expenditures at a divisional level through Fiscal Year 2017 in order to analyze their cost-recovery performance and will work collaboratively with the Office of Management and Budget, and the City Attorney’s Office to identify and define a reserve policy that is appropriate and specific to the Development Services. Staff anticipates returning to City Council with iterative recommendations, including adjustments to valuation-based fees and the inclusion of reserve costs, through subsequent budget processes. City of Palo Alto Page 9 Resource Impact The actions recommended in this report would increase the estimated revenue generated by the Development Service Department flat fee activities. Given the changing economic environment and the unknown potential impacts of the increases on activity levels (estimated to be minor), no adjustment to the budget is assumed. Revenue collections will be monitored and factored into the annual development of the budget as data is availabe and adjustments are found to be necessary. Environmental Review Adoption of an ordinance amending Development Services Municipal Fees is not a project for the purposes of the California Environmental Quality Act (CEQA) and therefore no environmental review is necessary. Attachments: Attachment A: Municipal Fee Proposals (PDF) Attachment B: CAP Cost of Services Study (PDF) Attachment C: 11-15-16_FCM-Excerpt-Item-3 (PDF) Not Yet Approved 1 016 Yang\Dev Services\ 2016-11-21 ORD amending DSD Municipal Fees (Phase I) Ordinance No. ____ Ordinance of the Council of the City of Palo Alto to Update the Fiscal Year 2017 Municipal Fee Schedule to Adjust Development Services Department Fees The City Council of the City of Palo Alto does hereby ORDAIN as follows: SECTION 1. Findings and declarations. A.In 2016, the Development Services Department completed Phase I of a fee study to update fees for services. Due to the timing of the study, fiscal year (FY) 2016 data was used, as it was the most recent data available when the study commenced. B.On June 13, 2016, Council adopted changes to the Fiscal Year 2017 Municipal Fee Schedule, applying a 5.5 percent average salary and benefits adjustment to most City fees. Development Services Department fees were not updated with most other City fees as part of the FY 2017 budget adoption. In addition, the study’s recommended fee levels did not account for the 5.5 percent average increase in the City’s salary and benefits costs. C.On November 15, 2016, the Finance Committee reviewed the fee study and recommended adoption of an ordinance updating Development Services Department fees in accordance with the study’s recommendations, adjusted by the annual salary and benefits adjustment of 5.5 percent. SECTION 2. The Council of the City of Palo Alto adopts the changes to the Municipal Fee Schedule as set forth in Exhibit "1" incorporated here by reference. When effective, such fees shall supersede any prior inconsistent fees charged by the Development Services Department. SECTION 3. The amount of the new or increased fees and charges is no more than necessary to cover the reasonable costs of the governmental activity, and the manner in which those costs are allocated to a payer bears a fair and reasonable relationship to the payer's burden on, or benefits received from, the governmental activity. SECTION 4. Fees in the Municipal Fee Schedule are for government services provided directly to the payor that are not provided to those not charged. The amount of this fee does not exceed the reasonable costs to the City of providing the services. Consequently, pursuant to Art. XIII C, Section l(e)(2), such fees are not a tax. SECTION 5. Effective Date. The fee increases proposed for FY 2017 described in Exhibit A shall become effective no sooner than sixty (60) days from the date of adoption of this ordinance. // Attachment A 2 016 Yang\Dev Services\ 2016-11-21 ORD amending DSD Municipal Fees (Phase I) SECTION 6. CEQA. The adoption of user fees is exempt from environmental review under the California Environmental Quality Act (CEQA). (See CEQA Guidelines Section 15273.) INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ____________________________ ____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ____________________________ ____________________________ Senior Deputy City Attorney City Manager ____________________________ Director of Development Services ____________________________ Director of Administrative Services FY 2016 Fee Proposed Fee Total Surcharge/(Subsidy)Notes Administration Business Registry Business Registry Fee $50.00 per business $50.00 per business No Change Business Registry fees studied separately Building Building Permit Fees A. $1.00 - $1,000.00 $69.20 base fee B. $1,000.01 - $2,000.00 $69.20 for the first $1,000.00 plus $5.47 for each additional $100.00 or fraction thereof, to and including $2,000.00 C. $2,000.01 - $25,000.00 $123.91 for the first $2,000.00 plus $25.03 for each additional $1,000.00 or fraction thereof, to and including $25,000.00 D. $25,000.01 - $50,000.00 $699.59 for the first $25,000.00 plus $18.58 for each additional $1,000.00 or fraction thereof, to and including $50,000.00 E. $50,000.01 - $100,000.00 $1,163.98 for the first $50,000.00 plus $12.50 for each additional $1,000.00 or fraction thereof, to and including $100,000.00 F. $100,000.01 - $500,000.00 $1,789.20 for the first $100,000.00 plus $10.03 for each additional $1,000.00 or fraction thereof, to and including $500,000.00 G. $500,000.01 - $1,000,000.00 $5,800.59 for the first $500,000.00 plus $8.52 for each additional $1,000.00 or fraction thereof, to and including $1,000,000.00 H. $1,000,000.01 and Up $10,058.55 for the first $1,000,000.00 plus $6.72 for each additional $1,000.00 or fraction thereof If valuation exceeds $5,000,000.00, an alternative fee arrangement may be established by the Chief Building Official to achieve full cost recovery I. Building Demolition Permit $320.00 (does not include C&D fees) $407 ($87) J. Commercial Interior Non-Structural Demolition Permit $194.00 (does not include C&D fees) $185 $9 Construction & Demolition Commercial and Multi-Family Projects greater than or equal to $25,000.00 in Valuation1 $238.00 per permit $389 ($151) Single Family and Two Family Projects greater than $25,000.00 and less than $75,000.00 in Valuations1 $80.00 per permit $162 ($82) Single Family and Two Family Projects greater than $75,000.00 in Valuation1 $212.00 per permit $238 ($26) Electrical Permits Base Fee $92.00 per permit $87 $5 New or Remodeled Square Footage $0.11 per square foot $0.02 $0.09 Air Conditioners $29.00 per unit $86 ($57) Air Cooled or Oil Cooled Lighting and/or Power Transformer Each KVA shall be considered as one horsepower and charged for as per motor schedule Delete Not actively charged Conditional Utility Agreement $252.00 each $250 $2 Busway, Power Duct, or Floor Duct Per Foot $0.50 each $71 Each Additional Meter $5.00 each $71 Fixtures, Switches, and Outlets $1.00 each $71 Lighting, Power and/or Control Panel Board, Switchboard Cabinet or Panel $5.00 each $71 Motor $23.00 each $71 Motor Generator $3.00 per KVA $71 Range, Electric Clothes Dryer, or Water Heater $5.00 each $71 Special Circuit (Not Listed Herein)$5.00 each $71 Service Conductor/Switch - Greater than 800 ampre $40.00 each $257 ($217) Service Conductor/Switch - Less than 200 ampre $18.00 each $128 ($110) Service Conductor/Switch - Less than 800 ampre $29.00 each $171 ($142) Temporary Power Pole $56.00 each $71 ($15) Temporary Wiring for Construction $56.00 each $71 ($15) Electrical Permits - Electrical Vehicle Charging Stations Commercial (Level 1 and 2)$370.00 $403 ($33) plus $92.50 for each additional station $78 $14 Commercial (Level 3 and 4)$560.00 $489 $71 plus $140.00 for each additional station $96 $44 Residential (All Types)$160.00 per station Delete Residential (Level 1 and 2)$177 Add Residential (Level 3)$249 Add DEVELOPMENT SERVICES No change to Valuation Table DSD to complete separate study Restructured to a single flat-fee per permit Converted to a multi-level fee. EXHIBIT 1 FY 2016 Fee Proposed Fee Total Surcharge/(Subsidy)Notes Electrical Permits - Photovoltaic Systems Residential System $311.00 each Delete Residential Systems (less than 10kW)$86 Add Residential Systems (greater than 10kW)$321 Add Commercial System (less than 10 kW)$565.00 each $566 ($1) Commercial System (10kW - 49kW)$850.00 each $850 No Change Commercial System (greater than 49kW)$900.00 each $921 ($21) General & Miscellaneous Fees Address Change $224.00 single address; $376 ($152) $112.00 each additional address $181 ($69) All Other Publications $16.00 each $17 ($1) Construction/Maintenance Vehicles $76.00 per space per week $80 ($4) Electric Service and Safety Inspection $84.00 per hour $159 ($75) Extension of Building Permit or Building Permit Application $56.00 per application $90 ($34) Inspections and Investigations - Outside Normal Business Hours Note: Inspections and investigations outside normal business hours (2- hour minimum).$202.00 per 1.5x OT hour; $385 ($183) $226.00 per 2.0x OT hour $513 ($287) Inspections and Investigations - Unclassified Note: Inspections and investigations for which no fee is specifically indicated (2-hour minimum).$163.00 per hour $240 ($77) Reactivation of Expired Building Permit $168.00 per permit plus Plan Check Fees as applicable $199 ($31) Reactivation of Expired Building Permit - All Others 50% of original Building Permit Fee not to exceed the full cost to perform remaining inspections as determined by the Chief Building Official No Change Reactivation of Expired Building Permit - Final Inspection Only $375.00 or 50% of original Building Permit Fee, whichever is less $267 $108 Real Property Research Fee (1-hour minimum)$127.00 per hour $256 ($129) Records Retention $4.00 per plan sheet $6 ($2) Reinspection Fee - Multi-Family Residential and Non- Residential $308.00 each $297 $11 Reinspection Fee - Single Family Residential $84.00 each secondary inspection type;$233 ($149) $308.00 each primary inspection type $297 $11 Request for Release of Building Plans $45.00 each $80 ($35) Residential Inspection Guidelines Note: Available free online $33.00 each $35 ($2) Green Building Residential - Single Family and Two Family New Construction1 Note: New construction plus additions greater than 1,250 sq. ft. and rebuilds.$677.00 per review Delete New Single Family $1,449 Add Residential - Existing Home Renovations, Rebuilds, and/or Additions Note: Any existing home renovation, rebuilds, and/or additions greater than 250 sq. ft. and less than 1,250 sq. ft. and/or greater than $100,000.00 valuation. $56.00 per review Delete Residential - Multi-Family Renovations or Alterations Note: Renovations or alterations greater than 50% of the existing unit sq. ft. and that include replacement or alteration of at least of the following: HVAC system, building envelope, hot water system, or lighting system. $1,190.00 per review Delete Alterations and additions for single and multifamily < 1,000 sq ft and increases conditioned space $1,158 Add Alterations and additions for single and multifamily > 1,000 sq ft $1,300 Add Residential - Multi-Family New Construction of Three or More Units (attached)$1,190.00 (1-10 units); $1,388.00 (11-24 units); $1,687.00 (25 units or more)Delete Multi Family New Construction of 3 or More (attached) Units $1,591 Add Multi Family New Construction of < 4 $1,306 Add Non-Residential - New Construction1 Note: New construction plus additions greater than 1,000 sq. ft. and rebuilds.$1,495.00 per review Delete New commercial 1000 - 25,000 SF $1,876 Add New commercial 25,001-50,000 SF $2,160 Add New commercial >50,000 SF $2,303 Add Non-Residential - Tenant Improvements, Renovations, or Alterations (greater than 5,000 sq. ft) Note: Any existing tenant improvement, renovation, rebuilds, and/or additions greater than 5,000 sq. ft. that include replacement or alteration of at least two of the following: HVAC system, building envelope, hot water system, or lighting system. $976.00 per review Delete Tenant improvements, renovations, or alterations > 5,000 sq ft Note: includes replacement or alteration of at least two of the following: HVAC system, building envelope, hot water system, or lighting system and project value greater than $200,000.$1,591 Add Tenant improvements, renovations or alterations > $200,000 in valuation (and not triggered by a Calgreen Tier) $1,306 Add Non-Residential - Tenant Improvements, Renovations, or Alterations (greater than $100,000 valuation) Note: Any existing tenant improvement, renovation, or alterations greater than $100,000.00 in valuation and/or landscape renovations 21,000 sq. ft. $357.00 per review Delete If the project is over $100,000 Energy Star is required after 12 months of occupancy $737 Add Landscape Plan Review - Single Family Residential $943 NEW Landscape Plan Review - Non-Residential & Multi-Family $1,533 NEW Landscape Inspection $230 NEW Converted to a multi-level fee. Green Building Fees have been updated in accordance with the current Green Building and Energy Ordinance. Necessary to provide services and compliance with the Emergency Building Standards for Outdoor Potable Water FY 2016 Fee Proposed Fee Total Surcharge/(Subsidy)Notes Mechanical Permits Base Fee $92.00 per permit $87 $5 New or Remodeled Square Footage $0.11 per square foot $0.02 $0.09 Flue $5.00 each Delete Furnace and Flue $28.00 each Delete Furance, Flue, and Associated Ducts $172 Add Boiler (Certified Design)$28.00 each Delete Boilers, Compressors, and Absoprtion Systems: For the installation or relocation of each boiler or compresor up to 30 hp, or each absopration system up to and including 1,000,000 Btu/h $115 Add For the installation or relocation of each boiler or compressor exceeding 30 hp, or each absorption system exceeding 1,000,000 Btu/h $172 Add Air Conditioner or Heat Pump $28.00 each Delete Duct Outlet $0.50 each Delete Air Handlers up to and including 10,000 cfm $57 Add Exhaust Hood - Kitchen or Industrial $28.00 each Delete Vent Fan (Bath, Dryer, Residential Kitchen)$11.00 each Delete Ventilation and Exhaust $57 Add Fire Damper $5.00 each Delete Miscellaneous For each appliance or piece of equipment regulated by this code, but not classed in other appliance categories, or for which no other fee is listed $57 Add Process Piping System $28.00 each $57 ($29) Process Piping System - Hazardous $56.00 each $137 ($81) Swimming Pool Heater $28.00 each $68 ($40) Evaporative Cooler $28.00 each Delete Not actively charged Plan Review Fees Additional Plan Review Note: Required by changes, additions, or revisions to plans including Alternative Means and Methods (2-hour minimum). For Elective (3rd party) and over-the-counter reviews (half hour minimum).$191.00 per hour $212 ($21) Certified Access Specialist (CASp) Review/Consultation Actual cost of CASp Consultant plus 15%$276 Building Plan Check 80% of Building Permit fee Elective Plan Check 35% of Building Plan Check fee Fire and Life Safety Plan Check 45% of Building Permit fee Public Works Plan Check 12% of Building Permit fee Zoning Plan Check 30% of Building Permit fee Plumbing Permits Base Fee $92.00 per permit $87 $5 New or Remodeled Square Footage $0.11 per square foot $0.02 $0.09 Plumbing Fixtures $3.00 each Delete Plumbing Fixtures: For each plumbing fixture on one trap or a set of fixtures on one trap (including water, drainage piping, and backflow protection therefore)$86 Add Commercial/Industrial Sewer $28.00 each Delete Residential Sewer $11.00 each Delete Plumbing Fixtures: For each building sewer $137 Add Rain Water System $5.00 each Delete Rain Water Systems $86 Add Water Heater $5.00 each Delete Water Heater, Vent, or Other $103 Add Gas Outlet $5.00 each Delete Radiant Heat Piping System $28.00 each Delete Gas Piping System $205 Add Industrial Waste System $28.00 each Delete Industrial Waste Pretreatment Interceptor (including trap and vent, except kitchen-type grease interceptors functioninga fixture traps)$205 Add Water Piping System or Repair $5.00 each Delete Water Piping Installation, alteration or repair of water piping, water treatment equipment or both.$103 Add Solar Hot Water System Note: Does not include Plan Check fee.$224.00 each $205 $19 Storm Drain System $28.00 each $205 ($177) Swimming Pool $28.00 each $68 ($40) Atmospheric-type Vaccume Breakers $103 New Backflow protective device other than atmospheric-type $205 New Medical Gas Piping Systems $205 New Plumbing Permits - Graywater Systems Clotheswasher System $56.00 each $86 ($30) Complex System $88.00 plus plan review at cost $205 ($117) Simple System $61.00 plus plan review at cost $86 ($25) Restructured to a single flat-fee per permit and re- named to be consistent with ICC permit fee tables Reflective of curent ICC tables and activities for which no other fee currently exists. Plumbing Fees have been updated to reflect current ICC table 114.1 unit fee schedule structure, per California state plumbing code. Mechanical Fees have been updated to reflect current ICC table 114.1 unit fee schedule structure, per California state mechanical code. Restructured to a single flat-fee per permit and re- named to be consistent with ICC permit fee tables No Change to Plan Check Permit Fees FY 2016 Fee Proposed Fee Total Surcharge/(Subsidy)Notes SB 1473 Fee A. $1.00 - $25,000.00 Permit Valuation $1.00 per valuation increment B. $25,001.00 - $50,000.00 Permit Valuation $2.00 per valuation increment C. $50,001.00 - $75,000.00 Permit Valuation $3.00 per valuation increment D. $75,001.00 - $100,000.00 Permit Valuation $4.00 per valuation increment E. Each $25,000.00 Increment or Fraction Thereof Above $100,000.00 Add $1.00 per valuation increment F. Minimum $1.00 minimum Strong Motion Instrument Program Commercial $28.00 per $100,000.00 permit valuation ($0.50 minimum) Residential $13.00 per $100,000.00 permit valuation ($0.50 minimum) Use & Occupancy Permits Certificate of Use and Occupancy $287.00 each Certificate of Use and Occupancy - Replacement $123.00 each SB 1186 Mandated Fee Note: Does not include fees collected by the Fire Department.$1.00 each No Change State mandated Temporary Occupancy Permit - Multi-Family Residential, Non-Residential, and Other Commercial $896.00 each $635 $261 Temporary Occupancy Permit - Single Family Residential and Commercial Tenant Improvement less than 10,000 sq. ft.$375.00 each $470 ($95) Fire Prevention Compliance Fees Emergency Response Fee - Hazmat (PAMC 17.24.050)Up to $1,212.00 for each incident up to 100% cost recovery No Change Installation or Closure Without Approved Plans and/or Permits $275.00 - $813.00 average fee range No Change Documents Emergency Planning Guide $253.00 each No Change Long-term Offsite Document Storage $0.25 per page No Change Microfilm Copy/Print $3.25 per blueprint page; $0.30 per specification/ calculation page No Change Photographs $30.00 first print; $0.55 each additional print No Change Hazardous Materials Classification Permits Compressed Gas $139.00 annually $369 ($230) Corrosives $139.00 annually $369 ($230) Cryogenic Fluid $139.00 annually $369 ($230) Flammable and Combustible Liquids $139.00 annually $369 ($230) Flammable Gas $139.00 annually $369 ($230) Flammable Solids $139.00 annually $369 ($230) Health Hazard (Liquids & Solids)$139.00 annually $369 ($230) Liquefied Petroleum Gases $139.00 annually $369 ($230) Organic Coatings $175.00 annually $369 ($194) Organic Peroxides $139.00 annually $369 ($230) Ovens - Industrial Baking or Drying $102.00 annually $369 ($267) Oxidizers (Liquids & Solids)$139.00 annually $369 ($230) Oxidizing Gas $139.00 annually $369 ($230) Pyrophoric Gas $139.00 annually $369 ($230) Pyrophoric Materials (Liquids & Solids)$139.00 annually $369 ($230) Pyrotechnical Special Effects Material $29.00 annually $369 ($340) Radioactive Materials $139.00 annually $369 ($230) Refrigeration Equipment $175.00 annually $369 ($194) Spraying/Dipping $175.00 annually $369 ($194) Toxic, Highly Toxic, Moderately Toxic, Health Hazard Gas Note: Includes pesticides, fumigants, and etiologic agents.$139.00 annually $369 ($230) Toxic, Highly Toxic, Moderately Toxic, Health Hazard Materials $139.00 annually $369 ($230) Unstable Reactive Gas $139.00 annually $369 ($230) Unstable Reactive Materials (Liquids & Solids)$139.00 annually $369 ($230) Water Reactive Materials (Liquids & Solids)$139.00 annually $369 ($230) Other Hazardous Materials - Unclassified Note: Inspections and investigations for which no fee is specifically indicated (1-hour maximum).$369 NEW General category to include other hazardous materials not listed above Tire Recapping/Tire Storage $575.00 annually $1,473 ($898) No Change These will be studied separately, with the integration of the Business Registry fee. No Change State mandated No Change State mandated FY 2016 Fee Proposed Fee Total Surcharge/(Subsidy)Notes Hazardous Materials Storage Permits Additional Approvals for Hazardous Materials Storage Permit Note: Additional approval for permit to construct, temporary closure, permanent closure, otherwise modify a hazardous materials storage facility. See CEQA for additional fees. $356.00 per occurrence, plus $800 ($444) $159.00 per hour for time above two hours $523 ($364) Business Plan (HMBP)$256.00 per location annually $523 ($267) Late Fee for Hazardous Materials Storage Permit 25% of total Hazerdous Material permit fee No Change Level I Facility (Includes 1 hr of Inspection Time) Note: Minimal storage as defined by having no hazardous materials over CFC permit amounts as specified in CFC section 105.$264.00 annually per location $369 ($105) Level II Facility (Includes 2 hrs of Inspection Time) Note: Quantities exceeding CFC permit threshold, but less than 50 gal., 500lbs or 200 cu. ft. Category also includes dry cleaning, fixed medical gas, auto or aircraft repair, and service stations.$404.00 annually per location plus other hazardous materials classification permit if applicable $738 ($334) Level III Facility (Includes 4 hours of Inspection Time) Note: Quantities exceed 50 gal. 500lbs, or 200 cu. ft. and not categorized as Level II. $729.00 annually per location plus other hazardous materials classification permit if applicable $1,476 ($747) Petroleum Aboveground Storage Tank (Includes 2hrs of Inspection Time)$593.00 annually $738 ($145) Provisional/6 Month (Includes 2 hrs of Inspection Time)$186.00 plus other hazardous materials classification permit fees if applicable $738 ($552) Inspection Fees Additional Inspection or Resinspection Fee $323.00 for up to 2 hours resinspection, plus $736 ($413) $159.00 per hour (during business hours) $368 ($209) After Hours Inspection Fee Note: Fee for before or after normal business hours; weekends and holidays included. Fee is to be paid in advance of inspection.$165.00 per hour; 4 hour minimum $552 ($387) Care Facility Note: Includes community, child day care and residential care for the elderly (CFC 111.4). Excludes residential elderly care facilities with six or fewer persons.$175.00 annually Delete Not actively charged Care Facility Inspection Including Fire Clearance $73.00 for facilities with 7-14 clients; $368 ($295) $140.00 for facilities with more than 14 clients $736 ($596) Christmas Tree Lot/Pumpkin Patch $175.00 each $368 ($193) $713.00 annually for up to 4 hours; plus $1,534 ($821) $159.00 for each additional hour $368 ($209) Outside Cooking Booths $198.00 each $552 ($354) Standby Fire Watch (Per Person)$159.00 per hour $368 ($209) Use and Occupancy Fire Inspection $148.00 per inspection No Change To be studied separately, with the integration of the Business Registry fee As-Built Plan Check and Additional Work $736 New Implemented to recover costs for activity in which no other permit currently exists Consultations Additional Hours Over Plan Review/Inspection $155.00 each $291 ($136)Changing to a Per Hour fee Alternate Means and Methods Application (2 hr Maximum)$356.00 per application $693 ($337) Appeals to Decisions $159.00 per hour $368 ($209) Consultation Fee $166.00 per hour $368 ($202) Hazardous Materials Data Entry Fee $77.00 per hour; 1 hour minimum Delete Not actively charged Hydrant Flow Fee $165.00 per occurrence $368 ($203) Prior Fee Range was 7-25 clients & 25+ High Rise Building - Certificate of Compliance Note: Certificate of compliance inspection for each high rise building which is required by state law to be inspected and certified annually as meeting minimum compliance with applicable state of California fire and life safety standards for existing high rise buildings (CFC 111.4.3). FY 2016 Fee Proposed Fee Total Surcharge/(Subsidy)Notes Life Safety & Fire Protection Automatic Fire Sprinkler Installation/Modification: 1-19 Sprinkler Heads $356.00 $736 ($380) 19+ Sprinkler Heads (Includes Hydrostatic Test), plus additional per head fee $1,626 plus $1.80 per head $4 ($2) Express Fire Protection Plan Check Fee $163.00 per occurrence No Change Fire Alarm System Installation and Modification $356.00 plus $1,028 ($672) $2.00 a device or contact point $22 ($20) Fire and Life Safety Plan Check - Commercial Note: Includes one inspection and reinspection.The Fire and Life Safety Plan Review Fee is 45% of the Building Plan Check Fee and is collected by the Building Division at the time an application of a Building Permit is submitted No Change Fire Protection and Fire Access Plan Review for New Single Family Dwellings or Additions $100.00 each $844 ($744) Underground Fire Service Line Note: Includes 4 hrs of Inspection & 1 hr of Plan Check $356.00 per occurrence $1,764 ($1,408) Previously included one inspection and one reinspection Hydrant/Appliance Installation or Modification $261.00 Delete plus $59.00 per hydrant $184 ($125) Other Automatic Fire Extinguishing System Note: Includes hood and duct, FM 200, Inergen, and C02. If a system has a release panel, Fire Alarm fees apply as well.$356.00 plus $7.25 per nozzle $1,028 ($672) Site Disaster Planning $166.00 per hour $368 ($202) Standpipe System - Wet, Dry, or Combination $208.00 per riser $736 ($528) Temporary Certificate of Occupancy $356.00 per occurrence No Change To be studied separately, with the integration of the Business Registry fee. Verification of Fire Protection System Maintenance and Certification $89.00 annually $83 $6 Food truck permits $184 New Implemented to recover costs for activity in which no other permit currently exists Multifamily dwellings, hotels & motels 4-50 units $368 New 51-100 units $736 New Greater than 100 units $1,104 New Fire Prevention Inspection of Private Schools $736 New Specific Hazard Permits Aerosol Products $102.00 annually $460 ($358) Amusement Buildings $410.00 each $0 Delete Not actively charged Automobile Wrecking Yard or Junk Yard $179.00 annually $0 Delete Not actively charged Bowling Alley and Pin Refinishing Involving the use of Flammable Liquids $179.00 each $1,074 ($895) Candles and Open Flames in Assembly Areas $142.00 annually $368 ($226) Carnivals and Fairs $179.00 each $1,534 ($1,355) Cellulose Nitrate Storage/Nitrate Film $102.00 annually $107 ($5) Combustible Fiber/Material Storage $179.00 annually Delete Not actively charged Confined Space $148.00 annually Delete Not actively charged Dust Producing Devices $126.00 annually Delete Not actively charged Excavate within 10 ft. of Flammable or Combustible Pipeline $88.00 each Delete Not actively charged Explosive or Blasting Agents $102.00 annually Delete Not actively charged Fireworks Display $565.00 each Delete Not actively charged High-piled Combustible Storage $102.00 annually Delete Not actively charged Hot Work (Welding) Operations $179.00 annually $368 ($189)Changing to a one-time fee Liquid or Gas-Fueled Powered Equipment/Generator $88.00 each $368 ($280) Liquid or Gas-Fueled Vehicles or Equipment in Assembly Buildings $103.00 each Delete Not actively charged Magnesium Working $103.00 annually Delete Not actively charged Malls - Covered $103.00 annually $736 ($633) Occupant Load Increase - Temporary Assembly $236.00 each $368 ($132) Open Burning $236.00 each $368 ($132) Open Flame/Flame Producing Devices $88.00 each $368 ($280) Operate a Tank Vehicle to Transport Flammable/Combustible Liquids $102.00 annually $522 ($420)Changing to a per-vehicle fee Parade Float $115.00 per hour $369 ($254) Place of Assembly $236.00 per occurrence $738 ($502) Place of Public Assembly - Temporary $236.00 each $368 ($132) Special Events Permit $368 New Implemented to recover costs for activity in which no other permit currently exists Tent or Air Supported Structure Note: Tent or air-supported structure having an area in excess of 200 sq. ft. or canopies in excess of 400 sq. ft. Fee includes a public assembly permit of $125.00 for all tents. $290.00 each $782 ($492) Restructuring to a two-tier fee Restructuring to one per- device fee to be charged in conjunction with the Underground Fire Service Line fee. New Fee and Fee Ranges implemented per State mandate to inspect these facilities Capital Accounting Partners Page 1 Report – Development Services Fee Study June 2016 CITY OF PALO ALTO Development Services Department CAPITAL ACCOUNTING PARTNERS, LLC Daniel B Edds, MBA, PMP 3570 Buena Vista Dr. Sacramento, Ca 95864 916.670.0001 danedds@mycapartner.com Attachment B Capital Accounting Partners Page 2 Contents Development Services Department ........................................................................................................................... 3 Introduction and Scope ................................................................................................................................... 3 Summary of Costing Methodologies ............................................................................................................... 3 Assuring Quality Results .................................................................................................................................. 6 Quantitative ............................................................................................................................................. 6 Qualitative ................................................................................................................................................ 6 Summary of Results ................................................................................................................................................ 8 General Observations of Cost Recovery and Pricing ....................................................................................... 8 Valuation Based Fees ............................................................................................................................... 8 Modifications to the Fee Schedule ........................................................................................................... 9 Results ............................................................................................................................................................. 9 Projecting Revenues ................................................................................................................................. 9 Challenges to Accurately Projecting Revenues .......................................................................................10 Reasons Revenues Can Fail to Meet Expenses .......................................................................................10 Summary of Results by Division or Work Unit ...............................................................................................11 Why Differences in Recovery Levels? .....................................................................................................11 Observations and Recommendations ......................................................................................................................13 General Observations and Recommendations .......................................................................................13 What is Not Covered in this Analysis ......................................................................................................13 Assessing Valuation Based Fees .............................................................................................................13 Adjusting the Fee Schedule ....................................................................................................................13 Building Reserves ...................................................................................................................................14 Development Services Fee Table ……………………………………………………………………………………………………………… 15 Capital Accounting Partners Page 3 Development Services Department The City’s Development Services Department is comprised of four divisions or functions: 1. Building; 2. Fire prevention; 3. Planning; and 4. Public works. Together, they form a valuable resource for home owners, businesses, contractors, developers, and citizens to build safe buildings that comply with the code requirements of the City. The long term objective of the Department is to become an enterprise fund. Financially, this means that fees for its various services must be sufficient to recover the cost of the Department. Introduction and Scope As part of its effort to manage its financial resources wisely, the City of Palo Alto engaged Capital Accounting Partners to prepare a detailed cost analysis of its Development Services user fees. The City's objectives for the study were to ensure that the Development Services Department is fully accounting for all of its costs and recovering adequate revenues to cover its expenses. The scope of this study included the following: Review and update the fee schedule; Calculate the total cost of fee generating services; Calculate the cost of plan check and inspection services from valuation based fees; Analyze cost recovery level; Develop a cost model based on the current organizational structure; Reviewing the results with staff; and Provide recommendations or methodologies on how to adjust fees annually. Summary of Costing Methodologies Driver Based Costing Models Developing driver based costing models is a detailed and robust method of calculating the cost of a specific service. It is based on the principles of activity based costing so it seeks to understand cost at an operational level. This means it relies on understanding the time staff invests in core business processes to provide fee and non-fee services. This provides the ability to understand staff time and cost as each Capital Accounting Partners Page 4 staff position participates in providing fee services. Graphically, the following figure illustrates this methodology. Hypothetical Illustration of a Driver Based Costing Model Contributing Staff Process Steps Fee Project Managers Permit Intake Plan Reviewer Building Inspector Chief Building Official Plan Review Inspection 7500 SF SFR Zoning Code Review Project Steps and Process Step 1: Collect Data – This first step involves discussions with staff to identify those positions within the department that provide and support direct services. It also involves collecting departmental budget and expenditure data, identifying the salary and benefits for each position, and identifying non-personnel expenditures, as well as any departmental and City wide overhead. Specifically, the steps involve the following: Identifying staff positions – This includes identifying both position titles and names. Calculating the number of productive hours – For each position, vacation time, sick leave, paid holidays, professional development (training), routine staff meetings, and daily work breaks are deducted from the standard 2,080 annual hours. The result is a range of hours available for each position on an annual basis. This range is typically 1,500 to 1,600 hours. Factors that influence this range are length of service with the jurisdiction and local policies for holiday and personal leave time. However, based on previous work with the City where the calculated number of productive hours was almost exactly 1600 hours, and at the request of the Office of Management and Finance, we set all positions at 1600 productive hours. Identifying and allocating non-personnel costs – Costs for materials and supplies are allocated to the salary and benefits for each position. Capital Accounting Partners Page 5 Assigning any other expenses that are budgeted in other areas – There are often expenses that should be included with the total cost of services. Examples of such costs might include amortized capital expenses for vehicles and technology. Identifying core business processes or activities – This step also involves discussions with staff to understand, at an operational level, the work of the operating unit. Core business processes used to provide services are identified and then defined by the tasks that are involved. Processes are also organized by direct and indirect categories: Direct processes and activities – Those processes that directly contribute to the processing of an application or permit are first identified. Examples of a direct activity are building inspection, application intake, and pre-application review. Indirect processes and activities – Those processes that support, but do not directly apply to the processing of a specific application or permit. An example of an indirect activity is customer service or staff training to maintain certifications. Step 2: Building cost structures – This second step involves significant interaction with staff and the development of time estimates for both direct and indirect processes in each department. Specifically, this step is at the core of the analysis. There are four processes that comprise this step: Gathering time estimates for direct processes – By interviewing staff in individual and group meetings, an estimate of time was assigned to each service by the process that is indicated. For the most part, the processes included three primary steps: Permit intake; Plan review; and Construction inspections. In this analysis, staff time is estimated and assigned to each step. The sum of all the process steps is the total time that is required to provide that specific service. Assigning indirect and annual process time – An annual time estimate is gathered from staff for those indirect or support processes in which they are involved. These may include activities such as program administration, customer service, and department administration. These costs are allocated to all services proportionately to all services provided by the department. Calculating fully loaded hourly rates and the cost of service – Once the total time for each direct and indirect service is estimated, the cost of service is calculated by using the fully loaded hourly rates for each staff member or position that is involved with the service. The fully loaded hourly rate for each employee is based on the employee's salary and benefit costs plus a share of non- personnel and City overhead costs divided by the employee's available work hours (i.e. 2,080 hours minus all leave hours). Thus, the direct and indirect cost by activity also includes departmental and citywide overhead as well as non-labor costs. The source of City indirect costs and non-personnel costs is from the annual budget or cost allocation that has been established by the City. Gathering activity or volume data – A critical element in the analysis is the number of times a given service is provided on an annual basis. This is critical data for three reasons: It allows a calculated projection of current revenue based on current prices. This is compared with actual revenue to see if there is a close match as the data should match. Capital Accounting Partners Page 6 It allows for a calculated projection of revenue at full cost. This is compared to actual expenditures to see if there is a close match as the data should match. It allows for a calculation of total hours consumed. Hours consumed must closely match actual hours available. If any of the three calculations do not approximate actual numbers, then time estimates and/or volume data need to be re-evaluated. These are critical quality checks for costing accuracy. Step 3: Calculating the full cost of services – This third step calculates the full cost of service for each direct service in the department. In the previous step, the cost of service was calculated for each direct and indirect service. In this step, the cost layers are brought together to establish the full cost of service for a specific direct service, program, or activity. As previously mentioned the cost of each direct service is calculated. To determine the full cost of service, the cost of indirect services is allocated to each direct service. The indirect services costs are allocated to each direct service based on each direct services proportion of labor spent processing each permit and application. By summing the direct and allocated indirect costs and multiplying that by the activity data, a total cost of service is calculated for both an individual service and the operating unit as a whole. Step 4: Set fees Based on any new, existing, or revised cost recovery policies, the recommended fees can be established. The recommended fees will be established based on City staff recommendations and Council discussion in the future. The fee analyses in this report are based on full cost recovery. Assuring Quality Results In our analysis we utilize both quantitative and qualitative tests for quality. Quantitative Our process incorporates substantial input from both individuals and groups. Our belief is that we get the best data from group interviews. For example, in determining how much time is required for any specific type of building inspection, we want to hear the perspective of an inspector, of the inspector supervisor, and the counter tech or project manager. Each will have a perspective. Each will contribute value to the estimate. When all perspectives agree, we gave have a good sense of confidence in our results. Qualitative We also utilize four qualitative measure of quality data. When each of these measures match and there are no major disagreements with the qualitative assessment, we have significant confidence in our results. These qualitative measures are: Quantitative Analysis Targeted Margin of Error 1) Budgeted expenses entering the cost models must equal total expenses accounted for in the costing model. 0% 2) Projected revenue from fees must closely match actual revenue from fees. + or – 5%-10% Capital Accounting Partners Page 7 3) Available staff time must be fully accounted for in the costing models. 0% 4) Total revenues from fees and contributions from the general fund or other sources must match total expenses. 0% Capital Accounting Partners Page 8 Summary of Results General Observations of Cost Recovery and Pricing In general, our results suggest that on average, Development Services has a level of cost recovery that almost covers its budgeted costs. However, our results also show some services are over recovering costs while other services are significantly under recovering cost. From our experience, this is fairly normal. One important result of a fee study is the “right sizing” of fees and a rebalancing of fees. The State of California requires that fees be in proportion to costs. For example, plumbing fees cannot be priced below cost while mechanical fees are price above cost. Similarly, green building fees cannot be priced below cost but new construction fees cannot be priced above cost to compensate for the loss of revenues. Therefore, establishing the full cost, and setting the price at or as near full cost is an important result of a fee study. Valuation Based Fees The Department recovers a substantial portion of its cost from its valuation based fees. These fees are generally for construction projects where the fee is based on a multiplier of construction value. Currently, the City is recovering about the correct amount from these fees. However, year over year, recovery from these fees may be a little over or a little under full cost. Expenses can be relatively constant but building activity can be volatile. As building activity heats up, revenues may exceed expenses. As building activity cools down, revenues may come short of expenses. Graphically, this relationship may appear this way. Currently, the City uses construction value to determine value as opposed to an independent assessment of value such as the International Code Council (ICC) valuation tables. Our recommendation to the City, and one that has been adopted by the Department, is to move towards using the ICC tables to determine value. This provides an independent assessment of valuation that is not tied to construction. Using construction value to calculate building fees means that Department revenues may move up or down depending upon market forces of supply and demand. A tight labor market will be higher labor costs for construction and City revenues will go up. Conversely, an Capital Accounting Partners Page 9 Projected Revenue at Full Cost Current Revenue Difference $ 2,500 $ 750 ($1,750) $ 500 $ 750 $250 $ 10,000 $ 7,000 ($3,000) $ 12,500 $ 3,750 ($8,750) $ 2,500 $ 1,250 ($1,250) $ 28,000 $ 13,500 ($14,500) oversupply of wood products may mean that construction costs go down and the City fees will go down with accordingly. The classic example of the two approaches can be seen when two houses with the exact floor plans are constructed. They both are the same size, they both have the same number of bathrooms, outlets, electrical panels, and sinks. However, one builder utilizes the cheapest materials and the homeowner wants the cheapest fixtures. The other builder utilizes the best materials and the home owner wants the finest fixtures available. The two homes will have very different construction values but the time and effort to review the plans and conduct all the inspections will be the same. To move to the ICC valuation of building, and to assure it will recover its cost, the City will need to start collecting three additional sources of data within its permitting system: 1.Building square footage; 2.Building type of construction; and 3.Building occupancy type. Without these additional data, it will be impossible to determine the correct multiplier that will result in full cost recovery. Therefore, we recommend the City begin collecting these data and when there are 6 months of data then calculate the correct multiplier. Modifications to the Fee Schedule Another result of a fee study is bringing the schedule of fees up to current code. As part of this study, we modified the schedule of fees to best reflect the California Building Standards Code. In some cases, this required little modification. In others, fees were dropped, fees were added, or some fees were simply renamed. However, in consultation with staff, it is our view that the schedule of fees reflected in our model brings the City’s fees into alignment with the California Building Standards Code. Results Projecting Revenues The math involved in projecting revenues is basic: Annual number of times a fee is charged X full cost = annual revenue. Hypothetical Example of how Revenue is Projected Fee Description Annual Activity Full cost Current Price Fee 1 10 $ 250 $ 75 Fee 2 5 $ 100 $ 150 Fee 3 20 $ 500 $ 350 Fee 4 50 $ 250 $ 75 Fee 5 25 $ 100 $ 50 Capital Accounting Partners Page 10 In this example, revenues from current fee levels is $13,500 and while these same services priced at full cost will generate $28,000 or $14,500 more. Challenges to Accurately Projecting Revenues Projecting future revenues should be simple. However, there are several challenges to projecting revenues accurately. Among these are: 1. Errors in the annual activity data; 2. Changes in fee descriptions; 3. New fees that are being from existing fees; 4. Fees where the work is being done but there is no fee to collect; and 5. Differences in timing between permitting systems and financial systems. Fire Prevention Fire Prevention is a classic example of how challenging projecting revenues can be. Frequently, Fire Prevention will be tasked for making inspections, but decisions by the Council prohibit or restrict the charging of full cost. Many councils will reduce or even eliminate some fees for non-profits, social service agencies, religious institutions, or operations catering to children. Public Works and Planning The Development Services Department is being charged for Planning and Public Works staff. These staff are built into the Departments budget in the normal budget cycle. The challenge for the Department is that these costs can be difficult to manage. The fees for Planning and Public Works are set by Council. The budgets for Planning and Public Works are based upon an assumed level of activity in the spring before the activity is actually realized. So if the actual activity is greater than projected activity, revenues higher than cost flow to the Department. However, if actual activity is lower than projected activity, then the Department has costs that it cannot recover. Reasons Revenues Can Fail to Meet Expenses There are several reasons why the Department might fail to meet its expenses. Among these are: 1. The Department is charged with inspection activity but it cannot charge for the service; 2. The Department has budgeted expenses but activity levels are lower than projected; 3. Former estimates required for plan review and inspection are not accurate; and 4. Productive hourly rates assumed in the calculations are not accurate. Capital Accounting Partners Page 11 Fee Type Projected Fee Revenues at Full Cost Projected Revenues at Current Prices Difference Surplus / Subsidy Valuation Bldg Permit & Plan Check $ 8,490,666 $ 8,599,967 $ 109,301 1% Non-Valuation Building Total 1,819,529$ 1,836,334$ $16,804 1% Construction & Demolition 149,930$ 124,042$ ($25,888)-17% Mechanical 166,768$ 387,519$ $220,751 132% Plumbing 222,406$ 358,690$ $136,284 61% Electrical 399,632$ 646,484$ $246,852 62% Green Building 675,347$ 187,421$ ($487,926)-72% Use and Occupancy 205,447$ 132,178$ ($73,269)-36% Fire Prevention Total 1,925,540$ 602,020$ ($1,323,520)-69% Public Works Total 860,363$ 269,792$ ($590,571)-69% Total Resources Consumed $ 13,096,098 $ 11,308,113 $ (1,787,985)-14% Summary of Results by Division or Work Unit The following graphic outlines various levels of recovery for each of the major work units within the Development Services Department. It shows, for example, that the Building function is subsidizing Fire Prevention, Planning, and Public Works. It should be noted however, that these data are based on current activity levels and the normal year to year changes to these activity levels can change these results. Project Revenues Based on Current Activity Levels Why Differences in Recovery Levels? There can be a many reasons why there are differences in cost recovery levels. Our observation is that the Department is under-recovering its fees. Much of this can be corrected by a rebalancing of fees. In other words, each division should be generating enough revenue to recover its costs. From our observations, the following are some reasons why each work group is either over recovering or under recovering its expenses. Building Observations The data suggests that Building Division is financially supporting the Department. There can be several reasons for this: Activity levels are escalating faster than staffing (expenses) can be added. This has the input of showing that revenues are exceeding expenses. Reliance on construction value vs an independent calculation such as the ICC valuation table. As building activity increases, basic supply and demand rules will push construction value higher. This will have the impact of increasing revenues to the City without incurring additional expenses. Capital Accounting Partners Page 12 Estimates of time to provide inspection and plan review services are incorrect. We see this in the current rates for mechanical, electrical, and plumbing fees for new construction. The current price is $.11/SF. Based on our analysis and in discussions with inspectors, the actual calculated cost is $.02/SF. Fire Prevention Observations Under recovering costs for Fire Prevention services is fairly common in the State of California. Sometimes this is by design but of often is it is not. From our observation there are three reasons why the City is under recovering costs of Fire Prevention: 1. Previous estimates of how much time is required for inspection and plan review time is different than actual. 2. Previous estimates of productive hourly rates are different and have not been updated until now. 3. The work unit is making inspections and providing a services but either the fee is not being charged or there is no fee. If the City were to decide that full cost recovery is in its best interest, then the fees the department collects, based on our calculations, should fully recover the cost of this function. Capital Accounting Partners Page 13 Observations and Recommendations General Observations and Recommendations As stated earlier, we observe that the Department is nearly recovering its expenses. However, “right sizing” its fees and adjusting its fees so that each division is recovering its costs is an important result of a fee study. We also observe that there are no built in costs to build reserves. We generally recommend reserves for building departments to be targeted at 6-12 months of operating expenses. For the Department, this would be a range of $6,500,000 - $13,000,000. What is Not Covered in this Analysis We are frequently asked “did you look at efficiency”. The simple answer is no, this was not within the scope of the project. However, we would add that with experience, certifications, and qualifications that we hold in the disciplines of process management and the application of lean thinking within the public sector we are very sensitive to this question. We would also add, that from our experience in providing these services, that seldom do they generate short term cost savings. The benefit they do bring in the short term is improvements in customer service. Plan review is completed faster. In the long term, they can reduce the escalation of costs. We are also frequently asked about work load demands. Again, this was outside project scope. However, we understand that the City is an ISO Class 1 accredited City. Only one of four in the State of California and one of 9 in the country. This is a prestigious award. From discussions with leadership, maintaining this certification may be a challenge going forward. Additional resources may be required to maintain the staffing to workload levels required by ISO. Assessing Valuation Based Fees As stated previously, the current methodology of assessing value, from which new construction building permits are based, is to use construction value. In addition, several other fees are derived from the calculation of permit value. From our observation, a better approach is to base value off an independent calculation of value such as the International Code Council (ICC) Valuation Table. This reduces fluctuations in revenues (up or down) to the City due to local supply & demand pressures, pricing and selection of internal fixtures, and temporary swings in commodities. However, moving toward this method will require additional data to be gathered on building permits. This will include data on the square footage of buildings, occupancy type, and building construction type. Without these data it will be impossible to accurately calculate what the multiplier needs to be to generate an appropriate level of cost recovery. We understand that this will be the objective of phase two of the user fee study. Adjusting the Fee Schedule A standard recommendation of ours is that fees be adjusted annually. We also recommend a complete review of costs for fee services every three to five years. With the annual update of fees, we recommend using a simple CPI type increase that is attached to the City’s labor cost. For example, if the Capital Accounting Partners Page 14 labor cost for the City goes up by 2% then adjust each fee by 2%. This is the simplest and most common method of adjusting fees annually. It is our observation that the regulatory requirements change enough within a three to five years that a comprehensive review of costs is then warranted. We understand that the City’s policy is to adjust fees annually based on changes to salaries and benefits. We would affirm this practice and find that those cities that do this, maintain better cost recovery levels over the long term. Building Reserves We regularly recommend 6-12 months of operating expenses as a reserve. We understand from staff that this will be a discussion for a later time. We would affirm this plan but also recommend that a reserve policy be set into place. This policy might target: Specific reserves (such as 12 months of operating expenses); An understanding of how the reserve will be managed; and How will a reserve be defined and realized? Capital Accounting Partners Page 15 DEVELOPMENT SERVICES FEE TABLE The following table details the individual unit costs of each fee in the Department and provides annual revenue impacts for each fee and all fees collectively. Palo Alto Building Dept Building Fees Service # If Any Fee Name Unit/Notes Actual Work Volume Bldg Time Fire Time Planning Time PW Time Direct Unit Cost Indirect Unit Allocated Costs Other external costs Total Cost Assigned Current Fee / Revenue Unit Surcharge or (Subsidy) Unit Cost SummaryUnit Time Assignments BUILDING FEES 1,165 Business Registry Fee per business -$ 50.00$ $50 -$ Building New Construction -$ All Valuation Based Building Fees Combined (total annual Calculations)5,973,018$ 2,517,648$ $8,490,666 8,599,967.00$ $109,301 -$ 1,217 I. Building Demolition Permit 177 1.17 0.333 234$ $152 $386 320.00$ ($66) 1,218 J. Commercial Interior Non-Structural Demolition Permit 39 0.33 0.333 106$ $69 $175 194.00$ $19 -$ 1,207 Additional Plan Review per hour 117 1 122$ $79 $201 191.00$ ($10) 1,202 Building Plan Check per hour -$ -$ 1,208 Certified Access Specialist (CASp) Review/Consultation Hourly 1 159$ $103 $262 -$ ($262) 1,203 -$ 1,204 Address change - single address 1 0.25 216$ $140 $356 224.00$ ($132) 1,206 Address change - each additional address 0.42 0.167 104$ $67 $171 112.00$ ($59) 1,205 -$ -$ Construction & Demolition -$ 1,198 Commercial and Multi-Family Projects greater than or equal to $25,000.00 in Valuation per permit 89 0.334 1.000 224$ $145 $369 238.00$ ($131) 1,200 Single Family and Two Family Projects greater than $25,000.00 and less than $75,000.00 in Valuations per permit 18 0.334 0.250 93$ $61 $154 80.00$ ($74) 1,199 Single Family and Two Family Projects greater than $75,000.00 in Valuation per permit 71 0.334 0.500 137$ $89 $225 212.00$ ($13) -$ -$ ELECTRICAL PERMITS 1,228 Air Conditioners per unit 39 0.5 49$ $32 $81 29.00$ ($52) 1,230 Air Cooled or Oil Cooled Lighting and/or Power Transformer per permit 0.50 49$ $32 $81 -$ ($81) 1,226 Base Fee per permit 1,696 0.33 50$ $32 $82 92.00$ $10 1,240 Busway, Power Duct install, repair or replace per permit 20 0.42 41$ $27 $68 0.50$ ($67) 1,229 per permit 0.42 41$ $27 $68 252.00$ $184 1,249 Each Additional section of meter per permit 2 0.42 41$ $27 $68 5.00$ ($63) 1,234 Fixtures, Switches, and Outlets per permit 1,633 0.42 41$ $27 $68 1.00$ ($67) 1,241 Lighting, Power and/or Control Panel Board, Switchboard Cabinet or Panel per permit 43 0.42 41$ $27 $68 5.00$ ($63) 1,236 Motor per permit 13 0.42 41$ $27 $68 23.00$ ($45) 1,235 Motor Generator per permit 40 0.42 41$ $27 $68 3.00$ ($65) 1,227 New or Remodeled Square Footage Per SqFt 3,723,840 0.00012 $0.01 $0.01 $0.02 0.11$ $0.09 1,237 Range, Electric Clothes Dryer, or Water Heater per permit 2 0.42 41$ $27 $68 5.00$ ($63) -$ 1,248 Service Conductor/Switch - Greater than 800 ampre per permit 2 1.50 148$ $96 $243 40.00$ ($203) 1,246 Service Conductor/Switch - Less than 200 ampre per permit 128 0.75 74$ $48 $122 18.00$ ($104) 1,247 Service Conductor/Switch - Less than 800 ampre per permit 11 1.00 98$ $64 $162 29.00$ ($133) 1,238 Special Circuit (Not Listed Herein)per permit 26 0.42 41$ $27 $68 5.00$ ($63) 1,250 Temporary Power Pole per permit 149 0.42 41$ $27 $68 56.00$ ($12) 1,251 Temporary Wiring for Construction per permit 0.42 41$ $27 $68 56.00$ ($12) -$ Electrical Permits - Electrical Vehicle Charging Stations -$ Capital Accounting Partners Page 1 of 14 BldCostCalcs Palo Alto Building Dept Building Fees Service # If Any Fee Name Unit/Notes Actual Work Volume Bldg Time Fire Time Planning Time PW Time Direct Unit Cost Indirect Unit Allocated Costs Other external costs Total Cost Assigned Current Fee / Revenue Unit Surcharge or (Subsidy) Unit Cost SummaryUnit Time Assignments 1,232 Commercial (Level 1 and 2)17 2.00 232$ $150 $382 370.00$ ($12) 1,233 Commercial (Level 1 and 2) - each additional station 79 0.42 45$ $29 $74 92.50$ $18 1,233 Commercial (Level 3 and 4)1 2.50 281$ $182 $464 560.00$ $96 1,234 Commercial (Level 3 and 4) - each additional station 0.50 55$ $36 $91 140.00$ $49 1,231 Residential (level 1 & 2)per station 57 0.92 102$ $66 $168 160.00$ ($8) Residential (level 3)1.33375 143$ $93 $236 ($236) Electrical Permits - Photovoltaic Systems -$ Residential System (less than 10 kw)127 0.5 49$ $32 $81 ($81) 1,242 Residential System (greater than 10 kw)each 1.875 185$ $120 $304 311.00$ $7 1,243 Commercial System (less than 10 kW)each 2.833333333 326$ $211 $537 565.00$ $28 1,244 Commercial System (10kW - 49kW)each 3 4.25 489$ $317 $805 850.00$ $45 1,245 Commercial System (greater than 49kW)each 1 4.666666667 530$ $343 $873 900.00$ $27 MECHANICAL PERMITS Swimming Pool Heather 23 0.40 39$ $26 $65 28.00$ ($37) 1,254 Admin base fee 1,021 0.334 50$ $32 $82 92.00$ $10 Mechanical new or remodel cost/SF Per SqFt 2,632,100 0.00012 $0.012 $0.008 $0.02 0.11$ $0 1a -$ 28.00$ $28 1b Furnaces 98 1.002 99$ $64 $163 92.00$ ($71) 1c 0.002 0$ $0 $0 ($0) 1d -$ 2 Appliance vents: installation, relocation or replacement of…0.335333 33$ $21 $54 28.00$ ($26) 3 Repairs, alteration or addition of each heating appliance… 0.335333 33$ $21 $54 28.00$ ($26) Boilers, Compressors, and Absorption Systems:-$ 4a Up to and including 3 HP, absorption system up to and including 100,000 Btu/h 0.67 66$ $43 $109 5.00$ ($104) 4b Up to and including 15HP, absorption system exceeding 100,000 Btu/h and including 500,000 Btu/h 86 0.67 66$ $43 $109 28.00$ ($81) 4c Up to and including 15-30HP, absorption system exceeding 500,000 Btu/h and including 1,000,000 Btu/h 0.67 66$ $43 $109 0.11$ ($108) 4d Up to and including 30-50HP, absorption system exceeding 1,000,000 Btu/h and including 1,750,000 Btu/h 1.00 99$ $64 $163 28.00$ ($135) 4e Greater than50HP, absorption system exceeding 1,750,000 Btu/h 1.00 99$ $64 $163 56.00$ ($107) 5 Air handlers up to and including 10,000 cf per cfm…0.34 33$ $21 $54 28.00$ ($26) Ventilation and exhaust:-$ 7a Each ventilation FAC connect to a single duct 76 0.34 33$ $21 $54 11.00$ ($43) 7b Each ventilation system that is not a portion of a heating or air- conditioning system …0.34 33$ $21 $54 ($54) 7c Installation of each hood that is served by mechanical exhaust, including the ducts of such hood 2 0.34 33$ $21 $54 28.00$ ($26) Miscellaneous -$ 9 Each appliance or piece of equipment regulated by this code, but not classed in other appliance categories for which no other fee is listed in this table 0.34 33$ $21 $54 ($54) Full Gas Piping -$ 10a Each gas piping system of 1-5 outlets 4 0.60 59$ $38 $98 28.00$ ($70) 10b Each additional gas piping system per outlet 0.33 33$ $21 $54 ($54) Process Piping -$ 11a Each hazardous process piping system 1-4 outlets 0.34 33$ $21 $54 28.00$ ($26) 11b Each hazardous process piping system >5 outlets 0.33 33$ $21 $54 28.00$ ($26) 11c Each nonhazardous process piping system of 1-4 outlets 0.80 79$ $51 $130 56.00$ ($74) Capital Accounting Partners Page 2 of 14 BldCostCalcs Palo Alto Building Dept Building Fees Service # If Any Fee Name Unit/Notes Actual Work Volume Bldg Time Fire Time Planning Time PW Time Direct Unit Cost Indirect Unit Allocated Costs Other external costs Total Cost Assigned Current Fee / Revenue Unit Surcharge or (Subsidy) Unit Cost SummaryUnit Time Assignments 11d Each NPP piping system of >5 outlets, per outlet 0.80 79$ $51 $130 5.00$ ($125) PLUMBING PERMITS - GRAY WATER SYSTEMS 1,266 Admin base fee 1,310 0.334 50$ $32 $82 92.00$ $10 1 For each plumbing fixture on one trap or set of fixtures..0.5 49$ $32 $81 3.00$ ($78) 2 For each building sewer and each trailer park sewer 15 0.802 79$ $51 $130 28.00$ ($102) 3 Rainwater system - per drain (inside building)66 0.5 49$ $32 $81 5.00$ ($76) 4 For each private sewage disposal system 120 0.802 79$ $51 $130 11.00$ ($119) 6 For each water heater, vent, or both 56 0.6 59$ $38 $97 5.00$ ($92) 7 For each gas piping system of one to five outlets 142 1.2 118$ $77 $195 28.00$ ($167) 8 For each additional gas piping system outlet, per outlet 0.3 30$ $19 $49 5.00$ ($44) 9 Industrial waste pretreatment interceptor, including trap and vent, X kitchen-type grease interceptors 1.2 118$ $77 $195 11.00$ ($184) 10 Installation, alteration or repair of water piping, water treatment equip or both 1 0.6 59$ $38 $97 5.00$ ($92) 11 Repair or alteration of drainage or vent piping, each fixture 16 0.5 49$ $32 $81 28.00$ ($53) 12 Lawn sprinkler system on one meter including backflow protection devices 0.5 49$ $32 $81 28.00$ ($53) 13A Atmospheric-type vacuum breakers not referenced above (1-5)0.6 59$ $38 $97 5.00$ ($92) 13B Atmospheric-type vacuum breakers not referenced above (>5)0.5 49$ $32 $81 5.00$ ($76) 14 Backflow protective device other than atmospheric-type (any size)78 1.2 118$ $77 $195 5.00$ ($190) Plumbing Permits - Graywater Systems -$ 1,271 Clothes washer System 0.5 49$ $32 $81 56.00$ ($25) 1,273 Complex System 1 1.2 118$ $77 $195 88.00$ ($107) 1,272 Simple System 3 0.5 49$ $32 $81 61.00$ ($20) 16 Installation and testing for a reclaimed water system 1.2 118$ $77 $195 -$ ($195) 17 Annual cross-connection testing of reclaimed water system…2.4 236$ $153 $390 ($390) 18 Each medical gas piping system 1-5 outlets 1.2 118$ $77 $195 ($195) Additional medical gas inlet(s)0.25 25$ $16 $41 -$ ($41) Electrical new or remodel cost/SF 2,127,236 0.00012 0.012$ 0.008$ 0.02$ 0.11$ $0 Solar hot water system 1.2 118.187$ 76.594$ 194.78$ 224.00$ $29 1,190 Storm drain system 1.2 118$ $77 $195 28.00$ ($167) 1,191 Swimming pool 0.4 39$ $26 $65 28.00$ ($37) Use & occupancy Permits 1,187 Certificate of Use and Occupancy each 155 2.5 456$ $296 $752 287.00$ ($465) 1,188 Certificate of Use and Occupancy - Replacement each 0.5 94$ $61 $155 123.00$ ($32) 1,189 -$ 1,186 Temporary Occupancy Permit - Multi-Family Residential, Non- Residential, and Other Commercial each 33 2.3 365$ $237 $602 896.00$ $294 1,185 Temporary Occupancy Permit - Single Family Residential and Commercial Tenant Improvement less than 10,000 sq. ft.each 155 1.7 270$ $175 $445 375.00$ ($70) -$ FIRE FEES Hazardous Materials Classification Permits -$ 1,367 Compressed Gas annually 28 1 229$ $121 $350 139.00$ ($211) 1,363 Corrosives annually 54 1 229$ $121 $350 139.00$ ($211) 1,364 Cryogenic Fluid annually 42 1 229$ $121 $350 139.00$ ($211) 1,365 Flammable and Combustible Liquids annually 172 1 229$ $121 $350 139.00$ ($211) 1,368 Flammable Gas annually 28 1 229$ $121 $350 139.00$ ($211) 1,366 Flammable Solids annually 1 229$ $121 $350 139.00$ ($211) 1,373 Health Hazard (Liquids & Solids)annually 33 1 229$ $121 $350 139.00$ ($211) Capital Accounting Partners Page 3 of 14 BldCostCalcs Palo Alto Building Dept Building Fees Service # If Any Fee Name Unit/Notes Actual Work Volume Bldg Time Fire Time Planning Time PW Time Direct Unit Cost Indirect Unit Allocated Costs Other external costs Total Cost Assigned Current Fee / Revenue Unit Surcharge or (Subsidy) Unit Cost SummaryUnit Time Assignments 1,381 Liquefied Petroleum Gases annually 10 1 229$ $121 $350 139.00$ ($211) 1,354 Organic Coatings annually 1 229$ $121 $350 175.00$ ($175) 1,374 Organic Peroxides annually 1 1 229$ $121 $350 139.00$ ($211) 1,355 Ovens - Industrial Baking or Drying annually 4 1 229$ $121 $350 102.00$ ($248) 1,375 Oxidizers (Liquids & Solids)annually 16 1 229$ $121 $350 139.00$ ($211) 1,369 Oxidizing Gas annually 34 1 229$ $121 $350 139.00$ ($211) 1,356 Parade Float per hour 1 229$ $121 $350 115.00$ ($235) 1,357 Place of Public Assembly per occurrence 2 457$ $242 $700 236.00$ ($464) 1,370 Pyrophoric Gas annually 1 1 229$ $121 $350 139.00$ ($211) 1,376 Pyrophoric Materials (Liquids & Solids)annually 4 1 229$ $121 $350 139.00$ ($211) 1,358 Pyrotechnical Special Effects Material annually 1 229$ $121 $350 29.00$ ($321) 1,377 Radioactive Materials annually 28 1 229$ $121 $350 139.00$ ($211) 1,359 Refrigeration Equipment annually 1 229$ $121 $350 175.00$ ($175) 1,360 Spraying/Dipping annually 17 1 229$ $121 $350 175.00$ ($175) 1,361 Tent or air-supported structure having an area in excess of 200 square feet; or canopies in excess of 400 square feet (includes a public assembly permit of $125.00 for all tents)each 2.167 485$ $257 $741 290.00$ ($451) 1,362 Tire Recapping/Tire Storage annually 4 913$ $483 $1,396 575.00$ ($821) 1,371 Toxic, Highly Toxic, Moderately Toxic, Health Hazard Gas annually 11 1 229$ $121 $350 139.00$ ($211) 1,378 Toxic, Highly Toxic, Moderately Toxic, Health Hazard Materials annually 38 1 229$ $121 $350 139.00$ ($211) 1,372 Unstable Reactive Gas annually 1 1 229$ $121 $350 139.00$ ($211) 1,379 Unstable Reactive Materials (Liquids & Solids)annually 1 229$ $121 $350 139.00$ ($211) 1,380 Water Reactive Materials (Liquids & Solids)annually 1 229$ $121 $350 139.00$ ($211) 1 229$ $121 $350 ($350) Hazardouis Materials County Reimbursement -$ 348,000.00$ $348,000 Hazardous Materials Storage Permits -$ 1,311 Additional Approvals for Hazardous Materials Storage Permit (first 2 hours)2.167 496$ $262 $758 356.00$ ($402) 1,312 Additional Approvals for Hazardous Materials Storage Permit (per hour for time above 2 hours)1.417 324$ $172 $496 159.00$ ($337) 1,308 Business Plan (HMBP)annually 234 1.417 324$ $172 $496 256.00$ ($240) 1,312 Late Fee for Hazardous Materials Storage Permit -$ -$ 1,305 Level I Facility 81 1 229$ $121 $350 264.00$ ($86) 1,306 Level II Facility 119 2 457$ $242 $700 404.00$ ($296) 1,307 Level III Facility 191 4 915$ $484 $1,399 729.00$ ($670) 1,309 Petroleum Aboveground Storage Tank annually 26 2 457$ $242 $700 593.00$ ($107) 1,310 Provisional (6 Month)2 457$ $242 $700 186.00$ ($514) -$ -$ Fire Inspection Fees -$ 1,313 Additional Resinspection Fee (up to 2 hours during normal business hours)150 2 456$ $242 $698 323.00$ ($375) 1,313 Additional Resinspection Fee (each additional hour)1 228$ $121 $349 159.00$ ($190) 1,314 After Hours Inspection Fee 1.5 342$ $181 $523 165.00$ ($358) Capital Accounting Partners Page 4 of 14 BldCostCalcs Palo Alto Building Dept Building Fees Service # If Any Fee Name Unit/Notes Actual Work Volume Bldg Time Fire Time Planning Time PW Time Direct Unit Cost Indirect Unit Allocated Costs Other external costs Total Cost Assigned Current Fee / Revenue Unit Surcharge or (Subsidy) Unit Cost SummaryUnit Time Assignments 1,316 Care Facility annually -$ 175.00$ $175 1,317 Care Facility Inspection Including Fire Clearance (greater than 25 2 456$ $242 $698 73.00$ ($625) Care Facility Inspection Including Fire Clearance (7-25 clients)1 228$ $121 $349 140.00$ ($209) 1,315 Christmas Tree Lot/Pumpkin Patch each 1 228$ $121 $349 175.00$ ($174) 1,321 High Rise Building - Certificate of Compliance (annually up to 4 4.167 951$ $503 $1,454 713.00$ ($741) 1,322 High Rise Building - Certificate of Compliance (each additional hour))1 228$ $121 $349 159.00$ ($190) 1,318 Outside Cooking Booths each 1.5 342$ $181 $523 198.00$ ($325) 1,320 Standby Fire Watch or After Hours at Fire or Incident Scene per hour 1 228$ $121 $349 159.00$ ($190) 1,319 Use and Occupancy Fire Inspection per inspection 155 1 228$ $121 $349 148.00$ ($201) As-Built Plan Check and Additional Work each 75 2 456$ $242 $698 ($698) -$ Investigations & Consultations -$ 1,325 Additional Hours Over Plan Review/Inspection each 1 181$ $96 $276 155.00$ ($121) 1,323 Alternate Means and Methods Application per application 75 2 429$ $227 $657 356.00$ ($301) 1,324 Appeals to Decisions per hour 1 228$ $121 $349 159.00$ ($190) 1,322 Consultation Fee per hour 475 1 228$ $121 $349 166.00$ ($183) 1,328 Hazardous Materials Data Entry Fee per hour -$ 77.00$ $77 1,327 Hydrant Flow Fee per occurrence 75 1 228$ $121 $349 165.00$ ($184) 1,326 Site Disaster Planning per hour 1 228$ $121 $349 166.00$ ($183) -$ -$ Life Safety & Fire Protection 1294A Automatic Fire Sprinkler Installation/Modification > 19 heads 4.417 1,008$ $534 $1,541 356.00$ ($1,185) 1,295 Automatic Fire Sprinkler Installation/Modification (plus per head)0.01 2$ $1 $3.49 1.80$ ($2) 1,301 Express Fire Protection Plan Check Fee 50% of usual fee -$ 163.00$ $163 1,296 Fire Alarm System Installation and Modification 3 637$ $337 $974 356.00$ ($618) 1,297 Fire Alarm System Installation and Modification (plus a device or contact point)0.060 14$ $7 $20.94 2.00$ ($19) 1,303 Fire Protection and Fire Access Plan Review for New Single Family Dwellings or Additions each 2.5 523$ $277 $800 100.00$ ($700) 1,298 Hydrant Installation/Modification - Private 0.5 114$ $60 $174 261.00$ $87 1,295 Other Automatic Fire Extinguishing System 3 637$ $337 $974 356.00$ ($618) 1,297 Standpipe System - Wet, Dry, or Combination 25 2 456$ $242 $698 208.00$ ($490) 1,300 Temporary Certificate of Occupancy per occurrence 2.167 494$ $262 $756 356.00$ ($400) 1,299 Underground Fire Service Line per 200LF of pipe (inspection, reinspection - 150 5 1,093$ $579 $1,672 356.00$ ($1,316) 1,304 Verification of Fire Protection System Maintenance and Certification annually 0.3 51$ $27 $78 89.00$ $11 Food truck permits 0.5 114$ $60 $174 ($174) Multifamily dwellings, hotels & motels -$ 4-50 units 1 228$ $121 $349 ($349) 51-100 units 2 456$ $242 $698 Greater than 100 units 3 684$ $362 $1,047 ($1,047) Fire Prevention Inspection of Private Schools 2 456$ $242 $698 ($698) 1294B Automatic Fire Sprinkler Installation/Modification > 19 heads 2 456$ $242 $698 ($698) Specific Hazard Permits -$ 1,329 Aerosol Products annually 1.25 285$ $151 $436 102.00$ ($334) 1,330 Amusement Buildings Delete -$ 410.00$ $410 Capital Accounting Partners Page 5 of 14 BldCostCalcs Palo Alto Building Dept Building Fees Service # If Any Fee Name Unit/Notes Actual Work Volume Bldg Time Fire Time Planning Time PW Time Direct Unit Cost Indirect Unit Allocated Costs Other external costs Total Cost Assigned Current Fee / Revenue Unit Surcharge or (Subsidy) Unit Cost SummaryUnit Time Assignments 1,331 Automobile Wrecking Yard or Junk Yard Delete -$ 179.00$ $179 1,332 Bowling Alley and Pin Refinishing Involving the use of Flammable each 2.917 666$ $352 $1,018 179.00$ ($839) 1,333 Candles and Open Flames in Assembly Areas annually 1 228$ $121 $349 142.00$ ($207) 1,334 Carnivals and Fairs each 4.167 951$ $503 $1,454 179.00$ ($1,275) 1,335 Cellulose Nitrate Storage/Nitrate Film annually 0.292 67$ $35 $102 102.00$ $0 1,337 Combustible Fiber/Material Storage Delete -$ 179.00$ $179 1,336 Confined Space annually -$ 148.00$ $148 1,338 Hot Work permit fee (one time permit)One time 1 228$ $121 $349 126.00$ ($223) 1,339 Hot Work permit fee (monthly permit)Monthy -$ 88.00$ $88 1,340 -$ 102.00$ $102 1,341 Fireworks Display Delete 3.167 723$ $383 565.00$ $565 1,342 High-piled Combustible Storage Delete -$ 102.00$ $102 1,343 Hot Work (Welding) Operations Delete -$ 179.00$ $179 1,349 Liquid or Gas-Fueled Powered Equipment each 1 228$ $121 $349 88.00$ ($261) 1,344 Liquid or Gas-Fueled Vehicles or Equipment in Assembly Buildings each -$ 103.00$ $103 1,350 Magnesium Working annually -$ 103.00$ $103 1,345 Malls - Covered annually 2 456$ $242 $698 103.00$ ($595) 1,351 Occupant Load Increase - Temporary Public Assembly each 1 228$ $121 $349 236.00$ ($113) 1,352 Open Burning each 1 228$ $121 $349 236.00$ ($113) 1,348 Open Flame/Flame Producing Devices each 1 228$ $121 $349 88.00$ ($261) 1,353 Operate a Tank Vehicle to Transport Flammable/Combustible annually 1.417 323$ $171 $494 102.00$ ($392) 1,347 Place of Public Assembly - Temporary each 1 228$ $121 $349 236.00$ ($113) 1,346 Temporary Kiosks -$ -$ -$ Fire Miscellaneous Fees -$ TCO fee for Vendors/Stock occupancy (Requires at least one additional inspection)250 3.5 752$ $398 $1,150 ($1,150) 1,288 Emergency Response Fee - Hazmat (PAMC 17.24.050)Per hour 1 228$ $121 $349 -$ ($349) 1,289 Installation or Closure Without Approved Plans and/or Permits Fine -$ -$ Fire plans revision 76 -$ Building General & Miscellaneous Fees -$ 1,176 All Other Publications each -$ 16.00$ $16 1,201 Construction/Maintenance Vehicles -$ 76.00$ $76 1,172 Electric Service and Safety Inspection per hour 1 98$ $52 $151 84.00$ ($67) 1,181 Extension of Building Permit or Building Permit Application per application 31 0.33 56$ $30 $86 56.00$ ($30) 1,174 Inspections and Investigations - Outside Normal Business Hours (1.5xOThour)1 1.5 238$ $126 $365 202.00$ ($163) 1,175 Inspections and Investigations - Outside Normal Business Hours (2.0xOThour)52 2 318$ $168 $486 226.00$ ($260) 1,173 Inspections and Investigations - Unclassified per hour 1 159$ $84 $243 163.00$ ($80) 1,184 Reactivation of Expired Building Permit - All Others 19 0.75 149$ $79 $228 ($228) 1,183 Reactivation of Expired Building Permit - Final Inspection Only 16 1.1 165$ $88 $253 375.00$ $122 1,182 Reactivation of Expired Building Permit Application 16 0.7 124$ $65 $189 168.00$ ($21) 1,178 Real Property Research Fee (1-hour minimum)per hour 1.0 159$ $84 $243 127.00$ ($116) 1,177 Records Retention per plan sheet 20,234 0.0 4$ $2 $6 4.00$ ($2) 1,180 Reinspection Fee - Multi-Family Residential and Non-Residential each 2 1.2 184$ $97 $281 308.00$ $27 1,179 Reinspection Fee - Single Family Residential (each secondary inspection type)14 0.9 144$ $76 220$ 84.00$ ($136) Capital Accounting Partners Page 6 of 14 BldCostCalcs Palo Alto Building Dept Building Fees Service # If Any Fee Name Unit/Notes Actual Work Volume Bldg Time Fire Time Planning Time PW Time Direct Unit Cost Indirect Unit Allocated Costs Other external costs Total Cost Assigned Current Fee / Revenue Unit Surcharge or (Subsidy) Unit Cost SummaryUnit Time Assignments 1,180 Reinspection Fee - Single Family Residential (each primary inspection type)1.2 184$ $97 281$ 308.00$ $27 1,171 Request for Release of Building Plans each 0.3 50$ $26 $76 45.00$ ($31) 1,175 Residential Inspection Guidelines each -$ 33.00$ $33 Conditional Utility Agreement 187 0.98 155$ $82 $237 252.00$ $15 Emergency Responder Radio Coverage (testing) fee.25 2 409$ $216 $625 ($625) GREEN BUILDING FEES Bldg Alterations and additions for single and multifamily < 1,000 sq ft and increases conditioned space Residential 99 3.70 495$ $602 $1,097 677.00$ ($420) Bldg Alterations and additions for single and multifamily > 1,000 sq ft Residential 166 4.20 556$ $676 $1,232 173.00$ ($1,059) Bldg Multi Family New Construction of 3 or More (attached) Units 4 5.10 681$ $827 $1,508 668.00$ ($840) Bldg Multi Family New Construction of < 4 Residential 4.10 559$ $679 $1,238 1,388.00$ $150 Bldg New Single family Residential 7 4.60 620$ $753 $1,373 1,687.00$ $314 Bldg Tenant improvements, renovations, or alterations > 5,000 sq ft that includes replacement or alteration of at least two of the following: HVAC system, building envelope, hot water system, or lighting system and project value greater than $200,000.Non-Residential 34 5.10 681$ $827 $1,508 942.00$ ($566) Bldg C. Tenant improvements, renovations or alterations > $200,000 in valuation (and not triggered by a Calgreen Tier) Non-Residential 42 4.10 559$ $679 $1,238 354.00$ ($884) Bldg If the project is over $100,000 Energy Star is required after 12 months of occupancy Non-Residential 2.10 315$ $383 $698 976.00$ $278 Bldg New commercial 1000 - 25,000 SF Non-Residential 21 6.10 803$ $975 $1,778 1,443.00$ ($335) Bldg New commercial 25,001-50,000 SF Non-Residential 7.10 924$ $1,123 $2,048 ($2,048) Bldg New commercial >50,000 SF Non-Residential 7.60 985$ $1,197 $2,183 ($2,183) Bldg Landscape Review - plan review Non-Residential 60 3.25 656$ $797 $1,453 ($1,453) Bldg Landscape Review - inspection Non-Residential 60 1.00 98$ $120 $218 ($218) Bldg Landscape Review - plan review SFR 80 2.00 404$ $490 $894 ($894) Bldg Landscape Review - inspection SFR 80 1.00 98$ $120 $218 ($218) Bldg Landscape Review - plan review Multifamily 10 3.25 656$ $797 $1,453 ($1,453) Bldg Landscape Review - inspection Multifamily 10 1.00 98$ $120 $218 ($218) Bldg -$ Fee # 325 Current -$ Capital Accounting Partners Page 7 of 14 BldCostCalcs Palo Alto Building Dept Building Fees Service # If Any Fee Name BUILDING FEES 1,165 Business Registry Fee Building New Construction All Valuation Based Building Fees Combined (total annual Calculations) 1,217 I. Building Demolition Permit 1,218 J. Commercial Interior Non-Structural Demolition Permit 1,207 Additional Plan Review 1,202 Building Plan Check 1,208 Certified Access Specialist (CASp) Review/Consultation 1,203 1,204 Address change - single address 1,206 Address change - each additional address 1,205 Construction & Demolition 1,198 Commercial and Multi-Family Projects greater than or equal to $25,000.00 in Valuation 1,200 Single Family and Two Family Projects greater than $25,000.00 and less than $75,000.00 in Valuations 1,199 Single Family and Two Family Projects greater than $75,000.00 in Valuation ELECTRICAL PERMITS 1,228 Air Conditioners 1,230 Air Cooled or Oil Cooled Lighting and/or Power Transformer 1,226 Base Fee 1,240 Busway, Power Duct install, repair or replace 1,229 1,249 Each Additional section of meter 1,234 Fixtures, Switches, and Outlets 1,241 Lighting, Power and/or Control Panel Board, Switchboard Cabinet or Panel 1,236 Motor 1,235 Motor Generator 1,227 New or Remodeled Square Footage 1,237 Range, Electric Clothes Dryer, or Water Heater 1,248 Service Conductor/Switch - Greater than 800 ampre 1,246 Service Conductor/Switch - Less than 200 ampre 1,247 Service Conductor/Switch - Less than 800 ampre 1,238 Special Circuit (Not Listed Herein) 1,250 Temporary Power Pole 1,251 Temporary Wiring for Construction Electrical Permits - Electrical Vehicle Charging Stations Annual Revenue Revenue at Full Cost of Services Projection of Revenues at Current Fees Annual Surplus (subsidy) R e q u i 6 Months Reserve, 3 yr build up Full Cost / Unit With Reserves Annual Cost Calculations w/o Reserves Reserve Requirements BUILDING FEES $ 2,307,699 1,165Business Registry Feeper business -$ 50.00$ $50 -$ $ - -$ -$ $ - $ - Building New Construction -$ -$ $ - $ - 5,973,018$ 2,517,648$ $8,490,666 8,599,967.00$ $109,301 8,490,666$ 8,599,967$ $109,301 $1,496,163 $ 9,986,829.26 $9,986,829 -$ -$ $ - 1,217I. Building Demolition Permit1771.17 0.333 234$ $152 $386 320.00$ ($66)68,288$ $56,640 ($11,648)$68 $ 453.79 $80,321 1,218J. Commercial Interior Non-Structural Demolition Permit390.33 0.333 106$ $69 $175 194.00$ $19 6,833$ $7,566 $733 $31 $ 206.09 $8,037 -$ -$ $ - 1,207Additional Plan Reviewper hour1171 122$ $79 $201 191.00$ ($10)23,497$ $22,347 ($1,150)$35 $ 236.21 $27,637 1,202Building Plan Checkper hour -$ -$ -$ $ - 1,208Certified Access Specialist (CASp) Review/ConsultationHourly1 159$ $103 $262 -$ ($262)-$ $46 $ 308.01 1,203 -$ -$ $ - 1,204Address change - single address10.25 216$ $140 $356 224.00$ ($132)-$ $63 $ 418.65 1,206Address change - each additional address0.420.167 104$ $67 $171 112.00$ ($59)-$ $30 $ 201.53 1,205 -$ -$ $ - -$ -$ $ - Construction & Demolition -$ -$ $ - 1,198per permit890.334 1.000 224$ $145 $369 238.00$ ($131)32,623$ $21,063 ($11,560)$65 $ 433.57 $38,371 1,200per permit180.334 0.250 93$ $61 $154 80.00$ ($74)2,725$ $1,416 ($1,309)$27 $ 181.05 $3,205 1,199per permit710.334 0.500 137$ $89 $225 212.00$ ($13)15,965$ $15,010 ($955)$40 $ 265.23 $18,778 -$ -$ $ - -$ $ - 3,165$ $1,131 ($2,034)$14 $ 95.46 $3,723 -$ $14 $ 95.46 139,694$ $156,032 $16,338 $15 $ 96.88 $164,310 1,353$ $10 ($1,343)$12 $ 79.55 $1,591 -$ $12 $ 79.55 135$ $10 ($125)$12 $ 79.55 $159 110,444$ $1,633 ($108,811)$12 $ 79.55 $129,906 2,908$ $215 ($2,693)$12 $ 79.55 $3,421 879$ $299 ($580)$12 $ 79.55 $1,034 2,705$ $120 ($2,585)$12 $ 79.55 $3,182 72,534$ $409,622 $337,089 $0.003 $ 0.0229 $85,315 135$ $10 ($125)$12 $ 79.55 $159 -$ $ - 487$ $80 ($407)$43 $ 286.38 $573 15,583$ $2,304 ($13,279)$21 $ 143.19 $18,328 1,785$ $319 ($1,466)$29 $ 190.92 $2,100 1,758$ $130 ($1,628)$12 $ 79.55 $2,068 10,077$ $8,344 ($1,733)$12 $ 79.55 $11,853 -$ $12 $ 79.55 -$ $ - -$ $ - Capital Accounting Partners Page 8 of 14 BldCostCalcs Palo Alto Building Dept Building Fees Service # If Any Fee Name 1,232 Commercial (Level 1 and 2) 1,233 Commercial (Level 1 and 2) - each additional station 1,233 Commercial (Level 3 and 4) 1,234 Commercial (Level 3 and 4) - each additional station 1,231 Residential (level 1 & 2) Residential (level 3) Electrical Permits - Photovoltaic Systems Residential System (less than 10 kw) 1,242 Residential System (greater than 10 kw) 1,243 Commercial System (less than 10 kW) 1,244 Commercial System (10kW - 49kW) 1,245 Commercial System (greater than 49kW) MECHANICAL PERMITS Swimming Pool Heather 1,254 Admin base fee Mechanical new or remodel cost/SF 1a 1b Furnaces 1c 1d 2 Appliance vents: installation, relocation or replacement of… 3 Repairs, alteration or addition of each heating appliance… Boilers, Compressors, and Absorption Systems: 4a Up to and including 3 HP, absorption system up to and including 100,000 Btu/h 4b Up to and including 15HP, absorption system exceeding 100,000 Btu/h and including 500,000 Btu/h 4c Up to and including 15-30HP, absorption system exceeding 500,000 Btu/h and including 1,000,000 Btu/h 4d Up to and including 30-50HP, absorption system exceeding 1,000,000 Btu/h and including 1,750,000 Btu/h 4e Greater than50HP, absorption system exceeding 1,750,000 Btu/h 5 Air handlers up to and including 10,000 cf per cfm… Ventilation and exhaust: 7a Each ventilation FAC connect to a single duct 7b Each ventilation system that is not a portion of a heating or air- conditioning system … 7c Installation of each hood that is served by mechanical exhaust, including the ducts of such hood Miscellaneous 9 Each appliance or piece of equipment regulated by this code, but not classed in other appliance categories for which no other fee is listed in this table Full Gas Piping 10a Each gas piping system of 1-5 outlets 10b Each additional gas piping system per outlet Process Piping 11a Each hazardous process piping system 1-4 outlets 11b Each hazardous process piping system >5 outlets 11c Each nonhazardous process piping system of 1-4 outlets Annual Revenue Revenue at Full Cost of Services Projection of Revenues at Current Fees Annual Surplus (subsidy) R e q u i 6 Months Reserve, 3 yr build up Full Cost / Unit With Reserves Annual Cost Calculations w/o Reserves Reserve Requirements 6,501$ $6,290 ($211) 5,850$ $7,308 $1,458 $13 $ 87.10 $6,881 464$ $560 $96 $82 $ 545.24 $545 -$ $16 $ 106.78 9,579$ $9,120 ($459)$30 $ 197.66 $11,266 -$ $42 $ 277.29 -$ $ - 10,307$ ($10,307)$14 $ 95.46 $12,123 -$ $39,497 $39,497 $ 304.35 -$ $95 $ 631.53 2,416$ $2,550 $134 $142 $ 947.29 $2,842 873$ $900 $27 $154 $ 1,026.84 $1,027 1,493$ $644 ($849)$11 $ 76.37 $1,756 84,096$ $93,932 $9,836 $15 $ 96.88 $98,915 51,268$ $289,531 $238,263 $0 $ 0.02 $60,303 -$ $ - 15,939$ ($15,939)$29 $ 191.30 $18,748 -$ $ 0.32 -$ $ - -$ $10 $ 64.02 -$ $10 $ 64.02 -$ $ - -$ $19 $ 127.66 9,334$ $2,408 ($6,926)$19 $ 127.66 $10,979 -$ $19 $ 127.66 -$ $29 $ 191.30 -$ $29 $ 191.30 -$ $10 $ 64.02 -$ $ - 4,137$ $836 ($3,301)$10 $ 64.02 $4,866 -$ $10 $ 64.02 109$ $56 ($53)$10 $ 63.96 $128 -$ $ - -$ $10 $ 63.96 -$ $ - 391$ $112 ($279)$17 $ 114.87 $459 -$ $10 $ 63.64 -$ $ - -$ -$ $10 $ 63.64 -$ $23 $ 153.05 Capital Accounting Partners Page 9 of 14 BldCostCalcs Palo Alto Building Dept Building Fees Service # If Any Fee Name 11d Each NPP piping system of >5 outlets, per outlet PLUMBING PERMITS - GRAY WATER SYSTEMS 1,266 Admin base fee 1 For each plumbing fixture on one trap or set of fixtures.. 2 For each building sewer and each trailer park sewer 3 Rainwater system - per drain (inside building) 4 For each private sewage disposal system 6 For each water heater, vent, or both 7 For each gas piping system of one to five outlets 8 For each additional gas piping system outlet, per outlet 9 Industrial waste pretreatment interceptor, including trap and vent, X kitchen-type grease interceptors 10 Installation, alteration or repair of water piping, water treatment equip or both 11 Repair or alteration of drainage or vent piping, each fixture 12 Lawn sprinkler system on one meter including backflow protection devices 13A Atmospheric-type vacuum breakers not referenced above (1-5) 13B Atmospheric-type vacuum breakers not referenced above (>5) 14 Backflow protective device other than atmospheric-type (any size) Plumbing Permits - Graywater Systems 1,271 Clothes washer System 1,273 Complex System 1,272 Simple System 16 Installation and testing for a reclaimed water system 17 Annual cross-connection testing of reclaimed water system… 18 Each medical gas piping system 1-5 outlets Additional medical gas inlet(s) Electrical new or remodel cost/SF Solar hot water system 1,190 Storm drain system 1,191 Swimming pool Use & occupancy Permits 1,187 Certificate of Use and Occupancy 1,188 Certificate of Use and Occupancy - Replacement 1,189 1,186 Temporary Occupancy Permit - Multi-Family Residential, Non- Residential, and Other Commercial 1,185 Temporary Occupancy Permit - Single Family Residential and Commercial Tenant Improvement less than 10,000 sq. ft. FIRE FEES Hazardous Materials Classification Permits 1,367 Compressed Gas 1,363 Corrosives 1,364 Cryogenic Fluid 1,365 Flammable and Combustible Liquids 1,368 Flammable Gas 1,366 Flammable Solids 1,373 Health Hazard (Liquids & Solids) Annual Revenue Revenue at Full Cost of Services Projection of Revenues at Current Fees Annual Surplus (subsidy) R e q u i 6 Months Reserve, 3 yr build up Full Cost / Unit With Reserves Annual Cost Calculations w/o Reserves Reserve Requirements -$ $23 $ 153.05 107,900$ $120,520 $12,620 $15 $ 96.88 $126,914 -$ $14 $ 95.46 1,953$ $420 ($1,533)$23 $ 153.12 $2,297 5,356$ $330 ($5,026)$14 $ 95.46 $6,300 15,621$ $1,320 ($14,301)$23 $ 153.12 $18,374 5,454$ $280 ($5,174)$17 $ 114.55 $6,415 27,659$ ($27,659)$34 $ 229.10 $32,533 -$ $710 $710 $ 48.70 -$ $34 $ 229.10 97$ $5 ($92)$17 $ 114.55 $115 1,299$ $448 ($851)$14 $ 95.46 $1,527 -$ $14 $ 95.46 -$ $17 $ 114.55 -$ $14 $ 95.46 15,193$ $390 ($14,803)$34 $ 229.10 $17,870 -$ $ - -$ $14 $ 95.46 195$ $88 ($107)$34 $ 229.10 $229 243$ $183 ($60)$14 $ 95.46 $286 -$ $34 $ 229.10 -$ $69 $ 458.21 -$ $34 $ 229.10 Additional medical gas inlet(s)0.25 25$ $16 $41 -$ ($41)-$ $7 $ 47.73 Electrical new or remodel cost/SF2,127,2360.00012 0.012$ 0.008$ 0.02$ 0.11$ $0 41,435$ $233,996 $192,561 $0 $ 0.02 $48,736 Solar hot water system1.2 118.187$ 76.594$ 194.78$ 224.00$ $29 -$ $34 $ 229.10 1,190Storm drain system1.2 118$ $77 $195 28.00$ ($167)-$ $34 $ 229.10 1,191Swimming pool 0.4 39$ $26 $65 28.00$ ($37)-$ $11 $ 76.37 Use & occupancy Permits 1,187Certificate of Use and Occupancyeach1552.5 456$ $296 $752 287.00$ ($465)116,569$ $44,485 ($72,084)$133 $ 884.58 $137,109 1,188Certificate of Use and Occupancy - Replacementeach0.5 94$ $61 $155 123.00$ ($32)-$ $27 $ 182.64 1,189 -$ -$ $ - 1,186each332.3 365$ $237 $602 896.00$ $294 19,876$ $29,568 $9,692 $106 $ 708.43 $23,378 1,185each1551.7 270$ $175 $445 375.00$ ($70)69,003$ $58,125 ($10,878)$78 $ 523.62 $81,162 -$ -$ $ - FIRE FEES Hazardous Materials Classification Permits -$ -$ 1,367Compressed Gasannually281 229$ $121 $350 139.00$ ($211)9,795$ ($9,795)$62 $ 411.45 $11,521 1,363Corrosivesannually541 229$ $121 $350 139.00$ ($211)18,890$ ($18,890)$62 $ 411.45 $22,219 1,364Cryogenic Fluidannually421 229$ $121 $350 139.00$ ($211)14,692$ ($14,692)$62 $411 $17,281 1,365Flammable and Combustible Liquidsannually1721 229$ $121 $350 139.00$ ($211)60,168$ ($60,168)$62 $411 $70,770 1,368Flammable Gasannually281 229$ $121 $350 139.00$ ($211)9,795$ ($9,795)$62 $411 $11,521 1,366Flammable Solidsannually1 229$ $121 $350 139.00$ ($211)-$ $62 $411 1,373Health Hazard (Liquids & Solids)annually331 229$ $121 $350 139.00$ ($211)11,544$ ($11,544)$62 $ 411.45 $13,578 Capital Accounting Partners Page 10 of 14 BldCostCalcs Palo Alto Building Dept Building Fees Service # If Any Fee Name 1,381 Liquefied Petroleum Gases 1,354 Organic Coatings 1,374 Organic Peroxides 1,355 Ovens - Industrial Baking or Drying 1,375 Oxidizers (Liquids & Solids) 1,369 Oxidizing Gas 1,356 Parade Float 1,357 Place of Public Assembly 1,370 Pyrophoric Gas 1,376 Pyrophoric Materials (Liquids & Solids) 1,358 Pyrotechnical Special Effects Material 1,377 Radioactive Materials 1,359 Refrigeration Equipment 1,360 Spraying/Dipping 1,361 Tent or air-supported structure having an area in excess of 200 square feet; or canopies in excess of 400 square feet (includes a public assembly permit of $125.00 for all tents) 1,362 Tire Recapping/Tire Storage 1,371 Toxic, Highly Toxic, Moderately Toxic, Health Hazard Gas 1,378 Toxic, Highly Toxic, Moderately Toxic, Health Hazard Materials 1,372 Unstable Reactive Gas 1,379 Unstable Reactive Materials (Liquids & Solids) 1,380 Water Reactive Materials (Liquids & Solids) Hazardouis Materials County Reimbursement Hazardous Materials Storage Permits 1,311 Additional Approvals for Hazardous Materials Storage Permit (first 2 hours) 1,312 Additional Approvals for Hazardous Materials Storage Permit (per hour for time above 2 hours) 1,308 Business Plan (HMBP) 1,312 Late Fee for Hazardous Materials Storage Permit 1,305 Level I Facility 1,306 Level II Facility 1,307 Level III Facility 1,309 Petroleum Aboveground Storage Tank 1,310 Provisional (6 Month) Fire Inspection Fees 1,313 Additional Resinspection Fee (up to 2 hours during normal business hours) 1,313 Additional Resinspection Fee (each additional hour) 1,314 After Hours Inspection Fee Annual Revenue Revenue at Full Cost of Services Projection of Revenues at Current Fees Annual Surplus (subsidy) R e q u i 6 Months Reserve, 3 yr build up Full Cost / Unit With Reserves Annual Cost Calculations w/o Reserves Reserve Requirements 1,381Liquefied Petroleum Gasesannually101 229$ $121 $350 139.00$ ($211)3,498$ ($3,498)$62 $ 411.45 $4,115 1,354Organic Coatingsannually1 229$ $121 $350 175.00$ ($175)-$ $62 $ 411.45 1,374Organic Peroxidesannually11 229$ $121 $350 139.00$ ($211)350$ ($350)$62 $ 411.45 $411 1,355Ovens - Industrial Baking or Dryingannually41 229$ $121 $350 102.00$ ($248)1,399$ ($1,399)$62 $ 411.45 $1,646 1,375Oxidizers (Liquids & Solids)annually161 229$ $121 $350 139.00$ ($211)5,597$ ($5,597)$62 $ 411.45 $6,583 1,369Oxidizing Gasannually341 229$ $121 $350 139.00$ ($211)11,894$ ($11,894)$62 $411 $13,989 1,356Parade Floatper hour1 229$ $121 $350 115.00$ ($235)-$ $62 $411 1,357Place of Public Assembly per occurrence2 457$ $242 $700 236.00$ ($464)-$ $123 $823 1,370Pyrophoric Gasannually11 229$ $121 $350 139.00$ ($211)350$ ($350)$62 $411 $411 1,376Pyrophoric Materials (Liquids & Solids)annually41 229$ $121 $350 139.00$ ($211)1,399$ ($1,399)$62 $411 $1,646 -$ $62 $411 9,795$ ($9,795)$62 $411 $11,521 -$ $62 $411 5,947$ ($5,947)$62 $411 $6,995 -$ $131 $872 -$ $246 $1,642 1,371Toxic, Highly Toxic, Moderately Toxic, Health Hazard Gasannually111 229$ $121 $350 139.00$ ($211)3,848$ ($3,848)$62 $411 $4,526 13,293$ ($13,293)$62 $411 $15,635 350$ ($350)$62 $411 $411 -$ $62 $411 -$ $62 $411 -$ $62 $411 -$ $348,000 $348,000 -$ -$ $134 $892 -$ $87 $583 115,990$ ($115,990)$87 $583 $136,429 -$ 1,305Level I Facility811 229$ $121 $350 264.00$ ($86)28,335$ ($28,335)$62 $411 $33,328 83,256$ ($83,256)$123 $823 $97,926 267,257$ ($267,257)$247 $1,646 $314,351 18,190$ ($18,190)$123 $823 $21,396 -$ $123 $823 -$ -$ -$ -$ -$ 104,687$ ($104,687)$123 $821 $123,134 -$ $61 $410 -$ $92 $616 Capital Accounting Partners Page 11 of 14 BldCostCalcs Palo Alto Building Dept Building Fees Service # If Any Fee Name 1,316 Care Facility 1,317 Care Facility Inspection Including Fire Clearance (greater than 25 Care Facility Inspection Including Fire Clearance (7-25 clients) 1,315 Christmas Tree Lot/Pumpkin Patch 1,321 High Rise Building - Certificate of Compliance (annually up to 4 1,322 High Rise Building - Certificate of Compliance (each additional hour)) 1,318 Outside Cooking Booths 1,320 Standby Fire Watch or After Hours at Fire or Incident Scene 1,319 Use and Occupancy Fire Inspection As-Built Plan Check and Additional Work Investigations & Consultations 1,325 Additional Hours Over Plan Review/Inspection 1,323 Alternate Means and Methods Application 1,324 Appeals to Decisions 1,322 Consultation Fee 1,328 Hazardous Materials Data Entry Fee 1,327 Hydrant Flow Fee 1,326 Site Disaster Planning Life Safety & Fire Protection 1294A Automatic Fire Sprinkler Installation/Modification > 19 heads 1,295 Automatic Fire Sprinkler Installation/Modification (plus per head) 1,301 Express Fire Protection Plan Check Fee 1,296 Fire Alarm System Installation and Modification 1,297 Fire Alarm System Installation and Modification (plus a device or contact point) 1,303 Fire Protection and Fire Access Plan Review for New Single Family Dwellings or Additions 1,298 Hydrant Installation/Modification - Private 1,295 Other Automatic Fire Extinguishing System 1,297 Standpipe System - Wet, Dry, or Combination 1,300 Temporary Certificate of Occupancy 1,299 Underground Fire Service Line 1,304 Verification of Fire Protection System Maintenance and Certification Food truck permits Multifamily dwellings, hotels & motels 4-50 units 51-100 units Greater than 100 units Fire Prevention Inspection of Private Schools 1294B Automatic Fire Sprinkler Installation/Modification > 19 heads Specific Hazard Permits 1,329 Aerosol Products 1,330 Amusement Buildings Annual Revenue Revenue at Full Cost of Services Projection of Revenues at Current Fees Annual Surplus (subsidy) R e q u i 6 Months Reserve, 3 yr build up Full Cost / Unit With Reserves Annual Cost Calculations w/o Reserves Reserve Requirements -$ -$ $123 $821 -$ $61 $410 -$ $61 $410 -$ $256 $1,710 -$ $61 $410 -$ $92 $616 -$ $61 $410 54,088$ $22,940 ($31,148)$61 $410 $63,619 52,344$ ($52,344)$123 $821 $61,567 -$ -$ -$ $49 $325 49,242$ ($49,242)$116 $772 $57,919 -$ $61 $410 165,755$ $78,850 ($86,905)$61 $410 $194,963 -$ 26,172$ ($26,172)$61 $410 $30,784 -$ $61 $410 -$ -$ -$ $272 $1,813 -$ $1 $4 -$ -$ $172 $1,146 -$ $4 $25 -$ $141 $941 -$ $31 $205 -$ $172 $1,146 17,448$ ($17,448)$123 $821 $20,522 -$ $133 $889 250,817$ ($250,817)$295 $1,967 $295,015 -$ $14 $92 -$ $31 $205 -$ -$ $61 $410 -$ $698 -$ $184 $1,231 -$ $123 $821 -$ $123 $821 -$ -$ $77 $513 -$ Capital Accounting Partners Page 12 of 14 BldCostCalcs Palo Alto Building Dept Building Fees Service # If Any Fee Name 1,331 Automobile Wrecking Yard or Junk Yard 1,332 Bowling Alley and Pin Refinishing Involving the use of Flammable 1,333 Candles and Open Flames in Assembly Areas 1,334 Carnivals and Fairs 1,335 Cellulose Nitrate Storage/Nitrate Film 1,337 Combustible Fiber/Material Storage 1,336 Confined Space 1,338 Hot Work permit fee (one time permit) 1,339 Hot Work permit fee (monthly permit) 1,340 1,341 Fireworks Display 1,342 High-piled Combustible Storage 1,343 Hot Work (Welding) Operations 1,349 Liquid or Gas-Fueled Powered Equipment 1,344 Liquid or Gas-Fueled Vehicles or Equipment in Assembly Buildings 1,350 Magnesium Working 1,345 Malls - Covered 1,351 Occupant Load Increase - Temporary Public Assembly 1,352 Open Burning 1,348 Open Flame/Flame Producing Devices 1,353 Operate a Tank Vehicle to Transport Flammable/Combustible 1,347 Place of Public Assembly - Temporary 1,346 Temporary Kiosks Fire Miscellaneous Fees TCO fee for Vendors/Stock occupancy (Requires at least one additional inspection) 1,288 Emergency Response Fee - Hazmat (PAMC 17.24.050) 1,289 Installation or Closure Without Approved Plans and/or Permits Fire plans revision Building General & Miscellaneous Fees 1,176 All Other Publications 1,201 Construction/Maintenance Vehicles 1,172 Electric Service and Safety Inspection 1,181 Extension of Building Permit or Building Permit Application 1,174 Inspections and Investigations - Outside Normal Business Hours (1.5xOThour) 1,175 Inspections and Investigations - Outside Normal Business Hours (2.0xOThour) 1,173 Inspections and Investigations - Unclassified 1,184 Reactivation of Expired Building Permit - All Others 1,183 Reactivation of Expired Building Permit - Final Inspection Only 1,182 Reactivation of Expired Building Permit Application 1,178 Real Property Research Fee (1-hour minimum) 1,177 Records Retention 1,180 Reinspection Fee - Multi-Family Residential and Non-Residential 1,179 Reinspection Fee - Single Family Residential (each secondary inspection type) Annual Revenue Revenue at Full Cost of Services Projection of Revenues at Current Fees Annual Surplus (subsidy) R e q u i 6 Months Reserve, 3 yr build up Full Cost / Unit With Reserves Annual Cost Calculations w/o Reserves Reserve Requirements -$ -$ $179 $1,197 -$ $61 $410 -$ $256 $1,710 -$ $18 $120 -$ -$ 1,338Hot Work permit fee (one time permit)One time1 228$ $121 $349 126.00$ ($223)-$ $61 $410 -$ -$ -$ -$ -$ -$ $61 $410 -$ -$ -$ $123 $821 -$ $61 $410 -$ $61 $410 -$ $61 $410 -$ $87 $582 -$ $61 $410 -$ -$ -$ 287,438$ ($287,438)$203 $1,352 $338,088 -$ $61 $410 -$ -$ -$ -$ -$ 1,172Electric Service and Safety Inspectionper hour1 98$ $52 $151 84.00$ ($67)-$ $27 $177 2,656$ $1,736 ($920)$15 $101 $3,124 365$ $202 ($163)$64 $429 $429 25,274$ $11,752 ($13,522)$86 $572 $29,727 -$ $43 $286 4,325$ ($4,325)$40 $268 $5,087 4,049$ $6,000 $1,951 $45 $298 $4,762 3,023$ $2,688 ($335)$33 $222 $3,556 -$ $43 $286 118,656$ $80,936 ($37,720)$1 $7 $139,564 562$ $616 $54 $50 $331 $661 3,086$ $1,176 ($1,910)$220 $3,086 $43,200 Capital Accounting Partners Page 13 of 14 BldCostCalcs Palo Alto Building Dept Building Fees Service # If Any Fee Name 1,180 Reinspection Fee - Single Family Residential (each primary inspection type) 1,171 Request for Release of Building Plans 1,175 Residential Inspection Guidelines Conditional Utility Agreement Emergency Responder Radio Coverage (testing) fee. GREEN BUILDING FEES Bldg Alterations and additions for single and multifamily < 1,000 sq ft and increases conditioned space Bldg Alterations and additions for single and multifamily > 1,000 sq ft Bldg Multi Family New Construction of 3 or More (attached) Units Bldg Multi Family New Construction of < 4 Bldg New Single family Bldg Tenant improvements, renovations, or alterations > 5,000 sq ft that includes replacement or alteration of at least two of the following: HVAC system, building envelope, hot water system, or lighting system and project value greater than $200,000. Bldg C. Tenant improvements, renovations or alterations > $200,000 in valuation (and not triggered by a Calgreen Tier) Bldg If the project is over $100,000 Energy Star is required after 12 months of occupancy Bldg New commercial 1000 - 25,000 SF Bldg New commercial 25,001-50,000 SF Bldg New commercial >50,000 SF Bldg Landscape Review - plan review Bldg Landscape Review - inspection Bldg Landscape Review - plan review Bldg Landscape Review - inspection Bldg Landscape Review - plan review Bldg Landscape Review - inspection Bldg Fee # 325 Annual Revenue Revenue at Full Cost of Services Projection of Revenues at Current Fees Annual Surplus (subsidy) R e q u i 6 Months Reserve, 3 yr build up Full Cost / Unit With Reserves Annual Cost Calculations w/o Reserves Reserve Requirements -$ $50 $331 -$ $13 $90 -$ 44,292$ $47,124 $2,832 $42 $279 $52,097 15,631$ ($15,631)$110 $735 $18,386 108,626$ $67,023 ($41,603)$193 $1,291 $127,767 204,545$ $28,718 ($175,827)$217 $1,449 $240,588 6,032$ $2,672 ($3,360)$266 $1,774 $7,095 -$ $218 $1,456 9,611$ $11,809 $2,198 $242 $1,615 $11,305 51,271$ $32,028 ($19,243)$266 $1,774 $60,305 51,997$ $14,868 ($37,129)$218 $1,456 $61,160 -$ $123 $821 37,336$ $30,303 ($7,033)$313 $2,091 $43,915 -$ $361 $2,409 -$ $385 $2,567 87,160$ ($87,160)$256 $1,709 $102,519 13,091$ ($13,091)$38 $257 $15,397 71,516$ ($71,516)$158 $1,051 $84,118 17,454$ ($17,454)$38 $257 $20,530 14,527$ ($14,527)$256 $1,709 $17,087 2,182$ ($2,182)$38 $257 $2,566 -$ -$ Annual Revenue Impact Revenue at Full Cost of Services Projection of Revenues at Current Fees Annual Surplus (subsidy)With Reserves 13,096,098$ 11,308,113$ ($1,787,985)$15,435,720 Annual Revenue Impacts Capital Accounting Partners Page 14 of 14 BldCostCalcs FINANCE COMMITTEE EXCERPT MINUTES 1 Special Meeting Tuesday, November 15, 2016 Chairperson Filseth called the meeting to order at 6:06 P.M. in the Community Meeting Room, 250 Hamilton Avenue, Palo Alto, California. Present: Filseth (Chair), Holman, Schmid, Wolbach Absent: 3. Development Services Cost of Services Study Including Fiscal Year 2017 Fee Proposals. Chair Filseth: With that we move to Item 3, Development Services Cost of Services Study. I don’t see anybody from the public in here, so I assume there are no public speakers to this topic. If there are any please speak up. Okay, thank you very much. Welcome Development Services, Peter. Peter Pirnejad, Development Services Director: We need a microphone. Well, hello. It used to be so informal, now it’s so formal. Well, okay, let me start from the top. Peter Pirnejad, Development Services Department Director. It’s a pleasure to be here. We’re going to be going over our proposed fee changes to nonvaluation based fees. It’s going to be a two-part process. This is the first part before you and I was just about to say that we’re going to share the mike with Office of Management and Budget and our key consultant that did the actual fee study. So basically Development Services is a matrix department. We have bits and pieces of many different departments and divisions within those departments and the trick is to try to figure out how to coordinate all of their efforts to make sure that we have a predictable, transparent and efficient process that meets all the codes of state, regional, local as well as adopt local amendments to meet the needs of the community and the Council. So tonight we’re talking about our fee structure because we have been directed to be cost recoverable, and that’s the direction we have been actively moving towards. We have been pretty successful at it over the last few years, since we’ve actually formed the department. Now we’re trying to refine that edge a bit more and be cost recoverable in each of those various divisions and departments. So Development Services, as you know, is a very tight sliver of activity and I put up this slide to sort of emphasize that we are talking about activity that’s EXCERPT MINUTES 2 Finance Committee Excerpt Minutes November 15, 2016 within private property and post entitlement, so we’re not talking about work that’s happening in the public right of way, we’re not talking about work that’s happening in the planning circles as it relates to the California Environmental Quality Act (CEQA), land use, development agreements, zone changes, general plan amendments. We’re really talking about, nondiscretionary items, ministerial items that are coming before us to do reviews of their building permit activity. So to that extent, we’re an enforcement agency. We’re trying to make sure that departments or applicants comply with code standards and understanding that those code standards come from a variety of different perspectives, Public Works, Planning, Fire, Utilities, etc. So when we did our Cost of Services Study we were talking about making sure that we are fully cost recoverable, ensuring that the applicant pays their entire share of what it would take to recover the entire cost, fully loaded, fully burdened, the cost of providing that service to them. It is broken up into two parts. The first part is the plan check fee, which covers all the plan checking, all the different departments, which is normally, the majority of which is a valuation-based process. Then the second is a permit-based fee, which covers all the inspection activity after the permit is issued. So with that I will pass it on to Jessie, but I’ll make sure to jump in if there’s any questions or I need to fill in any blanks. Jessie Deschamps, Senior Management Analyst: Thanks. Jessie Deschamps, Senior Management Analyst with the Office of Management and Budget, previously the Senior Management Analyst at Development Services. I’m part of the team that worked on this project. So just to give kind of a high- level overview, the objective of this is to calculate the total cost of fee- generating services, and with that said, to analyze these fees consistent with the City adopted cost recovery policy, which established a high, medium and low recovery range. Since participants receive most or all of the benefit from the services provided, this falls within the high category, so the fees in front of you are set at 100 percent recovery. Just to highly summarize the methodology, this is activity-based costing method as completed by our consultant, who is here tonight. It’s to identify staff positions, productive hours and direct and indirect activities and costs and to calculate a fully burdened hourly rate, upon which indirect and direct cost layers are added on top to come up with a total fee. So in terms of next steps, should Finance Committee recommend that we go forward, the Staff would provide notice of a public hearing to which Council must adopt the municipal fees by Ordinance. Upon adoption, the effective date would come 60 days following the adoption. So with that said, we have Staff here, we have our consultant here to answer any questions. Chair Filseth: Super, thanks very much. Questions? Council Member Schmid. EXCERPT MINUTES 3 Finance Committee Excerpt Minutes November 15, 2016 Council Member Schmid: I think Council has probably given clear direction. The cost recovery is our goal, our target. I like the study. I think it was very helpful, very detailed to look at each specific thing. One big issue that the City is concerned about is affordability of housing. We are basically pricing out 90 percent of the population from living here or staying here. So I look at some of the numbers that result from this study and, you know, it’s surprising and shocking. If you look at, I’ll just take for example, green building, Packet Page 298. Currently residents are paying $677 for new construction and you want to double that. Residential renovation currently $56 per review, going up to $1,000 per review. Just examples like that. So what can you give me in general? I guess you have these broken out into all kinds of pieces and parts, can you give me an idea on the residential side of one, new resident being built, or two, renovation. I guess if you look at the age of our housing stock, virtually everywhere in town we’re reaching the age of needing to renovate, so what are the costs currently and under the proposals for those two categories, new housing and renovation of existing housing? Mr. Pirnejad: So I can explain the methodology that we used. Council Member Schmid: The methodology is clear. I’m concerned about the outcome. Mr. Pirnejad: Right, so the outcome in the Fee Study isn’t broken up by the type of construction. It’s broken up into the amount of work, the number of hours it would actually take to do the work. So when we charge a fee, it would depend on what they were proposing and that proposal would determine the fee. So it’s, we don’t have scenarios built that would address a typical new construction versus a typical remodel. There’s lots of different scenarios that would require different sets of fees be assessed to those different scenarios. We could talk about like specific fees. Council Member Schmid: Okay, under green buildings, it says alterations and additions for single family homes less than 1,000 square feet. Currently $56, new proposed fee $1,097. Now that is 20 times as high. What’s taking place? Mr. Pirnejad: So with our Green Building Program, we’ve done many things to address the community needs, the Council’s direction to create a more robust Green Building Program. That program includes things such as low- flow fixtures, landscaping review, additional Title 20, energy compliance and all of these things have required that we revisit our process and ensure that EXCERPT MINUTES 4 Finance Committee Excerpt Minutes November 15, 2016 we’re able to provide the necessary level of review to meet all of those code requirements. Those fees haven’t been updated well before I have been here. I haven’t even heard of the last time we’ve updated fees. Back when that Green Building Fee was first assessed my assumption is that our process was much more simple than it is today. So maybe Dan can speak to the process that we went through to actually collect that fee. It was based on time. Council Member Schmid: Okay, let me add one point to my question. I was just looking at the permit, but if you add landscaping, you said landscaping used to be zero and now it’s $894. So you’re going from $56 to $1,900. Mr. Pirnejad: Yeah, the landscaping fee, it’s an interesting story. It started with the Governor Executive Order to require that we provide additional review for all landscaping. So it was something that wasn’t even something that we would review through a permitting process. People would just landscape their yards. Over the last 3-6 years, we’ve seen a lot of new regulations, partly because of the drought, that has mandated us to do an exceptionally higher level of review, forcing us to create processes and systems and add contractors to do those reviews that previous years we didn’t have to do. Council Member Schmid: Yeah, I guess I’m just concerned, trying to get a picture in my mind of taking an old, say an Eichler that’s 65 years old and saying, oh, I need to look at the water system, look at the backyard, look at the walls, and what’s, not the cost of the contracting, what is the City going to charge me. Mr. Pirnejad: Right. We’re seeing on average, we were just looking at that. The average, on average the fees are somewhere between doubling and tripling, because again, we haven’t looked at these fees probably as far back as six or seven years or more. This is, I think the second or third attempt we’ve had at a fee study, and we finally feel like we’ve brought before you a fee study that really is able to capture all the costs, the indirect costs, as well as the, you know, the fully burdened rate. Council Member Schmid: I guess the danger is that someone would say, oh, I’m just going to avoid that. Either I won’t refurbish my home which needs it, or I’ll not report it, which neither one we want to encourage. Mr. Pirnejad: Well, based on experience, I haven’t seen people not pull permits. The number of Code Enforcement violations that we get for people EXCERPT MINUTES 5 Finance Committee Excerpt Minutes November 15, 2016 working without permits is very low compared to other cities, so that’s not a concern. Council Member Schmid: Yeah, okay. Mr. Pirnejad: The concern that people aren’t renovating their homes doesn’t seem to, I don’t see that the values, the property values of these homes have quadrupled over the last five years, so there is definitely value in the home to be able to refinance or pull a second or whatever it is that they’re doing, or if they, or if it switches hands, there’s plenty of money to be spent on these projects. And again, the permit fees are a fraction of the cost of the renovations. Council Member Schmid: Can you give me an idea of that fraction? Is it a standard five percent or 10 percent? Mr. Pirnejad: Not for these fees. These are nonvaluation-based fees. When we come back with valuation-based fees, those are a percentage. Council Member Schmid: No, I mean can you give me an idea of what percentage your new fees would be of a renovation. Mr. Pirnejad: It would depend on the renovation. James Keene, City Manager: Are we taking up valuation-based fees tonight? Mr. Pirnejad: No, nonvaluation-based fees. Council Member Schmid: No, I’m just trying to get an idea of… Chair Filseth: (Inaudible) Mr. Pirnejad: Oh, geeze, not in Palo Alto. Mr. Keene: Well, I mean you guys deal with this all the time. Just like identify a project that could be roughly relevant and say that it’s $2,000 worth of permit fees for the green build, I mean, well what is it? Chair Filseth: To give an example, a $100,000 valuation on Page 298. EXCERPT MINUTES 6 Finance Committee Excerpt Minutes November 15, 2016 Mr. Pirnejad: So, again, since we’re not looking at valuation-based fees, but… Mr. Keene: He’s not saying you calculated based on valuation, but if you could give somebody the bill, they could calculate the ratio of the permit. That’s what he’s asking for, an example. Mr. Pirnejad: A kitchen remodel, for example, would be in Palo Alto $60,000. (crosstalk) I didn’t want to like scare anybody, but yeah. Council Member Schmid: So if you’re dealing with the gas line and electricity, what kind of permit fees are there? Mr. Pirnejad: Well, there’s building permit fees and then there’s things like utility hookup fees and meter fees and the installation of those meters, which (crosstalk) so we’re not updating utility fees. Mr. Keene: Just the fees we’re updating, tell him how much it is. Mr. Pirnejad: A few thousand dollars, roughly speaking. I mean, you’re talking about fixtures, you talking about lighting, you’re talking about maybe some minor… Council Member Schmid: Would the Fire Department come in? Mr. Pirnejad: Yes sir. Council Member Schmid: Okay. Let’s see, one other question. You say you’ve looked carefully at your cost and you’re using hours of work at 1,600, what happens to the other hours of work? Who pays? Mr. Pirnejad: We’ll get Dan to answer. Dan Edds, Capital Accounting Partners: So your question revolves around the calculation of productive hours. Excuse me, doing that we would start out with a standard 2,080 hours and then we’re subtracting out vacation time. We actually do that on an individual basis. Subtracting out paid holiday time, sick leave. We do actually use the full allowable amount for sick leave. We assume that’s essentially a budget expense to the City. Then we’re also subtracting out meeting time, time for training, building inspectors as well as plan reviewers all have standard training that they have to maintain for their EXCERPT MINUTES 7 Finance Committee Excerpt Minutes November 15, 2016 certifications, so we’re subtracting that time out, as well as the standard staff meeting every Monday morning at 10:00 A.M.. So when we do all those calculations invariably it comes down to 1,600 hours, depending upon the seniority of the staff. I’ve had cities that were around 1,400, but you know, people have been there for 30 years. I think around 1,600 hours is very, very standard. Council Member Schmid: Yeah, I guess that’s what, 12 weeks of time, and you would think in the focused department that a lot of that nonworking time is actually looking at records, talking to others about what should be done, new learning. It’s not down time. A lot of it is actually extremely valuable time, sharing notions and ideas, but this doesn’t get reimbursed. Mr. Edds: Well, we build it into the productive hourly rate, so as the number of productive hours comes down, that rate goes up. So, you know… Council Member Schmid: So you’re productive rate would pay for those hours. Mr. Edds: Yeah, that’s the only way we come to full cost recovery. Council Member Schmid: Okay. Chair Filseth: You load it as overhead on the productive hours. Mr. Edds: Yes. Council Member Schmid: One question, on Page 315, there’s a discussion there of reserves. You recommend getting reserves. I don’t understand why an operating department would need a reserve. What are you reserving for? If you’re a policeman or a fireman or utility, you have to deal with emergencies and you need a fund to get assets there in a crisis. But here you’re just responding to clients. If a problem comes up you don’t have clients, you don’t respond. So what’s the reserve for? Mr. Pirnejad: So as we slowly creep towards a full enterprise fund or maybe a partition general fund, we want to make sure we have all the revenues to operate outside the general fund from fee revenue. What we’re seeing is that the market is very cyclical. It’s very dynamic. It’s hard to predict the ebbs and flows. We can predict the general trends, but it’s harder to predict, you know, complete bottoming, so in those cases where we have a EXCERPT MINUTES 8 Finance Committee Excerpt Minutes November 15, 2016 bottoming, we can’t cycle staff out that quickly so we need a reserve in order to absorb that cushion so we’re not having to bleed between funds, one fund paying for a second fund. Fire Department paying for you know, Public Works fees and Building Department paying for Planning fees. Council Member Schmid: I thought there was a number of consultants or people that you would draw in as activity increases. Mr. Pirnejad: Yeah, but even those we can draw, but we can’t draw them that fast, where we would immediately, you know, let go five consultants if we saw a slight blip, because that blip could be just you know, a slight correction, and then we might see activity come back. Bringing those contractors back on isn’t as simple as flipping a switch, so the reserve would allow to absorb those tiny fluctuations if you will, and respond to major corrections. Council Member Schmid: So the full time staff would be increasing, is that your implication of building reserves? Mr. Pirnejad: The full time staff would be increasing? Council Member Schmid: The number of full time staff would increase, which would create a need for reserves? Mr. Pirnejad: No, the reserve would be created to absorb any fluctuations in the market that we would respond to say a decrease in permit activity by assessing whether it’s a minor correction or a trend. If it’s a trend, then the first thing that would happen is we downsize our contract staff, depending on where the activity is slowing. If it’s in the plan check, then we would downsize the plan check staff. If it’s in inspections, the inspection staff. Full time staff would be the last, because that’s where our core institutional knowledge lies and all the fees that we need to transfer over to the new contractors as we bring them on board. So that’s, but the argument is, having done this before with Dan, that cushion is to absorb. Mr. Keene: Thank you. So first, obviously, this whole move has been to not subsidize from the public good, private benefits. To get those aligned really closely and have the full cost, but we do have these ups and downs cyclical. I don’t see where, we’re identifying this is a need. Do we have a specific recommendation tonight as to what we want to do, and then secondly, I would be curious, I’m trying to understand how we would actually build the reserve, because… EXCERPT MINUTES 9 Finance Committee Excerpt Minutes November 15, 2016 Council Member Schmid: General Fund? Mr. Keene: Well, I mean, how do we build the reserve, because on the one hand we really can’t overcharge somebody for, I mean, we’re charging them 100 percent of our cost to do something. It seems problematic to me to start charging people some carrying costs for the fund as a whole, as some hedge for the future. You know, it kind of runs against the whole idea of the cost. Mr. Pirnejad: I’ll let Dan address. I mean, it’s a two-part answer. Mr. Keene: Because I don’t like the general fund answer, by the way. Chair Filseth: Can I ask a clarifying question before you answer? You know, hearing you describe it, it kind of sounds like a receivables issue. I mean, is it the case that somebody goes and does the work, right, and then you have to pay them, and then you have to collect the fee from the customer like a month later or two months. Is that the issue? Mr. Pirnejad: That’s a great analogy of how the plan check and inspection works. We collect a plan check fee and it might take us six months or a year to do that plan check. Then we collect a permit fee and it might take 18 months to continue to monitor that construction through inspections. Chair Filseth: Okay, but you collect the fee from the homeowner upfront. So you don’t need to finance it, so this isn’t a finance thing. Lalo Perez, Chief Financial Officer: And keep in mind, you’re paying the Staff, whether it’s contract or permanent, every month. Chair Filseth: Sure, but if I understand what Peter said, I mean, you know you sort of have fluctuations. The baseline is covered with the permanent staff and above the baseline is covered with contractors, right. So presumably there’s not that issue with the permanent staff, if I understand what you said. Mr. Pirnejad: Right, so… Chair Filseth: I was wondering if there is a receivable issue on the contract, but it doesn’t sound like it. The homeowner pays upfront. EXCERPT MINUTES 10 Finance Committee Excerpt Minutes November 15, 2016 Mr. Pirnejad: Right and just to be clear that we’re not recommending a reserve in this nonvaluation-based fee. It’s something that we need to come back and visit, but I’ll let Dan. Mr. Edds: The issue of reserves, there’s a couple of things going on, actually you’ve touched on both of them. One is as you just said, is a large project comes in on June 30 and you collect a fee. It may take 6, 8, 10, 12, 24 months to complete that. So a reserve helps buffer that issue where you collected a fee, but then the actual service has to be provided over the next several months, if not years. The other issue is just to maintain your staffing, and as Peter said, the institutional skill sets of your core staff, so you don’t want to lose that institutional knowledge of the regulations that’s required to build in the City of Palo Alto. With regards to looking or factoring in reserves as a cost, generally the way I do this, or the way I recommend is if you need an extra, you know, two percent, just layer that on top of the actual fee. When I presented that to any number of California building official representatives, I have yet to have one say, no you can’t do that. Everybody says, has told me we want the City to maintain the skill sets that they need so we can have a high quality of service over a long period of time, and not have these fluctuations where one month they are totally strapped and it takes a day or two to get an inspection made and then the next month after that then everybody is fine. The reserves really are designed to provide a high level of service that is stable over time, and my experience is that, especially since we have been coming out of the recession, is that many of my clients, virtually all of my clients are scrambling to catch up. I have had them where the general finance has actually made loans to the building function, the Building Department, to the Development Services Department, and now those are having to be paid back. If those reserves were adequate, that would have a lesser impact. The other thing about reserves that I like to point out is they are not necessarily fund balances. Then the two are very different. But the point of a reserve is really to fund staffing model through various fluctuations of building activity, what most of us would do in our business anyway, have reserves set aside. Mr. Pirnejad: That’s correct. We are going to come back when we do our valuation-based fees, to address the reserve policy. Mr. Perez: We would have guidance, specific guidance and specific target areas. It could be technology, replacement of systems, conversion from paper to electronics, online enhancement beyond what the shop currently has, so we will have very specific targets. EXCERPT MINUTES 11 Finance Committee Excerpt Minutes November 15, 2016 Council Member Holman: Just, so my understanding that’s not the recommendation now, but also how do we end up in the, I’ll call it a deficit or staff deficit, because it might be somebody draws a permit on let’s say January 1, but you don’t actually collect the other inspections for some time, but you have other work that’s already back before that, so isn’t there a constant, I don’t know how to say this right, but isn’t there a constant flow of work coming through those, so that you don’t really have a deficit? Because it’s not like you’re starting with zero every time. Mr. Pirnejad: Correct. So there are encumbrances that carry forward, but as we talked about, the fee comes in, it’s paying for work going forward. What we tend to see is that the work that’s coming in the door is hard to predict. So we look at planning trends, we look at building trends, Consumer Price Index (CPI), other indicators, to get a sense if the economy is slowing or not, because unlike other industries, in the building trades, it’s a very quick change. So you might see some drastic movement because if there was something that happened with the price of steel or, you know, if there was uncertainty in the market because of the political environment, all of a sudden projects stop. Commercial projects might stop, but residential projects might continue to go forward. So we’re developing those models, developing dashboards to be more predictable in terms of how we watch these trend lines. There is a continuous flow of revenues, but it’s not always enough to keep the existing staffing levels, so the hope is that the money we receive for a building permit would sustain all the activity necessary to provide that level of service that they paid for with that permit, but if revenues stop, then we need to be able to downsize quickly to respond to that slowing of the economy behind that permit that paid its fair share. Council Member Holman: So this is also an argument for why these fees should potentially be adjusted every year, because as we have staff cost increases annually, so these should really be adjusted every year. Mr. Pirnejad: I’m sure Dan would love that. Council Member Holman: And well, our City budget would too. Mr. Keene: So if I may say two things. One is I do think the two examples that were given about the sort of the fiscal years and the cash flow, the revenue flow, then when the work is done, it strikes me that most of that can be handled by clearly setting up a special revenue fund or an enterprise fund or whatever, so we don’t get into this issue of it just flowing back into the general fund. So that will take care of that and I have been an advocate EXCERPT MINUTES 12 Finance Committee Excerpt Minutes November 15, 2016 of that for years, from the get go and have used that approach before. But, again, this other idea of trying to keep the kind of stable, steady state which does require some buffering funding through reserves, I was being a little facetious about where it’s going to come from, but the need to have it is important, and I think this is a useful analogy, sort of like your investment portfolio, right, which is most people would generally recommend is be careful about jumping in and out of the market, because the ability to, you might be able to say, well, I’m going to sell now because things are really going bad, but more often than not, to be able to be there on the upswing is when people really get burned. They suddenly, if they’re not in the market, and all of a sudden things really go back up and they don’t get in in time, because it happens fast. And this is a little bit what happens more in the building area is we have some buffer by having a contract employee. It makes it easier to bring and pull, I mean push and pull, but they’re a portion of what we have, so we can use that as an almost, I want to say Federal Reserve or monetary policy stuff to kind of keep things health or whatever. But at some point, if we really go in and we have to lay off or you know, cut back on existing staff, we could have big then upswing, and then getting new people here and on board when our customers want them, you know, is really an issue. So in some sense you would way we want to be able to carry people a little more. We’re not going to completely feast or famine, so we’re ready when somebody comes in because we will have all kinds of issues when suddenly say, gosh, you not only do you not have the people, they don’t have enough experience here, they don’t understand the processes, they don’t know the context, all of those things. So just something to think about when we talk about it later. Council Member Holman: There are different ways to right size. Council Member Wolbach: So also I’m a bit concerned about something that Council Member Schmid mentioned earlier and it’s just the question of what it means for somebody who owns a home and is remodeling or is doing minor or substantial work on their home, or also for people who are trying to do the one kind of development where we have a growing reconditioning of the community that we need, which is residential development. I am particularly concerned about say people who are house rich, but don’t have a lot of income. They have had their house for a couple of decades, don’t have a lot of money coming in and might be on a fixed income, and I am looking at some of these fees and I am a little bit concerned. You know, I’m actually not, I don’t know if I would say that the $56 fee for renovation became $1,000. I’m not sure exactly how to read this because the definitions look like they were changed. This is on Packet Page 298 under Green Building. It looks like you’re deleting a couple, adding a couple. I’m not sure if they EXCERPT MINUTES 13 Finance Committee Excerpt Minutes November 15, 2016 translate exactly. There is a note about valuation. It’s kind of hard to read, the print is small, but it looks like there is a note about valuation for the old ones that are getting deleted and no note about valuation in the new ones. It looks like under 1,000 square feet is not much cheaper than over 1,000 square feet. Then on landscaping, those are pretty hefty fees for landscape reviews, almost $900 just for a single-family home. I did hear the reasoning. Then on the following Page, on Packet Page 299 under plumbing permits, we’re looking at a lot of Fees that are going up to $100, $200 from say $5 or $28 a piece. I am wondering for all of these, do we have any kind of low to moderate income discounts or, I mean, again my concern is policy implications of not the person who just bought, you know, a $2.5 million piece of property that has a home on it and they want to remodel it. I’m thinking of people who were here, Palo Alto residents who are here now. We were talking earlier about how a lot of homes in Palo Alto, you know, if you sold them would be worth $2.5 million, but a quarter of them are currently valued at $300,000. So anything you can do to alleviate my concerns here. I’m not precise in my request or my recommendation, just wondering if there is anything, you know. I’m concerned looking at these numbers, what it means for a lot of Palo Alto residents and I’m wondering if I’m missing something. Mr. Pirnejad: Well I would just draw a little bit of realization to the, like replacement fees, water heater replacement, roof replacement, those fees are not out of line with what other cities typically would charge. So we haven’t priced the routine maintenance type fees, say house rich, income poor residents struggling to make their utility payment for example, would still be able to re-roof their house. The cost of the permit wouldn’t be more than the cost of the roofing, wouldn’t be a deterrent. Where the pricing of the permit starts to escalate quickly is when you’re doing major work, when you’re doing major remodeling, major retrofitting, which requires construction, demolition, debris monitoring, requires green building compliance, that’s the type of work where you’re really doing some major retrofits and major renovations. And again, the fees are set at minimum cost recovery, so absolute net zero cost recovery, so we’re not generating a profit. We’re not putting money into any kind of reserve yet. Council Member Wolbach: I guess what I’m getting at is, this is the policy question for us to consider, are there times when we actually do want to subsidize, you know, a resident and provide it as a service to them, get his costs defrayed rather than doing full cost recovery. Mr. Pirnejad: I think for affordable housing projects, there’s other types of tax incentives, rebates, subsidies, grants that are available to subsidize say EXCERPT MINUTES 14 Finance Committee Excerpt Minutes November 15, 2016 affordable housing. And again, the cost of that construction would make the permit fee pale in comparison. The only way to subsidize the actual permit fee would be through a general fund subsidy, because we couldn’t use somebody else’s building permit revenue to offset the cost of somebody else’s building permit revenue or fees. That’s the concern. Council Member Wolbach: So as that relates to this, does that mean we are legally unable to reduce any of these fees and if we did want to subsidize it, we would have to find it somewhere else and then move it back into this. Mr. Pirnejad: We would have to bring it from the General Fund. Council Member Wolbach: Okay. And help me understand, and I should remember, please remind me, when these landscape plan reviews would be needed for a single-family residence. So I see landscape plan reviews, single family residential, $894. Who would that apply to? Just if you totally tore down your house, scrapped everything, did it from scratch? Mr. Pirnejad: Essentially, so if you remember almost a year ago, I came to the Council with the proposal that says, if you do anything to your landscape we would want a permit. We pulled back from that and we just stuck to the state minimum, which is 1,000 square feet. So you would have to do again a major renovation to your home that’s impacting the landscaping that would kick in the landscaping review fee. Council Member Wolbach: But if somebody just wanted to redo their landscaping, just wanted to redo their garden, tear out a lawn and put in drought resistance stuff, no permit? Mr. Pirnejad: They would not need a permit. Council Member Wolbach: Okay, that does help alleviate a lot of my concern on that. (crosstalk) I’m not going to speak to that. And, okay, this is a bit cut off, at least in our printed version in what I’m looking at here, on the following page, Page 299, of these fees that go from, this is under plumbing permits, all of these fees that go from say $5 up to $81, $97 from $5 or $28 up to $195, there is something about it being a flat fee per permit. Is it that those tend to get grouped together when somebody remodels their kitchen? I can’t actually read what it’s supposed to say there. EXCERPT MINUTES 15 Finance Committee Excerpt Minutes November 15, 2016 Mr. Pirnejad: Well, maybe I can ask Dan to provide more clarity, but what we did is some of the fees went up, some of them went down, because we took a look at how we were collecting the fee, and then tried to assess it to a fully burdened rate that took into account how much time it took to do each of those activities. So if you look at a fixture, the per fixture account may have gone up in terms of the permit fee, only because we really took a hard look at how long does it take to do all the activities necessary to enforce code compliance with that specific fixture. And again, we haven’t looked at those fees in close to a decade, so it’s much more exact than it used to be and the methodology is much more of a science than it was before. I’ll let Dan add any flavor to that. Mr. Edds: Sure, thank you. A couple of things. Number one, specifically with the plumbing fees as well as electrical, mechanical, there is also an admin base fee, which is actually going to go down, and the other thing is in developing these, the cost for these services, we actually looked at how are the inspections made. So that your example, Councilman, what used to be a $5 fee, we actually looked at how that specific service is processed in terms of the inspection and administrative piece. I don’t know how the $5 was calculated but I can say how we calculated this one and it’s based on the inspection time to get out there and actually do the inspection. Council Member Wolbach: Okay, and again, going back to the question of discounts or subsidies or things like that, I’m again thinking about lower to middle income residents, do you happen to know if we do provide any discounts or subsidies to some of these low or moderate income and retrofitting or the work that they’re doing is something they need to do in order to maintain the health and safety of the building? Let’s say maybe you’re a retiree, you’ve been in your house a long time, your house is falling apart and really needs some work just to keep it habitable. Do you know if we do provide in the City organization, discounts or subsidies of any kind for at least the fee aspect of that. Mr. Pirnejad: In Development Services we don’t have any kind of incentive, but Utilities has certain incentive programs to, say, switch over to an all- electric water heater or other types of programs that are incentive based. We, all of our fees are fee-based. We don’t have any incentives or any way to provide that discount, again, unless there was some outside agency or general fund contribution. Council Member Wolbach: Okay, so it sounds like tonight’s not the time to push for that, but I guess maybe we can bookmark that for a future EXCERPT MINUTES 16 Finance Committee Excerpt Minutes November 15, 2016 discussion, because it’s something like what you’re describing with utilities, might be appropriate to consider, but again, unless the Chair thinks I’m wrong, it sounds like, and from what I’m hearing from Staff, it sounds like that’s a future discussion beyond the purview of this. Council Member Holman: Yeah, just a point on it, so going along with two comments that have been made previously, I mean I can see how some of the fees would be disincentives to get a permit. Now if you look at a plumbing fixture, if you add $97 to, excuse me, it would be $81 to replacing a toilet, I mean what’s the cost of a toilet? You’re adding significantly, so I can see how people wouldn’t get permits. And this came up in a little different way about mechanical equipment being in setbacks, and people needing to move them, you know, to make them compliant but we didn’t want the compliance to keep them from coming in to get a permit to do it right, so I mean, we can’t argue both ways. I mean reality exists in both occasions. You can’t argue in just one way. Mr. Pirnejad: Well, just drawing from personal experience in other jurisdictions, Palo Alto is kind of an exception to the rule. By and large, we don’t have an issue of people not pulling permits for work. The people that wouldn’t pull a permit for a toilet wouldn’t pull that permit if that fee was $10 or if it was $100, they just wouldn’t pull a permit. But again, those circumstances, based on my assessment is few and far between. The fee is really a function of how long does it actually take an inspector to schedule the inspection, drive out to the site, take a look at the toilet, make sure it is Code compliant, installed, doesn’t contaminate the water supply and is installed properly. It is one visit, but again, we’re talking about a fully burdened rate, so. Council Member Holman: I understand that. To go to Cory’s point earlier though, I don’t, and respectfully seriously, I don’t know how anybody could know who would or wouldn’t pull a permit depending on the permit cost. How would anybody know? Mr. Pirnejad: Your assessment? Council Member Wolbach: Actually, just a couple of real quick questions. So, if you have a toilet or a sink or showerhead in your place. You go to Home Depot, pick up a new one, put it in, that requires one of these $81, $97 fees? Mr. Pirnejad: That’s correct. EXCERPT MINUTES 17 Finance Committee Excerpt Minutes November 15, 2016 Council Member Wolbach: Again, to this point, I respectfully just disagree that I think anecdotally I think there is a lot of work that is done in Palo Alto which is not permitted. Mr. Pirnejad: I have a lot of faith in our residents. Council Member Wolbach: I have, that’s a commentary statement. Council Member Holman: And we just add $81 to it. Council Member Wolbach: And how much is a showerhead or a new sink or a faucet? Mr. Pirnejad: All I can say is the cost of the permit is strictly a function of how long does it take to issue the permit, support that issuance of the permit, pay for the inspector to go out there, come back, the fully burdened rate yada, yada. Council Member Holman: So I’m going to make a little bit of an argument here for, it’s off topic, acknowledging that, that the goal of Code Enforcement is to get compliance, but we’re subsidizing Code Enforcement tremendously by not charging penalties and fees, you know, at a much earlier time, rather than waiting for multiple offences before ever charging anything. So we’re subsidizing code enforcement but we’re perhaps creating burdens by doing what’s the responsible thing to do here in terms of fees, so it’s just a comment. Council Member Schmid: I’ll move the Staff recommendation. Chair Filseth: Second. MOTION: Council Member Schmid moved, seconded by Chair Filseth to recommend the City Council adopt an Ordinance amending the Development Services Municipal Fees as described in Attachment A of the Staff Report, based on the completion of a Cost of Services Study (Attachment B) and adjusted by the annual inflator applied to Municipal Fees from Fiscal Year 2016 to Fiscal Year 2017. Chair Filseth: Do you care to speak to your Motion? EXCERPT MINUTES 18 Finance Committee Excerpt Minutes November 15, 2016 Council Member Schmid: Yeah, I think the goal of the Council always has been to cover your costs. I think that you’ve got good evidence for what you presented to us. I think the sense of the Council is to be sensitive about homes, but with that I think we should move ahead. Thank you. Chair Filseth: It looks very thorough. Thank you very much. Do you have a comment? All in favor? Motion passes unanimously. Thank you very much. MOTION PASSED: 4-0 ADJOURNMENT: The meeting was adjourned at 9:11 P.M. City of Palo Alto COLLEAGUES MEMO December 12, 2016 Page 1 of 1 (ID # 7565) DATE: December 12, 2016 TO: City Council Members FROM: Council Member Holman, Council Member Kniss, Council Member Wolbach, Council Member Burt SUBJECT: COLLEAGUES MEMO REAFFIRMING PALO ALTO'S COMMITMENT TO A DIVERSE, SUPPORTIVE, INCLUSIVE AND PROTECTIVE COMMUNITY We recommend Council adopt the attached Resolution affirming Palo Alto’s commitment to a diverse, supportive, inclusive and protective community. NOT YET APPROVED 161201 tlh 0140172 1 Resolution No. ________ Resolution of the Council of the City of Palo Alto to Reaffirm Palo Alto’s Commitment to a Diverse, Supportive, Inclusive, and Protective Community R E C I T A L S A. Palo Altans value a community characterized by diversity, multiculturalism, and unity, embodied in our national motto, E Pluribus Unum (from many, one); and B. Palo Alto’s community spirit is one of protection and support, with many Palo Altans active as volunteers in preparing for and responding to emergencies both natural and man-made, and ensuring the physical and emotional needs of all are considered and met wherever possible; and C. Each person is naturally and legally entitled to live a life unmolested by harassment, discrimination, persecution, or assault, whether perpetrated by individuals, groups, businesses, or government; and D. There exists significant and growing concern in our community based upon recent national and regional incidents of hate crimes, discrimination, sexual harassment, and assault, and fear of a trend toward more of these crimes in the future; and E. There also exists considerable concern in our community of risks to marginalized communities of persecution, deportation, denial of constitutional and human rights, and relaxation of national laws protecting people from discrimination, harassment, and assault; and F. Many Palo Altans, including a large number of students, have recently marched peacefully, rallied, and otherwise communicated their rejection of bigotry and affirmed their commitment to a diverse, supportive, inclusive, and protective community; and G. Palo Altans value all members of our community of all religions, ancestries, and ethnicities as well as people of any disability, gender, sexual orientation, or gender identity. NOW, THEREFORE, the Council of the City of Palo Alto takes this opportunity to reinforce our commitment to a diverse, supportive, inclusive, and protective community and RESOLVES as follows: SECTION 1. Resolution. NOT YET APPROVED 161201 tlh 0140172 2 The City of Palo Alto rejects bigotry in all its forms, including but not limited to Islamophobia, anti-Semitism, racism, nativism, misogyny, and homophobia; and The City of Palo Alto does not tolerate discrimination, hate crimes, harassment, or assault; and The City of Palo Alto will oppose any attempts to undermine the safety, security, and rights of members of our community; and The City of Palo Alto recognizes, values, and will proactively work to ensure the rights and privileges of everyone in Palo Alto, regardless of religion, ancestry, country of birth, immigration status, disability, gender, sexual orientation, or gender identity; and The City of Palo Alto will promote actual safety, a sense of security, and equal protection of constitutional and human rights, leading by example through equitable treatment of all by City officials and departments. SECTION 2. CEQA. The Council finds that the adoption of this resolution does not meet the definition of a project under Public Resources Code Section 21065, thus, no environmental assessment under the California Environmental Quality Act is required. SECTION 3. Effective Date. This resolution shall take effect immediately on its passage. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: __________________________ _____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: __________________________ _____________________________ City Attorney City Manager _____________________________ Director of Administrative Services City of Palo Alto COLLEAGUES MEMO December 12, 2016 Page 1 of 3 (ID # 7566) DATE: December 12, 2016 TO: City Council Members FROM: Council Member Holman, Council Member Filseth, Vice Mayor Scharff, Council Member Burt SUBJECT: COLLEAGUES MEMO REGARDING SUPPORT FUNDING FOR THE BARRON PARK DONKEY PROJECT Goal: Provide support funding for continuing the neighborhood and community tradition of keeping and caring for donkeys in Barron Park. Background and Discussion: Donkeys have been a part of the landscape in Barron Park since the Depression Era when Cornelis and Josina Bol’s 13 acres of farmland included a donkey pasture. Cornelis Bol was a long-time Stanford professor who also invented the mercury vapor light. The Bols allowed neighborhood children to visit and ride the donkeys. Donkeys have served as neighborhood pets ever since. When Cornelis Bol died in 1965, the neighbors taxed themselves to create Bol Park, a wish of Bol’s. The park opened in 1974, a year before Barron Park was annexed into Palo Alto. When Josina Bol passed away in 1996, neighborhood volunteers “adopted” Mickey and brought Niner and Perry to be his new companions. Donkeys have served as Gunn High School mascots at football games, are Sunday regulars in Bol Park for personal attention from children, and Perry is famous as the model for Donkey in the Shrek movies. Among those who regularly visit the donkeys are staff and patients of the VA Hospital, Stanford Research Park employees, young children with parents, and countless students coming and going from Gunn High School. The community was reminded of how important the donkeys are when passersby kept asking when Perry was coming home after the recent passing of Niner. And at the memorial for Niner on November 20 when some 120 or so neighbors came to pay their respects. And by the December 12, 2016 Page 2 of 3 (ID # 7566) excitement of children and adults to get a look at Perry and his new friend Jenny who both arrived at the pasture on November 15. In August 2013, the Acterra / Barron Park Donkey Project was established between Acterra and the subsequent owner of the Bol property, James Witt, who continues the donkey pasture as the home for the donkeys. A prior relationship with Acterra had been established providing a non-profit umbrella so that donations made to cover expenses for the donkeys could be tax deductible. Acterra also holds these funds and pays approved bills for the Project. The donkeys are supported by individual donations, and to secure the donkey tradition, the Barron Park Donkey Project has begun a fundraising effort to cover the next 5 years of expenses estimated to be $125,000. Routine expenses account for veterinary costs, Acterra fees (including insurance), pasture lease expense, food and misc expenses totaling $75,000 over the 5 year period. Special expenses such as just experienced with the care for Niner plus clean up and maintenance at the pasture in coordination with efforts by the owner come to $20,000 based on experience. And finally, a reserve of $20,000 with a goal of $30,000 (replenished as needed) is held at Acterra to assure there is funding for potential extraordinary expenses such as just described. Because of recent special expenses, this reserve needs to be rebuilt. Recommendation: We ask Colleagues to join us in committing $15,000 from Council contingency funds to support the Barron Park Donkey Project fundraising goal of $125,000 to cover 5 years of donkey-related expenses. The first $10,000 from the City will serve as a challenge toward other fundraising and the remaining $5,000 upon successful match of the $10,000. In doing so, the Council will help ensure the tradition of donkeys in the Barron Park neighborhood and continue the strong community they generate. This memo requests that Council make this decision at the meeting of December 12, 2016. To do so, Council should: 1. Direct and authorize the City Manager to prepare and execute a Memorandum of Agreement with Acterra to make an initial grant of $10,000 for donkey-related expenses, and, upon successful private fundraising by the Barron Park Donkey Project of $10,000, provide an additional City grant of $5,000. 2. Amend the Fiscal Year 2017 Budget Appropriation Ordinance for the General Fund budget by: a. Increasing the Community Services Department appropriation for grants and subsidies in the amount of $15,000; b. Decreasing the Non-Departmental City Council Contingency appropriation in the amount of $15,000. December 12, 2016 Page 3 of 3 (ID # 7566) Staff and Fiscal Impact: There is more than sufficient funding in the Council Contingency fund to allow this expenditure. A modest amount of staff time will be needed to prepare the Memorandum of Agreement and administer the transactions. CITY OF PALO ALTO OFFICE OF THE CITY CLERK December 12, 2016 The Honorable City Council Palo Alto, California Boards and Commissions Term End Dates for 2017 (Maddy Act) The 2017 Maddy Act list is attached. Government Code Section 54970-54974, the Maddy Act, requires that on or before December 31 of each year the City must prepare a list of all appointments which will expire in the upcoming year. The list is posted on the agenda posting board in King Plaza, in front of City Hall, and also in the posting board within the entry to the Council Chambers, where they will remain throughout 2017. ATTACHMENTS: Attachment A: Maddy Act 2017 (DOC) Department Head: Beth Minor, City Clerk Page 2 LOCAL APPOINTMENTS LIST OF CITY OF PALO ALTO BOARD AND COMMISSION TERMS EXPIRING IN 2017 For additional information, contact: City Clerks Office, City of Palo Alto 250 Hamilton Avenue, Palo Alto, CA 94301 (650) 329-2571, http://www.cityofpaloalto.org/clerk In compliance with the Americans with Disabilities Act (ADA) of 1990, this document may be provided in other accessible formats. For information contact: City of Palo Alto - ADA Coordinator 650/329-2550 (Voice) or email ada@cityofpaloalto.org Last updated 11/14/2016 ARCHITECTURAL REVIEW BOARD (ARB) - Three-year term No Residency Requirement Board Member Date of Appointment Present Term Expires Wynne Furth 05/04/2015 12/15/2017 Kyu Kim 11/10/2014 12/15/2017 Eligibility Requirements: A board of five members, at least three of whom shall be architects, landscape architects, building designers or other design professionals. Regular meetings are held at 8:30 a.m. on the first and third Thursdays of each month. Terms are for three years and commence on December 16. (PAMC 2.16 and 2.21) HISTORIC RESOURCES BOARD (HRB) - Three-year term Board Member Date of Appointment Present Term Expires Martin Bernstein 06/01/1996 12/15/2017 Roger Kohler 02/14/1995 12/15/2017 Michael Makinen 10/13/1999 12/15/2017 Margaret Wimmer 06/10/2013 12/15/2017 Eligibility Requirements: A board of seven members who have demonstrated interest in and knowledge of history, architecture or historic preservation. One member shall be an owner/occupant of a Category 1 or 2 historic structure or of a structure in an historic district; three members shall be architects, landscape architects, building designers or other design professionals and at least one member shall possess academic education or practical experience in history or a related field. Regular meetings are held at 8:30 a.m. on the second and fourth Thursdays of each month. Terms are for three years and commence on December 16. (PAMC 2.16 and 16.49) HUMAN RELATIONS COMMISSION (HRC) - Three-year term Residency Requirement Commissioner Date of Appointment Present Term Expires Mehdi Alhassani 05/01/2015 05/31/2017 Daryl Savage 07/26/2005 05/31/2017 Eligibility Requirements: A commission of seven members who are not Council Members, officers or employees of the City and who are residents of the City of Palo Alto. Regular meetings are held at 7:00 p.m. on the second Thursday of each month. Terms are for three years and commence on June 1. (PAMC 2.16 and 2.22) LIBRARY ADVISORY COMMISSION (LAC) – Three-year term Residency Requirement Commissioner Date of Appointment Present Term Expires Doug Hagan 05/01/2014 05/31/2017 June Loy 04/28/2014 05/31/2017 Don McDougall 05/01/2014 05/31/2017 Eligibility Requirements: Composed of five members who shall be appointed by and shall serve at the pleasure of the City Council, but who shall not be Council Members, officers or employees of the City of Palo Alto. Each member of the commission shall have a demonstrated interest in public library matters. Regular meetings are held at 7:00 p.m. on the fourth Thursday of every other month. Terms are for three years and commence on June 1. (PAMC 2.16 and 2.24) PARKS AND RECREATION COMMISSION (PARC) – Three-year term No Residency Requirement No terms expire in 2017 Eligibility Requirements: A commission composed of seven members who shall be appointed by and shall serve at the pleasure of the City Council, but who shall not be Council Members, officers or employees of the City of Palo Alto. Each member of the commission shall have a demonstrated interest in parks, open space and recreation matters. All members of the commission shall be residents of Palo Alto. Regular meetings are held at 7:00 p.m. on the fourth Tuesday of each month. Terms are for three years and commence on December 16. (PAMC 2.16 and 2.25) PLANNING AND TRANSPORTATION COMMISSION (PTC) Four-year term Residency Requirement Commissioner Date of Appointment Present Term Expires Michael Alcheck 07/23/2012 12/15/2017 Eric Rosenblum 04/21/2014 12/15/2017 Eligibility Requirements: A commission of seven members who are not Council Members, officers or employees of the city and who are residents of the City of Palo Alto. Regular meetings are held at 6:00 p.m. on the second and last Wednesdays of each month. Terms are for four years and commence on December 16. (PAMC 2.16, 2.20, and 19.04) LOCAL APPOINTMENTS LIST OF CITY OF PALO ALTO BOARD AND COMMISSION TERMS EXPIRING IN 2017 For additional information, contact: City Clerks Office, City of Palo Alto 250 Hamilton Avenue, Palo Alto, CA 94301 (650) 329-2571, http://www.cityofpaloalto.org/clerk In compliance with the Americans with Disabilities Act (ADA) of 1990, this document may be provided in other accessible formats. For information contact: City of Palo Alto - ADA Coordinator 650/329-2550 (Voice) or email ada@cityofpaloalto.org Last updated 11/14/2016 PUBLIC ART COMMISSION (PAC) - Three-year term No Residency Requirement Commissioner Date of Appointment Present Term Expires Jim Migdal 05/13/2014 05/31/2017 Dara Olmsted Silverstein 05/01/2014 05/31/2017 Amanda Ross 05/09/2011 05/31/2017 Nia Taylor 05/01/2014 05/31/2017 Eligibility Requirements: A commission of seven members who are not Council Members, officers or employees of the City. Members shall be either members of the Architectural Review Board or shall be professional visual artists, professional visual arts educators, professional visual arts scholars or visual arts collectors whose authorities and skills are known and respected in the community and whenever feasible, who have demonstrated interest in, and have participated in, the arts program of the City of Palo Alto. Regular meetings are held at 7:00 p.m. on the third Thursday of each month. Terms are for three years and commence on June 1. (PAMC 2.16, 2.18 and 2.26) STORM DRAIN OVERSIGHT COMMITTEE (SDOC) - Four- year term EACH COMMITTEE MEMBER MUST AT ALL TIMES BE EITHER A PALO ALTO RESIDENT OR AN EMPLOYEE OF A PALO ALTO BUSINESS OR OWN PROPERTY WITHIN THE CITY OF PALO ALTO No terms expire in 2017 Eligibility Requirements: Composed of five members who shall be appointed by and shall serve at the pleasure of the City Council, but who shall not be Council Members, officers or employees of the City of Palo Alto. Each member of the committee shall have a demonstrated interest in municipal infrastructure and fiscal accountability. Committee meetings will be held on weekday mornings per the schedule described below. The committee shall meet in January and April of each year to review the proposed budget. UTILITIES ADVISORY COMMISSION (UAC) – Three-year term Residency Requirement for six Members Commissioner Date of Appointment Present Term Expires James Cook 07/19/2010 05/31/2017 Lisa Forssell 06/01/2016 05/31/2017 Eligibility Requirements: A commission of seven members who are not Council Members, officers or employees of the City. Each member shall be a utility customer or the authorized representative of a utility customer. Six members of the commission shall at all times be residents of the City. Regular meetings are held at 7:00 p.m. on the first Wednesday of each month. Terms are for three years and commence on June 1. (PAMC 2.16 and 2.23) UTILITIES ADVISORY COMMISSION – Three-year term Residency Requirement for Four Members Eligibility Requirements: A commission of seven members who are not Council Members, officers, or employees of the City. Each member shall be a utility customer or the authorized representative of a utility customer. Six members of the commission shall at all times be residents of the City. Regular meetings are held at 7:00 p.m. on the first Wednesday of each month. Terms are for three years and commence on June 1. (PAMC 2.16 and 2.23) City of Palo Alto (ID # 6221) City Council Staff Report Report Type: Informational Report Meeting Date: 12/12/2016 City of Palo Alto Page 1 Summary Title: Update for Fiber-to-the-Premises and Wireless Initiatives Title: Informational Update Regarding Fiber-to-the-Premises and Wireless Initiatives From: City Manager Lead Department: IT Department Staff Recommendation This report is informational only and no Council action is required. Executive Summary The purpose of this report is to update the Council on various fiber and wireless activities started under the Council’s 2013 “Technology and the Connected City” initiative; changes in the telecommunication industry, and potential future discussions for Fiber-to-the-Premises (“FTTP”) and wireless projects, including staff plans for a Study Session with Council in early 2017. Background On September 28, 2015, staff presented to the Council a Fiber-to-the-Premises Master Plan (“FTTP Master Plan”) and a Wireless Network Plan (Staff Report #6104). These plans were prepared by the City’s consultant, CTC Technology & Energy (“CTC”). The Council approved a multipart Motion which directed staff to pursue several actions related to a ubiquitous fiber network in Palo Alto and expansion of the wireless network. On November 30, 2015, Council approved a staff recommendation to work concurrently on a response to the Council Motion on municipal fiber and wireless; continue negotiations with Google Fiber and AT&T; approve a temporary contract position for a Fiber and Wireless Telecommunications Project Manager, and approve contract amendments with CTC (Staff Report #6301). On August 16, 2016, staff presented to the Policy and Services Committee a status update on the Council Motions including work related to potential Google Fiber and AT&T GigaPower deployments and co-build opportunities (Staff Report #7174). City of Palo Alto Page 2 Staff has also presented information and requested feedback from the Utilities Advisory Commission and Citizen’s Advisory Committee about the various fiber and wireless initiatives, in addition to other industry developments including Google Fiber’s “pause”. Discussion Since the FTTP Master Plan and Wireless Network Plan were completed and reviewed by the Council in September of 2015, staff has worked to complete the various tasks in the Council’s September 28, 2015 and November 30, 2015 Motions. The majority of the tasks have been completed (Exhibit A – Council Motion Status) and others are in progress or being evaluated by staff in light of new developments in the industry and based on information gathered by staff. In the last year the competitive landscape in the telecommunications industry has continued to change in significant ways throughout the country, including Palo Alto. The following is a summary of the most significant changes: Google Fiber In mid-July 2016, Google Fiber (“Google”) advised staff that it was “pausing” its plans to build a fiber network in Silicon Valley and other cities where construction had not yet started. At that time, staff was informed by Google that it could be several months before Google decided whether to move forward with a build-out as they explored more innovative ways of deployment - including a hybrid of fiber and wireless technologies - that overcome some of the challenges they are facing in their current builds in other areas of the country. Staff has worked with Google for more than two years to develop a variety of agreements1 to facilitate their network build in Palo Alto, in addition to the exploration of a potential “co-build” approach. The co-build is a unique concept whereby Google and the City would share the cost to install City conduit in underground utility areas and “messenger”2 on utility poles to support the installation of City fiber optic cables at a future date as Google builds its own network. Implementation of this concept would have given the City the ability to expand its existing fiber network by preparing infrastructure such as utility poles and conduit for future fiber expansion as needed. Google informed staff that co-build discussions were also being postponed. On October 25, 2016, Google Fiber announced that the Alphabet division that operates Google Fiber is "pausing" fiber operations in 10 cities where it hadn't yet fully committed to building, including the San Jose area (Palo Alto, Santa Clara, San Jose, Mountain View and Sunnyvale). The head of Google Fiber, Craig Barratt, also announced that he will step down from his post and remain only as an adviser. Google Fiber already offers gigabit Internet and cable TV service in eight metro areas and is still committed to building in another four where construction has 1For instance, a Master License Agreement for utility pole attachments; a Master Encroachment Agreement for use of the public rights-of-way; both of which were to include a Cost Recovery provision to compensate the City for the use of resources to process pole applications, issuance of permits and complete inspections. 2 Messenger is a piece of heavy metal cabling attached to a pole line to support aerial cable (e.g. coaxial, copper or fiber optic cable). City of Palo Alto Page 3 already begun. Google also recently purchased a San Francisco-based wireless ISP called Webpass, which offers high-speed fixed wireless Internet in six metro areas, including parts of the Bay Area. Webpass uses technology that beams high-speed Internet into apartment buildings using a fiber-connected antenna. This approach and other wireless technologies may provide a quicker, less disruptive and more cost effective way to expand access to faster web speeds. AT&T AT&T has begun to submit permit applications to upgrade its existing network for its GigaPower service. AT&T has since rebranded AT&T GigaPower under the name AT&T Fiber. This upgrade involves installing new cabinets next to existing U-verse cabinets in order to provide gigabit- speed broadband services to Palo Alto community members. AT&T’s tentative plans are to install approximately twenty-seven (27) cabinets to cover one half of Palo Alto: two (2) in 2016 and up to twenty-five (25) in 2017. AT&T would select neighborhoods with high potential for adoption and will use consumer demand levels to determine further deployments in the city. Approximately 54 cabinets would serve most of the city. Staff also initiated co-build discussions with AT&T, but there has been no progress at this time other than a commitment by AT&T leadership to explore creative and innovative ideas. Comcast Comcast has informed staff that it plans its DOCSIS 3.13 deployment throughout Palo Alto and other cities in the Bay Area in the second quarter of 2017 to offer multi-gigabit service to its residential customers. This deployment will make it possible for Comcast XFINITY and Comcast Business Internet customers to receive gigabit speeds over the communications lines that most customers already have in their homes and offices. For business services, bandwidth will be scalable from 1 Mbps to 10 Gbps, and as high as 100 Gbps if specific criteria are met. Comcast also currently offers a 2 Gbps broadband service called Gigabit Pro when certain conditions are met. Additionally, Comcast has deployed more than 500 Wi-Fi hotspots in the Palo Alto area. Other Telecommunication Service Providers Several wireless carriers and builders of shared infrastructure for the wireless industry are seeking to deploy new communication facilities such as distributed antenna systems (“DAS”) and small cell technologies in Palo Alto. In the past few years, AT&T Mobility and Crown Castle have deployed approximately ninety-five (95) DAS and small cell sites in several areas of the city to improve the coverage and capacity of the carriers’ mobile networks. These facilities are typically located on City-owned utility poles and streetlight poles in the public rights-of-way. More deployments are planned by Verizon Wireless and other carriers, in addition to the builders of shared wireless infrastructure for the wireless industry. 3 Data over Cable Service Interface Specification (“DOCSIS”) is an international telecommunications standard that permits the addition of high-bandwidth data transfer to an existing cable TV (CATV) system. It is employed by many cable television operators to provide Internet access over their existing hybrid fiber-coaxial (HFC) infrastructure. DOCSIS 1.0 was released in 1997. The most recent version of DOCSIS (3.1) was released in 2014. The DOCSIS 3.1 specification supports Internet speeds of 10 Gigabits per second (Gbps) for downloads downstream and 1Gbps upstream - the level of speeds typically only available with a fiber optic connection. City of Palo Alto Page 4 Analysis of Request for Information Responses for FTTP Public-Private Partnership The FTTP Master Plan recommended exploring a public-private partnership to evaluate the potential for a telecommunication firm to participate with the City in building and operating a network as a way to share the costs and potentially mitigate the financial obligations for both parties. The Master Plan identified a number of ways this could be accomplished. In the Council’s September 28, 2015 Motion staff was directed to issue a Request for Information (RFI) for a public-private partnership for deployment of citywide FTTP. In May 2016, the RFI was issued. Eight (8) firms responded and the responses were reviewed by staff and CTC. A summary report was prepared by CTC reviewing and evaluating each of the responses (Exhibit B – RFI Response Memo). After review, none of these responses completely align with the objectives of the RFI for a public-private partnership (two were deemed to be incomplete based on the RFI response instructions). Nevertheless, CTC recommended conducting discussions with three (3) of the respondents for information collection purposes. Staff met with the three firms and at this time staff is tabling additional discussions. The following is a summary of the discussions with the three vendors: 1. Comcast outlined their latest service offerings, including the deployment of DOCSIS 3.1 in the second quarter of 2017. Deployment of DOCSIS 3.1 will allow Comcast to provide gigabit-speed Internet to Palo Alto citizens over their existing hybrid fiber-coaxial cable network in advance of a potential Google Fiber network build. Comcast’s coverage map for Palo Alto estimates that over ninety percent of the City is passed by their network. Comcast’s purpose for responding to the RFI was based on opening a dialogue with the City to demonstrate that they are already a good partner for the City in terms of delivering competitive advanced voice, video and data services. Comcast prefers to own and maintain their own network, so they have no interest in exploring a public-private partnership for citywide FTTP as described in the RFI. 2. Axia proposes a private risk and private investment model. Under this model, Axia envisions that they would design, build, own, operate, and manage the FTTP network. The City would assist with marketing and providing event spaces, and would facilitate permitting. Axia has deployed and operated FTTP networks of all scales internationally. Axia has deployed FTTP networks in Alberta, Canada, France and Singapore. In the United States, Axia is responsible for operating and maintaining the Axia MassBroadband123 Network in Western Massachusetts (1,338 miles of fiber backhaul infrastructure and electronics connecting more than 120 communities). There are elements of Axia’s response that align with the City’s expectations for a public- private partnership, however, the City would not own the network or have much control over its deployment. This does not align with the City’s objective of owning the infrastructure. City of Palo Alto Page 5 In June of 2016, Axia issued a press release regarding their Fiber-to-the-Premise Internet Expansion Initiative into the United States. The following is a link to the press release: http://www.marketwired.com/press-release/axia-announces-fiber-to-the-premise-internet- expansion-initiative-into-usa-2135566.htm 3. N1 Networks/UTOPIA (“N1 Networks”) proposed that the City build a ubiquitous FTTP network that would be financed, owned, operated and maintained by the City. N1 Networks would then provide multiple services on the network through an “open access” model for providers facilitated through existing peering agreements with independent service providers. Customer service, network engineering, equipment installation, design services, marketing (in conjunction with the City), and sales services could be provided by N1 Networks under a fee-based consulting agreement. N1 Networks indicated they are not interested in a co-build scenario; their focus would be on the services related to the network after the City builds it throughout Palo Alto. N1 Networks recommended model requires the City to issue a bond to finance the network, which represents a substantial financial commitment by the City. Under their model, N1 Networks proposes a revenue sharing agreement with the City to recover capital costs. The City would also be responsible for customer billing and customer debt collection, as well as collecting the transport fees from the Internet Service Providers provisioning services over the open access network. Each of the individual RFI responses can be viewed at the following link: https://www.cityofpaloalto.org/gov/depts/utl/news/rfi_responses.asp Wi-Fi Deployments for Unserved City Facilities and High Traffic Retail Areas Multiple interviews conducted during the assessment for the Wireless Network Plan indicated there have been no specific requests from the business community or the general public for Wi- Fi services in high traffic retail areas. A significant number of Palo Alto businesses already offer free Wi-Fi service to patrons. Additionally, companies such as AT&T and Comcast have installed and operate Wi-Fi access points for their customers in many areas of the City and are planning upgrades to these services in 2017. It should be noted, too, that other cities’ implementations of municipal Wi-Fi services generally did not develop the anticipated level of acceptance. Part of the problem with those deployments was related to the speed and reliability of earlier Wi-Fi technology compared to commercial wireless options. In the same timeframe that those cities implemented municipal Wi-Fi, the commercial wireless carriers successfully deployed 3G and 4G data access technologies that have developed a high degree of consumer acceptance based on cost, performance, and the convenience of essentially universal service. In contrast, many municipal Wi-Fi deployments served only a limited area—and performance in many cases fell short of user expectations. The expansion of Wi-Fi techonology at unserved City facilities and public areas was evaluated City of Palo Alto Page 6 with the Community Services Department (CSD). Most City facilties already have Wi-Fi access (“OverAir Wi-Fi Hotspot”). The outcome of the evaluation reflected concern from CSD staff regarding the deployment of Wi-Fi at Riconada Pool and City Parks due to safety concerns. The potential for distracted parents in the areas of the City where parents are expected to supervise their children is the primary concern. In addition to potential safety concerns, parks and other open spaces provide an important respite from technology, a place to “unplug” and focus on spending time with family and friends and to connect with the outdoors and nature. The areas of the City where CSD recommends Wi-Fi deployment are at common areas in Cubberley, Lucie Stern, the Golf Course Pro Shop and Cafe, and Lytton Plaza. A high-level cost estimate for the recommended sites is $181,965 for installation and $16,865 for monthly recurring charges. Dig Once The Council’s September 28, 2015 Motion directed staff to develop a “dig once” ordinance. At the time, the City anticipated that Google and potentially other telecommunications providers may soon submit applications to the City for widespread underground and overhead construction. Accordingly, encouraging or requiring simultaneous underground construction and co-location of broadband infrastructure in the public rights-of-way (“PROW”) had the potential to create benefits for both the City and private sector communications providers. A dig once policy might reduce the long-term cost of building communications facilities by capitalizing on significant economies of scale through: Coordination of fiber and conduit construction with utility construction and other disruptive activities in the PROW; Construction of spare conduit capacity where multiple service providers or entities may require infrastructure. More broadly, dig once policies, depending on how they are structured, have the potential to achieve a number of goals, including: • Protecting newly and recently paved roads and sidewalks • Enhancing the uniformity of construction • Ensuring efficient, non-duplicative placement of infrastructure in the PROW • Reducing overall costs of all underground work in the PROW, both utility - and telecommunications - related, for public and private parties • Facilitating private communications network deployment by reducing construction costs • Leveraging construction by third-party entities for the deployment of a public communications network, or deployment of conduit that can be made available to other entities City of Palo Alto Page 7 Since Council provided its direction in late 2015, however, circumstances in the third party telecommunications marketplace nationwide and here in Palo Alto have changed dramatically. Most notably with respect to dig once, telecommunications providers are not proposing the same City-wide, large scale excavations or builds that the City was anticipating back in 2015. Instead, with Google Fiber’s reorganization and retreat from a comprehensive infrastructure build, the City is finding that telecommunications providers are more inclined to explore incremental expansions or, where scope of a project is larger, above ground builds. With these significant market changes and Council’s initial 2015 directive in mind, staff’s work on this item remains ongoing; however, staff’s research and emphasis has changed somewhat to address this new reality. In particular, staff has been working in the following areas: Comprehensive Assessment of State, Local Dig Once Policies. The City has engaged its City’s consultant, CTC, to survey and evaluate “dig once” approaches adopted or proposed by other jurisdictions across the country, especially in California. CTC’s report, including recommendations for a new ordinance or revision of the current municipal code, is provided in Exhibit C – Dig Once Approach. CTC interviewed representatives of cities and other government entities that have adopted dig once or joint trenching policies to gather information about their outcomes and best practices. CTC then reviewed the treatment of costs in dig once scenarios. In many cases, the incremental costs of construction are borne by the jurisdiction. Many policies also provide exceptions or forego the excess conduit construction if the cost- benefit analysis is not reasonable. Staff is currently evaluating CTC’s proposed approach to determine if it meets the City’s needs in practice. Staff is specifically concerned with how the CTC recommendations might alter or supplement the City’s existing coordination processes. For instance, City departments already coordinate construction of large City sponsored projects, which distinguishes Palo Alto from other cities that may adopt a more formalized framework both for City initiated and third party projects. Review of City’s Existing Dig Once and Coordination Approach In addition to working with CTC to evaluate the work other jurisdictions have done with dig once, the City has initiated a review of its existing Municipal Code provisions governing Third Party Coordination in the public rights-of-way (“PROW”) (Section 12.10.060) and Joint Trench Coordination in Underground Districts (Section 12.16.030), including specifically an assessment of how cross-departmental teams (Utilities, Public Works, Development Center and Planning) currently work together on both City- initiated and third party infrastructure projects to determine if there are opportunities for streamlining and improvement. City of Palo Alto Page 8 Recognize Collaborative Opportunities on Project-by-Project Basis Although projects involving Citywide excavation do not appear to be on the City’s immediate horizon, staff nevertheless plans to evaluate any upcoming, larger scale third party projects for opportunities to cooperate and identify opportunities to strategically expand or opportunistically enhance the City’s fiber network now, or in the future, whether such third party project is an overhead or underground endeavor. Research, Monitor Practical, Legal Strategies to Cooperate on Above Ground Construction Staff continues to research and monitor “one touch make-ready” ordinances and policies adopted by other jurisdictions. According to Next Century Cities, “[a]kin to dig once, one touch make-ready leverages labor-intensive work on infrastructure to reduce the cost and speed of deployment of new networks. Before a pole may be used for a new attachment, ‘make-ready’ work is usually needed — the existing attachments on the pole have to be rearranged so that it is ready for a new attacher. Often times, there are multiple attachments on the pole already (e.g., telecommunications, cables), and, currently each is moved sequentially — which can create delays and multiple disruptions in a neighborhood. In the case of one touch make-ready, companies that own poles agree on one or more common contractors that could move existing attachments on a pole (‘make ready’ work), allowing a single crew to move all attachments on a pole on a single visit, rather than sending in a unique crew to move each attachment sequentially. Sending in separate crews is time-consuming and disruptive to local communities and municipal governments. One-touch make-ready polices would ease this burden.” Even as the City continues to actively monitor progress in this area, it is important to signal a note of context and caution: Cities enacting ordinances involving elements of a “one touch make-ready approach” have been the subject of or are currently being threatened with litigation from incumbent telecommunications providers. Any work the City pursues in this area will need to be evaluated against this challenging practical and legal backdrop. Staff intends to provide updates along with more formal recommendations in the above listed areas at the upcoming Council study session to solicit Council feedback regarding the same. Potential Topics for Council Study Session As a result of Google Fiber’s pause and other market developments, a Council study session will be scheduled in early 2017 to seek further direction from Council to explore alternative City of Palo Alto Page 9 approaches to ultra-high speed Internet connectivity for the community. At the study session, staff intends to provide information to the Council regarding the following items: Citywide Fiber-to-the-Premises The Master Plan analysis indicates that, assuming the network achieves the 72 percent “take rate”4 required to positively cash flow the enterprise, the City will require an estimated overall capital investment of approximately $77.6 million to build and operate the network (this cost and the anticipated startup costs associated with initial network deployment are subject to change based on real-world variables.) Certain challenges inherent to FTTP deployment are especially pronounced in the Palo Alto. The City’s primary challenge in its pursuit of an FTTP buildout is that its costs will be high compared to other metropolitan areas for labor and materials. The cost of outside plant (OSP)5 and drop cables6 will be greater than in other metropolitan areas because Bay Area costs tend to be higher. Additionally, many of the easements where the City must build are privately owned, which will require every drop cable to be placed in conduit. The high construction and labor costs result in a higher necessary take rate for the City’s FTTP enterprise to obtain and maintain positive cash flow. Based on the financial projections (and the underlying assumptions), a 72 percent take rate is required to financially sustain the network. This is not only much higher than overbuilders have been able to achieve in other communities, but also higher than the required take rates for other potential municipal fiber enterprises. As a comparison, other recent analyses performed by CTC for municipalities have shown a required take rate in the mid-40 percent range in order to maintain positive cash flow. In light of the high cost to build and the extremely high required take rate, it may seem that there is little incentive for any provider (public or private) to pursue an FTTP deployment in Palo Alto. Nonetheless, the public and private sectors each have unique advantages and disadvantages that may impact their ability to undertake a standalone overbuild. A private entity and a public entity could complement one another by developing a partnership that can take advantage of each entity’s strengths, and may significantly reduce cost and risk. These advantages and disadvantages were described extensively in the Master Plan. The timing of the RFI issuance for a public-private partnership for deployment of citywide FTTP in May 2016 was not opportunistic because Palo Alto was identified as one of the potential Google Fiber cities. As a result of Google Fiber’s interest, the City received formal feedback from one vendor that this discouraged them from responding to the RFI. 4 Take rate is the percentage of subscribers who purchase services from an enterprise—and is an important driver in the success of an FTTP retail model. If the required take rate is not met, the enterprise will not be able to sustain itself and its operational costs will have to be offset through an alternative source. 5 OSP is physical assets like overhead and underground fiber, accompanying ducts and splice cases, and other network components. 6 Drop cables connect the fiber optic backbone to the customer premises. City of Palo Alto Page 10 Another critical component of building a citywide FTTP network is the funding requirement. The FTTP Master Plan provided a cost estimate of $77.6 million to build a ubiquitous network in Palo Alto including a customer take rate of 72 percent to financially sustain the network. Staff would need to identify various funding models to construct and run a municipally-owned citywide network. The funding models would also explore subsidizing options if 72 percent take rate was not achievable. Fiber-to-the-Node (FTTN) With the assistance of CTC, staff developed a high-level analysis of the cost to build a Fiber-to- the-Node (“FTTN”) network.7 This analysis was not part of CTC’s original scope of work for the FTTP Master Plan. A FTTN network would require construction of approximately 62 miles of fiber plant, compared to 230 miles for a citywide FTTP network deployment. The FTTN network would provide an access point to connect neighborhood-area backhaul communications links, lower the barriers for potential FTTP providers, and expand the functionality and the choices of technology that can be implemented for Utilities and Public Safety, including Smart Grid and wireless networks. The following is a high-level breakdown of the FTTN cost components and total estimated network costs: Cost Component Total Estimated Cost Outside Plant (OSP) Engineering $1,110,000 Quality Control/Quality Assurance 290,000 General OSP Construction Cost 7,110,000 Special Crossings 150,000 Backbone & Distribution Plant Splicing 310,000 Backbone Hub, Termination & Testing 2,410,000 Drop Connections (Tap to WAP) 45,000 *Total Estimated Cost *This estimate does not include any of the network electronics, wireless or otherwise) $11,425,000 The above noted cost estimate may provide a basis for developing a Request for Proposal (“RFP”) to build a Fiber-to-the-Node network. The RFP may include an option for the City to build the “last mile” at a later date, or as a means of creating an incentive for a private sector partner to build and operate the last mile. This network could potentially deliver next- generation voice, video and data services, in addition to other emerging applications delivered over high-capacity fiber and wireless networks. 7 Fiber-to-the-Node (FTTN) is one of several options for providing cable telecommunications services to multiple destinations. Fiber-to-the-Node facilitates providing broadband connections and other data services through a common network box, which is often called a node. Fiber-to-the-Node may also be called Fiber-to-the- Neighborhood. City of Palo Alto Page 11 Upgrade of Existing Fiber Optic Backbone The dark fiber optic backbone network was originally conceived by the City in the mid-1990s and is maintained and operated by Utilities. In 2000, the City began to license “dark fiber” for commercial purposes. In the Fiscal Year 2017 Capital Improvement Program, $1.3 million was budgeted for the Fiber Optic System Rebuild project. This project will rebuild portions of the “dark” fiber optics network including installation of new aerial ducts or substructures (conduits and boxes), and additional fiber backbone cable to increase capacity for sections of the City’s fiber network that are at or near capacity. The rebuild project will improve the City’s ability to maintain a competitive market for advanced telecommunications services and extend the network to other commercial and industrial areas. Staff will determine whether the rebuild project could be expanded into residential areas and possibly integrate with the Fiber-to-the-Node approach. The primary purpose of the FTTN approach is to create building blocks to push fiber closer to residential neighborhoods. This approach could create a potential “jumping off point” to bring fiber to individual homes – also known as building the “last mile.” In addition to creating a platform for FTTP, this infrastructure may have ancillary benefits in terms of creating additional opportunities for licensing dark fiber. If fiber was expanded to residential neighborhoods, it would be available to the wireless carriers who need to build small cell sites in not just commercial areas, but also in residential areas to improve coverage and capacity for their networks. This is known as “network densification.” These small cell sites, located primarily on utility and streetlight poles in the public rights-of-way, will need to be connected to fiber to “backhaul” traffic to a central point in the network. The carriers can build this fiber themselves, but if City fiber is available it could be licensed to the carriers at a more expedient and cost-effective manner. According to RCR Wireless News, fiber is expected to be a significant focus on planned 5G network deployments. Similar to 4G and 3G before it, 5G is the “next generation” of wireless connectivity built specifically to keep up with the proliferation of devices that need a mobile Internet connection, connecting not just a smartphone and computer, but home appliances, door locks, security cameras, cars, wearables, and many other inert devices beginning to connect to the web. This is also known as the “Internet of Things” (“IoT”). In effect, these dark fiber licensing opportunities for the wireless carriers and builders of shared wireless infrastructure may facilitate a new opportunity to increase revenues under the existing business model. Additionally, this fiber expansion could also create a communications platform for Smart City applications, especially for communication with utility meters, street lights, parking, traffic and City news. Timeline The majority of the work on the September 28, 2015 and November 30, 2015 Council Motions is expected to be completed by the end of Calendar Year 2016. The status update for each of City of Palo Alto Page 12 the Council Motions can be found in Exhibit A. To further support the above information, a Study Session with Council is under consideration for early 2017. Policy Implications The fiber and wireless activities are consistent with the Telecommunications Policy adopted by the Council in 1997, to facilitate advanced telecommunications services in Palo Alto in an environmentally sound manner (Reference CMR: 369:97- Proposed Telecommunications Policy Statements). Environmental Review This informational update concerning City initiatives related to FTTP and wireless networks is not a Project requiring California Environmental Quality Act review. Attachments: Exhibit A - Council Motion Status (DOCX) Exhibit B - RFI Response Memo (DOCX) Exhibit C - Dig Once Approach (DOCX) Staff Work Plan Update: City Council Motion from September 28, 2015 (CMR ID #6104) and status of November 30, 2015 (CMR ID #6301) staff recommendations: Task Target Date Status 1 Council requests an update to the consultant’s report including: a In the FTTP Master Plan: 12/31/2015 Completed. Reviewed assumptions for outside plant costs and capital additions in FTTP Master Plan with CAC and CTC on 1/21/16 and 2/18/16. CAC now in agreement with CTC’s FTTP network cost estimates and there are no discrepancies to report. Detailed assumptions, and their impacts, used to forecast the FTTP capital additions are to be reviewed by Citizen Advisors if there is a disagreement between the consultant’s report and the CAC’s recommendation, the Staff Report to Council will highlight the discrepancy. Once this is accomplished, a revised forecast is to be provided to the Council as an Action Item; b In the Wireless Network Report: i. A 20-year forecast should be provided consistent with the FTTP report; 12/31/2015 Completed ii. The description of Scenario 1 lacked both a price forecast and fiber backhaul details for the proposed municipal properties to be served. These details should be included in an update prior to an RFP. Evaluate expanding wireless access in retail areas, with an option for expanding Wi-Fi coverage at City facilities and public areas as part of the RFP (Scenario 1); 9/30/2016 Completed. The cost estimates for the extension of existing City Wi-Fi to unserved City facilities & public areas/parks are shown in Exhibit A. The evaluation of expanding Wi-Fi access in retail areas showed that Wi-Fi coverage in retail areas is adequately provided by the retail institutions. Expanding Wi-Fi coverage in these areas is not recommended by City Staff. 2 Issue RFP to add dedicated wireless communications to increase communication for Public Safety and Utilities departments (Scenarios 3 and 4); 12/30/2016 In progress. The draft RFP(s) and cost estimates are near completion for the following: 1. Citywide Mobile Data Network for Public Safety 2. Point-to-Multipoint Network for Secure City Enterprise Access (Public Safety & Utilities) 3 Direct Staff to bring a dig-once Ordinance; Fall/Winter 2016 In Progress. The CTC report evaluates existing dig once models from other municipalities and provides recommendations for the City to consider. Staff is evaluating CTC’s proposed approach and reviewing existing Municipal Code provisions governing Third Party and Joint Trench Coordination. 4 Direct Staff to discuss co-build with AT&T and Google how the City can lay its own conduit to the premise during the buildouts; a AT&T 12/30/2016 In Progress. The City met with AT&T representatives to discuss a co- build opportunity as AT&T deploys their AT&T Fiber Internet service in Palo Alto. Follow up discussions continue to occur; the most recent meeting was on 11/16/16. b Google TBD On-Hold. At Google’s request, the discussion regarding deployment of FTTP for the 5 proposed Bay Area cities the discussions to identify the feasibility of various joint build opportunities and the potential deployment of Google Fiber in Palo Alto are on hold while they examine new, innovative methods for fiber deployment. 5 Move forward with RFI exploring both Muni- owned model with contractors for build and ongoing operations, and Public—private model with City owned fiber and private partner (such as Sonic) operating and owning electronics, considering both Google in the market and not; 9/30/2016 Completed. The 8 RFIs received have been reviewed and CTC provided an evaluation report of the RFIs in Exhibit B. 3 of the respondent firms were interviewed, none of the respondent’s proposals completely align with city goals. 6 Approve a temporary contract position for a Fiber and Wireless Telecommunications Project Manager, dedicated to Fiber-to-the- Premises and wireless initiatives, in the amount of $228,000 annually, $684,000 for a period up to three (3) years; TBD On-Hold. The decision was made to put this position on hold due to the Google Fiber “pause”. Staff will evaluate whether a contract position or professional services agreement is needed dependent on City Council’s decision regarding staff recommendations. 7 Approve and authorize the City Manager or his designee to execute amendments to two contracts with Columbia Telecommunications Corporation dba CTC Technology & Energy (“CTC”) as follows: a Increasing the not-to-exceed amount for Contract No. C15152568 (Wireless Network Plan) by $94,490 from $131,650 to $226,140 (includes a 10% contingency for the provision of related additional, but unforeseen consulting services) and extend the contract to June 30, 2016 to develop a Request for Proposal for dedicated wireless communications for Public Safety and Utilities, in addition to evaluating the expansion of wireless access in retail areas 12/31/2015 Completed. Amendment finalized on 1/6/16. b Increasing the not-to-exceed amount for Contract No. C15152569 (FTTP Master Plan) by $58,850 from $144,944 to $203,794 (includes a 10% contingency for the provision of related additional, but unforeseen consulting services) and extend the contract to June 30, 2016 to provide technical analysis of the Request for Information (RFI) responses and any consulting services needed to help develop a “Dig Once” Ordinance for consideration by the Council 12/31/2015 Completed. Amendment finalized on 1/6/16. 1 Date: October 24, 2016 To: Todd Henderson, Project Manager City of Palo Alto Jim Fleming, Subject Matter Expert City of Palo Alto From: Tom Asp, Principal Analyst Sabrina Gosnell, Senior Analyst & Technical Writer Re: RFI Response Evaluation The City of Palo Alto received eight (8) responses to its Request for Information (RFI) for a Partnership for Deployment of Citywide Fiber-to-the-Premises (FTTP): Axia Connect, Ltd. Comcast of California IX, Inc. Construction CAD Solutions, Inc. Fujitsu Network Communications, Inc. Macquarie Infrastructure Developments, LLC N1 Networks/UTOPIA Race Telecommunications, Inc. Ventura Next The responses from Race Telecommunications, Inc. and Ventura Next did not include the RFI’s Appendix A – Responsibility Matrix, which required respondents to outline their proposed model’s division of operational and financial responsibilities. Appendix A was one of the RFI’s base requirements because it was designed to gather valuable information about a respondent’s proposed business model. After discussions with staff, the Race and Ventura responses were excluded from detailed review, leaving six total responses for further consideration. After internal review and additional strategy sessions with staff, CTC and City representatives met with three potential partner “finalists” for further discussion about their RFI responses. This memo summarizes our process for review, and our conclusions and possible next steps after meeting with finalists. The RFI Review Process CTC conducted a thorough initial review of each response based on the City’s vision of an FTTP deployment capable of enhancing the broadband connectivity of the City’s residents, businesses, and community anchor institutions (CAIs). All responses were expected to align with the overarching goal to improve the range and quality of available broadband and data transport CTC Memo to City of Palo Alto | October 2016 2 services, and to complement City of Palo Alto Utilities’ (CPAU) existing dark fiber enterprise by expanding service beyond commercial customers to encompass the full range of users in Palo Alto. The RFI’s Appendix A – Responsibility Matrix was designed to outline the division of operational and financial responsibilities for a wide range of tasks and financial commitments related to network construction, maintenance, operations, sales, marketing, taxes, replenishments, and so on. It aims to draw out what each respondent is truly offering the City, which is not always apparent from the response narrative. Table 1 shows a simplified comparison of the six compliant responses to the RFI to demonstrate how we concluded which respondents the City should engage further. This is not a comprehensive evaluation matrix—rather, it is an at-a-glance view to supplement this narrative. Table 1: Simple Review Matrix Base business model Primary Operational Responsibilities Primary Financial Responsibilities City Financial Risk CTC Recommended Further Discussion Axia Private investment, public facilitation Respondent Respondent Moderate Y Comcast Incumbent upgrade Respondent Respondent Low Y CCS Engineering and consulting services City City High N Fujitsu Private execution, public funding1 City City High N Macquarie Private execution, public funding City City High N N1/UTOPIA Engineering and consulting with operational support from UTOPIA City City High Y The Projected High Cost to Build FTTP in Palo Alto Makes Private Investment Attractive The City of Palo Alto Fiber-to-the-Premises Master Plan that CTC prepared for the City in 2015 projected that certain challenges inherent to FTTP deployment, such as the cost of construction and operating costs when compared to other markets, are especially pronounced in the City. Our analysis concluded that a municipal model—in which the City constructs, owns, and operates the fiber on its own—would require a 72 percent take rate to achieve positive cash flow. And even 1 For any “private execution, public funding” model, the private partner would seek financing on behalf of the partnership, but the City would likely be required to secure the repayment of the loan(s) if cash inflows such as subscriber revenue did not generate enough income to cover the principal and interest payments. CTC Memo to City of Palo Alto | October 2016 3 with such a high take rate, the model projected that an overall capital investment of more than $77 million would be necessary to build the network. In that model, we anticipated that the cost of outside plant (OSP)2 and drop cables3 would be greater than in other metropolitan areas because Bay Area costs tend to be higher, many of the easements where the City must build are privately owned, and every drop cable must be placed in conduit. Labor for operations will also be costlier than in other metropolitan areas because salaries in the Bay Area tend to be higher on average. Further, if the deployment uses existing or new City staff, municipal employee salaries are calculated at an extremely high 65 percent. As a comparison, we have typically calculated this rate at approximately 35 percent in other studies we have conducted. The high cost to build and extremely high required take rate were some of the driving forces behind developing this RFI to engage the private sector to find a meaningful balance between public and private risk and reward. Although the City wants to retain control over the infrastructure, spending nearly $70 million on fiber deployment does not seem feasible. The RFI sought to find partnerships to help mitigate this price tag, and balance public and private sector strengths and weaknesses. The Respondents Had Mixed Input on How Additional Gigabit Providers Would Impact Their Proposed Model The City’s RFI indicated that AT&T and Comcast currently offer service in the area and may upgrade their systems to enable 1 Gbps and beyond service offerings. It also stated that Google Fiber has announced plans to deploy in Palo Alto. The RFI asked respondents to indicate how the presence of other Gigabit providers may impact their proposed partnership model. The presence of other Gigabit providers did not appear to be a “deal breaker” for any of the respondents. The respondents presented a range of input on this topic: Axia suggested that it welcomes all competitors in the marketplace, and that it would still follow its proposed business model, even if other providers began offering Gigabit service. The CCS response indicated it will not directly offer services, thus the presence of additional competition does not impact its business model. The only impact other providers may have on the CCS model’s success is potentially driving up make-ready costs. Comcast’s response stated that it welcomes competition “when it occurs on an equitable and fair regulatory playing field.” It went on to say, “benefits and incentives offered to 2 OSP includes physical assets like overhead and underground fiber, accompanying ducts and splice cases, and other network components. 3 Drop cables connect the fiber optic backbone to the customer premises. CTC Memo to City of Palo Alto | October 2016 4 one competitor should be offered to all competitors.” The response indicates that Comcast already faces significant competition and will not be deterred by additional competitors. Fujitsu indicated that it does not believe incumbent providers will upgrade their existing plant in the near-term, nor does it expect that Google Fiber is truly interested in a market the size of Palo Alto. Fujitsu would expect a Google Fiber deployment to use the City’s open access FTTP network to deliver its services. The Macquarie response indicated that Google Fiber’s presence should create some urgency for the City to move forward with a partnership right away, especially if it elects to pursue the partnership model that Macquarie proposed. The N1/UTOPIA response acknowledged that a Google overbuild could significantly impact take rates, but indicated that N1/UTOPIA still believed a partnership could be viable. There Were Fewer Responses and Less Willingness to Take On Financial Risk than Anticipated Because of the high cost to deploy FTTP in Palo Alto, the RFI sought potential partners that would be willing to directly invest in FTTP deployment and take on some risk of their own, though the City also aimed to find a partner that would allow some degree of City control. No partners emerged during the process that truly fit these criteria, and the RFI process did not produce a clear “frontrunner” whose proposal aligned with the City’s goals. In comparison to RFI responses we have seen in other communities in recent months, the City’s RFI process did not yield as many responses as we hoped to see, and there was less willingness to take financial risk than we have seen in other markets. Given Palo Alto’s reputation as a hub for technological innovation, and based on what we have seen in the industry, we anticipated more responses from partners willing to invest and share risk with the City. Although every respondent indicated that Google Fiber’s presence in the market would not deter respondents from pursuing a partnership with the City, we suspect that responses were likely tempered by Google Fiber’s stated plans to deploy in Palo Alto. Further, it is likely that some potential partners did not respond at all considering the pending Google Fiber deployment. None of the RFI Responses Perfectly Aligned with the City’s Goals All the respondents had suggestions for how to help the City meet its goals, and there were several creative business models. Four of the six respondents would rely on the City to make a large infrastructure investment, either directly through bonding or through a guaranteed payment or other backstop mechanism. Depending on the flow of funds between the entities, CTC Memo to City of Palo Alto | October 2016 5 and the breakdown of responsibilities, this could entail enormous financial and political risk for the City. Axia and Comcast would not require a financial commitment from the City, though their approaches are not at all similar. Axia proposes a private risk and private investment model. The Axia model envisions that the private partner would own and operate the FTTP network, and the City would assist with marketing and providing event spaces, and would ease permitting for Axia. Comcast, which is an incumbent service provider in the City, proposes to upgrade its system. The Comcast proposal is not a true “partnership,” as the City envisions partnering. Comcast suggests that it is already serving the area well, and will continue to do so as it upgrades its infrastructure. The remaining four models are all slightly different from one another, but all require significant investment from the City (and, thus, would entail more risk than the Axia and Comcast approaches). The mechanism through which the City would be expected to invest varies from one model to the next, but any investment the City makes should be directly tied to the level of control it has over the network. The Construction CAD Solutions (CCS) response indicates that CCS will offer engineering and other services for the City to deploy a municipal FTTP network. Fujitsu would also rely on the City to develop and deploy FTTP; as the private partner, Fujitsu would perform feasibility analysis and engineering, and would engage equipment and OSP vendors to assist the City. Access to vendor relationships could be useful if the City sought to directly deploy the network, but this relationship would require the City to engage multiple partners to meet all its needs. The Macquarie proposal appears to meet the City’s goals in that the company would assist the City in deploying a ubiquitous FTTP network. However, the flow of funds in the proposed model would require the City to guarantee the private funding Macquarie proposes to offer, and the City would not directly own the network. Essentially the City would take on all the financial risk with little reward. The benefit of the Macquarie approach is that it removes operational responsibility from the City. Some communities may be willing and able to pay a premium to not have to worry about the details of deploying, operating, and offering service over a network; however, we do not believe this is the best scenario for the City. Finally, the N1/UTOPIA response is a combination response that offers engineering and consulting services through N1 for the City to develop and deploy a municipal fiber network. The response envisions that the City will partner with the UTOPIA organization for operations, which is a consortium of cities that have deployed fiber networks. This approach does not significantly mitigate the City’s financial risk, as the expectation is that the City will be financially responsible CTC Memo to City of Palo Alto | October 2016 6 for all aspects of the deployment. Working with UTOPIA, or at least tapping into the institutional knowledge, may have some benefits for the City. The City Met with Three Respondents The RFI’s primary objective was to enable the City to establish a long-term relationship with a partner, in addition to establishing an equitable balance of risks and rewards, which are essential ingredients to developing a positive partnership. Although none of the proposals exactly met the City’s objectives, we believed it was prudent for the City to hold additional discussions with three respondents. The Axia response seemed closest to the City’s expectations, and appeared to entail minimal risk for the City. Given this, we suggested further discussions to seek additional details about Axia’s proposed business model, and to see if the company believed there is a comfortable fit for the City. A public–private partnership is intended to be a decades-long relationship, and being comfortable with a partner on paper is only one part of the overall process toward establishing that dynamic. Comcast’s proposal did not meet the City’s goals as they were outlined in the RFI, and its response did not indicate an interest in the type of partnership the City envisions. However, given Comcast’s established presence in the community, it seemed prudent for the City to engage the company directly to learn more about Comcast’s proposal and its plans. The N1/UTOPIA response did not meet the City’s goals, and the proposed business model would not enable the type of partnership the RFI sought. The N1/UTOPIA model requires the City to build, finance, and fund the FTTP network, while N1/UTOPIA would operate the network on a day-to-day basis. UTOPIA likely possesses insight from its experience operating an open access fiber optic network in the state of Utah. We believe the City may be able to learn from senior staff at N1/UTOPIA and potentially work together in some capacity. The Private Sector Appears to Be Responding to Potential Competition In the City’s meeting with Comcast, the cable provider indicated that it expects to upgrade its system in Palo Alto to DOCSIS 3.1 by the second quarter of 2017.4 While this was not a written agreement, Comcast sent a large team of senior staff and verbally committed to this upgrade. This upgrade is in addition to AT&T’s announcement last year that it would bring its GigaPower 4 Data Over Cable Service Interface Specification (“DOCSIS”) is an international telecommunications standard that permits the addition of high-bandwidth data transfer to an existing cable TV (CATV) system. It is employed by many cable television operators to provide Internet access over their existing hybrid fiber-coaxial cable (HFC) infrastructure. DOCSIS 1.0 was released in 1997. The most recent version of DOCSIS (3.1) was released in 2014. The DOCSIS 3.1 specification supports Internet speeds of 10 Gigabits per second (Gbps) for downloads downstream and 1Gbps upstream - the level of speeds typically only available with a fiber optic connection. CTC Memo to City of Palo Alto | October 2016 7 product (now rebranded as “AT&T Fiber”) to Palo Alto, which can provide up to 1 Gigabit per second (Gbps) service. The Master Plan that CTC prepared in 2015 indicated that Google Fiber’s imminent presence in the City may affect the Palo Alto broadband market, and that incumbent providers may react in several ways. In our experience, even the possibility of competition—particularly when the new competitor is Google Fiber—incentivizes incumbent providers to make efforts to modify their existing market presence. While Google Fiber has not yet deployed in the City, and may not enter the market in the same way it originally planned, the local market seems to be changing in response to the possibility of competition. Both AT&T and Comcast have seemingly begun taking steps to enhance and upgrade their existing technology in Palo Alto, and will ultimately improve their service offerings. Incumbent Upgrades Are Not the Same as FTTP and Price Is a Factor Unlike many other markets, there appears to be movement in the private sector toward filling gaps in the City in the short term, Moreover, it is important to note that while incumbent upgrades may achieve better broadband connectivity for the community than what is available today, this is not the same as an FTTP deployment. The cutting-edge fiber-based service that the City hopes to achieve is not possible over the legacy networks in Palo Alto, even after upgrades. Nonetheless, incumbent upgrades may provide a stopgap that helps meet some of the community’s needs while the City determines its path forward. The Comcast representatives acknowledged that their intended upgrade is not the same as FTTP, but they stressed that evolving DOCSIS technology will enable more robust connectivity than what is available today in Palo Alto. While Comcast can offer some 2 Gbps services today, this requires a costly special build and comes with high monthly service fees. The City May Want to Consider Alternative Business Models Most of the responses suggest that the City would have to take significant financial risk for the partnership to work—either by investing directly, or through payment guarantees to the private partner. CTC cannot provide legal guidance; the City should engage its legal counsel as it considers its options, particularly any action that may create a financial or legal commitment for the City or CPAU. If, after consultation with its legal and finance staff, the City determines that it must seek bond financing or otherwise make a large investment, it will likely want to start its strategic process “from scratch.” If the City indicates an ability and willingness to directly invest public funds, in addition to some or all of the fiber optic fund reserve toward an FTTP deployment, we anticipate that the nature and number of responses to a procurement process would change considerably. CTC Memo to City of Palo Alto | October 2016 8 This would also change the City’s approach to a partnership, and it would be valuable for the City to develop a new plan and path forward if it decided to make a significant investment in building a citywide network. The City may want to encourage a private provider such as Axia to deploy a fiber network in Palo Alto to help meet the community’s needs. In the proposed Axia model, the City would not take on substantial risk—but it would also not own the network or have much control over its deployment. Another challenge with this approach is that service prices over the long term are likely to be high; although a fiber overbuild will typically cause prices to be lower in the short term, deploying an additional network does not solve the market structure in the long term. That is, there are multiple networks to maintain and each provider must price services in alignment with its network and retail operational realities. If the City wants to retain ownership of the network, it will likely have to make a substantial investment to deploy fiber of its own. Alternatively, it could take a “slow and steady” approach and deploy in targeted areas to help make a business case for fiber. This approach may allow the City to focus on serving areas where return on investment may be highest, which could help establish a revenue stream and support future deployment of additional fiber. Dig Once Approach Prepared for the City of Palo Alto, California May 2016 Dig Once Approach | DRAFT | May, 2016 ii Contents 1 Executive Summary ................................................................................................................. 1 2 The Case for Dig Once Policies ................................................................................................ 2 3 Dig Once Conduit Installation ................................................................................................. 4 3.1 Conduit Installation in Standard Trench or in Offset Joint Trench .................................. 4 4 Dig Once Policies Across the Country ..................................................................................... 7 5 Recommendations for Enacting a Dig-Once Policy............................................................... 12 5.1 Prioritize Projects for Building ........................................................................................ 12 5.2 Estimate Incremental Costs ........................................................................................... 14 5.3 Develop a Standard Specification .................................................................................. 15 5.4 Develop a Procedure to Track and Manage Infrastructure ........................................... 16 Figures Figure 1: Typical Configuration for Conduit in Dig Once Opportunity ........................................... 5 Figure 2: Vertical Profile for Typical Vault Installation ................................................................... 6 Tables Table 1: Sample Dig Once Summaries .......................................................................................... 10 Dig Once Approach | DRAFT | May, 2016 1 1 Executive Summary The City of Palo Alto’s City Council has requested that staff develop a Dig Once Ordinance. The Dig Once Ordinance would modify the City’s Municipal Code that governs utility excavation. The City aims to accomplish a number of potential goals through this ordinance, including: Protecting newly and recently paved roads and sidewalks Enhancing the uniformity of construction Ensuring efficient, non-duplicative placement of infrastructure in the public right-of-way (PROW) Reducing overall costs of all underground work in the PROW, both utility- and telecommunications-related, for public and private parties Facilitating private communications network deployment by reducing construction costs Leveraging construction by third-party entities for the deployment of a public communications network, or deployment of conduit that can be made available to other entities The City hired CTC to support the development of this ordinance. We surveyed approaches adopted or proposed by other jurisdictions across the country, including in California. We also interviewed representatives of cities and other government entities that have adopted dig once or joint trenching policies to gather information about their outcomes and best practices. We then reviewed the treatment of costs in dig once scenarios. In many cases, the incremental costs of construction are borne by the jurisdiction. Many policies also provide exceptions or forego the excess conduit construction if the cost-benefit analysis is not reasonable. Based on our survey and our experience with best practices, we identified three general approaches to dig once policies. Some cities require an excavator applying for a permit in the PROW to notify utilities and other relevant entities about the project and invite their participation. Localities with a “shadow conduit” installation policy require the excavator to install excess conduit for future use; depending on the policy, the excavator or the jurisdiction may then lease that excess capacity. Other localities, like Palo Alto, undertake a longer-term process, coordinating multi-year plans with excavators. We recommend that the City take the following steps toward refining its ordinance: Prioritize projects suitable for additional construction based on a scoring mechanism Develop a refined estimate of the incremental costs during the design stage Develop a standard engineering specification for dig-once conduit Develop a procedure to systematically track and manage the construction and to create a repository of existing infrastructure Dig Once Approach | DRAFT | May, 2016 2 2 The Case for Dig Once Policies The construction of fiber optic communications cables is a costly, complex, and time-consuming process. The high cost of construction creates a barrier to entry for potential broadband communications providers. While aerial construction methods requiring attachments to utility poles is generally less expensive that underground construction, aerial installation has significant drawbacks— including a limit to the quantity of cables and attachments that can be placed on existing utility poles in more crowded areas, and greater exposure to outside conditions. Underground construction using protective conduit generally provides scalable, flexible, and durable long-term communications infrastructure, but is also typically more expensive than aerial construction. Further, from the City’s perspective, cutting roads and sidewalks substantially reduces the lifetime and performance of those surfaces. And each excavation diminishes the space available for future infrastructure. Accordingly, encouraging or requiring simultaneous underground construction and co-location of broadband infrastructure in the PROW creates benefits for both the City and private sector communications providers. Dig once policies reduce the long-term cost of building communications facilities by capitalizing on significant economies of scale through: 1. Coordination of fiber and conduit construction with utility construction and other disruptive activities in the PROW. 2. Construction of spare conduit capacity where multiple service providers or entities may require infrastructure. These economies exist primarily because fiber optic cables and conduit are relatively inexpensive, often contributing to less than one-quarter of the total cost of new construction. While material costs typically fall well below $40,000 per mile (even for large cables containing hundreds of fiber strands), labor, permitting, and engineering costs commonly drive the total price toward $200,000 per mile if conducted as a standalone project. To put the cost savings in perspective, consider two examples. If fiber construction is coordinated with a major road or utility project that is already disrupting the PROW in a rural area, the cost of constructing the fiber, communications conduit, and other materials can be as low as $10,000 per mile. However, if fiber construction is completed as part of a separate standalone project, the cost of constructing fiber and communications conduit typically range from $95,000 to $200,000 per mile, and even higher in complex urban environments. Dig Once Approach | DRAFT | May, 2016 3 Another motivation for coordinating construction is to take the opportunity to build multiple conduit in a closely packed bank. Banks of conduit constructed simultaneously allow a single excavation to place several conduit in the physical space usually used by one or two. Conversely, multiple conduit installed at different times must be physically spaced, often by several feet, to prevent damage to one while installing the next. Once the PROW becomes crowded, the choices of construction methods are reduced, leaving only less desirable methods and more-costly locations for construction of additional infrastructure. The key benefits achieved through coordinated construction efforts include reduced: Labor and material costs, through reduced crew mobilization expenses and larger bulk material purchases Trenching or boring costs when coordination enables lower-cost methods (e.g., trenching as opposed to boring) or allows multiple entities to share a common trench or bore for their independent purposes Traffic control and safety personnel costs, particularly when constructing along roadways that require lane closures Engineering and survey costs associated with locating existing utilities and specifying the placement of new facilities Engineering and survey costs associated with environmental impact studies and approvals Lease fees for access to private easements, such as those owned by electric utilities Railroad crossing permit fees and engineering Restoration to the PROW or roadway, particularly in conjunction with roadway improvements Bridge crossing permit fees and engineering Dig Once Approach | DRAFT | May, 2016 4 3 Dig Once Conduit Installation There are several possibilities for a standardized approach to conduit installation. We describe below two potential dig once approaches that consider the placement of City communications conduit in coordination with trenching performed by an excavator. The two approaches are designed for two different scenarios: one in which the added dig once infrastructure can share the same trench with no modifications, and one in which the additional conduit cannot share the standard trench (e.g., due to potential interference between the dig once conduit and the primary construction), thus requiring the two conduit to be offset in a wider trench. We also describe a scenario that might be more accurately termed a “Restore Once” or “Pave Once” opportunity, but which may still provide some of the economies of the single-trench dig once. All of these scenarios assume that the City has identified a given corridor as a suitable one for conduit installation, and that it has justified the incremental cost and effort for installation— potentially based on a standard set of criteria such as those in Section 5.1. 3.1 Conduit Installation in Standard Trench or in Offset Joint Trench Ideally, the dig once conduit is placed over the excavator utilities. This reduces or eliminates the need for additional trenching and would incur the lowest incremental cost. There should be space for third-party vaults for use by non-City users, adjacent to the main vaults. Third-party service providers will have access to the conduit at their vaults; all other vaults and conduit will only be accessible by the City or by contractors managing the conduit for the City. With the permission of the utility owner, it may be possible to place the City conduit directly over the utility conduit (see “Model A” in Figure 1 below). This is a potential approach when the utility is a communications utility. Reducing the clearance between the utility and the City conduit will reduce or eliminate any incremental excavation to accommodate the City conduit. In some scenarios, the conduit may need to be offset horizontally from the utility Infrastructure. This may be the case where the infrastructure is a water pipe that should be offset for ease of maintenance, for example. Offsetting the dig once conduit may also reduce the risk of it being damaged by a broken water pipe or by repair to that pipe. “Model B” in Figure 1 depicts a dig once scenario in an offset trench. Figure 2 is a vertical profile for a typical vault installation. Dig Once Approach | DRAFT | May, 2016 5 Figure 1: Typical Configuration for Conduit in Dig Once Opportunity Dig Once Approach | DRAFT | May, 2016 6 Figure 2: Vertical Profile for Typical Vault Installation Dig-Once Joint Trench Typical vault Elevation City and County of San Francisco, California SIZE FSCM NO DWG NO REV 11"x17"8 SCALE Not to scale SHEET 1 OF 4 INSTALLATION AND CONSTRUCTION NOTES: 1. An electrical ground rod shall be installed in all vaults. Ground rods shall be comprised of 13-mil copper-clad steel, 5/8-inch diameter, minimum 10- foot length, and tested to have an electrical resistance to ground of 25 ohms or less. 2. Vaults shall be of a composite, straight-walled construction, UL-listed to ANSI 77-2010. Vaults and lids shall be Tier 22 load-rated. Vaults shall have external dimension of approximately 30”x 48”x 36” (WxLxD). Vault lids shall be etched with the words, “City of San Francisco Fiber Optics” 3. Conduit shall enter vaults from the sidewall through openings created per manufacturer instructions to retain the associated load rating. Conduits shall protrude beyond the interior wall of the vault by a minimum of 1-inch, and no more than 3-inches. 4. Vaults shall be installed flush with grade on a 6-inch bed of #57 crushed stone or gravel. An additional 1-inch to 2-inches of stone shall be placed inside the base of the vault. 5. A minimum of 12-inches of select, compacted backfill must surround the vault on all sides. Backfill must not contain large rocks or chunks, and there should be no voids between the vault sidewalls and the native surrounding soil. Typical Vault Installation GRADE 2-inch HDPE conduits Tamped / undisturbed soil Min 4" Min 12"Compacted select backfill 6" bed of #57 crushed stone Add 1" to 2" of additional crushed stone / gravel inside vault base 10 AWG insulated tracer wire 5/8-inch diameter ground rod, minimum 10 feet long, 25 ohm test Ground rod clamp 1" to 3" Dig Once Approach | DRAFT | May, 2016 7 4 Dig Once Policies Across the Country A number of cities and counties across the country have developed and implemented dig once policies. The primary motivation for municipalities has been to preserve the ROW and improve the telecommunications competition in the market. The following are a range of policies we have seen. Table 1 summarizes the different examples. a. The City of Boston, Massachusetts was one of the first cities in the country to implement a dig once policy (adopted in 1988). In the first few years of adoption all excavators in the PROW were required to install four 1.5” banks of conduit during construction. The cost to lease the conduit was a one-time fee of the present value of the average shared cost of construction of $67.61 per foot of conduit used and an annual fee of $5 per foot. Due to the lack of standardization, the quality of the conduit varied greatly across the system. There were few users of the system; the costs associated with leasing were high, and depreciation was not accounted for. Potential users of the conduit often chose to build on parallel streets. Thus, the extent to which this policy became successful depended on factors such as cost and demand for interconnectivity. The city is now in the process of conducting a survey to assess the quality of the existing conduit. Over the past year, the policy was modified to require excavators to install 4” shadow conduit for the city and other future users—which will be required to lease space in the conduit from the shadow builder before being allowed to dig again in that corridor. The lease price is a lump sum of the present value of $200,000 for the right of entry (or equivalent) in addition to an annual fee of $5 per foot. The city also has a five-year moratorium once construction in a particular PROW takes place (i.e., a new excavator in that location would have to conduct restoration from curb to curb). b. The City of Berkeley, California does not have a dig once ordinance but it has policies within its municipal code that aim to reduce the impact of construction in the PROW for telecommunication systems. The city does this by mandating that any excess capacity in existing or future duct, conduit, manhole, or handhole be made available by the excavator for use by third parties. Also, a prospective excavator would have to coordinate major construction efforts in the PROW with other utility companies through city-sponsored utility coordination meetings. In new developments, a provider would contact the developer to determine whether any surplus conduit exists and whether any joint trenching or boring projects are feasible. In a new installation that would require excavation, the provider shall install within existing infrastructure whenever sufficient excess capacity was available on reasonable Dig Once Approach | DRAFT | May, 2016 8 financial terms. Also, the city does not allow a company to excavate if the street has been reconstructed in the preceding five-year period. c. The City of Bellevue, Washington does not have a dig once requirement. However, the city conditions development projects on the excavator providing the city with conduit through the length of the frontage and also possible street lighting and/or signal upgrades. Every transportation project that constructs on the sidewalk is required to install conduit. d. The Central Coast Broadband Consortium (CCBC) is a group of local governments that aims to promote broadband availability, access, and adoption in Monterey, Santa Cruz, and San Benito counties in California. The CCBC has developed a model shadow conduit policy for the local governments which allows for the installation of additional conduit in the PROW when a construction permit is requested by a telecommunications or utility service provider. The model policy would allow for the jurisdiction to open a 60-day window to notify all other known telecommunications and utility providers in order to coordinate with the placement of conduit in the PROW. The permit applicant would be the lead company and the other providers would piggyback on the installation. Under California law, the lead company has the ability to charge fees for the installation of communication conduit in the PROW. One of the goals of the CCBC through this policy was to increase competition by reducing the cost of entry for future service providers. e. The City of Gonzales, California has developed a dig once policy for public works projects, including construction and maintenance of transportation and utility infrastructure. Excavators in the PROW are required to install communications conduit. An exception is allowed if the City determines there is insufficient cost benefit. The City developed common standards related to the conduit including: Use of PVC Schedule 40 material (color orange). Laid to a depth of not less than 18 inches below grade in concrete sidewalk areas, and not less than 30 inches below finished grade in all other areas when feasible, or the maximum feasible depth otherwise. A minimum 2-inch diameter The costs associated with the installation of the conduit are covered by the public works budget and the city owns the conduit. f. The City of Santa Cruz, California recently implemented a dig once policy with the primary aim to foster telecommunications market competition and to create a provision for the Dig Once Approach | DRAFT | May, 2016 9 installation or upgrade of telecommunications cable or conduit for city use. Staff notifies all excavators in the city of the opportunity to join the open trench and helps coordinate efforts for multiple parties to join the dig. City staff works with contractors to identify the most cost-effective approach consistent with city requirements to obtain upgrades in the PROW. So far, one excavation, a city water project, has fallen under the jurisdiction of this ordinance. The bids the city received for the extra communications duct (requested as an optional line item in the bids) were high and did not justify the cost. The City is examining how to improve the outcome for future excavation projects, such as a planned citywide fiber optic project. The city also enacted a moratorium on standalone construction in the excavation area, in order to protect the PROW after the excavation. g. The City of San Francisco, California has developed a dig once ordinance that modifies the city’s Public Works Code provisions governing utility excavation—specifically, the Code’s requirements for coordination.1 The Department of Public Works (DPW) can only approve an application for an excavation permit if the applicant’s plans include the installation of communications facilities (e.g., conduit) that meet the Department of Technology (DT) specifications, unless DT has opted out of the excavation project. Excavators (both internal and external) are required to place conduit for the use of DT as well as conduit available for leasing. DT is responsible for the excavator’s incremental costs. The city requires proposing the installation of four 1” conduit with manholes at regular intervals. The shadow conduit is required to be placed in joint trench above the excavator’s conduit. The beginning phase of this ordinance was started in Fall 2014 and the Order was adopted in 2015. The City is now in process of prioritizing projects (based on a cost-benefit analysis) through a scoring mechanism as the costs are higher with joint build construction. These high costs are typical of urban settings. The City is using its Accela right-of-way asset management system (formerly Envista), a map-based application, to document and analyze excavator plans, in some cases years ahead of construction, to identify, analyze, and coordinate projects. h. San Benito County, California has incorporated a dig once policy as part of its multi-use streets policy by requiring county roadway construction projects involving more than surface pavement treatment to include underground utility conduit. Improved telecommunications infrastructure is part of the county’s current general plan. The 1 “Article 2.4: Excavation in the Public Right-of-Way,” Public Works Code, available at: http://tinyurl.com/kqqqop5 Dig Once Approach | DRAFT | May, 2016 10 county is also a partner in a municipal fiber network and aims to use this policy to expand the network. i. In Arlington County, Virginia, a large electric grid project designed by Dominion Virginia Power, an investor-owned utility, required construction of underground conduit along many miles of congested urban PROW. As part of the utility permitting and coordination, the county entered into an agreement with the utility to construct fiber optics for the county’s use in parallel conduit and manholes. he county pursued the project independently of any dig once ordinance. The county received cost estimates for each segment in the design phase and decided to proceed based on the estimates. As part of the agreement, the county provided the specifications for the conduit and the fiber. The specifications included: Two 4-inch conduit with tracer wire installed at a minimum of 24 inches from the top of the power line trench. Splice boxes (24"x 36" x 36") located approximately 600 feet apart Installation of one set of three 1.25-inch innerduct in each 4-inch conduit. Installation of one 144-fiber cable in one innerduct of each 4-inch conduit, leaving a 50 foot coil in each. The acceptance of the installation was done only after the county had inspected and tested the conduit and fiber, and payment was made thereafter. Table 1: Sample Dig Once Summaries Locality/Network Summary Costs (a) City of Boston, MA Shadow conduit installation Conduit system not standardized Expensive for potential users of conduit One time cost: present value of construction + $5/foot/year (b) City of Berkeley, CA Excess capacity required to be made available for leasing Determined by lessor of excess capacity (c) CCBC Consortium of local governments developed a model ordinance Shadow conduit installation Not determined, possibly shared construction Dig Once Approach | DRAFT | May, 2016 11 Locality/Network Summary Costs 60-day notification window when permit application is received costs or charges by lead company (d) City of Bellevue, WA Additional conduit during some capital improvement and development projects Transportation projects required to install conduit Funded from city budget (e) City of Gonzales, CA Shadow conduit installation Standards developed for conduit Decision to install conduit only if the cost-benefit analysis is favorable Public Works budget (f) City of Santa Cruz, CA Joint build based on costs Optional bids for extra ducts City opted not to build conduit because of high incremental conduit cost in the first project attempted under the policy Joint build costs and/or county budget (g) City of San Francisco, CA Shadow conduit installation and conduit available for leasing Project prioritization based on scoring mechanism Incremental costs paid by city, priced at $20.07 per foot (shared trench) and $29.14 per foot (offset trench) (h) San Benito County, CA Conduit to be constructed as part of county road projects Coordination with county fiber build County capital program funds (i) Arlington County, VA Obtained conduit and fiber as part of an agreement for an electric grid upgrade project in the PROW by investor-owned electric utility County developed specifications and inspected installation County funds, $392,082 for 21,700 feet Dig Once Approach | DRAFT | May, 2016 12 5 Recommendations for Enacting a Dig-Once Policy We recommend that the City modify its Municipal Code by adding “Dig Once Ordinance” related policies that would require any excavation plans to include City conduit or fiber, unless the City chooses to opt out of the excavation project. Such an ordinance would require the installation of City-owned communications infrastructure in excavation projects where the City determines that it is both financially feasible and consistent with the City’s long-term goals to develop the City’s communication infrastructure. While enacting a dig once policy we recommend that the City develop a procedure, a standard specification as well as prioritize projects and estimate the incremental costs for construction of additional infrastructure. We explain each recommendation below: 5.1 Prioritize Projects for Building The cost of installing conduit is drastically reduced when a trench is already dug. However, the cost is still significant, and the City will need to prioritize projects that achieve the most value for the money spent, and maximize the likelihood of the conduit being used. Because of the cost of conduit installation, even in a dig once opportunity, it is necessary to prioritize construction to ensure that 1) City priorities are identified when dig once opportunities emerge, and 2) resources are not wasted in building conduit that is unlikely to be used. We observed that the following factors typically affect the use of conduit, based on our experience in other cities and dig once settings: Percentage of the utility poles with space for additional utilities and reasonable cost of attachment; Excavation projects that extend only a short distance, such as for a few blocks; Excavation projects isolated from other projects and existing fiber and conduit infrastructure; Excavation projects in low- and medium-density residential areas, not in proximity to City locations or large developments; and Excavation projects that affect the top layer of the street and do not break into the concrete layer. We also note that the cost of conduit construction is approximately 50 percent higher in dig once opportunities where the excavator is not digging a trench, or where the trench cannot be shared or needs to be widened for placement of the dig once conduit. Dig Once Approach | DRAFT | May, 2016 13 To ensure that dig once projects are both financially feasible and consistent with the City’s long- term goals, we propose prioritization based on the following factors: 1. Ability to place conduit over long, continuous corridors across the City 2. Proximity of the project to City facilities requiring service 3. Lack of existing City communications infrastructure in the vicinity 4. Potential interest in conduit from partners or customers (e.g., City departments, service providers, or developers) 5. Lack of cost-effective alternatives due to physical constraints in the vicinity (e.g., targets of opportunity such as bridges or freeway underpasses) 6. Lack of capacity on utility poles along the route 7. Risk to dig once communications infrastructure (e.g., water, gas, and sewer need to be placed deep underground and dig once infrastructure placed far above that infrastructure to reduce likelihood of damage to the dig once conduit during an emergency utility repair; this is less true of electrical and communications excavation that is in closer proximity to the dig once conduit, making the dig once conduit easier to avoid) 8. Delays to critical infrastructure (i.e., the incremental days for dig once coordination must not create a public safety risk) 9. Project cost (i.e., prioritizing projects with lower-than-average costs) 10. Synergies with opportunistic major projects, such as highway mass transit, or bridge replacement 11. Major right-of-way crossings, such as railroad, water, highway, interstate etc. Often times these are difficult for private carriers to facilitate or justify 12. Conduit placement for building laterals into key sites, data centers, or facilities deemed potential targets for redevelopment As opportunities emerge, or as existing opportunities are reviewed, we recommend they be evaluated based on the above prioritization. We recommend scoring and ranking each potential project on the above criteria. As part of another client engagement, we reviewed at a high level the proposed excavation projects in the City of San Francisco; we scored each on a one-to-10 scale for the criteria similar to the above, then ranked them. Dig Once Approach | DRAFT | May, 2016 14 Our analysis separated projects based on type (Transit, Electrical, Gas, Water, Sewer, Traffic, Communications, and Combined) and plotted the projects along with city facilities, community anchor facilities, existing city fiber and conduit, and other points of interest. Based on our high-level analysis, the highest-scoring projects in San Francisco—and the ones we recommended prioritizing—typically: Provided long conduit routes; Covered major corridors of value to city and non-city conduit users; Passed near city facilities; and Were the lowest cost per foot—in part because many involved breaking through the concrete layer of the roadway, reducing the incremental cost for placing conduit. In short, these projects provided the collective advantage of lower incremental cost and highest potential value. 5.2 Estimate Incremental Costs As part of its permit submittal process, the City has to ensure that the permit fees covers its costs associated with design of the additional infrastructure. For cost estimation purposes, the incremental cost is the cost of additional materials (conduit, vaults, location tape, building materials) and labor (incremental engineering, incremental design, placement and assembly of incremental conduit, placement of incremental vaults, interconnection, testing, and documentation). The cost does not have to include roadway or sidewalk restoration or paving (which we assume to be part of the original project) beyond that which is specifically required for the placement of vaults for City communications conduit within paved or concrete surfaces outside of the original project boundaries. Where trenches are joint, the cost does not include trenching or backfilling. Where the dig once trench is separate from the original trench, the incremental cost includes trenching and backfill, but does not include repaving or restoring the road surface (again, assumed to be part of the original project). Average costs may be derived based on an ensemble of contractor pricing schedules. As the City gains experience by participating in projects, it will develop a more accurate sense of cost. Dig Once Approach | DRAFT | May, 2016 15 5.3 Develop a Standard Specification The challenge in developing a standard specification for a dig once project is to incorporate the requirements of known and unknown users, and to provide sufficient capacity and capability without excessive costs. The following factors may be considered in developing a conduit specification: 1. Capacity—sufficient conduit needs to be installed, and that conduit needs to have sufficient internal diameter, to accommodate future users’ cables and to be segmented to enable conduit to be shared or cables added at a future date 2. Segmentation—users need to have the appropriate level of separation from each other for commercial, security, or operational reasons 3. Access—vaults and handholes need to be placed to provide access to conduit and the ability to pull fiber. Vaults need to be spaced to minimize the cost of extending conduit to buildings and other facilities that may be served by fiber 4. Costs—materials beyond those that are likely to be needed will add cost, as will the incremental labor to construct them. Beyond a certain point, trenches need to be widened or deepened to accommodate conduit 5. Robustness—the materials, construction standards, and placement need to reasonably protect the users’ fiber, and not unduly complicate maintenance and repairs 6. Architecture—sweeps, bend radius, and vault sizes need to be appropriate for all potential sizes of fiber We recommend further discussions with private carriers to better develop a specification. It may be appropriate to have a different specification for different projects. Based on our knowledge of similar efforts in other cities, and our analysis, we believe the following standardized approach is suitable for major corridors and can be modified as discussion proceed with excavators in the rights-of-way: Four 2-inch conduit, minimum SDR 11 HDPE, each of a separate color or unique striping to simplify identification of conduits within vaults and between vaults, in the event conduit must be accessed or repaired at intermediate points Composite vaults measuring 30” x 48” x 36” (W x L x D), placed in the sidewalk or available green space within the City right-of-way, as close to the curb or gutter as possible Vaults spaced at intervals of 600 feet or less, typically at the intersection of City blocks Dig Once Approach | DRAFT | May, 2016 16 Sweeping conduit bends with a minimum radius of 36 inches to allow cable to be pulled without exceeding pull-tension thresholds when placing high-count fiber cables (e.g., 864- count) Conduit placed in the same trench directly above the excavator’s infrastructure or, where this is not possible, placed with minimum horizontal offset to minimize cost It is important to note that the above approach is designed to create consistency and predictability in costs and deployment and, of necessity, is a compromise among the potential users. If an excavation project has a long time horizon and sufficient budget, it is possible to customize the dig once build, potentially adding conduit or adding vaults at particular locations. This approach is a compromise among different types of conduit users. Some users might prefer larger conduit for consistency with earlier builds. Others might seek a larger count of smaller conduit, to provide more flexibility. Two-inch conduit has become a standard size for a wide range of construction projects, and can support the widest range of use cases. A single 2-inch conduit can accommodate a range of multi- cable configurations while retaining recommended fill ratios, allowing a single user to serve its backbone and “lateral”/access cable requirements with a single, dedicated conduit. Compared to placing fewer, larger conduits segmented with innerduct, this approach provides greater opportunity for individual conduit to be intercepted and routed for future vault installation by a particular user. Additionally, 2-inch conduit is substantially cheaper to install and physically more flexible than larger varieties, offering more options to route around existing utilities and other obstructions. 5.4 Develop a Procedure to Track and Manage Infrastructure The City needs to develop a systematic way to track the planned, ongoing, and completed construction in a timely way (potentially using the City’s asset management system) and prioritizing and selecting projects for City participation. The City also needs a way to quickly notify potentially interested parties and to coordinate participation with excavators. The impact on the excavator can be minimized through the use of a well-thought-out process that minimizes delays. First, the excavator would have to submit dig once plans and cost estimates to the City; the plans would need to include conduit per the dig once specifications. The City would review the plans and cost estimates for consistency with the dig once requirements. If the plans were compliant and the cost estimates reasonable according to local costs and industry standards, the project could proceed; otherwise, the applicant would need to resubmit compliant plans. If the City and the applicant were to reach an agreement, the City could issue an approval; if not, the City could decline to participate in the project. Dig Once Approach | DRAFT | May, 2016 17 After the excavator installed the conduit, the City should inspect the conduit for quality and compliance with the dig once requirements. If the conduit were compliant, the excavator would submit as-built information. If the conduit were not compliant, the excavator and the City would negotiate a remedy, and the excavator would perform the negotiated remedy. The City would then re-inspect the conduit; if the conduit were compliant, the excavator would submit the as- built information and request reimbursement. The excavator’s as-built information should include scale plans of the completed project, including: 1. Vertical and horizontal position of conduit and vaults; 2. GPS coordinates for manholes; 3. Edge-of-curb offset measurement every 50 feet; and 4. Colors, diameters, and materials of conduit. City of Palo Alto (ID # 7308) City Council Staff Report Report Type: Informational Report Meeting Date: 12/12/2016 City of Palo Alto Page 1 Summary Title: CalPERS Pension 2016 Title: Transmittal of the CalPERS City of Palo Alto Pension Plan Annual Valuation Reports as of June 30, 2015 From: City Manager Lead Department: Administrative Services Recommendation This in an informational item and no Council action is necessary. Background Annually staff provides the CalPERS actuarial reports detailing the latest status of the City of Palo Alto Pension trust plans for employees and retirees. These actuary reports are used to calculate the annual required contribution to the trust for the pension obligations. In addition, there updates on the rate of return, funding status, changes to the trust based on various impacts detailed in the report. The City of Palo Alto provides a defined pension benefit to its employees through the State of California Pension Retirement System (CalPERS), which manages and administers the program. The CalPERS program maintains two trust accounts: 1) for safety employees (fire and police); and 2) for miscellaneous employees (all other non-safety personnel such as field personnel, administrative support and managers). This annual report provides updated actuarial information for both pension plans as of June 30, 2015. Pursuant to CalPERS rules, City employees vest in the pension program after 5 years of service and, over time, the City has offered different pension payout formulas. Fire (safety) employees hired up to June 7, 2012 are Tier 1 with a retirement formula of 3 percent for each year worked and eligibility starts at 50 years of age (3%@50). Fire employees hired after this date are Tier 2 and receive 3%@55. Police (safety) employees hired up to December 6, 2012 are Tier 1 with a retirement formula of 3 percent for each year worked and eligibility starts at 50 years of age (3%@50). Police employees hired after this date receive Tier 2, 3%@55. The majority of current miscellaneous employees are in Tier 1 and the formula is 2.7 percent per year worked with eligibility starting at the age of 55 (2.7%@55). Effective July 16, 2010 the City changed the City of Palo Alto Page 2 formula for new employees to Tier 2 and 2 percent per year with eligibility starting at the age of 60 (2%@60). The California Public Employees’ Pension Reform Act of 2013 (PEPRA) mandated a third tier pension formula of 2%@62 for Miscellaneous and 2.7%@57 for Safety, effective January 1, 2013. This change provides the lower benefit for those hired and who are new to CalPERS on or after January 1, 2013. As a result of the new formulas, which lower the pension benefit for newer employees, the City will experience small savings for employees in the 2017 pension rates just received. This is due to the increasing number of employees in Tiers 2 and 3. In addition to the lower pension formula for Tier 3, there is a pension compensation limit of $140,424 for calendar year 2015 for all employees in this tier. The breakdown of employees in each tier, as of March 2016, is shown in the table below: Tier 1 Tier 2 Tier 3 Miscellaneous 65% 15% 20% Safety 82% 7% 11% Discussion CalPERS prepares an annual actuarial analysis to determine the City’s pension liability and annual required contribution for the two trusts. The actuarial is based on current employees’ accrued benefit and former employees that are vested but have yet to retire and retired employees as of June 30, 2015. The CalPERS actuarial analysis by practice is completed two years in arrears. The rates outlined below are based on an estimated 0.6 percent investment return in Fiscal Year 2016 and an assumed 7.5 percent investment return every fiscal year thereafter. Please note the rate of return for June 30, 2014 was 2.4%, which was also below the target level. City of Palo Alto Page 3 The chart below reflects the rates paid for Fiscal Year 2016 and the projected rates for Fiscal Year 2017. PERS Projected Rates Current Next Year Year to Payment Payment Year FY16 FY17 Change Miscellaneous1 27.694% 28.89% 1.196% Safety2 41.932% 45.426% 3.494% The chart below reflects the CalPERS projected rates for FY18 - FY22. PERS Projected Rates Projected Projected Year to Projected Year to Projected Year to Projected Year to Payment Payment Year Payment Year Payment Year Payment Year FY18 FY19 Change FY20 Change FY21 Change FY22 Change Miscellaneous1 31.0% 33.1% 2.1% 35.2% 2.1% 35.9% 0.7% 36.4% 0.5% Safety2 49.69% 52.1% 2.41% 55.5% 3.4% 56.4% 0.90% 57.3% 0.9% 1 The employee share of pension costs for Miscellaneous employees in Tier 1 are 8 percent, Tier 2 are 7 percent and Tier 3 are 6.25 percent. Safety employees in Tiers 1 and 2 are 9 percent and Tier 3 are 11.25 percent. 2 The employee share of pension costs for Safety employees is 9% or 11.25% also depending on the tier. City of Palo Alto Page 4 *(MVA) - Based on a point in time (June 30, 2015 in this case) comparison between the Market Value of Assets and the Actuarial Liability. Discount Rate Sensitivity Another change is the inclusion of an Analysis of Discount Rate Sensitivity. This has also been an area of discussion among the member agencies and associated governing boards. This is the language from page 21 of the CalPERS actuarial report (Attachment A and B). “The following analysis looks at the FY18 total normal cost rates and liabilities under two different discount rate scenarios. Shown below are the total normal cost rates assuming discount rates that are 1% lower and 1% higher than the current valuation discount rate. This analysis gives an indication of the potential plan impacts if the Public Employees Retirement Fund were to realize investment returns of 6.50% or 8.50% over the long-term. This type of analysis gives the reader a sense of the long-term risk of the employer contribution rates”. The pension liability and current funding for safety and miscellaneous employees is shown here: FY17 FY18 Difference Safety 1 Present Value of Projected Benefits $426,369,163 $433,980,861 $7,611,698 2% 2 Entry Age Normal Accrued Liability $367,478,634 $377,934,524 $10,455,890 3% 3 Market Value of Assets (MVA)* $264,145,000 $259,169,591 $(4,975,409) 2% 4 Unfunded Accrued Liability (UAL) $103,333,634 $ 118,764,933 $15,431,299 13% 5 Funded Ratio [(5)/(4e)] 71.9% 68.6% -3.3% Miscellaneous 1 Present Value of Projected Benefits $756,332,825 $788,241,494 $31,908,669 4% 2 Entry Age Normal Accrued Liability $666,978,627 $696,699,220 $ 29,720,593 4% 3 Market Value of Assets (MVA)* $475,566,994 $477,031,099 $ 1,464,105 0% 4 Unfunded Accrued Liability (UAL) $191,411,633 $219,668,121 $28,256,488 13% 5 Funded Ratio 71.3% 68.5% 2.8% Total Employer Contribution Miscellaneous $21,404,510 $23,616,949 $2,212,439 9% Safety $10,560,036 $11,503,389 $ 943,353 8% Total $31,964,546 $35,120,338 $3,155,792 9% City of Palo Alto Page 5 Sensitivity Analysis for Safety As of June 30, 2015 6.50% Discount Rate (-1%) 7.50% Discount Rate (assumed rate) 8.50% Discount Rate (+1%) Total Normal Cost 35.207% 28.029% 22.530% Accrued Liability $425,987,913 $377,934,524 $338,195,457 Unfunded Accrued Liability $166,818,322 $118,764,933 $ 79,025,866 Sensitivity Analysis for Miscellaneous As of June 30, 2015 6.50% Discount Rate (-1%) 7.50% Discount Rate (assumed rate) 8.50% Discount Rate (+1%) Total Normal Cost 21.982% 17.623% 14.305% Accrued Liability $785,681,736 $696,699,220 $622,745,835 Unfunded Accrued Liability $308,650,637 $219,668,121 $145,714,736 Council Direction The City Council has made addressing the unfunded pension liabilities a priority and has asked staff to develop a funding plan addressing the issues. Staff hired Bartel & Associate to assist in the process and has set aside $2.1 million in the General Fund to establish a Section 115 Trust to offset some of the unfunded pension obligations. Staff will present the establishment of the trust to the Council in the coming months and later as part of the FY18 proposed budget additional ongoing funding options for the General Fund and the other funds. Financial Impacts Staff will include the required and projected pension contribution rates in the development of the FY18 Proposed budget. The two actuarial reports are attached for further details. The annual required payments to CalPERS will be going up due to the lower than expected investment returns earned by the trust. In the most recent labor agreements the City has negotiated employee contributions to the employer annual contribution which will help offset some of the increases. Attachments: Attachment A: CalPERS Misc Actuarial Valuation June 2015 (PDF) Attachment B: CalPERS Safety Actuarial Valuation June 2015 (PDF) California Public Employees’ Retirement System Actuarial Office P.O. Box 942701 Sacramento, CA 94229-2701 TTY: (916) 795-3240 (888) 225-7377 phone • (916) 795-2744 fax www.calpers.ca.gov August 2016 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO (CalPERS ID: 6373437857) Annual Valuation Report as of June 30, 2015 Dear Employer, As an attachment to this letter, you will find a copy of the June 30, 2015 actuarial valuation report of your pension plan. Your 2015 actuarial valuation report contains important actuarial information about your pension plan at CalPERS. Your CalPERS staff actuary, whose signature appears in the “Actuarial Certification” section on page 1, is available to discuss the report with you after August 31, 2016. Future Contributions The exhibit below displays the minimum employer contributions for Fiscal Year 2017-18 and projected contributions for Fiscal Year 2018-19, before any cost sharing. The projected contributions for Fiscal Year 2018-19 are based on the most recent information available, including an estimate of the investment return for Fiscal Year 2015-16, namely 0.0 percent. For a projection of employer contributions beyond Fiscal Year 2018-19, please refer to the “Projected Employer Contributions” in the “Highlights and Executive Summary” section. This 5-year projection of future employer contributions supersedes any previous projections we have provided. The “Risk Analysis” section of the valuation report also contains estimated employer contributions in future years under a variety of investment return scenarios. Fiscal Year Employer Normal Cost Rate Employer Payment of Unfunded Liability Employee PEPRA Rate 2017-18 10.039% $15,765,273 6.25% 2018-19 (projected) 10.0% $18,464,881 N/A Member contributions other than cost sharing (whether paid by the employer or the employee) are in addition to the above. The employer contributions in this report do not reflect any cost sharing arrangement you may have with your employees. The estimates for Fiscal Year 2018-19 also assume that there are no future contract amendments and no liability gains or losses (such as larger than expected pay increases, more retirements than expected, etc.). This is a very important assumption because these gains and losses do occur and can have a significant impact on required contributions. These gains and losses cannot be predicted in advance so the projected employer contributions are just estimates. The actual required employer contributions for Fiscal Year 2018-19 will be provided in next year’s report. MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO (CalPERS ID: 6373437857) Annual Valuation Report as of June 30, 2015 Page 2 Changes since the Prior Year’s Valuation Beginning with Fiscal Year 2017-18 CalPERS will collect employer contributions toward the plan’s unfunded liability as dollar amounts instead of the prior method of a contribution rate. This change will address potential funding issues that could arise from a declining payroll or reduction in the number of active members in the plan. Funding the unfunded liability as a percentage of payroll could lead to the underfunding of the plans. Although employers will be invoiced at the beginning of the fiscal year for their unfunded liability payment the plan’s normal cost contribution will continue to be collected as a percentage of payroll. The CalPERS Board of Administration adopted a Risk Mitigation Policy which is designed to reduce funding risk over time. The policy establishes a mechanism whereby CalPERS investment performance that significantly outperforms the discount rate triggers adjustments to the discount rate, expected investment return and strategic asset allocation targets. A minimum excess investment return of 4% above the existing discount rate is necessary to cause a funding risk mitigation event. The policy has no impact on the current year valuation results but is expected to have an impact in future years. More details on the Risk Mitigation Policy can be found on our website. Besides the above noted changes, there may also be changes specific to the plan such as contract amendments and funding changes. Further descriptions of general changes are included in the “Highlights and Executive Summary” section and in Appendix A, “Actuarial Methods and Assumptions.” The effects of the changes on the required contributions are included in the “Reconciliation of Required Employer Contributions” section. We understand that you might have a number of questions about these results. While we are very interested in discussing these results with your agency, in the interest of allowing us to give every public agency their results, we ask that you wait until after August 31 to contact us with actuarial questions. If you have other questions, you may call the Customer Contact Center at (888)-CalPERS or (888-225-7377). Sincerely, ALAN MILLIGAN Chief Actuary ACTUARIAL VALUATION as of June 30, 2015 for the MISCELLANEOUS PLAN of the CITY OF PALO ALTO (CalPERS ID: 6373437857) (Rate Plan ID: 8) REQUIRED CONTRIBUTIONS FOR FISCAL YEAR July 1, 2017 – June 30, 2018 TABLE OF CONTENTS ACTUARIAL CERTIFICATION 1 HIGHLIGHTS AND EXECUTIVE SUMMARY Introduction 3 Purpose of the Report 3 Required Contributions 4 Plan’s Funded Status 5 Projected Employer Contributions 5 Cost 6 Changes Since the Prior Year’s Valuation 7 Subsequent Events 7 ASSETS Reconciliation of the Market Value of Assets 9 Asset Allocation 10 CalPERS History of Investment Returns 11 LIABILITIES AND CONTRIBUTIONS Development of Accrued and Unfunded Liabilities 13 (Gain) / Loss Analysis 06/30/14 - 06/30/15 14 Schedule of Amortization Bases 15 30-Year Amortization Schedule and Alternatives 16 Reconciliation of Required Employer Contributions 18 Employer Contribution History 19 Funding History 19 RISK ANALYSIS Analysis of Future Investment Return Scenarios 21 Analysis of Discount Rate Sensitivity 22 Volatility Ratios 23 Hypothetical Termination Liability 24 PLAN’S MAJOR BENEFIT PROVISIONS Plan’s Major Benefit Options 26 APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS Actuarial Data A1 Actuarial Methods A1 – A2 Actuarial Assumptions A3 – A21 Miscellaneous A21 APPENDIX B – PRINCIPAL PLAN PROVISIONS B1 – B10 APPENDIX C – PARTICIPANT DATA Summary of Valuation Data C1 Active Members C2 Transferred and Terminated Members C3 Retired Members and Beneficiaries C4 – C5 APPENDIX D – DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATE D1 APPENDIX E – GLOSSARY OF ACTUARIAL TERMS E1 – E2 (CY) FIN PROCESS CONTROL ID: 480029 (PY) FIN PROCESS CONTROL ID: 463712 REPORT ID: 95691 CALPERS ACTUARIAL VALUATION - June 30, 2015 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 1 ACTUARIAL CERTIFICATION To the best of our knowledge, this report is complete and accurate and contains sufficient information to disclose, fully and fairly, the funded condition of the MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO. This valuation is based on the member and financial data as of June 30, 2015 provided by the various CalPERS databases and the benefits under this plan with CalPERS as of the date this report was produced. It is our opinion that the valuation has been performed in accordance with generally accepted actuarial principles, in accordance with standards of practice prescribed by the Actuarial Standards Board, and that the assumptions and methods are internally consistent and reasonable for this plan, as prescribed by the CalPERS Board of Administration according to provisions set forth in the California Public Employees’ Retirement Law. The undersigned is an actuary for CalPERS, who is a member of the American Academy of Actuaries and the Society of Actuaries and meets the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein. DAVID CLEMENT, ASA, MAAA, EA Senior Pension Actuary, CalPERS HIGHLIGHTS AND EXECUTIVE SUMMARY INTRODUCTION PURPOSE OF THE REPORT REQUIRED CONTRIBUTIONS PLAN’S FUNDED STATUS PROJECTED EMPLOYER CONTRIBUTIONS COST CHANGES SINCE THE PRIOR YEAR’S VALUATION SUBSEQUENT EVENTS CALPERS ACTUARIAL VALUATION - June 30, 2015 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 3 Introduction This report presents the results of the June 30, 2015 actuarial valuation of the MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO of the California Public Employees’ Retirement System (CalPERS). This actuarial valuation sets the required employer contributions for Fiscal Year 2017-18. The CalPERS Board of Administration adopted a Risk Mitigation Policy which is designed to reduce funding risk over time. The policy establishes a mechanism whereby CalPERS investment performance that significantly outperforms the discount rate triggers adjustments to the discount rate, expected investment return and strategic asset allocation targets. A minimum excess investment return of 4% above the existing discount rate is necessary to cause a funding risk mitigation event. The Risk Mitigation Policy does not have an impact on the current year actuarial valuation. More details on the Risk Mitigation Policy can be found on our website. Purpose of the Report The actuarial valuation was prepared by the CalPERS Actuarial Office using data as of June 30, 2015. The purpose of the report is to: Set forth the assets and accrued liabilities of this plan as of June 30, 2015; Determine the required employer contributions for the fiscal year July 1, 2017 through June 30, 2018; Provide actuarial information as of June 30, 2015 to the CalPERS Board of Administration and other interested parties. The pension funding information presented in this report should not be used in financial reports subject to Governmental Accounting Standards Board (GASB) Statement No. 68 for an Agent Employer Defined Benefit Pension Plan. A separate accounting valuation report for such purposes is available from CalPERS and details for ordering are available on our website. The use of this report for any other purposes may be inappropriate. In particular, this report does not contain information applicable to alternative benefit costs. The employer should contact their actuary before disseminating any portion of this report for any reason that is not explicitly described above. California Actuarial Advisory Panel Recommendations This report includes all the basic disclosure elements as described in the Model Disclosure Elements for Actuarial Valuation Reports recommended in 2011 by the California Actuarial Advisory Panel (CAAP), with the exception of including the original base amounts of the various components of the unfunded liability in the Schedule of Amortization Bases shown on page 15. Additionally, this report includes the following “Enhanced Risk Disclosures” also recommended by the CAAP in the Model Disclosure Elements document: A “Deterministic Stress Test,” projecting future results under different investment income scenarios A “Sensitivity Analysis,” showing the impact on current valuation results using a 1 percent plus or minus change in the discount rate. CALPERS ACTUARIAL VALUATION - June 30, 2015 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 4 Required Contributions Fiscal Year Required Employer Contribution 2017-18 Employer Normal Cost Rate 10.039% Plus Either 1) Monthly Employer Dollar UAL Payment $ 1,313,773 Or 2) Annual UAL Prepayment Option $ 15,205,379 Required PEPRA Member Contribution Rate 6.25% The total minimum required employer contribution is the sum of the Plan’s Employer Normal Cost Rate (expressed as a percentage of payroll) plus the Employer Unfunded Accrued Liability (UAL) Contribution Amount (billed monthly in dollars). Only the UAL portion of the employer contribution can be prepaid (which must be received in full no later than July 31). Plan Normal Cost contributions will be made as part of the payroll reporting process. If there is contractual cost sharing or other change, this amount will change. §20572 of the Public Employees’ Retirement Law assesses interest at an annual rate of 10 percent if a contracting agency fails to remit the required contributions when due. For additional detail regarding the determination of the required contribution for PEPRA members, see Appendix D. Required member contributions for Classic members can be found in Appendix B. Fiscal Year Fiscal Year 2016-17 2017-18 Normal Cost Contribution as a Percentage of Payroll Total Normal Cost 18.014% 17.623% Employee Contribution1 7.680% 7.584% Employer Normal Cost 10.334% 10.039% Projected Annual Payroll for Contribution Year $ 74,090,105 $ 78,211,742 Estimated Employer Contributions Based On Projected Payroll Total Normal Cost $ 13,346,592 $ 13,783,255 Employee Contribution1 5,690,120 5,931,579 Employer Normal Cost 7,656,472 7,851,676 Unfunded Liability Contribution 13,748,038 15,765,273 Estimated Total Employer Contribution2 $ 21,404,510 $ 23,616,949 1 For classic members, this is the percentage specified in the Public Employees Retirement Law, net of any reduction from the use of a modified formula or other factors. For PEPRA members, the member contribution rate is based on 50 percent of the normal cost. A development of PEPRA member contribution rates can be found in Appendix D. Employee cost sharing is not shown in this report. 2 As a percentage of projected payroll the UAL contribution for Fiscal Year 2017-18 is 20.157 percent for an estimated total employer contribution rate of 30.196 percent. As determined in the June 30, 2014 valuation, the Fiscal Year 2016-17 UAL contribution is 18.556 percent for a total employer contribution rate of 28.890 percent. CALPERS ACTUARIAL VALUATION - June 30, 2015 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 5 Plan’s Funded Status Projected Employer Contributions The estimated employer contribution for Fiscal Year 2018-19 is based on a projection of the most recent information we have available, including an estimated 0.0 percent investment return for Fiscal Year 2015- 16. The table below shows projected employer contributions (before cost sharing) for the next five fiscal years, assuming CalPERS earns 0.0 percent for Fiscal Year 2015-16 and 7.50 percent every fiscal year thereafter, and assuming that all other actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur during the projection period. The projected normal cost percentages do not reflect that the normal cost will decline over time as new employees are hired into PEPRA or other lower cost benefit tiers. Required Contribution Projected Future Employer Contributions Fiscal Year 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 Normal Cost % 10.039% 10.0% 10.0% 10.0% 10.0% 10.0% UAL $ 15,765,273 18,464,881 21,312,272 23,163,641 24,930,285 26,323,908 For projected contributions under alternate investment return scenarios, please see the “Analysis of Future Investment Return Scenarios” in the “Risk Analysis” section. June 30, 2014 June 30, 2015 1. Present Value of Projected Benefits $ 756,332,825 $ 788,241,494 2. Entry Age Normal Accrued Liability 666,978,627 696,699,220 3. Market Value of Assets (MVA) $ 475,566,994 $ 477,031,099 4. Unfunded Accrued Liability (UAL) [(2) – (3)] $ 191,411,633 $ 219,668,121 5. Funded Ratio [(3) / (2)] 71.3% 68.5% CALPERS ACTUARIAL VALUATION - June 30, 2015 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 6 Cost Actuarial Cost Estimates in General What will this pension plan cost? Unfortunately, there is no simple answer. There are two major reasons for the complexity of the answer. First, actuarial calculations, including the ones in this report, are based on a number of assumptions about the future. These assumptions can be divided into two categories. Demographic assumptions include the percentage of employees that will terminate, die, become disabled, and retire in each future year. Economic assumptions include future salary increases for each active employee, and the assumption with the greatest impact: future asset returns at CalPERS for each year into the future until the last dollar is paid to current members of the plan. While CalPERS has set these assumptions to reflect our best estimate of the real future of the plan, it must be understood that these assumptions are very long-term predictors and will surely not be realized in any one year. For example, while the asset earnings at CalPERS have averaged more than the assumed return of 7.5 percent for the past twenty year period ending June 30, 2015, returns for each fiscal year ranged from negative -24 percent to +21.7 percent. Second, the very nature of actuarial funding produces the answer to the question of plan cost as the sum of two separate pieces. The Normal Cost (i.e., the annual cost associated with one year of service accrual) expressed as a percentage of total active payroll. The Past Service Cost or Accrued Liability (i.e., the current value of the benefit for all credited past service of current members) which is expressed as a lump sum dollar amount. The cost is the sum of a percent of future pay and a lump sum dollar amount. In prior years CalPERS converted Past Service Cost to a percent of payroll and expressed the total required employer contribution as a single rate. Going forward the Past Service Cost will no longer be converted to a percent of payroll and this cost will be invoiced to the employer as a monthly dollar contribution amount with the option to prepay the annual amount at the beginning of the fiscal year. The normal cost will continue to be expressed as a percentage of active payroll with employer and employee contributions payable as part of the payroll reporting process. CALPERS ACTUARIAL VALUATION - June 30, 2015 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 7 Changes since the Prior Year’s Valuation Benefits The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first annual valuation following the effective date of the legislation. Voluntary benefit changes by plan amendment are generally included in the first valuation that is prepared after the amendment becomes effective, even if the valuation date is prior to the effective date of the amendment. This valuation generally reflects plan changes by amendments effective before the date of the report. Please refer to the “Plan’s Major Benefit Options” and Appendix B for a summary of the plan provisions used in this valuation. The effect of any mandated benefit changes or plan amendments on the unfunded liability is shown in the “(Gain)/Loss Analysis” and the effect on the employer contribution is shown in the “Reconciliation of Required Employer Contributions.” It should be noted that no change in liability or contribution is shown for any plan changes which were already included in the prior year’s valuation. Actuarial Methods and Assumptions Beginning with Fiscal Year 2017-18 CalPERS will collect employer contributions toward the plan’s unfunded liability as dollar amounts instead of the prior method of a contribution rate. This change will address potential funding issues that could arise from a declining payroll or reduction in the number of active members in the plan. Funding the unfunded liability as a percentage of payroll could lead to the underfunding of the plans. Although employers will be invoiced at the beginning of the fiscal year for their unfunded liability payment the plan’s normal cost contribution will continue to be collected as a percentage of payroll. Subsequent Events Risk Mitigation The CalPERS Board of Administration adopted a Risk Mitigation Policy which is designed to reduce funding risk over time. The policy establishes a mechanism whereby CalPERS investment performance that significantly outperforms the discount rate triggers adjustments to the discount rate, expected investment return and strategic asset allocation targets. A minimum excess investment return of 4% above the existing discount rate is necessary to cause a funding risk mitigation event. More details on the Risk Mitigation Policy can be found on our website. ASSETS RECONCILIATION OF THE MARKET VALUE OF ASSETS ASSET ALLOCATION CALPERS HISTORY OF INVESTMENT RETURNS CALPERS ACTUARIAL VALUATION - June 30, 2015 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 9 Reconciliation of the Market Value of Assets 1. Market Value of Assets as of 6/30/14 including Receivables $ 475,566,994 2. Change in Receivables for Service Buybacks as of 6/30/14 (558,036) 3. Employer Contributions 18,610,590 4. Employee Contributions 5,436,814 5. Benefit Payments to Retirees and Beneficiaries (32,746,389) 6. Refunds (233,429) 7. Lump Sum Payments 0 8. Transfers and Miscellaneous Adjustments 850,812 9. Investment Return 10,103,743 10. Market Value of Assets as of 6/30/15 including Receivables $ 477,031,099 CALPERS ACTUARIAL VALUATION - June 30, 2015 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 10 Asset Allocation CalPERS adheres to an Asset Allocation Strategy which establishes asset class allocation policy targets and ranges, and manages those asset class allocations within their policy ranges. CalPERS Investment Belief No. 6 recognizes that strategic asset allocation is the dominant determinant of portfolio risk and return. On February 19, 2014, the CalPERS Board of Administration adopted changes to the current asset allocation as shown in the Policy Target Allocation below expressed as a percentage of total assets. The asset allocation has an expected long term blended rate of return of 7.5 percent. The asset allocation and market value of assets shown below reflect the values of the Public Employees’ Retirement Fund (PERF) in its entirety as of June 30, 2015. The assets for CITY OF PALO ALTO MISCELLANEOUS PLAN are part of the PERF and are invested accordingly. (A) Asset Class (B) Market Value ($ Billion) (C) Policy Target Allocation Global Equity 162.5 51.0% Private Equity 29.0 10.0% Global Fixed Income 53.1 20.0% Liquidity 7.5 1.0% Real Assets 31.8 12.0% Inflation Sensitive Assets 15.6 6.0% Other 2.4 0.0% Total Fund $301.9 100.0% Global Equity 53.8% Private Equity 9.6% Global Fixed Income 17.6% Liquidity 2.5% Real Assets 10.5% Inflation 5.2% Other 0.8% Asset Allocation at 6/30/2015 CALPERS ACTUARIAL VALUATION - June 30, 2015 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 11 CalPERS History of Investment Returns The following is a chart with the 20-year historical annual returns of the Public Employees Retirement Fund for each fiscal year ending on June 30. Beginning in 2002, the figures are reported as gross of fees. The table below shows historical geometric mean annual returns of the Public Employees Retirement Fund for various time periods ending on June 30, 2015, (figures are reported as gross of fees). The geometric mean rate of return is the average rate per period compounded over multiple periods. It should be recognized that in any given year the rate of return is volatile. Although the expected rate of return on the recently adopted new asset allocation is 7.5 percent, the portfolio has an expected volatility of 11.76 percent per year. The volatility is a measure of the risk of the portfolio expressed in the standard deviation of the fund’s total return distribution, expressed as a percentage. Consequently, when looking at investment returns, it is more instructive to look at returns over longer time horizons. History of CalPERS Geometric Mean Rates of Return and Volatilities 1 year 5 year 10 year 20 year 30 year Geometric Return 2.4% 10.7% 6.1% 7.7% 9.1% Volatility – 9.4% 14.0% 11.8% 10.5% -25.0% -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 15 . 3 % 20 . 1 % 19 . 5 % 12 . 5 % 10 . 5 % -7. 2 % -6. 1 % 3. 7 % 16 . 6 % 12 . 3 % 11 . 8 % 19 . 1 % -5. 1 % -24 . 0 % 13 . 3 % 21 . 7 % 0. 1 % 13 . 2 % 17 . 7 % 2. 4 % LIABILITIES AND CONTRIBUTIONS DEVELOPMENT OF ACCRUED AND UNFUNDED LIABILITIES (GAIN) / LOSS ANALYSIS 06/30/14 - 06/30/15 SCHEDULE OF AMORTIZATION BASES 30-YEAR AMORTIZATION SCHEDULES AND ALTERNATIVES RECONCILIATION OF REQUIRED EMPLOYER CONTRIBUTIONS EMPLOYER CONTRIBUTION HISTORY FUNDING HISTORY CALPERS ACTUARIAL VALUATION - June 30, 2015 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 13 Development of Accrued and Unfunded Liabilities June 30, 2014 June 30, 2015 1. Present Value of Projected Benefits a) Active Members $ 328,196,243 342,215,197 b) Transferred Members 28,487,782 31,772,074 c) Terminated Members 11,097,567 12,787,802 d) Members and Beneficiaries Receiving Payments 388,551,233 401,466,421 e) Total $ 756,332,825 788,241,494 2. Present Value of Future Employer Normal Costs $ 49,756,329 50,436,220 3. Present Value of Future Employee Contributions $ 39,597,869 41,106,054 4. Entry Age Normal Accrued Liability a) Active Members [(1a) - (2) - (3)] $ 238,842,045 250,672,923 b) Transferred Members (1b) 28,487,782 31,772,074 c) Terminated Members (1c) 11,097,567 12,787,802 d) Members and Beneficiaries Receiving Payments (1d) 388,551,233 401,466,421 e) Total $ 666,978,627 696,699,220 5. Market Value of Assets (MVA) $ 475,566,994 477,031,099 6. Unfunded Accrued Liability (UAL) [(4e) - (5)] $ 191,411,633 219,668,121 7. Funded Ratio [(5) / (4e)] 71.3% 68.5% CALPERS ACTUARIAL VALUATION - June 30, 2015 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 14 (Gain)/Loss Analysis 6/30/14 – 6/30/15 To calculate the cost requirements of the plan, assumptions are made about future events that affect the amount and timing of benefits to be paid and assets to be accumulated. Each year, actual experience is compared to the expected experience based on the actuarial assumptions. This results in actuarial gains or losses, as shown below. 1. Total (Gain)/Loss for the Year a) Unfunded Accrued Liability (UAL) as of 6/30/14 $ 191,411,633 b) Expected Payment on the UAL during 2014/2015 11,157,164 c) Interest through 6/30/15 [.075 x (1a) - ((1.075)½ - 1) x (1b)] 13,945,043 d) Expected UAL before all other changes [(1a) - (1b) + (1c)] 194,199,512 e) Change due to plan changes 0 f) Change due to assumption change 0 g) Expected UAL after all other changes [(1d) + (1e) + (1f)] 194,199,512 h) Actual UAL as of 6/30/15 219,668,121 i) Total (Gain)/Loss for 2014/2015 [(1h) - (1g)] $ 25,468,609 2. Contribution (Gain)/Loss for the Year a) Expected Contribution (Employer and Employee) $ 23,606,313 b) Interest on Expected Contributions 869,233 c) Actual Contributions 24,047,404 d) Interest on Actual Contributions 885,475 e) Expected Contributions with Interest [(2a) + (2b)] 24,475,546 f) Actual Contributions with Interest [(2c) + (2d)] 24,932,879 g) Contribution (Gain)/Loss [(2e) - (2f)] $ (457,333) 3. Asset (Gain)/Loss for the Year a) Market Value of Assets as of 6/30/14 $ 475,566,994 b) Prior Fiscal Year Receivables (3,097,997) c) Current Fiscal Year Receivables 2,539,961 d) Contributions Received 24,047,404 e) Benefits and Refunds Paid (32,979,818) f) Transfers and Miscellaneous Adjustments 850,812 g) Expected Int. [.075 x (3a + 3b) + ((1.075)½ - 1) x ((3d) + (3e) + (3f))] 35,137,593 h) Expected Assets as of 6/30/15 [(3a) + (3b) + (3c) + (3d) + (3e) + (3f) + (3g)] 502,064,949 i) Market Value of Assets as of 6/30/15 477,031,099 j) Asset (Gain)/Loss [(3h) - (3i)] $ 25,033,850 4. Liability (Gain)/Loss for the Year a) Total (Gain)/Loss (1i) $ 25,468,609 b) Contribution (Gain)/Loss (2g) (457,333) c) Asset (Gain)/Loss (3j) 25,033,850 d) Liability (Gain)/Loss [(4a) - (4b) - (4c)] $ 892,092 CALPERS ACTUARIAL VALUATION - June 30, 2015 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 15 Schedule of Amortization Bases There is a two-year lag between the valuation date and the start of the contribution fiscal year. The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2015. The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuation date: Fiscal Year 2017-18. This two-year lag is necessary due to the amount of time needed to extract and test the membership and financial data, and the need to provide public agencies with their required employer contribution well in advance of the start of the fiscal year. The Unfunded Accrued Liability (UAL) is used to determine the employer contribution and therefore must be rolled forward two years from the valuation date to the first day of the fiscal year for which the contribution is being determined. The UAL is rolled forward each year by subtracting the expected payment on the UAL for the fiscal year and adjusting for interest. The expected payment on the UAL for a fiscal year is equal to the Expected Employer Contribution for the fiscal year minus the Expected Normal Cost for the year. The Employer Contribution for the first fiscal year is determined by the actuarial valuation two years ago and the contribution for the second year is from the actuarial valuation one year ago. The Normal Cost Rate for each of the two fiscal years is assumed to be the same as the rate determined by the current valuation. All expected dollar amounts are determined by multiplying the rate by the expected payroll for the applicable fiscal year, based on payroll as of the valuation date. Reason for Base Date Established Amorti- zation Period Balance 6/30/15 Expected Payment 2015-16 Balance 6/30/16 Expected Payment 2016-17 Balance 6/30/17 Scheduled Payment for 2017-18 ASSUMPTION CHANGE 06/30/03 8 $16,368,045 $2,041,742 $15,478,726 $2,102,994 $14,459,200 $2,166,084 METHOD CHANGE 06/30/04 9 $(1,242,428) $(143,706) $(1,186,612) $(148,017) $(1,122,141) $(152,458) BENEFIT CHANGE 06/30/05 9 $27,525,484 $3,183,753 $26,288,910 $3,279,266 $24,860,563 $3,377,643 ASSUMPTION CHANGE 06/30/09 14 $26,033,681 $2,280,338 $25,621,903 $2,348,748 $25,108,312 $2,419,210 SPECIAL (GAIN)/LOSS 06/30/09 24 $16,522,550 $1,068,659 $16,653,731 $1,100,719 $16,761,511 $1,133,741 SPECIAL (GAIN)/LOSS 06/30/10 25 $1,362,193 $86,333 $1,374,845 $88,923 $1,385,761 $91,591 ASSUMPTION CHANGE 06/30/11 16 $12,138,402 $981,326 $12,031,321 $1,010,766 $11,885,686 $1,041,089 SPECIAL (GAIN)/LOSS 06/30/11 26 $(57,199) $(3,557) $(57,801) $(3,663) $(58,338) $(3,773) PAYMENT (GAIN)/LOSS 06/30/12 27 $2,987,057 $182,432 $3,021,937 $187,905 $3,053,759 $193,542 (GAIN)/LOSS 06/30/12 27 $25,181,428 $1,537,932 $25,475,473 $1,584,070 $25,743,734 $1,631,592 (GAIN)/LOSS 06/30/13 28 $70,544,959 $992,217 $74,807,078 $2,043,968 $78,298,378 $3,157,930 ASSUMPTION CHANGE 06/30/14 19 $37,964,904 $(415,048) $41,242,604 $785,576 $43,521,296 $1,618,287 (GAIN)/LOSS 06/30/14 29 $(41,129,563) $777,721 $(45,020,639) $(633,217) $(47,740,654) $(1,304,427) (GAIN)/LOSS 06/30/15 30 $25,468,608 $601,043 $26,755,579 $639,126 $28,099,587 $395,222 TOTAL $219,668,121 $13,171,185 $222,487,055 $14,387,164 $224,256,654 $15,765,273 CALPERS ACTUARIAL VALUATION - June 30, 2015 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 20 Page 16 30-Year Amortization Schedule and Alternatives The amortization schedule on the previous page shows the minimum contributions required according to CalPERS amortization policy. There has been considerable interest from many agencies in paying off these unfunded accrued liabilities sooner and the possible savings in doing so. As a result, we have provided alternate amortization schedules to help analyze the current amortization schedule and illustrate the advantages of accelerating unfunded liability payments. Shown on the following page are future year amortization payments based on 1) the current amortization schedule reflecting the individual bases and remaining periods shown on the previous page, and 2) alternate “fresh start” amortization schedules using two sample periods that would both result in interest savings relative to the current amortization schedule. Note that the payments under each alternate scenario increase by 3 percent for each year into the future. The schedules do not attempt to reflect any experience after June 30, 2015 that may deviate from the actuarial assumptions. Therefore, future amortization payments displayed in the Current Amortization Schedule may not match projected amortization payments shown in connection with Projected Employer Contributions provided elsewhere in this report. The Current Amortization Schedule typically contains individual bases that are both positive and negative. Positive bases result from plan changes, assumption changes or plan experience that result in increases to unfunded liability. Negative bases result from plan changes, assumption changes or plan experience that result in decreases to unfunded liability. The combination of positive and negative bases within an amortization schedule can result in unusual or problematic circumstances in future years such as: A positive total unfunded liability with a negative total payment, A negative total unfunded liability with a positive total payment, or Total payments that completely amortize the unfunded liability over a very short period of time In any year where one of the above scenarios occurs, the actuary will consider corrective action such as replacing the existing unfunded liability bases with a single “fresh start” base and amortizing it over a reasonable period. The Current Amortization Schedule on the following page may appear to show that, based on the current amortization bases, one of the above scenarios will occur at some point in the future. It is impossible to know today whether such a scenario will in fact arise since there will be additional bases added to the amortization schedule in each future year. Should such a scenario arise in any future year, the actuary will take appropriate action based on guidelines in the CalPERS amortization policy. For purposes of this display, total payments include any negative payments. Therefore, the amount of estimated savings may be understated to the extent that negative payments appear in the current schedule. CALPERS ACTUARIAL VALUATION - June 30, 2015 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 17 30-Year Amortization Schedule and Alternatives Alternate Schedules Current Amortization Schedule 20 Year Amortization 15 Year Amortization Date Balance Payment Balance Payment Balance Payment 6/30/2017 224,256,654 15,765,273 224,256,654 16,932,595 224,256,654 20,557,503 6/30/2018 224,730,121 17,891,172 223,519,815 17,440,572 219,761,430 21,174,228 6/30/2019 223,034,919 20,130,431 222,201,031 17,963,790 214,289,630 21,809,455 6/30/2020 218,890,860 21,337,696 220,240,855 18,502,703 207,748,828 22,463,739 6/30/2021 213,184,281 22,422,654 217,574,908 19,057,784 200,039,090 23,137,651 6/30/2022 205,924,801 23,095,333 214,133,495 19,629,518 191,052,394 23,831,781 6/30/2023 197,423,410 23,788,194 209,841,189 20,218,403 180,672,008 24,546,734 6/30/2024 187,566,042 24,501,838 204,616,392 20,824,956 168,771,813 25,283,136 6/30/2025 176,229,451 22,492,963 198,370,847 21,449,704 155,215,586 26,041,630 6/30/2026 166,125,455 18,959,617 191,009,134 22,093,195 139,856,218 26,822,879 6/30/2027 158,927,118 19,528,404 182,428,107 22,755,991 122,534,881 27,627,565 6/30/2028 150,599,168 20,114,257 172,516,301 23,438,671 103,080,128 28,456,392 6/30/2029 141,039,200 20,717,684 161,153,292 24,141,831 81,306,922 29,310,084 6/30/2030 130,136,587 21,339,216 148,209,006 24,866,086 57,015,599 30,189,387 6/30/2031 117,771,863 18,320,120 133,542,975 25,612,069 29,990,747 31,095,068 6/30/2032 107,610,049 17,609,103 117,003,540 26,380,431 6/30/2033 97,423,293 15,168,298 98,426,993 27,171,844 6/30/2034 89,003,217 14,285,953 77,636,650 27,986,999 6/30/2035 80,866,464 13,337,020 54,441,861 28,826,609 6/30/2036 73,103,331 12,318,294 28,636,936 29,691,407 6/30/2037 65,814,205 12,687,844 6/30/2038 57,595,234 13,068,478 6/30/2039 48,365,190 13,460,532 6/30/2040 38,036,402 13,864,348 6/30/2041 26,514,273 9,835,811 6/30/2042 18,304,856 9,100,702 6/30/2043 10,241,912 7,665,964 6/30/2044 3,061,815 2,074,421 6/30/2045 1,140,646 316,260 6/30/2046 898,289 931,366 Totals 466,129,246 454,985,158 382,347,232 Estimated Savings 11,144,088 83,782,014 CALPERS ACTUARIAL VALUATION - June 30, 2015 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 18 Reconciliation of Required Employer Contributions Normal Cost (% of Payroll) 1. For Period 7/1/16 – 6/30/17 a) Employer Normal Cost 10.334% b) Employee Contribution 7.680% c) Total Normal Cost 18.014% 2. Effect of changes since the prior year annual valuation a) Effect of changes in demographics results (0.391%) b) Effect of plan changes 0.000% c) Effect of changes in assumptions 0.000% d) Net effect of the changes above [sum of (a) through (c)] (0.391%) 3. For Period 7/1/17 – 6/30/18 a) Employer Normal Cost 10.039% b) Employee Contribution 7.584% c) Total Normal Cost 17.623% Employer Normal Cost Change [(3a) – (1a)] (0.295%) Employee Contribution Change [(3b) – (1b)] (0.096%) Unfunded Liability Contribution ($) 1. For Period 7/1/16 – 6/30/17 13,748,038 2. Effect of changes since the prior year annual valuation a) Effect of changes in demographics and financial results 395,222 b) Effect of plan changes 0 c) Effect of changes in assumptions 0 d) Effect of progression of amortization payments 1,622,013 e) Effect of changes due to Fresh Start 0 f) Effect of elimination of amortization base 0 g) Net effect of the changes above [sum of (a) through (f)] 2,017,235 3. For Period 7/1/17 – 6/30/18 [(1)+(2g)] 15,765,273 The amounts shown for the period 7/1/16 – 6/30/17 may be different if a prepayment of unfunded actuarial liability is made or a plan change became effective after the prior year’s actuarial valuation was performed. CALPERS ACTUARIAL VALUATION - June 30, 2015 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 19 Employer Contribution History The table below provides a recent history of the required employer contributions for the plan, as determined by the annual actuarial valuation. It does not account for prepayments or benefit changes made during a fiscal year. Required By Valuation Fiscal Year Employer Normal Cost Unfunded Rate Unfunded Liability Payment ($) 2012 - 13 10.171% 12.799% N/A 2013 - 14 10.360% 14.240% N/A 2014 - 15 10.283% 15.839% N/A 2015 - 16 10.358% 17.336% N/A 2016 - 17 10.334% 18.556% N/A 2017 - 18 10.039% N/A 15,765,273 Funding History The table below shows the recent history of the actuarial accrued liability, the market value of assets, the funded ratio and the annual covered payroll. Valuation Date Accrued Liability Market Value of Assets (MVA) Unfunded Liability Funded Ratio Annual Covered Payroll 06/30/10 $ 521,269,469 $ 323,971,012 $ 197,298,457 62.2% $ 62,496,037 06/30/11 552,715,631 384,056,704 168,658,927 69.5% 60,297,783 06/30/12 576,182,013 373,592,926 202,589,087 64.8% 62,910,810 06/30/13 602,540,178 412,227,784 190,312,394 68.4% 64,439,680 06/30/14 666,978,627 475,566,994 191,411,633 71.3% 67,802,942 06/30/15 696,699,220 477,031,099 219,668,121 68.5% 71,574,823 RISK ANALYSIS ANALYSIS OF FUTURE INVESTMENT RETURN SCENARIOS ANALYSIS OF DISCOUNT RATE SENSITIVITY VOLATILITY RATIOS HYPOTHETICAL TERMINATION LIABILITY CALPERS ACTUARIAL VALUATION - June 30, 2015 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 21 Analysis of Future Investment Return Scenarios The investment return for Fiscal Year 2015-16 was not known at the time this report was produced. The investment return in Fiscal Year 2015-16 as of April 30, 2016 is 0.0 percent before administrative expenses. For purposes of projecting future employer contributions, we are assuming a 0.0 percent investment return for Fiscal Year 2015-16. The investment return realized during a fiscal year first affects the required contribution for the fiscal year two years later. For example, the investment return for Fiscal Year 2015-16 will first be reflected in the June 30, 2016 actuarial valuation that will be used to set the employer contribution for Fiscal Year 2018-19. The Fiscal Year 2016-17 investment return will first be reflected in the June 30, 2017 actuarial valuation that will be used to set the employer contribution for Fiscal Year 2019-20 and so forth. As part of this report, a sensitivity analysis was performed to determine the effects of various investment returns during fiscal years 2016-17, 2017-18 and 2018-19 on the 2019-20, 2020-21 and 2021-22 employer contributions. Once again, the projections assume that all other actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur. Five different investment return scenarios were selected. The first scenario is a -3.8 percent return for each of the 2016-17, 2017-18, and 2018-19 fiscal years. Based on the current investment allocation, this is what one would expect if the markets were to give us about a 5th percentile return from July 1, 2016 through June 30, 2019. The second scenario is a 2.8 percent return for each of the 2016-17, 2017-18, and 2018-19 fiscal years. Based on the current investment allocation, this is what one would expect if the markets were to give us about a 25th percentile return from July 1, 2016 through June 30, 2019. The third scenario is a 7.5 percent return for each of the 2016-17, 2017-18, and 2018-19 fiscal years. Based on the current investment allocation, this is what one would expect if the markets were to give us about a 49th percentile return from July 1, 2016 through June 30, 2019. The fourth scenario is a 12.0 percent return for each of the 2016-17, 2017-18, and 2018-19 fiscal years. Based on the current investment allocation, this is what one would expect if the markets were to give us about a 75th percentile return from July 1, 2016 through June 30, 2019. Finally, the last scenario is an 18.9 percent return for each of the 2016-17, 2017-18, and 2018-19 fiscal years. Based on the current investment allocation, this is what one would expect if the markets were to give us about a 95th percentile return from July 1, 2016 through June 30, 2019. The table below shows the estimated projected contributions and the estimated increases for the plan under the five different scenarios. 2016-19 Investment Return Scenario Fiscal Year Estimated Change Between 2018-19 and 2021-22 2019-20 2020-21 2021-22 (3.8%) Normal Cost 10.0% 10.0% 10.0% 0.0% UAL Contribution $22,162,810 $25,721,705 $30,063,395 $11,598,514 2.8% Normal Cost 10.0% 10.0% 10.0% 0.0% UAL Contribution $21,666,079 $24,251,089 $27,159,754 $8,694,873 7.5% Normal Cost 10.0% 10.0% 10.0% 0.0% UAL Contribution $21,312,272 $23,163,641 $24,930,285 $6,465,404 12.0% Normal Cost 10.3% 10.5% 10.7% 0.7% UAL Contribution $20,960,120 $22,136,464 $22,846,622 $4,381,741 18.9% Normal Cost 10.7% 11.3% 12.0% 2.0% UAL Contribution $20,422,028 $20,574,871 $19,644,996 $1,180,115 CALPERS ACTUARIAL VALUATION - June 30, 2015 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 22 For the last two scenarios in the table above the results incorporate the impact of CalPERS Risk Mitigation Policy. A 12.0% return would result in a reduction of the discount rate by 0.05% and a return of 18.9% would reduce the discount rate by 0.15%. Reducing the discount rate increases both the plan’s accrued liability and normal cost. While the projections reflect estimated changes to the normal cost due to lower discount rates, they do not reflect the possible increase in the PEPRA member contribution rate in such scenarios. More details about the Risk Mitigation policy can be found on our website. The projected normal cost percentages do not reflect that the normal cost will decline over time as new employees are hired into PEPRA or other lower cost benefit tiers. Analysis of Discount Rate Sensitivity The following analysis looks at the Fiscal Year 2017-18 total normal cost rates and liabilities under two different discount rate scenarios. Shown below are the total normal cost rates assuming discount rates that are 1 percent lower and 1 percent higher than the current valuation discount rate. This analysis shows the potential plan impacts if the PERF were to realize investment returns of 6.50 percent or 8.50 percent over the long-term. This type of analysis gives the reader a sense of the long-term risk to required contributions. Sensitivity Analysis As of June 30, 2015 6.50% Discount Rate (-1%) 7.50% Discount Rate (assumed rate) 8.50% Discount Rate (+1%) Plan’s Total Normal Cost 21.982% 17.623% 14.305% Accrued Liability $785,681,736 $696,699,220 $622,745,835 Unfunded Accrued Liability $308,650,637 $219,668,121 $145,714,736 CALPERS ACTUARIAL VALUATION - June 30, 2015 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 23 Volatility Ratios The actuarial calculations supplied in this communication are based on a number of assumptions about long-term demographic and economic behavior. Unless these assumptions (terminations, deaths, disabilities, retirements, salary growth, and investment return) are exactly realized each year, there will be differences on a year-to-year basis. The year-to-year differences between actual experience and the assumptions are called actuarial gains and losses and serve to lower or raise required employer contributions from one year to the next. Therefore, employer contributions will inevitably fluctuate, especially due to the ups and downs of investment returns. Asset Volatility Ratio (AVR) Plans that have higher asset-to-payroll ratios experience more volatile employer contributions (as a percentage of payroll) due to investment return. For example, a plan with an asset-to-payroll ratio of 8 may experience twice the contribution volatility due to investment return volatility than a plan with an asset-to- payroll ratio of 4. Shown below is the asset volatility ratio, a measure of the plan’s current volatility. It should be noted that this ratio is a measure of the current situation. It increases over time but generally tends to stabilize as the plan matures. Liability Volatility Ratio (LVR) Plans that have higher liability-to-payroll ratios experience more volatile employer contributions (as a percentage of payroll) due to investment return and changes in liability. For example, a plan with a liability- to-payroll ratio of 8 is expected to have twice the contribution volatility of a plan with a liability-to-payroll ratio of 4. The liability volatility ratio is also included in the table below. It should be noted that this ratio indicates a longer-term potential for contribution volatility. The asset volatility ratio, described above, will tend to move closer to the liability volatility ratio as the plan matures. Contribution Volatility As of June 30, 2015 1. Market Value of Assets without Receivables $ 474,491,138 2. Payroll 71,574,823 3. Asset Volatility Ratio (AVR) [(1) / ( 2)] 6.6 4. Accrued Liability $ 696,699,220 5. Liability Volatility Ratio (LVR) [(4) / (2)] 9.7 CALPERS ACTUARIAL VALUATION - June 30, 2015 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 24 Hypothetical Termination Liability The hypothetical termination liability is an estimate of the financial position of the plan had the contract with CalPERS been terminated as of June 30, 2015. The plan liability on a termination basis is calculated differently compared to the plan’s ongoing funding liability. For this hypothetical termination liability calculation, both compensation and service are frozen as of the valuation date and no future pay increases or service accruals are assumed. A more conservative investment policy and asset allocation strategy was adopted by the CalPERS Board for the Terminated Agency Pool. The Terminated Agency Pool has limited funding sources since no future employer contributions will be made. Therefore, expected benefit payments are secured by risk-free assets and benefit security for members is increased while limiting the funding risk. However, this asset allocation has a lower expected rate of return than the PERF and consequently, a lower discount rate assumption. The lower discount rate for the Terminated Agency Pool results in higher liabilities for terminated plans. The effective termination discount rate will depend on actual market rates of return for risk-free securities on the date of termination. As market discount rates are variable the table below shows a range for the hypothetical termination liability based on the lowest and highest interest rates observed during an approximate 2-year period centered around the valuation date. Market Value of Assets (MVA) Hypothetical Termination Liability1,2 @ 2.00% Funded Status Unfunded Termination Liability @ 2.00% Hypothetical Termination Liability1,2 @ 3.25% Funded Status Unfunded Termination Liability @ 3.25% $477,031,099 $1,361,309,842 35.0% $884,278,743 $1,144,034,631 41.7% $667,003,532 1 The hypothetical liabilities calculated above include a 7 percent mortality contingency load in accordance with Board policy. Other actuarial assumptions, such as wage and inflation assumptions, can be found in Appendix A. 2 The current discount rate assumption used for termination valuations is a weighted average of the 10-year and 30-year U.S. Treasury yields where the weights are based on matching asset and liability durations as of the termination date. The discount rates used in the table are based on 20-year Treasury bonds, rounded to the nearest quarter percentage point, which is a good proxy for most plans. The 20-year Treasury yield was 2.75 percent on June 30, 2015. In order to terminate the plan, you must first contact our Retirement Services Contract Unit to initiate a Resolution of Intent to Terminate. The completed Resolution will allow the plan actuary to give you a preliminary termination valuation with a more up-to-date estimate of the plan liabilities. CalPERS advises you to consult with the plan actuary before beginning this process. PLAN’S MAJOR BENEFIT PROVISIONS CALPERS ACTUARIAL VALUATION – June 30, 2015 MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Plan’s Major Benefit Options Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions is in the following section of this Appendix. Contract Package Active Misc Active Misc Active Misc Inactive Misc Receiving Misc Benefit Provision Benefit Formula 2.7% @ 55 2.0% @ 60 2.0% @ 62 2.0% @ 55 Social Security Coverage No No No No Full/Modified Full Full Full Full Employee Contribution Rate 8.00% 7.00% 6.25% Final Average Compensation Period One Year One Year Three Year One Year Sick Leave Credit No No No No Non-Industrial Disability Standard Standard Standard Standard Industrial Disability No No No No Pre-Retirement Death Benefits Optional Settlement 2W No No No No 1959 Survivor Benefit Level Level 1 Level 1 Level 1 Level 1 Special No No No No Alternate (firefighters) No No No No Post-Retirement Death Benefits Lump Sum $500 $500 $500 $500 $500 Survivor Allowance (PRSA) No No No No No COLA 2% 2% 2% 2% 2% Page 26 APPENDICES APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS APPENDIX B – PRINCIPAL PLAN PROVISIONS APPENDIX C – PARTICIPANT DATA APPENDIX D – DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATES APPENDIX E – GLOSSARY OF ACTUARIAL TERMS APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS ACTUARIAL DATA ACTUARIAL METHODS ACTUARIAL ASSUMPTIONS MISCELLANEOUS CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-1 Actuarial Data As stated in the Actuarial Certification, the data which serves as the basis of this valuation has been obtained from the various CalPERS databases. We have reviewed the valuation data and believe that it is reasonable and appropriate in aggregate. We are unaware of any potential data issues that would have a material effect on the results of this valuation, except that data does not always contain the latest salary information for former members now in reciprocal systems and does not recognize the potential for unusually large salary deviation in certain cases such as elected officials. Therefore, salary information in these cases may not be accurate. These situations are relatively infrequent, however, and when they do occur, they generally do not have a material impact on the required employer contributions. Actuarial Methods Actuarial Cost Method The actuarial cost method used is the Entry Age Normal Cost Method. Under this method, projected benefits are determined for all members and the associated liabilities are spread in a manner that produces level annual cost as a percentage of pay in each year from the member’s age of hire (entry age) to their assumed retirement age on the valuation date. The cost allocated to the current fiscal year is called the normal cost. The actuarial accrued liability for active members is then calculated as the portion of the total cost of the plan allocated to prior years. The actuarial accrued liability for members currently receiving benefits and for members entitled to deferred benefits is equal to the present value of the benefits expected to be paid. No normal costs are applicable for these participants. Amortization of Unfunded Actuarial Accrued Liability The excess of the total actuarial accrued liability over the market value of plan assets is called the unfunded actuarial accrued liability (UAL). Funding requirements are determined by adding the normal cost and an amortization payment toward the unfunded liability. Commencing with the June 30, 2013 valuation, all new gains or losses are tracked and amortized over a fixed 30-year period with a 5 year ramp up at the beginning and a 5 year ramp down at the end of the amortization period. All changes in liability due to plan amendments (other than golden handshakes) are amortized over a 20-year period with no ramp. Changes in actuarial assumptions, or changes in actuarial methodology are amortized over a 20-year period with a 5 year ramp up at the beginning and a 5 year ramp down at the end of the amortization period. Changes in unfunded accrued liability due to a Golden Handshake will be amortized over a period of 5 years. Exceptions for Inconsistencies: An exception to the amortization rules above is used whenever their application results in inconsistencies. In these cases, a “fresh start” approach is used. This means that the current unfunded actuarial liability is projected and amortized over a set number of years. For example, a fresh start is needed in the following situations: 1) When a positive payment would be required on a negative unfunded actuarial liability (or conversely a negative payment on a positive unfunded actuarial liability); or 2) When there are excess assets, rather than an unfunded liability. In this situation, a 30-year fresh start is used. It should be noted that the actuary may determine that a fresh start is necessary under other circumstances. In all cases of a fresh start, the period is set by the actuary at what is deemed appropriate; however, the period will not be greater than 30 years. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-2 Exceptions for Inactive Plans: The following exceptions apply to plans classified as Inactive. These plans have no active members and no expectation to have active members in the future. Amortization of unfunded liability is on a “level dollar” basis rather than a “level percent of pay” basis Actuarial judgment will be used to shorten amortization periods for Inactive plans with existing periods that are deemed too long given the duration of the liability. In many cases, a Fresh Start approach with a 20 year closed period will be used. However, the specific demographics of the plan will be used to determine if periods shorter or longer than 20 years may be more appropriate. Asset Valuation Method It is the policy of the CalPERS Board of Administration to use professionally accepted amortization methods to eliminate a surplus or an unfunded accrued liability in a manner that maintains benefit security for the members of the System while minimizing substantial variations in required employer contributions. On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS amortization and rate smoothing policies. Beginning with the June 30, 2013 valuations that set the employer contribution for Fiscal Year 2015-16, CalPERS employs a policy that amortizes all gains and losses over a fixed 30-year period. The increase or decrease in the rate is then spread directly over a 5-year period. This method is referred to as “direct rate smoothing.” CalPERS no longer uses an actuarial value of assets and only uses the market value of assets. The direct rate smoothing method is equivalent to a method using a 5 year asset smoothing period with no actuarial value of asset corridor and a 25-year amortization period for gains and losses. PEPRA Normal Cost Rate Methodology Per Government Code Section 7522.30(b) the “normal cost rate” shall mean the annual actuarially determined normal cost for the plan of retirement benefits provided to the new member and shall be established based on actuarial assumptions used to determine the liabilities and costs as part of the annual actuarial valuation. The plan of retirement benefits shall include any elements that would impact the actuarial determination of the normal cost, including, but not limited to, the retirement formula, eligibility and vesting criteria, ancillary benefit provisions, and any automatic cost-of-living adjustments as determined by the public retirement system. Each non-pooled plan is considered to be stable with a sufficiently large demographic of actives. It is preferable to determine normal cost using a large active population ongoing so that this rate remains relatively stable. The total PEPRA normal cost will be calculated using all active members within a non- pooled plan. Accordingly, plans will be funded equally between employer and employee based on the demographics of the employees of that employer. As each non-pooled plan builds up to either 100+ active PEPRA members or half of their active population is under the PEPRA formula, the total PEPRA normal cost will be based on the active PEPRA population in the plan. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-3 Actuarial Assumptions In 2014, CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions and strategic asset allocation. On February 19, 2014, the CalPERS Board of Administration adopted relatively modest changes to the current asset allocation that will reduce the expected volatility of returns. The adopted asset allocation is expected to have a long-term blended return that continues to support a discount rate assumption of 7.5 percent. The Board also approved several changes to the demographic assumptions that more closely align with actual experience. The most significant of these is mortality improvement to acknowledge the greater life expectancies we are seeing in our membership and expected continued improvements. The new actuarial assumptions were first used in the June 30, 2014 valuation to set the Fiscal Year 2016-17 contribution for public agency employers. The increase in liability due to new actuarial assumptions is amortized over a 20-year period with a 5-year ramp-up/ramp-down in accordance with Board policy. These new actuarial assumptions are set forth in this section. For more details and additional rationale for the selection of the actuarial assumptions, please refer to the CalPERS Experience Study and Review of Actuarial Assumptions report from January 2014 that can be found on the CalPERS website under: “Forms and Publications”. Click on “View All” and search for Experience Study. All actuarial assumptions (except the discount rates used for the hypothetical termination liability) represent an estimate of future experience rather than observations of the estimates inherent in market data. Economic Assumptions Discount Rate 7.5 percent compounded annually (net of expenses). This assumption is used for all plans. Termination Liability Discount Rate The current discount rate assumption used for termination valuations is a weighted average of the 10-year and 30-year U.S. Treasury yields where the weights are based on matching asset and liability durations as of the termination date. The hypothetical termination liabilities in this report are calculated using an observed range of market interest rates. This range is based on the lowest and highest 20-year Treasury bond observed during an approximate 2-year period centered around the valuation date. The 20-year Treasury bond has a similar duration to most plan liabilities and serves as a good proxy for the termination discount rate. The 20-year Treasury yield was 2.75 percent on June 30, 2015. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-4 Salary Growth Annual increases vary by category, entry age, and duration of service. A sample of assumed increases are shown below. Public Agency Miscellaneous Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1220 0.1160 0.1020 1 0.0990 0.0940 0.0830 2 0.0860 0.0810 0.0710 3 0.0770 0.0720 0.0630 4 0.0700 0.0650 0.0570 5 0.0640 0.0600 0.0520 10 0.0460 0.0430 0.0390 15 0.0420 0.0400 0.0360 20 0.0390 0.0380 0.0340 25 0.0370 0.0360 0.0330 30 0.0350 0.0340 0.0320 Public Agency Fire Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.2000 0.1980 0.1680 1 0.1490 0.1460 0.1250 2 0.1200 0.1160 0.0990 3 0.0980 0.0940 0.0810 4 0.0820 0.0780 0.0670 5 0.0690 0.0640 0.0550 10 0.0470 0.0460 0.0420 15 0.0440 0.0420 0.0390 20 0.0420 0.0390 0.0360 25 0.0400 0.0370 0.0340 30 0.0380 0.0360 0.0340 Public Agency Police Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1500 0.1470 0.1310 1 0.1160 0.1120 0.1010 2 0.0950 0.0920 0.0830 3 0.0810 0.0780 0.0700 4 0.0700 0.0670 0.0600 5 0.0610 0.0580 0.0520 10 0.0450 0.0430 0.0370 15 0.0450 0.0430 0.0370 20 0.0450 0.0430 0.0370 25 0.0450 0.0430 0.0370 30 0.0450 0.0430 0.0370 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-5 Salary Growth (continued) Public Agency County Peace Officers Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1770 0.1670 0.1500 1 0.1340 0.1260 0.1140 2 0.1080 0.1030 0.0940 3 0.0900 0.0860 0.0790 4 0.0760 0.0730 0.0670 5 0.0650 0.0620 0.0580 10 0.0470 0.0450 0.0410 15 0.0460 0.0450 0.0390 20 0.0460 0.0450 0.0380 25 0.0460 0.0450 0.0380 30 0.0460 0.0440 0.0380 Schools Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.0900 0.0880 0.0820 1 0.0780 0.0750 0.0700 2 0.0700 0.0680 0.0630 3 0.0650 0.0630 0.0580 4 0.0610 0.0590 0.0540 5 0.0580 0.0560 0.0510 10 0.0460 0.0450 0.0410 15 0.0420 0.0410 0.0380 20 0.0390 0.0380 0.0350 25 0.0370 0.0350 0.0330 30 0.0350 0.0330 0.0310 The Miscellaneous salary scale is used for Local Prosecutors. The Police salary scale is used for Other Safety, Local Sheriff, and School Police. Overall Payroll Growth 3.00 percent compounded annually (used in projecting the payroll over which the unfunded liability is amortized). This assumption is used for all plans. Inflation 2.75 percent compounded annually. This assumption is used for all plans. Non-valued Potential Additional Liabilities The potential liability loss for a cost-of-living increase exceeding the 2.75 percent inflation assumption, and any potential liability loss from future member service purchases are not reflected in the valuation. Miscellaneous Loading Factors Credit for Unused Sick Leave Total years of service is increased by 1 percent for those plans that have accepted the provision providing Credit for Unused Sick Leave. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-6 Conversion of Employer Paid Member Contributions (EPMC) Total years of service is increased by the Employee Contribution Rate for those plans with the provision providing for the Conversion of Employer Paid Member Contributions (EPMC) during the final compensation period. Norris Decision (Best Factors) Employees hired prior to July 1, 1982 have projected benefit amounts increased in order to reflect the use of “Best Factors” in the calculation of optional benefit forms. This is due to a 1983 Supreme Court decision, known as the Norris decision, which required males and females to be treated equally in the determination of benefit amounts. Consequently, anyone already employed at that time is given the best possible conversion factor when optional benefits are determined. No loading is necessary for employees hired after July 1, 1982. Termination Liability The termination liabilities include a 7 percent contingency load. This load is for unforeseen improvements in mortality. Demographic Assumptions Pre-Retirement Mortality Non-industrial death rates vary by age and gender. Industrial death rates vary by age. See sample rates in table below. The non-industrial death rates are used for all plans. The industrial death rates are used for safety plans (except for Local Prosecutor safety members where the corresponding miscellaneous plan does not have the Industrial Death Benefit). Non-Industrial Death Industrial Death (Not Job-Related) (Job-Related) Age Male Female Male and Female 20 0.00031 0.00020 0.00003 25 0.00040 0.00023 0.00007 30 0.00049 0.00025 0.00010 35 0.00057 0.00035 0.00012 40 0.00075 0.00050 0.00013 45 0.00106 0.00071 0.00014 50 0.00155 0.00100 0.00015 55 0.00228 0.00138 0.00016 60 0.00308 0.00182 0.00017 65 0.00400 0.00257 0.00018 70 0.00524 0.00367 0.00019 75 0.00713 0.00526 0.00020 80 0.00990 0.00814 0.00021 Miscellaneous plans usually have industrial death rates set to zero unless the agency has specifically contracted for industrial death benefits. If so, each non-industrial death rate shown above will be split into two components; 99 percent will become the non-industrial death rate and 1 percent will become the industrial death rate. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-7 Post-Retirement Mortality Rates vary by age, type of retirement, and gender. See sample rates in table below. These rates are used for all plans. Healthy Recipients Non-Industrially Disabled Industrially Disabled (Not Job-Related) (Job-Related) Age Male Female Male Female Male Female 50 0.00501 0.00466 0.01680 0.01158 0.00501 0.00466 55 0.00599 0.00416 0.01973 0.01149 0.00599 0.00416 60 0.00710 0.00436 0.02289 0.01235 0.00754 0.00518 65 0.00829 0.00588 0.02451 0.01607 0.01122 0.00838 70 0.01305 0.00993 0.02875 0.02211 0.01635 0.01395 75 0.02205 0.01722 0.03990 0.03037 0.02834 0.02319 80 0.03899 0.02902 0.06083 0.04725 0.04899 0.03910 85 0.06969 0.05243 0.09731 0.07762 0.07679 0.06251 90 0.12974 0.09887 0.14804 0.12890 0.12974 0.09887 95 0.22444 0.18489 0.22444 0.21746 0.22444 0.18489 100 0.32536 0.30017 0.32536 0.30017 0.32536 0.30017 105 0.58527 0.56093 0.58527 0.56093 0.58527 0.56093 110 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 The post-retirement mortality rates above include 20 years of projected on-going mortality improvement using Scale BB published by the Society of Actuaries. Marital Status For active members, a percentage who are married upon retirement is assumed according to member category as shown in the following table. Member Category Percent Married Miscellaneous Member 85% Local Police 90% Local Fire 90% Other Local Safety 90% School Police 90% Age of Spouse It is assumed that female spouses are 3 years younger than male spouses. This assumption is used for all plans. Terminated Members It is assumed that terminated members refund immediately if non-vested. Terminated members who are vested are assumed to follow the same service retirement pattern as active members but with a load to reflect the expected higher rates of retirement, especially at lower ages. The following table shows the load factors that are applied to the service retirement assumption for active members to obtain the service retirement pattern for separated vested members: Age Load Factor Miscellaneous Load Factor Safety 50 190% 310% 51 110% 190% 52 110% 105% 53 through 54 100% 105% 55 100% 140% 56 and above 100% (no change) 100% (no change) Termination with Refund Rates vary by entry age and service for miscellaneous plans. Rates vary by service for safety plans. See sample rates in tables below. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-8 Public Agency Miscellaneous Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45 0 0.1742 0.1674 0.1606 0.1537 0.1468 0.1400 1 0.1545 0.1477 0.1409 0.1339 0.1271 0.1203 2 0.1348 0.1280 0.1212 0.1142 0.1074 0.1006 3 0.1151 0.1083 0.1015 0.0945 0.0877 0.0809 4 0.0954 0.0886 0.0818 0.0748 0.0680 0.0612 5 0.0212 0.0193 0.0174 0.0155 0.0136 0.0116 10 0.0138 0.0121 0.0104 0.0088 0.0071 0.0055 15 0.0060 0.0051 0.0042 0.0032 0.0023 0.0014 20 0.0037 0.0029 0.0021 0.0013 0.0005 0.0001 25 0.0017 0.0011 0.0005 0.0001 0.0001 0.0001 30 0.0005 0.0001 0.0001 0.0001 0.0001 0.0001 35 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 Public Agency Safety Duration of Service Fire Police County Peace Officer 0 0.0710 0.1013 0.0997 1 0.0554 0.0636 0.0782 2 0.0398 0.0271 0.0566 3 0.0242 0.0258 0.0437 4 0.0218 0.0245 0.0414 5 0.0029 0.0086 0.0145 10 0.0009 0.0053 0.0089 15 0.0006 0.0027 0.0045 20 0.0005 0.0017 0.0020 25 0.0003 0.0012 0.0009 30 0.0003 0.0009 0.0006 35 0.0003 0.0009 0.0006 The police termination and refund rates are also used for Public Agency Local Prosecutors, Other Safety, Local Sheriff, and School Police. Schools Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45 0 0.1730 0.1627 0.1525 0.1422 0.1319 0.1217 1 0.1585 0.1482 0.1379 0.1277 0.1174 0.1071 2 0.1440 0.1336 0.1234 0.1131 0.1028 0.0926 3 0.1295 0.1192 0.1089 0.0987 0.0884 0.0781 4 0.1149 0.1046 0.0944 0.0841 0.0738 0.0636 5 0.0278 0.0249 0.0221 0.0192 0.0164 0.0135 10 0.0172 0.0147 0.0122 0.0098 0.0074 0.0049 15 0.0115 0.0094 0.0074 0.0053 0.0032 0.0011 20 0.0073 0.0055 0.0038 0.0020 0.0002 0.0002 25 0.0037 0.0023 0.0010 0.0002 0.0002 0.0002 30 0.0015 0.0003 0.0002 0.0002 0.0002 0.0002 35 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-9 Termination with Vested Benefits Rates vary by entry age and service for miscellaneous plans. Rates vary by service for safety plans. See sample rates in tables below. Public Agency Miscellaneous Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 5 0.0656 0.0597 0.0537 0.0477 0.0418 10 0.0530 0.0466 0.0403 0.0339 0.0000 15 0.0443 0.0373 0.0305 0.0000 0.0000 20 0.0333 0.0261 0.0000 0.0000 0.0000 25 0.0212 0.0000 0.0000 0.0000 0.0000 30 0.0000 0.0000 0.0000 0.0000 0.0000 35 0.0000 0.0000 0.0000 0.0000 0.0000 Public Agency Safety Duration of Service Fire Police County Peace Officer 5 0.0162 0.0163 0.0265 10 0.0061 0.0126 0.0204 15 0.0058 0.0082 0.0130 20 0.0053 0.0065 0.0074 25 0.0047 0.0058 0.0043 30 0.0045 0.0056 0.0030 35 0.0000 0.0000 0.0000 When a member is eligible to retire, the termination with vested benefits probability is set to zero. After termination with vested benefits, a miscellaneous member is assumed to retire at age 59 and a safety member at age 54. The Police termination with vested benefits rates are also used for Public Agency Local Prosecutors, Other Safety, Local Sheriff, and School Police. Schools Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 5 0.0816 0.0733 0.0649 0.0566 0.0482 10 0.0629 0.0540 0.0450 0.0359 0.0000 15 0.0537 0.0440 0.0344 0.0000 0.0000 20 0.0420 0.0317 0.0000 0.0000 0.0000 25 0.0291 0.0000 0.0000 0.0000 0.0000 30 0.0000 0.0000 0.0000 0.0000 0.0000 35 0.0000 0.0000 0.0000 0.0000 0.0000 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-10 Non-Industrial (Not Job-Related) Disability Rates vary by age and gender for miscellaneous plans. Rates vary by age and category for safety plans. Miscellaneous Fire Police County Peace Officer Schools Age Male Female Male and Female Male and Female Male and Female Male Female 20 0.0002 0.0001 0.0001 0.0001 0.0001 0.0003 0.0003 25 0.0002 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 30 0.0002 0.0002 0.0001 0.0002 0.0001 0.0001 0.0002 35 0.0005 0.0008 0.0001 0.0003 0.0004 0.0005 0.0004 40 0.0012 0.0016 0.0001 0.0004 0.0007 0.0015 0.0010 45 0.0019 0.0022 0.0002 0.0005 0.0013 0.0030 0.0019 50 0.0021 0.0023 0.0005 0.0008 0.0018 0.0039 0.0024 55 0.0022 0.0018 0.0010 0.0013 0.0010 0.0036 0.0021 60 0.0022 0.0014 0.0015 0.0020 0.0006 0.0031 0.0014 The miscellaneous non-industrial disability rates are used for Local Prosecutors. The police non-industrial disability rates are also used for Other Safety, Local Sheriff, and School Police. Industrial (Job-Related) Disability Rates vary by age and category. Age Fire Police County Peace Officer 20 0.0001 0.0000 0.0004 25 0.0003 0.0017 0.0013 30 0.0007 0.0048 0.0025 35 0.0016 0.0079 0.0037 40 0.0030 0.0110 0.0051 45 0.0053 0.0141 0.0067 50 0.0277 0.0185 0.0092 55 0.0409 0.0479 0.0151 60 0.0583 0.0602 0.0174 The police industrial disability rates are also used for Local Sheriff and Other Safety. Fifty percent of the police industrial disability rates are used for School Police. One percent of the police industrial disability rates are used for Local Prosecutors. Normally, rates are zero for miscellaneous plans unless the agency has specifically contracted for industrial disability benefits. If so, each miscellaneous non-industrial disability rate will be split into two components: 50 percent will become the non-industrial disability rate and 50 percent will become the industrial disability rate. Service Retirement Retirement rates vary by age, service, and formula, except for the safety ½ @ 55 and 2% @ 55 formulas, where retirement rates vary by age only. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-11 Service Retirement Public Agency Miscellaneous 1.5% @ 65 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.008 0.011 0.013 0.015 0.017 0.019 51 0.007 0.010 0.012 0.013 0.015 0.017 52 0.010 0.014 0.017 0.019 0.021 0.024 53 0.008 0.012 0.015 0.017 0.019 0.022 54 0.012 0.016 0.019 0.022 0.025 0.028 55 0.018 0.025 0.031 0.035 0.038 0.043 56 0.015 0.021 0.025 0.029 0.032 0.036 57 0.020 0.028 0.033 0.038 0.043 0.048 58 0.024 0.033 0.040 0.046 0.052 0.058 59 0.028 0.039 0.048 0.054 0.060 0.067 60 0.049 0.069 0.083 0.094 0.105 0.118 61 0.062 0.087 0.106 0.120 0.133 0.150 62 0.104 0.146 0.177 0.200 0.223 0.251 63 0.099 0.139 0.169 0.191 0.213 0.239 64 0.097 0.136 0.165 0.186 0.209 0.233 65 0.140 0.197 0.240 0.271 0.302 0.339 66 0.092 0.130 0.157 0.177 0.198 0.222 67 0.129 0.181 0.220 0.249 0.277 0.311 68 0.092 0.129 0.156 0.177 0.197 0.221 69 0.092 0.130 0.158 0.178 0.199 0.224 70 0.103 0.144 0.175 0.198 0.221 0.248 Public Agency Miscellaneous 2% @ 60 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.010 0.013 0.015 0.018 0.019 0.021 51 0.009 0.011 0.014 0.016 0.017 0.019 52 0.011 0.014 0.017 0.020 0.022 0.024 53 0.010 0.012 0.015 0.017 0.020 0.021 54 0.015 0.019 0.023 0.025 0.029 0.031 55 0.022 0.029 0.035 0.040 0.045 0.049 56 0.018 0.024 0.028 0.033 0.036 0.040 57 0.024 0.032 0.038 0.043 0.049 0.053 58 0.027 0.036 0.043 0.049 0.055 0.061 59 0.033 0.044 0.054 0.061 0.068 0.076 60 0.056 0.077 0.092 0.105 0.117 0.130 61 0.071 0.097 0.118 0.134 0.149 0.166 62 0.117 0.164 0.198 0.224 0.250 0.280 63 0.122 0.171 0.207 0.234 0.261 0.292 64 0.114 0.159 0.193 0.218 0.244 0.271 65 0.150 0.209 0.255 0.287 0.321 0.358 66 0.114 0.158 0.192 0.217 0.243 0.270 67 0.141 0.196 0.238 0.270 0.301 0.337 68 0.103 0.143 0.174 0.196 0.219 0.245 69 0.109 0.153 0.185 0.209 0.234 0.261 70 0.117 0.162 0.197 0.222 0.248 0.277 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-12 Service Retirement Public Agency Miscellaneous 2% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.014 0.018 0.021 0.025 0.027 0.031 51 0.012 0.014 0.017 0.020 0.021 0.025 52 0.013 0.017 0.019 0.023 0.025 0.028 53 0.015 0.020 0.023 0.027 0.030 0.034 54 0.026 0.033 0.038 0.045 0.051 0.059 55 0.048 0.061 0.074 0.088 0.100 0.117 56 0.042 0.053 0.063 0.075 0.085 0.100 57 0.044 0.056 0.067 0.081 0.091 0.107 58 0.049 0.062 0.074 0.089 0.100 0.118 59 0.057 0.072 0.086 0.103 0.118 0.138 60 0.067 0.086 0.103 0.123 0.139 0.164 61 0.081 0.103 0.124 0.148 0.168 0.199 62 0.116 0.147 0.178 0.214 0.243 0.288 63 0.114 0.144 0.174 0.208 0.237 0.281 64 0.108 0.138 0.166 0.199 0.227 0.268 65 0.155 0.197 0.238 0.285 0.325 0.386 66 0.132 0.168 0.203 0.243 0.276 0.328 67 0.122 0.155 0.189 0.225 0.256 0.304 68 0.111 0.141 0.170 0.204 0.232 0.274 69 0.114 0.144 0.174 0.209 0.238 0.282 70 0.130 0.165 0.200 0.240 0.272 0.323 Public Agency Miscellaneous 2.5% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.004 0.009 0.019 0.029 0.049 0.094 51 0.004 0.009 0.019 0.029 0.049 0.094 52 0.004 0.009 0.020 0.030 0.050 0.095 53 0.008 0.014 0.025 0.036 0.058 0.104 54 0.024 0.034 0.050 0.066 0.091 0.142 55 0.066 0.088 0.115 0.142 0.179 0.241 56 0.042 0.057 0.078 0.098 0.128 0.184 57 0.041 0.057 0.077 0.097 0.128 0.183 58 0.045 0.061 0.083 0.104 0.136 0.192 59 0.055 0.074 0.098 0.123 0.157 0.216 60 0.066 0.088 0.115 0.142 0.179 0.241 61 0.072 0.095 0.124 0.153 0.191 0.255 62 0.099 0.130 0.166 0.202 0.248 0.319 63 0.092 0.121 0.155 0.189 0.233 0.302 64 0.091 0.119 0.153 0.187 0.231 0.299 65 0.122 0.160 0.202 0.245 0.297 0.374 66 0.138 0.179 0.226 0.272 0.329 0.411 67 0.114 0.149 0.189 0.229 0.279 0.354 68 0.100 0.131 0.168 0.204 0.250 0.322 69 0.114 0.149 0.189 0.229 0.279 0.354 70 0.127 0.165 0.209 0.253 0.306 0.385 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-13 Service Retirement Public Agency Miscellaneous 2.7% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.004 0.009 0.014 0.035 0.055 0.095 51 0.002 0.006 0.011 0.030 0.050 0.090 52 0.006 0.012 0.017 0.038 0.059 0.099 53 0.010 0.017 0.024 0.046 0.068 0.110 54 0.032 0.044 0.057 0.085 0.113 0.160 55 0.076 0.101 0.125 0.165 0.205 0.265 56 0.055 0.074 0.093 0.127 0.160 0.214 57 0.050 0.068 0.086 0.118 0.151 0.204 58 0.055 0.074 0.093 0.127 0.161 0.215 59 0.061 0.082 0.102 0.138 0.174 0.229 60 0.069 0.093 0.116 0.154 0.192 0.250 61 0.086 0.113 0.141 0.183 0.225 0.288 62 0.105 0.138 0.171 0.218 0.266 0.334 63 0.103 0.135 0.167 0.215 0.262 0.329 64 0.109 0.143 0.177 0.226 0.275 0.344 65 0.134 0.174 0.215 0.270 0.326 0.401 66 0.147 0.191 0.235 0.294 0.354 0.433 67 0.121 0.158 0.196 0.248 0.300 0.372 68 0.113 0.147 0.182 0.232 0.282 0.352 69 0.117 0.153 0.189 0.240 0.291 0.362 70 0.141 0.183 0.226 0.283 0.341 0.418 Public Agency Miscellaneous 3% @ 60 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.012 0.018 0.024 0.039 0.040 0.091 51 0.009 0.014 0.019 0.034 0.034 0.084 52 0.014 0.020 0.026 0.043 0.044 0.096 53 0.016 0.023 0.031 0.048 0.050 0.102 54 0.026 0.036 0.045 0.065 0.070 0.125 55 0.043 0.057 0.072 0.096 0.105 0.165 56 0.042 0.056 0.070 0.094 0.103 0.162 57 0.049 0.065 0.082 0.108 0.119 0.180 58 0.057 0.076 0.094 0.122 0.136 0.199 59 0.076 0.100 0.123 0.157 0.175 0.244 60 0.114 0.148 0.182 0.226 0.255 0.334 61 0.095 0.123 0.152 0.190 0.214 0.288 62 0.133 0.172 0.211 0.260 0.294 0.378 63 0.129 0.166 0.204 0.252 0.285 0.368 64 0.143 0.185 0.226 0.278 0.315 0.401 65 0.202 0.260 0.318 0.386 0.439 0.542 66 0.177 0.228 0.279 0.340 0.386 0.482 67 0.151 0.194 0.238 0.292 0.331 0.420 68 0.139 0.179 0.220 0.270 0.306 0.391 69 0.190 0.245 0.299 0.364 0.414 0.513 70 0.140 0.182 0.223 0.274 0.310 0.396 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-14 Service Retirement Public Agency Miscellaneous 2% @ 62 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.000 0.000 0.000 0.000 0.000 0.000 51 0.000 0.000 0.000 0.000 0.000 0.000 52 0.010 0.013 0.016 0.019 0.022 0.024 53 0.013 0.017 0.020 0.024 0.027 0.031 54 0.021 0.027 0.033 0.039 0.045 0.050 55 0.044 0.056 0.068 0.080 0.092 0.104 56 0.030 0.039 0.047 0.055 0.063 0.072 57 0.036 0.046 0.056 0.066 0.076 0.086 58 0.046 0.059 0.072 0.085 0.097 0.110 59 0.058 0.074 0.089 0.105 0.121 0.137 60 0.062 0.078 0.095 0.112 0.129 0.146 61 0.062 0.079 0.096 0.113 0.129 0.146 62 0.097 0.123 0.150 0.176 0.202 0.229 63 0.089 0.113 0.137 0.162 0.186 0.210 64 0.094 0.120 0.145 0.171 0.197 0.222 65 0.129 0.164 0.199 0.234 0.269 0.304 66 0.105 0.133 0.162 0.190 0.219 0.247 67 0.105 0.133 0.162 0.190 0.219 0.247 68 0.105 0.133 0.162 0.190 0.219 0.247 69 0.105 0.133 0.162 0.190 0.219 0.247 70 0.125 0.160 0.194 0.228 0.262 0.296 Service Retirement Public Agency Fire ½ @ 55 and 2% @ 55 Age 50 51 52 53 54 55 Rate 0.0159 0.0000 0.0344 0.0199 0.0413 0.0751 Age 56 57 58 59 60 Rate 0.1108 0.0000 0.0950 0.0441 1.00000 Public Agency Police ½ @ 55 and 2% @ 55 Age 50 51 52 53 54 55 Rate 0.0255 0.0000 0.0164 0.0272 0.0095 0.1667 Age 56 57 58 59 60 Rate 0.0692 0.0511 0.0724 0.0704 1.0000 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-15 Service Retirement Public Agency Police 2% @ 50 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.005 0.005 0.005 0.005 0.017 0.089 51 0.005 0.005 0.005 0.005 0.017 0.087 52 0.018 0.018 0.018 0.018 0.042 0.132 53 0.044 0.044 0.044 0.044 0.090 0.217 54 0.065 0.065 0.065 0.065 0.126 0.283 55 0.086 0.086 0.086 0.086 0.166 0.354 56 0.067 0.067 0.067 0.067 0.130 0.289 57 0.066 0.066 0.066 0.066 0.129 0.288 58 0.066 0.066 0.066 0.066 0.129 0.288 59 0.139 0.139 0.139 0.139 0.176 0.312 60 0.123 0.123 0.123 0.123 0.153 0.278 61 0.110 0.110 0.110 0.110 0.138 0.256 62 0.130 0.130 0.130 0.130 0.162 0.291 63 0.130 0.130 0.130 0.130 0.162 0.291 64 0.130 0.130 0.130 0.130 0.162 0.291 65 1.000 1.000 1.000 1.000 1.000 1.000 These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety. Service Retirement Public Agency Fire 2% @ 50 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.009 0.009 0.009 0.009 0.013 0.020 51 0.013 0.013 0.013 0.013 0.020 0.029 52 0.018 0.018 0.018 0.018 0.028 0.042 53 0.052 0.052 0.052 0.052 0.079 0.119 54 0.067 0.067 0.067 0.067 0.103 0.154 55 0.089 0.089 0.089 0.089 0.136 0.204 56 0.083 0.083 0.083 0.083 0.127 0.190 57 0.082 0.082 0.082 0.082 0.126 0.189 58 0.088 0.088 0.088 0.088 0.136 0.204 59 0.074 0.074 0.074 0.074 0.113 0.170 60 0.100 0.100 0.100 0.100 0.154 0.230 61 0.072 0.072 0.072 0.072 0.110 0.165 62 0.099 0.099 0.099 0.099 0.152 0.228 63 0.114 0.114 0.114 0.114 0.175 0.262 64 0.114 0.114 0.114 0.114 0.175 0.262 65 1.000 1.000 1.000 1.000 1.000 1.000 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-16 Service Retirement Public Agency Police 3% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.004 0.004 0.004 0.004 0.015 0.086 51 0.014 0.014 0.014 0.014 0.034 0.114 52 0.026 0.026 0.026 0.026 0.060 0.154 53 0.038 0.038 0.038 0.038 0.083 0.188 54 0.071 0.071 0.071 0.071 0.151 0.292 55 0.061 0.061 0.061 0.061 0.131 0.261 56 0.072 0.072 0.072 0.072 0.153 0.295 57 0.065 0.065 0.065 0.065 0.140 0.273 58 0.066 0.066 0.066 0.066 0.142 0.277 59 0.118 0.118 0.118 0.118 0.247 0.437 60 0.065 0.065 0.065 0.065 0.138 0.272 61 0.084 0.084 0.084 0.084 0.178 0.332 62 0.108 0.108 0.108 0.108 0.226 0.405 63 0.084 0.084 0.084 0.084 0.178 0.332 64 0.084 0.084 0.084 0.084 0.178 0.332 65 1.000 1.000 1.000 1.000 1.000 1.000 These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety. Service Retirement Public Agency Fire 3% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.001 0.001 0.001 0.006 0.016 0.069 51 0.002 0.002 0.002 0.006 0.018 0.071 52 0.012 0.012 0.012 0.021 0.040 0.098 53 0.032 0.032 0.032 0.049 0.085 0.149 54 0.057 0.057 0.057 0.087 0.144 0.217 55 0.073 0.073 0.073 0.109 0.179 0.259 56 0.064 0.064 0.064 0.097 0.161 0.238 57 0.063 0.063 0.063 0.095 0.157 0.233 58 0.065 0.065 0.065 0.099 0.163 0.241 59 0.088 0.088 0.088 0.131 0.213 0.299 60 0.105 0.105 0.105 0.155 0.251 0.344 61 0.118 0.118 0.118 0.175 0.282 0.380 62 0.087 0.087 0.087 0.128 0.210 0.295 63 0.067 0.067 0.067 0.100 0.165 0.243 64 0.067 0.067 0.067 0.100 0.165 0.243 65 1.000 1.000 1.000 1.000 1.000 1.000 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-17 Service Retirement Public Agency Police 3% @ 50 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.050 0.050 0.050 0.099 0.240 0.314 51 0.034 0.034 0.034 0.072 0.198 0.260 52 0.033 0.033 0.033 0.071 0.198 0.259 53 0.039 0.039 0.039 0.080 0.212 0.277 54 0.045 0.045 0.045 0.092 0.229 0.300 55 0.052 0.052 0.052 0.105 0.248 0.323 56 0.042 0.042 0.042 0.087 0.221 0.289 57 0.043 0.043 0.043 0.088 0.223 0.292 58 0.054 0.054 0.054 0.109 0.255 0.333 59 0.054 0.054 0.054 0.108 0.253 0.330 60 0.060 0.060 0.060 0.121 0.272 0.355 61 0.048 0.048 0.048 0.098 0.238 0.311 62 0.061 0.061 0.061 0.122 0.274 0.357 63 0.057 0.057 0.057 0.115 0.263 0.343 64 0.069 0.069 0.069 0.137 0.296 0.385 65 1.000 1.000 1.000 1.000 1.000 1.000 These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety. Service Retirement Public Agency Fire 3% @ 50 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.020 0.020 0.020 0.040 0.130 0.192 51 0.008 0.008 0.008 0.023 0.107 0.164 52 0.023 0.023 0.023 0.043 0.136 0.198 53 0.023 0.023 0.023 0.043 0.135 0.198 54 0.027 0.027 0.027 0.048 0.143 0.207 55 0.043 0.043 0.043 0.070 0.174 0.244 56 0.053 0.053 0.053 0.085 0.196 0.269 57 0.054 0.054 0.054 0.086 0.197 0.271 58 0.052 0.052 0.052 0.084 0.193 0.268 59 0.075 0.075 0.075 0.116 0.239 0.321 60 0.065 0.065 0.065 0.102 0.219 0.298 61 0.076 0.076 0.076 0.117 0.241 0.324 62 0.068 0.068 0.068 0.106 0.224 0.304 63 0.027 0.027 0.027 0.049 0.143 0.208 64 0.094 0.094 0.094 0.143 0.277 0.366 65 1.000 1.000 1.000 1.000 1.000 1.000 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-18 Service Retirement Public Agency Police 2% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.011 0.011 0.011 0.011 0.020 0.036 51 0.009 0.009 0.009 0.009 0.016 0.028 52 0.018 0.018 0.018 0.018 0.034 0.060 53 0.037 0.037 0.037 0.037 0.067 0.119 54 0.049 0.049 0.049 0.049 0.089 0.159 55 0.063 0.063 0.063 0.063 0.115 0.205 56 0.045 0.045 0.045 0.045 0.082 0.146 57 0.064 0.064 0.064 0.064 0.117 0.209 58 0.047 0.047 0.047 0.047 0.086 0.154 59 0.105 0.105 0.105 0.105 0.130 0.191 60 0.105 0.105 0.105 0.105 0.129 0.188 61 0.105 0.105 0.105 0.105 0.129 0.188 62 0.105 0.105 0.105 0.105 0.129 0.188 63 0.105 0.105 0.105 0.105 0.129 0.188 64 0.105 0.105 0.105 0.105 0.129 0.188 65 1.000 1.000 1.000 1.000 1.000 1.000 These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety. Service Retirement Public Agency Fire 2% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.005 0.005 0.005 0.005 0.008 0.012 51 0.006 0.006 0.006 0.006 0.009 0.013 52 0.012 0.012 0.012 0.012 0.019 0.028 53 0.033 0.033 0.033 0.033 0.050 0.075 54 0.045 0.045 0.045 0.045 0.069 0.103 55 0.061 0.061 0.061 0.061 0.094 0.140 56 0.055 0.055 0.055 0.055 0.084 0.126 57 0.081 0.081 0.081 0.081 0.125 0.187 58 0.059 0.059 0.059 0.059 0.091 0.137 59 0.055 0.055 0.055 0.055 0.084 0.126 60 0.085 0.085 0.085 0.085 0.131 0.196 61 0.085 0.085 0.085 0.085 0.131 0.196 62 0.085 0.085 0.085 0.085 0.131 0.196 63 0.085 0.085 0.085 0.085 0.131 0.196 64 0.085 0.085 0.085 0.085 0.131 0.196 65 1.000 1.000 1.000 1.000 1.000 1.000 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-19 Service Retirement Public Agency Police 2.5% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.014 0.014 0.014 0.014 0.025 0.045 51 0.012 0.012 0.012 0.012 0.021 0.038 52 0.025 0.025 0.025 0.025 0.046 0.081 53 0.047 0.047 0.047 0.047 0.086 0.154 54 0.063 0.063 0.063 0.063 0.115 0.205 55 0.076 0.076 0.076 0.076 0.140 0.249 56 0.054 0.054 0.054 0.054 0.099 0.177 57 0.071 0.071 0.071 0.071 0.130 0.232 58 0.057 0.057 0.057 0.057 0.103 0.184 59 0.126 0.126 0.126 0.126 0.156 0.229 60 0.126 0.126 0.126 0.126 0.155 0.226 61 0.126 0.126 0.126 0.126 0.155 0.226 62 0.126 0.126 0.126 0.126 0.155 0.226 63 0.126 0.126 0.126 0.126 0.155 0.226 64 0.126 0.126 0.126 0.126 0.155 0.226 65 1.000 1.000 1.000 1.000 1.000 1.000 These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety. Service Retirement Public Agency Fire 2.5% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.007 0.007 0.007 0.007 0.010 0.015 51 0.008 0.008 0.008 0.008 0.012 0.018 52 0.016 0.016 0.016 0.016 0.025 0.038 53 0.042 0.042 0.042 0.042 0.064 0.096 54 0.057 0.057 0.057 0.057 0.088 0.132 55 0.074 0.074 0.074 0.074 0.114 0.170 56 0.066 0.066 0.066 0.066 0.102 0.153 57 0.090 0.090 0.090 0.090 0.139 0.208 58 0.071 0.071 0.071 0.071 0.110 0.164 59 0.066 0.066 0.066 0.066 0.101 0.151 60 0.102 0.102 0.102 0.102 0.157 0.235 61 0.102 0.102 0.102 0.102 0.157 0.236 62 0.102 0.102 0.102 0.102 0.157 0.236 63 0.102 0.102 0.102 0.102 0.157 0.236 64 0.102 0.102 0.102 0.102 0.157 0.236 65 1.000 1.000 1.000 1.000 1.000 1.000 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-20 Service Retirement Public Agency Police 2.7% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.0138 0.0138 0.0138 0.0138 0.0253 0.0451 51 0.0123 0.0123 0.0123 0.0123 0.0226 0.0402 52 0.0249 0.0249 0.0249 0.0249 0.0456 0.0812 53 0.0497 0.0497 0.0497 0.0497 0.0909 0.1621 54 0.0662 0.0662 0.0662 0.0662 0.1211 0.2160 55 0.0854 0.0854 0.0854 0.0854 0.1563 0.2785 56 0.0606 0.0606 0.0606 0.0606 0.1108 0.1975 57 0.0711 0.0711 0.0711 0.0711 0.1300 0.2318 58 0.0628 0.0628 0.0628 0.0628 0.1149 0.2049 59 0.1396 0.1396 0.1396 0.1396 0.1735 0.2544 60 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 61 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 62 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 63 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 64 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety. Service Retirement Public Agency Fire 2.7% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.0065 0.0065 0.0065 0.0065 0.0101 0.0151 51 0.0081 0.0081 0.0081 0.0081 0.0125 0.0187 52 0.0164 0.0164 0.0164 0.0164 0.0254 0.0380 53 0.0442 0.0442 0.0442 0.0442 0.0680 0.1018 54 0.0606 0.0606 0.0606 0.0606 0.0934 0.1397 55 0.0825 0.0825 0.0825 0.0825 0.1269 0.1900 56 0.0740 0.0740 0.0740 0.0740 0.1140 0.1706 57 0.0901 0.0901 0.0901 0.0901 0.1387 0.2077 58 0.0790 0.0790 0.0790 0.0790 0.1217 0.1821 59 0.0729 0.0729 0.0729 0.0729 0.1123 0.1681 60 0.1135 0.1135 0.1135 0.1135 0.1747 0.2615 61 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 62 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 63 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 64 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-21 Service Retirement Schools 2% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.005 0.009 0.013 0.015 0.016 0.018 51 0.005 0.010 0.014 0.017 0.019 0.021 52 0.006 0.012 0.017 0.020 0.022 0.025 53 0.007 0.014 0.019 0.023 0.026 0.029 54 0.012 0.024 0.033 0.039 0.044 0.049 55 0.024 0.048 0.067 0.079 0.088 0.099 56 0.020 0.039 0.055 0.065 0.072 0.081 57 0.021 0.042 0.059 0.070 0.078 0.087 58 0.025 0.050 0.070 0.083 0.092 0.103 59 0.029 0.057 0.080 0.095 0.105 0.118 60 0.037 0.073 0.102 0.121 0.134 0.150 61 0.046 0.090 0.126 0.149 0.166 0.186 62 0.076 0.151 0.212 0.250 0.278 0.311 63 0.069 0.136 0.191 0.225 0.251 0.281 64 0.067 0.133 0.185 0.219 0.244 0.273 65 0.091 0.180 0.251 0.297 0.331 0.370 66 0.072 0.143 0.200 0.237 0.264 0.295 67 0.067 0.132 0.185 0.218 0.243 0.272 68 0.060 0.118 0.165 0.195 0.217 0.243 69 0.067 0.133 0.187 0.220 0.246 0.275 70 0.066 0.131 0.183 0.216 0.241 0.270 Miscellaneous Internal Revenue Code Section 415 The limitations on benefits imposed by Internal Revenue Code Section 415 are taken into account in this valuation. Each year the impact of any changes in this limitation since the prior valuation is included and amortized as part of the actuarial gain or loss base. This results in lower contributions for those employers contributing to the Replacement Benefit Fund and protects CalPERS from prefunding expected benefits in excess of limits imposed by federal tax law. Internal Revenue Code Section 401(a)(17) The limitations on compensation imposed by Internal Revenue Code Section 401(a)(17) are taken into account in this valuation. Each year, the impact of any changes in the compensation limitation since the prior valuation is included and amortized as part of the actuarial gain or loss base. The compensation limit for classic members for the 2015 calendar year is $265,000. APPENDIX B PRINCIPAL PLAN PROVISIONS CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-1 The following is a description of the principal plan provisions used in calculating costs and liabilities. We have indicated whether a plan provision is standard or optional. Standard benefits are applicable to all members while optional benefits vary among employers. Optional benefits that apply to a single period of time, such as Golden Handshakes, have not been included. Many of the statements in this summary are general in nature, and are intended to provide an easily understood summary of the Public Employees’ Retirement Law. The law itself governs in all situations. Service Retirement Eligibility A classic CalPERS member or PEPRA Safety member becomes eligible for Service Retirement upon attainment of age 50 with at least 5 years of credited service (total service across all CalPERS employers, and with certain other retirement systems with which CalPERS has reciprocity agreements). For employees hired into a plan with the 1.5 percent at 65 formula, eligibility for service retirement is age 55 with at least 5 years of service. PEPRA miscellaneous members become eligible for service retirement upon attainment of age 52 with at least 5 years of service. Benefit The service retirement benefit is a monthly allowance equal to the product of the benefit factor, years of service, and final compensation. The benefit factor depends on the benefit formula specified in your agency’s contract. The table below shows the factors for each of the available formulas. Factors vary by the member’s age at retirement. Listed are the factors for retirement at whole year ages: Miscellaneous Plan Formulas Retirement Age 1.5% at 65 2% at 60 2% at 55 2.5% at 55 2.7% at 55 3% at 60 PEPRA 2% at 62 50 0.5000% 1.092% 1.426% 2.000% 2.000% 2.000% N/A 51 0.5667% 1.156% 1.522% 2.100% 2.140% 2.100% N/A 52 0.6334% 1.224% 1.628% 2.200% 2.280% 2.200% 1.000% 53 0.7000% 1.296% 1.742% 2.300% 2.420% 2.300% 1.100% 54 0.7667% 1.376% 1.866% 2.400% 2.560% 2.400% 1.200% 55 0.8334% 1.460% 2.000% 2.500% 2.700% 2.500% 1.300% 56 0.9000% 1.552% 2.052% 2.500% 2.700% 2.600% 1.400% 57 0.9667% 1.650% 2.104% 2.500% 2.700% 2.700% 1.500% 58 1.0334% 1.758% 2.156% 2.500% 2.700% 2.800% 1.600% 59 1.1000% 1.874% 2.210% 2.500% 2.700% 2.900% 1.700% 60 1.1667% 2.000% 2.262% 2.500% 2.700% 3.000% 1.800% 61 1.2334% 2.134% 2.314% 2.500% 2.700% 3.000% 1.900% 62 1.3000% 2.272% 2.366% 2.500% 2.700% 3.000% 2.000% 63 1.3667% 2.418% 2.418% 2.500% 2.700% 3.000% 2.100% 64 1.4334% 2.418% 2.418% 2.500% 2.700% 3.000% 2.200% 65 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.300% 66 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.400% 67 & up 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.500% CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-2 Safety Plan Formulas Retirement Age ½ at 55 * 2% at 55 2% at 50 3% at 55 3% at 50 50 1.783% 1.426% 2.000% 2.400% 3.000% 51 1.903% 1.522% 2.140% 2.520% 3.000% 52 2.035% 1.628% 2.280% 2.640% 3.000% 53 2.178% 1.742% 2.420% 2.760% 3.000% 54 2.333% 1.866% 2.560% 2.880% 3.000% 55 & Up 2.500% 2.000% 2.700% 3.000% 3.000% * For this formula, the benefit factor also varies by entry age. The factors shown are for members with an entry age of 35 or greater. If entry age is less than 35, then the age 55 benefit factor is 50 percent divided by the difference between age 55 and entry age. The benefit factor for ages prior to age 55 is the same proportion of the age 55 benefit factor as in the above table. PEPRA Safety Plan Formulas Retirement Age 2% at 57 2.5% at 57 2.7% at 57 50 1.426% 2.000% 2.000% 51 1.508% 2.071% 2.100% 52 1.590% 2.143% 2.200% 53 1.672% 2.214% 2.300% 54 1.754% 2.286% 2.400% 55 1.836% 2.357% 2.500% 56 1.918% 2.429% 2.600% 57 & Up 2.000% 2.500% 2.700% The years of service is the amount credited by CalPERS to a member while he or she is employed in this group (or for other periods that are recognized under the employer’s contract with CalPERS). For a member who has earned service with multiple CalPERS employers, the benefit from each employer is calculated separately according to each employer’s contract, and then added together for the total allowance. An agency may contract for an optional benefit where any unused sick leave accumulated at the time of retirement will be converted to credited service at a rate of 0.004 years of service for each day of sick leave. The final compensation is the monthly average of the member’s highest 36 or 12 consecutive months’ full-time equivalent monthly pay (no matter which CalPERS employer paid this compensation). The standard benefit is 36 months. Employers had the option of providing a final compensation equal to the highest 12 consecutive months for classic plans only. Final compensation must be defined by the highest 36 consecutive months’ pay under the 1.5% at 65 formula. PEPRA members have a cap on the annual salary that can be used to calculate final compensation for all new members based on the Social Security contribution and benefit base. For employees that participate in Social Security this cap is $117,020 for 2015 and for those employees that do not participate in Social Security the cap for 2015 is $140,424. Adjustments to the caps are permitted annually based on changes to the CPI for all urban consumers. Employees must be covered by Social Security with the 1.5% at 65 formula. Social Security is optional for all other benefit formulas. For employees covered by Social Security, the modified formula is the standard benefit. Under this type of formula, the final compensation is offset by $133.33 (or by one third if the final compensation is less than $400). Employers may contract for the full benefit with Social Security that will eliminate the offset applicable to the final compensation. For employees not covered by Social Security, the full benefit is paid with CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-3 no offsets. Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 if members are not covered by Social Security or $513 if members are covered by Social Security. The miscellaneous and PEPRA safety service retirement benefit is not capped. The classic service retirement benefit is capped at 90 percent of final compensation. Vested Deferred Retirement Eligibility for Deferred Status A CalPERS member becomes eligible for a deferred vested retirement benefit when he or she leaves employment, keeps his or her contribution account balance on deposit with CalPERS, and has earned at least 5 years of credited service (total service across all CalPERS employers, and with certain other retirement systems with which CalPERS has reciprocity agreements). Eligibility to Start Receiving Benefits The CalPERS classic members and PEPRA safety members become eligible to receive the deferred retirement benefit upon satisfying the eligibility requirements for deferred status and upon attainment of age 50 (55 for employees hired into a 1.5% @ 65 plan). PEPRA miscellaneous members become eligible to receive the deferred retirement benefit upon satisfying the eligibility requirements for deferred status and upon attainment of age 52. Benefit The vested deferred retirement benefit is the same as the service retirement benefit, where the benefit factor is based on the member’s age at allowance commencement. For members who have earned service with multiple CalPERS employers, the benefit from each employer is calculated separately according to each employer’s contract, and then added together for the total allowance. Non-Industrial (Non-Job Related) Disability Retirement Eligibility A CalPERS member is eligible for Non-Industrial Disability Retirement if he or she becomes disabled and has at least 5 years of credited service (total service across all CalPERS employers, and with certain other retirement systems with which CalPERS has reciprocity agreements). There is no special age requirement. Disabled means the member is unable to perform his or her job because of an illness or injury, which is expected to be permanent or to last indefinitely. The illness or injury does not have to be job related. A CalPERS member must be actively employed by any CalPERS employer at the time of disability in order to be eligible for this benefit. Standard Benefit The standard Non-Industrial Disability Retirement benefit is a monthly allowance equal to 1.8 percent of final compensation, multiplied by service, which is determined as follows: Service is CalPERS credited service, for members with less than 10 years of service or greater than 18.518 years of service; or Service is CalPERS credited service plus the additional number of years that the member would have worked until age 60, for members with at least 10 years but not more than 18.518 years of service. The maximum benefit in this case is 33 1/3 percent of final compensation. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-4 Improved Benefit Employers have the option of providing the improved Non-Industrial Disability Retirement benefit. This benefit provides a monthly allowance equal to 30 percent of final compensation for the first 5 years of service, plus 1 percent for each additional year of service to a maximum of 50 percent of final compensation. Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a disability benefit. Members eligible to retire, and who have attained the normal retirement age determined by their service retirement benefit formula, will receive the same dollar amount for disability retirement as that payable for service retirement. For members who have earned service with multiple CalPERS employers, the benefit attributed to each employer is the total disability allowance multiplied by the ratio of service with a particular employer to the total CalPERS service. Industrial (Job Related) Disability Retirement All safety members have this benefit. For miscellaneous members, employers have the option of providing this benefit. An employer may choose to provide the increased benefit option or the improved benefit option. Eligibility An employee is eligible for Industrial Disability Retirement if he or she becomes disabled while working, where disabled means the member is unable to perform the duties of the job because of a work-related illness or injury, which is expected to be permanent or to last indefinitely. A CalPERS member who has left active employment within this group is not eligible for this benefit, except to the extent described below. Standard Benefit The standard Industrial Disability Retirement benefit is a monthly allowance equal to 50 percent of final compensation. Increased Benefit (75 percent of Final Compensation) The increased Industrial Disability Retirement benefit is a monthly allowance equal to 75 percent final compensation for total disability. Improved Benefit (50 percent to 90 percent of Final Compensation) The improved Industrial Disability Retirement benefit is a monthly allowance equal to the Workman’s Compensation Appeals Board permanent disability rate percentage (if 50 percent or greater, with a maximum of 90 percent) times the final compensation. For a CalPERS member not actively employed in this group who became disabled while employed by some other CalPERS employer, the benefit is a return of accumulated member contributions with respect to employment in this group. With the standard or increased benefit, a member may also choose to receive the annuitization of the accumulated member contributions. If a member is eligible for service retirement and if the service retirement benefit is more than the industrial disability retirement benefit, the member may choose to receive the larger benefit. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-5 Post-Retirement Death Benefit Standard Lump Sum Payment Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree’s designated survivor(s), or to the retiree’s estate. Improved Lump Sum Payment Employers have the option of providing an improved lump sum death benefit of $600, $2,000, $3,000, $4,000 or $5,000. Form of Payment for Retirement Allowance Standard Form of Payment Generally, the retirement allowance is paid to the retiree in the form of an annuity for as long as he or she is alive. The retiree may choose to provide for a portion of his or her allowance to be paid to any designated beneficiary after the retiree’s death. CalPERS provides for a variety of such benefit options, which the retiree pays for by taking a reduction in his or her retirement allowance. Such reduction takes into account the amount to be provided to the beneficiary and the probable duration of payments (based on the ages of the member and beneficiary) made subsequent to the member’s death. Improved Form of Payment (Post-Retirement Survivor Allowance) Employers have the option to contract for the post-retirement survivor allowance. For retirement allowances with respect to service subject to the modified formula, 25 percent of the retirement allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. For retirement allowances with respect to service subject to the full or supplemental formula, 50 percent of the retirement allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. This additional benefit is referred to as post-retirement survivor allowance (PRSA) or simply as survivor continuance. In other words, 25 percent or 50 percent of the allowance, the continuance portion, is paid to the retiree for as long as he or she is alive, and that same amount is continued to the retiree’s spouse (or if no eligible spouse, to unmarried child(ren) until they attain age 18; or, if no eligible child(ren), to a qualifying dependent parent) for the rest of his or her lifetime. This benefit will not be discontinued in the event the spouse remarries. The remaining 75 percent or 50 percent of the retirement allowance, which may be referred to as the option portion of the benefit, is paid to the retiree as an annuity for as long as he or she is alive. Or, the retiree may choose to provide for some of this option portion to be paid to any designated beneficiary after the retiree’s death. Benefit options applicable to the option portion are the same as those offered with the standard form. The reduction is calculated in the same manner but is applied only to the option portion. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-6 Pre-Retirement Death Benefits Basic Death Benefit This is a standard benefit. Eligibility An employee’s beneficiary (or estate) may receive the basic death benefit if the member dies while actively employed. A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be eligible for this benefit. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this basic death benefit. Benefit The basic death benefit is a lump sum in the amount of the member’s accumulated contributions, where interest is currently credited at 7.5 percent per year, plus a lump sum in the amount of one month's salary for each completed year of current service, up to a maximum of six months' salary. For purposes of this benefit, one month's salary is defined as the member's average monthly full-time rate of compensation during the 12 months preceding death. 1957 Survivor Benefit This is a standard benefit. Eligibility An employee’s eligible survivor(s) may receive the 1957 Survivor benefit if the member dies while actively employed, has attained at least age 50 for classic and safety PEPRA members and age 52 for miscellaneous PEPRA members, and has at least 5 years of credited service (total service across all CalPERS employers and with certain other retirement systems with which CalPERS has reciprocity agreements). A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married at least one year before death or, if there is no eligible spouse, to the member's unmarried child(ren) under age 18. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this 1957 Survivor benefit. Benefit The 1957 Survivor benefit is a monthly allowance equal to one-half of the unmodified service retirement benefit that the member would have been entitled to receive if the member had retired on the date of his or her death. If the benefit is payable to the spouse, the benefit is discontinued upon the death of the spouse. If the benefit is payable to dependent child(ren), the benefit will be discontinued upon death or attainment of age 18, unless the child(ren) is disabled. The total amount paid will be at least equal to the basic death benefit. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-7 Optional Settlement 2W Death Benefit This is an optional benefit. Eligibility An employee’s eligible survivor may receive the Optional Settlement 2W Death benefit if the member dies while actively employed, has attained at least age 50 for classic and safety PEPRA members and age 52 for miscellaneous PEPRA members, and has at least 5 years of credited service (total service across all CalPERS employers and with certain other retirement systems with which CalPERS has reciprocity agreements). A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married at least one year before death. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this Optional Settlement 2W Death benefit. Benefit The Optional Settlement 2W Death benefit is a monthly allowance equal to the service retirement benefit that the member would have received had the member retired on the date of his or her death and elected Optional Settlement 2W. (A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that it will continue to be paid after his or her death to a surviving beneficiary.) The allowance is payable as long as the surviving spouse lives, at which time it is continued to any unmarried child(ren) under age 18, if applicable. The total amount paid will be at least equal to the basic death benefit. Special Death Benefit This is a standard benefit for safety members. An employer may elect to provide this benefit for miscellaneous members. Eligibility An employee’s eligible survivor(s) may receive the special death benefit if the member dies while actively employed and the death is job-related. A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried child(ren) under age 22. An eligible survivor who chooses to receive this benefit will not receive any other death benefit. Benefit The special death benefit is a monthly allowance equal to 50 percent of final compensation, and will be increased whenever the compensation paid to active employees is increased but ceasing to increase when the member would have attained age 50. The allowance is payable to the surviving spouse until death at which time the allowance is continued to any unmarried child(ren) under age 22. There is a guarantee that the total amount paid will at least equal the basic death benefit. If the member’s death is the result of an accident or injury caused by external violence or physical force incurred in the performance of the member’s duty, and there are eligible surviving child(ren) (eligible means unmarried child(ren) under age 22) in addition to an eligible spouse, then an additional monthly allowance is paid equal to the following: if 1 eligible child: 12.5 percent of final compensation if 2 eligible children: 20.0 percent of final compensation if 3 or more eligible children: 25.0 percent of final compensation CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-8 Alternate Death Benefit for Local Fire Members This is an optional benefit available only to local fire members. Eligibility An employee’s eligible survivor(s) may receive the alternate death benefit in lieu of the basic death benefit or the 1957 Survivor benefit if the member dies while actively employed and has at least 20 years of total CalPERS service. A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried child(ren) under age 18. Benefit The Alternate Death benefit is a monthly allowance equal to the service retirement benefit that the member would have received had the member retired on the date of his or her death and elected Optional Settlement 2W. (A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that it will continue to be paid after his or her death to a surviving beneficiary.) If the member has not yet attained age 50, the benefit is equal to that which would be payable if the member had retired at age 50, based on service credited at the time of death. The allowance is payable as long as the surviving spouse lives, at which time it is continued to any unmarried child(ren) under age 18, if applicable. The total amount paid will be at least equal to the basic death benefit. Cost-of-Living Adjustments (COLA) Standard Benefit Retirement and survivor allowances are adjusted each year in May for cost of living, beginning the second calendar year after the year of retirement. The standard cost-of-living adjustment (COLA) is 2 percent. Annual adjustments are calculated by first determining the lesser of 1) 2 percent compounded from the end of the year of retirement or 2) actual rate of inflation. The resulting increase is divided by the total increase provided in prior years. For any particular year, the COLA adjustment may be less than 2 percent (when the rate of inflation is low), may be greater than the rate of inflation (when the rate of inflation is low after several years of high inflation) or may even be greater than 2 percent (when inflation is high after several years of low inflation). Improved Benefit Employers have the option of providing a COLA of 3 percent, 4 percent, or 5 percent, determined in the same manner as described above for the standard 2 percent COLA. An improved COLA is not available with the 1.5% at 65 formula. Purchasing Power Protection Allowance (PPPA) Retirement and survivor allowances are protected against inflation by PPPA. PPPA benefits are cost-of-living adjustments that are intended to maintain an individual’s allowance at 80 percent of the initial allowance at retirement adjusted for inflation since retirement. The PPPA benefit will be coordinated with other cost-of-living adjustments provided under the plan. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-9 Employee Contributions Each employee contributes toward his or her retirement based upon the retirement formula. The standard employee contribution is as described below. The percent contributed below the monthly compensation breakpoint is 0 percent. The monthly compensation breakpoint is $0 for full and supplemental formula members and $133.33 for employees covered by the modified formula. The percent contributed above the monthly compensation breakpoint depends upon the benefit formula, as shown in the table below. Benefit Formula Percent Contributed above the Breakpoint Miscellaneous, 1.5% at 65 2% Miscellaneous, 2% at 60 7% Miscellaneous, 2% at 55 7% Miscellaneous, 2.5% at 55 8% Miscellaneous, 2.7% at 55 8% Miscellaneous, 3% at 60 8% Miscellaneous, 2% at 62 50% of the Total Normal Cost Miscellaneous, 1.5% at 65 50% of the Total Normal Cost Safety, 1/2 at 55 Varies by entry age Safety, 2% at 55 7% Safety, 2% at 50 9% Safety, 3% at 55 9% Safety, 3% at 50 9% Safety, 2% at 57 50% of the Total Normal Cost Safety, 2.5% at 57 50% of the Total Normal Cost Safety, 2.7% at 57 50% of the Total Normal Cost The employer may choose to “pick-up” these contributions for classic members (Employer Paid Member Contributions or EPMC). EPMC is prohibited for new PEPRA members. An employer may also include Employee Cost Sharing in the contract, where employees agree to share the cost of the employer contribution. These contributions are paid in addition to the member contribution. Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 and the contribution rate is 6 percent if members are not covered by Social Security. If members are covered by Social Security, the offset is $513 and the contribution rate is 5 percent. Refund of Employee Contributions If the member’s service with the employer ends, and if the member does not satisfy the eligibility conditions for any of the retirement benefits above, the member may elect to receive a refund of his or her employee contributions, which are credited with 6 percent interest compounded annually. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-10 1959 Survivor Benefit This is a pre-retirement death benefit available only to members not covered by Social Security. Any agency joining CalPERS subsequent to 1993 is required to provide this benefit if the members are not covered by Social Security. The benefit is optional for agencies joining CalPERS prior to 1994. Levels 1, 2 and 3 are now closed. Any new agency or any agency wishing to add this benefit or increase the current level may only choose the 4th or Indexed Level. This benefit is not included in the results presented in this valuation. More information on this benefit is available on the CalPERS website at www.calpers.ca.gov. APPENDIX C PARTICIPANT DATA SUMMARY OF VALUATION DATA ACTIVE MEMBERS TRANSFERRED AND TERMINATED MEMBERS RETIRED MEMBERS AND BENEFICIARIES CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX C MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PARTICIPANT DATA C-1 Summary of Valuation Data June 30, 2014 June 30, 2015 1. Active Members a) Counts 802 796 b) Average Attained Age 46.15 46.35 c) Average Entry Age to Rate Plan 35.01 35.01 d) Average Years of Service 11.14 11.34 e) Average Annual Covered Pay $ 84,542 $ 89,918 f) Annual Covered Payroll 67,802,942 71,574,823 g) Projected Annual Payroll for Contribution Year 74,090,105 78,211,742 h) Present Value of Future Payroll 520,997,982 549,799,999 2. Transferred Members a) Counts 328 347 b) Average Attained Age 46.00 46.34 c) Average Years of Service 3.55 3.55 d) Average Annual Covered Pay $ 109,195 $ 111,297 3. Terminated Members a) Counts 335 367 b) Average Attained Age 47.91 47.69 c) Average Years of Service 3.27 3.30 d) Average Annual Covered Pay $ 63,122 $ 64,442 4. Retired Members and Beneficiaries a) Counts 1,011 1,027 b) Average Attained Age 68.88 69.31 c) Average Annual Benefits $ 31,739 $ 32,564 5. Active to Retired Ratio [(1a) / (4a)] 0.79 0.78 Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records may exist for those who have service in more than one valuation group. This does not result in double counting of liabilities. Average Annual Benefits represents benefit amounts payable by this plan only. Some members may have service with another agency and would therefore have a larger total benefit than would be included as part of the average shown here. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX C MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PARTICIPANT DATA C-2 Active Members Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records may exist for those who have service in more than one valuation group. This does not result in double counting of liabilities. Distribution of Active Members by Age and Service Years of Service at Valuation Date Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total 15-24 9 0 0 0 0 0 9 25-29 44 1 0 0 0 0 45 30-34 57 23 6 0 0 0 86 35-39 40 32 30 7 1 0 110 40-44 29 18 24 16 9 0 96 45-49 32 24 18 25 14 4 117 50-54 20 27 24 28 31 30 160 55-59 19 20 12 17 12 16 96 60-64 6 11 9 9 13 6 54 65 and over 2 3 3 5 5 5 23 All Ages 258 159 126 107 85 61 796 Distribution of Average Annual Salaries by Age and Service Years of Service at Valuation Date Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Average 15-24 $63,734 $0 $0 $0 $0 $0 $63,734 25-29 64,285 105,017 0 0 0 0 65,190 30-34 77,493 85,599 75,106 0 0 0 79,494 35-39 80,643 88,773 88,554 89,679 78,000 0 85,717 40-44 86,134 88,852 94,892 95,296 100,494 0 91,706 45-49 107,383 89,193 96,840 96,462 114,059 106,393 100,461 50-54 96,698 93,391 91,570 93,205 93,712 105,916 95,909 55-59 98,286 96,453 84,096 79,257 96,305 97,575 92,395 60-64 104,461 98,147 87,671 108,979 83,214 85,719 93,932 65 and over 101,497 22,869 68,330 85,486 90,936 119,627 85,080 All Ages $83,761 $89,644 $89,910 $92,798 $96,194 $102,897 $89,918 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX C MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PARTICIPANT DATA C-3 Transferred and Terminated Members Distribution of Transfers to Other CalPERS Plans by Age and Service Years of Service at Valuation Date Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total Average Salary 15-24 2 0 0 0 0 0 2 $78,045 25-29 13 0 0 0 0 0 13 87,759 30-34 37 4 1 0 0 0 42 95,661 35-39 35 8 0 0 0 0 43 106,188 40-44 45 8 0 2 0 0 55 104,754 45-49 42 12 2 3 1 0 60 112,866 50-54 46 14 4 1 1 0 66 120,586 55-59 21 5 5 1 1 0 33 139,634 60-64 16 9 1 1 0 0 27 112,626 65 and over 3 2 1 0 0 0 6 99,709 All Ages 260 62 14 8 3 0 347 111,297 Distribution of Terminated Participants with Funds on Deposit by Age and Service Years of Service at Valuation Date Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total Average Salary 15-24 4 0 0 0 0 0 4 $51,666 25-29 11 1 0 0 0 0 12 73,116 30-34 27 2 0 0 0 0 29 63,658 35-39 51 3 1 0 0 0 55 63,065 40-44 29 9 1 1 0 0 40 66,737 45-49 46 17 3 1 1 0 68 67,874 50-54 45 11 4 2 1 0 63 68,079 55-59 32 8 6 1 0 0 47 63,460 60-64 21 4 2 0 0 0 27 57,010 65 and over 17 3 1 1 0 0 22 52,539 All Ages 283 58 18 6 2 0 367 64,442 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX C MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PARTICIPANT DATA C-4 Retired Members and Beneficiaries Distribution of Retirees and Beneficiaries by Age and Retirement Type* Attained Age Service Retirement Non- Industrial Disability Industrial Disability Non- Industrial Death Industrial Death Death After Retirement Total Under 30 0 0 0 0 0 2 2 30-34 0 0 0 0 0 2 2 35-39 0 0 2 0 0 0 2 40-44 0 1 2 0 0 0 3 45-49 0 2 0 0 0 0 2 50-54 22 7 3 0 0 2 34 55-59 102 15 1 0 0 6 124 60-64 170 7 2 0 0 9 188 65-69 190 11 2 0 0 13 216 70-74 173 7 2 0 0 17 199 75-79 84 7 0 0 0 8 99 80-84 57 5 1 0 0 16 79 85 and Over 46 2 0 0 0 29 77 All Ages 844 64 15 0 0 104 1,027 Distribution of Average Annual Amounts for Retirees and Beneficiaries by Age and Retirement Type* Attained Age Service Retirement Non- Industrial Disability Industrial Disability Non- Industrial Death Industrial Death Death After Retirement Average Under 30 $0 $0 $0 $0 $0 $13,093 $13,093 30-34 0 0 0 0 0 11,344 11,344 35-39 0 0 239 0 0 0 239 40-44 0 8,919 264 0 0 0 3,149 45-49 0 10,962 0 0 0 0 10,962 50-54 32,965 12,110 514 0 0 21,847 25,154 55-59 40,509 13,928 1,582 0 0 13,661 35,681 60-64 42,190 18,227 6,724 0 0 38,456 40,741 65-69 38,117 17,463 9,268 0 0 21,262 35,784 70-74 30,994 14,489 1,830 0 0 19,278 29,119 75-79 34,358 20,078 0 0 0 31,212 33,094 80-84 26,848 17,102 4,176 0 0 22,269 25,017 85 and Over 20,765 17,621 0 0 0 22,652 21,394 All Ages $35,551 $15,733 $2,930 $0 $0 $22,958 $32,564 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX C MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PARTICIPANT DATA C-5 Retired Members and Beneficiaries (continued) Distribution of Retirees and Beneficiaries by Years Retired and Retirement Type* Years Retired Service Retirement Non- Industrial Disability Industrial Disability Non- Industrial Death Industrial Death Death After Retirement Total Under 5 Yrs 184 4 6 0 0 37 231 5-9 305 12 1 0 0 26 344 10-14 158 12 2 0 0 16 188 15-19 97 10 6 0 0 12 125 20-24 56 19 0 0 0 6 81 25-29 28 3 0 0 0 6 37 30 and Over 16 4 0 0 0 1 21 All Years 844 64 15 0 0 104 1,027 Distribution of Average Annual Amounts for Retirees and Beneficiaries by Years Retired and Retirement Type* Years Retired Service Retirement Non- Industrial Disability Industrial Disability Non- Industrial Death Industrial Death Death After Retirement Average Under 5 Yrs $37,122 $12,390 $261 $0 $0 $26,848 $34,091 5-9 45,411 10,995 17,544 0 0 24,059 42,515 10-14 30,848 18,663 6,159 0 0 16,960 28,626 15-19 27,053 20,253 2,087 0 0 22,419 24,866 20-24 17,457 16,940 0 0 0 18,868 17,440 25-29 21,212 11,247 0 0 0 18,236 19,921 30 and Over 15,914 10,839 0 0 0 5,778 14,465 All Years $35,551 $15,733 $2,930 $0 $0 $22,958 $32,564 * Counts of members do not include alternate payees receiving benefits while the member is still working. Therefore, the total counts may not match information on page 25 of the report. Multiple records may exist for those who have service in more than one coverage group. This does not result in double counting of liabilities. APPENDIX D DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATES CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX D MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO PARTICIPANT DATA D-1 Development of PEPRA Members Contribution Rates The table below shows the determination of the Member contribution rates based on 50 percent of the Total Normal Cost for each respective plan on June 30, 2015. Assembly Bill (AB) 340 created PEPRA that implemented new benefit formulas and a final compensation period as well as new contribution requirements for new employees. In accordance with Section Code 7522.30(b), “new members … shall have an initial contribution rate of at least 50 percent of the normal cost rate.” The normal cost for the plan is dependent on the benefit levels, actuarial assumptions and demographics of the plan particularly the entry age into the plan. The PEPRA total normal cost for the plan is calculated assuming the entire active population, including classic members, is subject to the adopted PEPRA formula and applicable compensation limits. Should the total normal cost of the plan change by one percent or more from the base total normal cost established for the plan, the new member rate shall be 50% of the new normal cost rounded up to the next highest quarter percent. Basis for Current Rate Rates Effective July 1, 2017 Rate Plan Identifier Plan Total Normal Cost Member Rate Total Normal Cost Change Change Needed Member Rate 26004 Miscellaneous PEPRA 12.500% 6.250% 11.805% (0.695%) No 6.250% APPENDIX E GLOSSARY OF ACTUARIAL TERMS CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX E MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO GLOSSARY OF ACTUARIAL TERMS E-1 Glossary of Actuarial Terms Accrued Liability (also called Actuarial Accrued Liability or Entry Age Normal Accrued Liability) The total dollars needed as of the valuation date to fund all benefits earned in the past for current members. Actuarial Assumptions Assumptions made about certain events that will affect pension costs. Assumptions generally can be broken down into two categories: demographic and economic. Demographic assumptions include such things as mortality, disability and retirement rates. Economic assumptions include discount rate, salary growth and inflation. Actuarial Methods Procedures employed by actuaries to achieve certain funding goals of a pension plan. Actuarial methods include funding method, setting the length of time to fund the Accrued Liability and determining the Value of Assets. Actuarial Valuation The determination, as of a valuation date of the Normal Cost, Accrued liability, and related actuarial present values for a pension plan. These valuations are performed annually or when an employer is contemplating a change to their plan provisions. Amortization Bases Separate payment schedules for different portions of the Unfunded Liability. The total Unfunded Liability of a Risk Pool or non-pooled plan can be segregated by "cause,” creating “bases” and each such base will be separately amortized and paid for over a specific period of time. However, all bases are amortized using investment and payroll assumptions from the current valuation. This can be likened to a home having a first mortgage of 24 years remaining payments and a second mortgage that has 10 years remaining payments. Each base or each mortgage note has its own terms (payment period, principal, etc.) Generally, in an actuarial valuation, the separate bases consist of changes in unfunded liability due to contract amendments, actuarial assumption changes, actuarial methodology changes, and/or gains and losses. Payment periods are determined by Board policy and vary based on the cause of the change. Amortization Period The number of years required to pay off an Amortization Base. Classic Member (under PEPRA) A classic member is a member who joined CalPERS prior to January, 1, 2013 and who is not defined as a new member under PEPRA. (See definition of new member below) Discount Rate Assumption The actuarial assumption that was called “investment return” in earlier CalPERS reports or “actuarial interest rate” in Section 20014 of the California Public Employees’ Retirement Law (PERL). Entry Age The earliest age at which a plan member begins to accrue benefits under a defined benefit pension plan. In most cases, this is the age of the member on their date of hire. Entry Age Normal Cost Method An actuarial cost method designed to fund a member's total plan benefit over the course of his or her career. This method is designed to yield a rate expressed as a level percentage of payroll. (The assumed retirement age less the entry age is the amount of time required to fund a member’s total benefit. Generally, the older a member on the date of hire, the greater the entry age normal cost. This is mainly because there is less time to earn investment income to fund the future benefits.) CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX E MISCELLANEOUS PLAN OF THE CITY OF PALO ALTO GLOSSARY OF ACTUARIAL TERMS E-2 Fresh Start A Fresh Start is when multiple amortization bases are collapsed to one base and amortized together over a new funding period. Funded Status A measure of how well funded, or how "on track" a plan or risk pool is with respect to assets versus accrued liabilities. A ratio greater than 100% means the plan or risk pool has more assets than liabilities and a ratio less than 100% means liabilities are greater than assets. GASB 68 Statement No. 68 of the Governmental Accounting Standards Board. The accounting standard governing a state or local governmental employer’s accounting and financial reporting for pensions. GASB 68 replaces GASB 27 effective the first fiscal year beginning after June 15, 2014. New Member (under PEPRA) A new member includes an individual who becomes a member of a public retirement system for the first time on or after January 1, 2013, and who was not a member of another public retirement system prior to that date, and who is not subject to reciprocity with another public retirement system. Normal Cost The annual cost of service accrual for the upcoming fiscal year for active employees. The normal cost should be viewed as the long term contribution rate. Pension Actuary A business professional that is authorized by the Society of Actuaries, and the American Academy of Actuaries to perform the calculations necessary to properly fund a pension plan. PEPRA The California Public Employees’ Pension Reform Act of 2013 Prepayment Contribution A payment made by the employer to reduce or eliminate the year’s required employer contribution. Present Value of Benefits (PVB) The total dollars needed as of the valuation date to fund all benefits earned in the past or expected to be earned in the future for current members. Superfunded A condition existing when a plan’s Actuarial Value of Assets exceeds its Present Value of Benefits. Prior to the passage of PEPRA, when this condition existed on a given valuation date for a given plan, employee contributions for the rate year covered by that valuation could be waived. Unfunded Liability (UAL) When a plan or pool’s Value of Assets is less than its Accrued Liability, the difference is the plan or pool’s Unfunded Liability. If the Unfunded Liability is positive, the plan or pool will have to pay contributions exceeding the Normal Cost. California Public Employees’ Retirement System Actuarial Office P.O. Box 942701 Sacramento, CA 94229-2701 TTY: (916) 795-3240 (888) 225-7377 phone • (916) 795-2744 fax www.calpers.ca.gov August 2016 SAFETY PLAN OF THE CITY OF PALO ALTO (CalPERS ID: 6373437857) Annual Valuation Report as of June 30, 2015 Dear Employer, As an attachment to this letter, you will find a copy of the June 30, 2015 actuarial valuation report of your pension plan. Your 2015 actuarial valuation report contains important actuarial information about your pension plan at CalPERS. Your CalPERS staff actuary, whose signature appears in the “Actuarial Certification” section on page 1, is available to discuss the report with you after August 31, 2016. Future Contributions The exhibit below displays the minimum employer contributions for Fiscal Year 2017-18 and projected contributions for Fiscal Year 2018-19, before any cost sharing. The projected contributions for Fiscal Year 2018-19 are based on the most recent information available, including an estimate of the investment return for Fiscal Year 2015-16, namely 0.0 percent. For a projection of employer contributions beyond Fiscal Year 2018-19, please refer to the “Projected Employer Contributions” in the “Highlights and Executive Summary” section. This 5-year projection of future employer contributions supersedes any previous projections we have provided. The “Risk Analysis” section of the valuation report also contains estimated employer contributions in future years under a variety of investment return scenarios. Fiscal Year Employer Normal Cost Rate Employer Payment of Unfunded Liability Employee PEPRA Rate 2017-18 18.900% $7,127,885 10.75% 2018-19 (projected) 18.9% $8,469,191 N/A Member contributions other than cost sharing (whether paid by the employer or the employee) are in addition to the above. The employer contributions in this report do not reflect any cost sharing arrangement you may have with your employees. The estimates for Fiscal Year 2018-19 also assume that there are no future contract amendments and no liability gains or losses (such as larger than expected pay increases, more retirements than expected, etc.). This is a very important assumption because these gains and losses do occur and can have a significant impact on required contributions. These gains and losses cannot be predicted in advance so the projected employer contributions are just estimates. The actual required employer contributions for Fiscal Year 2018-19 will be provided in next year’s report. SAFETY PLAN OF THE CITY OF PALO ALTO (CalPERS ID: 6373437857) Annual Valuation Report as of June 30, 2015 Page 2 Changes since the Prior Year’s Valuation Beginning with Fiscal Year 2017-18 CalPERS will collect employer contributions toward the plan’s unfunded liability as dollar amounts instead of the prior method of a contribution rate. This change will address potential funding issues that could arise from a declining payroll or reduction in the number of active members in the plan. Funding the unfunded liability as a percentage of payroll could lead to the underfunding of the plans. Although employers will be invoiced at the beginning of the fiscal year for their unfunded liability payment the plan’s normal cost contribution will continue to be collected as a percentage of payroll. The CalPERS Board of Administration adopted a Risk Mitigation Policy which is designed to reduce funding risk over time. The policy establishes a mechanism whereby CalPERS investment performance that significantly outperforms the discount rate triggers adjustments to the discount rate, expected investment return and strategic asset allocation targets. A minimum excess investment return of 4% above the existing discount rate is necessary to cause a funding risk mitigation event. The policy has no impact on the current year valuation results but is expected to have an impact in future years. More details on the Risk Mitigation Policy can be found on our website. Besides the above noted changes, there may also be changes specific to the plan such as contract amendments and funding changes. Further descriptions of general changes are included in the “Highlights and Executive Summary” section and in Appendix A, “Actuarial Methods and Assumptions.” The effects of the changes on the required contributions are included in the “Reconciliation of Required Employer Contributions” section. We understand that you might have a number of questions about these results. While we are very interested in discussing these results with your agency, in the interest of allowing us to give every public agency their results, we ask that you wait until after August 31 to contact us with actuarial questions. If you have other questions, you may call the Customer Contact Center at (888)-CalPERS or (888-225-7377). Sincerely, ALAN MILLIGAN Chief Actuary ACTUARIAL VALUATION as of June 30, 2015 for the SAFETY PLAN of the CITY OF PALO ALTO (CalPERS ID: 6373437857) (Rate Plan ID: 5080) REQUIRED CONTRIBUTIONS FOR FISCAL YEAR July 1, 2017 – June 30, 2018 TABLE OF CONTENTS ACTUARIAL CERTIFICATION 1 HIGHLIGHTS AND EXECUTIVE SUMMARY Introduction 3 Purpose of the Report 3 Required Contributions 4 Plan’s Funded Status 5 Projected Employer Contributions 5 Cost 6 Changes Since the Prior Year’s Valuation 7 Subsequent Events 7 ASSETS Reconciliation of the Market Value of Assets 9 Asset Allocation 10 CalPERS History of Investment Returns 11 LIABILITIES AND CONTRIBUTIONS Development of Accrued and Unfunded Liabilities 13 (Gain) / Loss Analysis 06/30/14 - 06/30/15 14 Schedule of Amortization Bases 15 30-Year Amortization Schedule and Alternatives 16 Reconciliation of Required Employer Contributions 18 Employer Contribution History 19 Funding History 19 RISK ANALYSIS Analysis of Future Investment Return Scenarios 21 Analysis of Discount Rate Sensitivity 22 Volatility Ratios 23 Hypothetical Termination Liability 24 PLAN’S MAJOR BENEFIT PROVISIONS Plan’s Major Benefit Options 26 APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS Actuarial Data A1 Actuarial Methods A1 – A2 Actuarial Assumptions A3 – A21 Miscellaneous A21 APPENDIX B – PRINCIPAL PLAN PROVISIONS B1 – B10 APPENDIX C – PARTICIPANT DATA Summary of Valuation Data C1 Active Members C2 Transferred and Terminated Members C3 Retired Members and Beneficiaries C4 – C5 APPENDIX D – DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATE D1 APPENDIX E – GLOSSARY OF ACTUARIAL TERMS E1 – E2 (CY) FIN PROCESS CONTROL ID: 480105 (PY) FIN PROCESS CONTROL ID: 466096 REPORT ID: 95693 CALPERS ACTUARIAL VALUATION - June 30, 2015 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 1 ACTUARIAL CERTIFICATION To the best of our knowledge, this report is complete and accurate and contains sufficient information to disclose, fully and fairly, the funded condition of the SAFETY PLAN OF THE CITY OF PALO ALTO. This valuation is based on the member and financial data as of June 30, 2015 provided by the various CalPERS databases and the benefits under this plan with CalPERS as of the date this report was produced. It is our opinion that the valuation has been performed in accordance with generally accepted actuarial principles, in accordance with standards of practice prescribed by the Actuarial Standards Board, and that the assumptions and methods are internally consistent and reasonable for this plan, as prescribed by the CalPERS Board of Administration according to provisions set forth in the California Public Employees’ Retirement Law. The undersigned is an actuary for CalPERS, who is a member of the American Academy of Actuaries and the Society of Actuaries and meets the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein. DAVID CLEMENT, ASA, MAAA, EA Senior Pension Actuary, CalPERS HIGHLIGHTS AND EXECUTIVE SUMMARY INTRODUCTION PURPOSE OF THE REPORT REQUIRED CONTRIBUTIONS PLAN’S FUNDED STATUS PROJECTED EMPLOYER CONTRIBUTIONS COST CHANGES SINCE THE PRIOR YEAR’S VALUATION SUBSEQUENT EVENTS CALPERS ACTUARIAL VALUATION - June 30, 2015 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 3 Introduction This report presents the results of the June 30, 2015 actuarial valuation of the SAFETY PLAN OF THE CITY OF PALO ALTO of the California Public Employees’ Retirement System (CalPERS). This actuarial valuation sets the required employer contributions for Fiscal Year 2017-18. The CalPERS Board of Administration adopted a Risk Mitigation Policy which is designed to reduce funding risk over time. The policy establishes a mechanism whereby CalPERS investment performance that significantly outperforms the discount rate triggers adjustments to the discount rate, expected investment return and strategic asset allocation targets. A minimum excess investment return of 4% above the existing discount rate is necessary to cause a funding risk mitigation event. The Risk Mitigation Policy does not have an impact on the current year actuarial valuation. More details on the Risk Mitigation Policy can be found on our website. Purpose of the Report The actuarial valuation was prepared by the CalPERS Actuarial Office using data as of June 30, 2015. The purpose of the report is to: Set forth the assets and accrued liabilities of this plan as of June 30, 2015; Determine the required employer contributions for the fiscal year July 1, 2017 through June 30, 2018; Provide actuarial information as of June 30, 2015 to the CalPERS Board of Administration and other interested parties. The pension funding information presented in this report should not be used in financial reports subject to Governmental Accounting Standards Board (GASB) Statement No. 68 for an Agent Employer Defined Benefit Pension Plan. A separate accounting valuation report for such purposes is available from CalPERS and details for ordering are available on our website. The use of this report for any other purposes may be inappropriate. In particular, this report does not contain information applicable to alternative benefit costs. The employer should contact their actuary before disseminating any portion of this report for any reason that is not explicitly described above. California Actuarial Advisory Panel Recommendations This report includes all the basic disclosure elements as described in the Model Disclosure Elements for Actuarial Valuation Reports recommended in 2011 by the California Actuarial Advisory Panel (CAAP), with the exception of including the original base amounts of the various components of the unfunded liability in the Schedule of Amortization Bases shown on page 15. Additionally, this report includes the following “Enhanced Risk Disclosures” also recommended by the CAAP in the Model Disclosure Elements document: A “Deterministic Stress Test,” projecting future results under different investment income scenarios A “Sensitivity Analysis,” showing the impact on current valuation results using a 1 percent plus or minus change in the discount rate. CALPERS ACTUARIAL VALUATION - June 30, 2015 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 4 Required Contributions Fiscal Year Required Employer Contribution 2017-18 Employer Normal Cost Rate 18.900% Plus Either 1) Monthly Employer Dollar UAL Payment $ 593,990 Or 2) Annual UAL Prepayment Option $ 6,874,743 Required PEPRA Member Contribution Rate 10.75% The total minimum required employer contribution is the sum of the Plan’s Employer Normal Cost Rate (expressed as a percentage of payroll) plus the Employer Unfunded Accrued Liability (UAL) Contribution Amount (billed monthly in dollars). Only the UAL portion of the employer contribution can be prepaid (which must be received in full no later than July 31). Plan Normal Cost contributions will be made as part of the payroll reporting process. If there is contractual cost sharing or other change, this amount will change. §20572 of the Public Employees’ Retirement Law assesses interest at an annual rate of 10 percent if a contracting agency fails to remit the required contributions when due. For additional detail regarding the determination of the required contribution for PEPRA members, see Appendix D. Required member contributions for Classic members can be found in Appendix B. Fiscal Year Fiscal Year 2016-17 2017-18 Normal Cost Contribution as a Percentage of Payroll Total Normal Cost 28.120% 28.029% Employee Contribution1 9.143% 9.129% Employer Normal Cost 18.977% 18.900% Projected Annual Payroll for Contribution Year $ 23,246,697 $ 23,150,815 Estimated Employer Contributions Based On Projected Payroll Total Normal Cost $ 6,536,972 $ 6,488,942 Employee Contribution1 2,125,446 2,113,438 Employer Normal Cost 4,411,526 4,375,504 Unfunded Liability Contribution 6,148,510 7,127,885 Estimated Total Employer Contribution2 $ 10,560,036 $ 11,503,389 1 For classic members, this is the percentage specified in the Public Employees Retirement Law, net of any reduction from the use of a modified formula or other factors. For PEPRA members, the member contribution rate is based on 50 percent of the normal cost. A development of PEPRA member contribution rates can be found in Appendix D. Employee cost sharing is not shown in this report. 2 As a percentage of projected payroll the UAL contribution for Fiscal Year 2017-18 is 30.789 percent for an estimated total employer contribution rate of 49.689 percent. As determined in the June 30, 2014 valuation, the Fiscal Year 2016-17 UAL contribution is 26.449 percent for a total employer contribution rate of 45.426 percent. CALPERS ACTUARIAL VALUATION - June 30, 2015 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 5 Plan’s Funded Status Projected Employer Contributions The estimated employer contribution for Fiscal Year 2018-19 is based on a projection of the most recent information we have available, including an estimated 0.0 percent investment return for Fiscal Year 2015- 16. The table below shows projected employer contributions (before cost sharing) for the next five fiscal years, assuming CalPERS earns 0.0 percent for Fiscal Year 2015-16 and 7.50 percent every fiscal year thereafter, and assuming that all other actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur during the projection period. The projected normal cost percentages do not reflect that the normal cost will decline over time as new employees are hired into PEPRA or other lower cost benefit tiers. Required Contribution Projected Future Employer Contributions Fiscal Year 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 Normal Cost % 18.900% 18.9% 18.9% 18.9% 18.9% 18.9% UAL $ 7,127,885 8,469,191 9,884,561 10,739,149 11,629,663 12,325,997 For projected contributions under alternate investment return scenarios, please see the “Analysis of Future Investment Return Scenarios” in the “Risk Analysis” section. June 30, 2014 June 30, 2015 1. Present Value of Projected Benefits $ 426,369,163 $ 433,980,861 2. Entry Age Normal Accrued Liability 367,478,634 377,934,524 3. Market Value of Assets (MVA) $ 264,145,000 $ 259,169,591 4. Unfunded Accrued Liability (UAL) [(2) – (3)] $ 103,333,634 $ 118,764,933 5. Funded Ratio [(3) / (2)] 71.9% 68.6% CALPERS ACTUARIAL VALUATION - June 30, 2015 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 6 Cost Actuarial Cost Estimates in General What will this pension plan cost? Unfortunately, there is no simple answer. There are two major reasons for the complexity of the answer. First, actuarial calculations, including the ones in this report, are based on a number of assumptions about the future. These assumptions can be divided into two categories. Demographic assumptions include the percentage of employees that will terminate, die, become disabled, and retire in each future year. Economic assumptions include future salary increases for each active employee, and the assumption with the greatest impact: future asset returns at CalPERS for each year into the future until the last dollar is paid to current members of the plan. While CalPERS has set these assumptions to reflect our best estimate of the real future of the plan, it must be understood that these assumptions are very long-term predictors and will surely not be realized in any one year. For example, while the asset earnings at CalPERS have averaged more than the assumed return of 7.5 percent for the past twenty year period ending June 30, 2015, returns for each fiscal year ranged from negative -24 percent to +21.7 percent. Second, the very nature of actuarial funding produces the answer to the question of plan cost as the sum of two separate pieces. The Normal Cost (i.e., the annual cost associated with one year of service accrual) expressed as a percentage of total active payroll. The Past Service Cost or Accrued Liability (i.e., the current value of the benefit for all credited past service of current members) which is expressed as a lump sum dollar amount. The cost is the sum of a percent of future pay and a lump sum dollar amount. In prior years CalPERS converted Past Service Cost to a percent of payroll and expressed the total required employer contribution as a single rate. Going forward the Past Service Cost will no longer be converted to a percent of payroll and this cost will be invoiced to the employer as a monthly dollar contribution amount with the option to prepay the annual amount at the beginning of the fiscal year. The normal cost will continue to be expressed as a percentage of active payroll with employer and employee contributions payable as part of the payroll reporting process. CALPERS ACTUARIAL VALUATION - June 30, 2015 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 7 Changes since the Prior Year’s Valuation Benefits The standard actuarial practice at CalPERS is to recognize mandated legislative benefit changes in the first annual valuation following the effective date of the legislation. Voluntary benefit changes by plan amendment are generally included in the first valuation that is prepared after the amendment becomes effective, even if the valuation date is prior to the effective date of the amendment. This valuation generally reflects plan changes by amendments effective before the date of the report. Please refer to the “Plan’s Major Benefit Options” and Appendix B for a summary of the plan provisions used in this valuation. The effect of any mandated benefit changes or plan amendments on the unfunded liability is shown in the “(Gain)/Loss Analysis” and the effect on the employer contribution is shown in the “Reconciliation of Required Employer Contributions.” It should be noted that no change in liability or contribution is shown for any plan changes which were already included in the prior year’s valuation. Actuarial Methods and Assumptions Beginning with Fiscal Year 2017-18 CalPERS will collect employer contributions toward the plan’s unfunded liability as dollar amounts instead of the prior method of a contribution rate. This change will address potential funding issues that could arise from a declining payroll or reduction in the number of active members in the plan. Funding the unfunded liability as a percentage of payroll could lead to the underfunding of the plans. Although employers will be invoiced at the beginning of the fiscal year for their unfunded liability payment the plan’s normal cost contribution will continue to be collected as a percentage of payroll. Subsequent Events Risk Mitigation The CalPERS Board of Administration adopted a Risk Mitigation Policy which is designed to reduce funding risk over time. The policy establishes a mechanism whereby CalPERS investment performance that significantly outperforms the discount rate triggers adjustments to the discount rate, expected investment return and strategic asset allocation targets. A minimum excess investment return of 4% above the existing discount rate is necessary to cause a funding risk mitigation event. More details on the Risk Mitigation Policy can be found on our website. ASSETS RECONCILIATION OF THE MARKET VALUE OF ASSETS ASSET ALLOCATION CALPERS HISTORY OF INVESTMENT RETURNS CALPERS ACTUARIAL VALUATION - June 30, 2015 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 9 Reconciliation of the Market Value of Assets 1. Market Value of Assets as of 6/30/14 including Receivables $ 264,145,000 2. Change in Receivables for Service Buybacks as of 6/30/14 (209,974) 3. Employer Contributions 8,615,752 4. Employee Contributions 1,994,256 5. Benefit Payments to Retirees and Beneficiaries (20,991,011) 6. Refunds (156,687) 7. Lump Sum Payments 0 8. Transfers and Miscellaneous Adjustments 263,632 9. Investment Return 5,508,623 10. Market Value of Assets as of 6/30/15 including Receivables $ 259,169,591 CALPERS ACTUARIAL VALUATION - June 30, 2015 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 10 Asset Allocation CalPERS adheres to an Asset Allocation Strategy which establishes asset class allocation policy targets and ranges, and manages those asset class allocations within their policy ranges. CalPERS Investment Belief No. 6 recognizes that strategic asset allocation is the dominant determinant of portfolio risk and return. On February 19, 2014, the CalPERS Board of Administration adopted changes to the current asset allocation as shown in the Policy Target Allocation below expressed as a percentage of total assets. The asset allocation has an expected long term blended rate of return of 7.5 percent. The asset allocation and market value of assets shown below reflect the values of the Public Employees’ Retirement Fund (PERF) in its entirety as of June 30, 2015. The assets for CITY OF PALO ALTO SAFETY PLAN are part of the PERF and are invested accordingly. (A) Asset Class (B) Market Value ($ Billion) (C) Policy Target Allocation Global Equity 162.5 51.0% Private Equity 29.0 10.0% Global Fixed Income 53.1 20.0% Liquidity 7.5 1.0% Real Assets 31.8 12.0% Inflation Sensitive Assets 15.6 6.0% Other 2.4 0.0% Total Fund $301.9 100.0% Global Equity 53.8% Private Equity 9.6% Global Fixed Income 17.6% Liquidity 2.5% Real Assets 10.5% Inflation 5.2% Other 0.8% Asset Allocation at 6/30/2015 CALPERS ACTUARIAL VALUATION - June 30, 2015 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 11 CalPERS History of Investment Returns The following is a chart with the 20-year historical annual returns of the Public Employees Retirement Fund for each fiscal year ending on June 30. Beginning in 2002, the figures are reported as gross of fees. The table below shows historical geometric mean annual returns of the Public Employees Retirement Fund for various time periods ending on June 30, 2015, (figures are reported as gross of fees). The geometric mean rate of return is the average rate per period compounded over multiple periods. It should be recognized that in any given year the rate of return is volatile. Although the expected rate of return on the recently adopted new asset allocation is 7.5 percent, the portfolio has an expected volatility of 11.76 percent per year. The volatility is a measure of the risk of the portfolio expressed in the standard deviation of the fund’s total return distribution, expressed as a percentage. Consequently, when looking at investment returns, it is more instructive to look at returns over longer time horizons. History of CalPERS Geometric Mean Rates of Return and Volatilities 1 year 5 year 10 year 20 year 30 year Geometric Return 2.4% 10.7% 6.1% 7.7% 9.1% Volatility – 9.4% 14.0% 11.8% 10.5% -25.0% -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 15 . 3 % 20 . 1 % 19 . 5 % 12 . 5 % 10 . 5 % -7. 2 % -6. 1 % 3. 7 % 16 . 6 % 12 . 3 % 11 . 8 % 19 . 1 % -5. 1 % -24 . 0 % 13 . 3 % 21 . 7 % 0. 1 % 13 . 2 % 17 . 7 % 2. 4 % LIABILITIES AND CONTRIBUTIONS DEVELOPMENT OF ACCRUED AND UNFUNDED LIABILITIES (GAIN) / LOSS ANALYSIS 06/30/14 - 06/30/15 SCHEDULE OF AMORTIZATION BASES 30-YEAR AMORTIZATION SCHEDULES AND ALTERNATIVES RECONCILIATION OF REQUIRED EMPLOYER CONTRIBUTIONS EMPLOYER CONTRIBUTION HISTORY FUNDING HISTORY CALPERS ACTUARIAL VALUATION - June 30, 2015 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 13 Development of Accrued and Unfunded Liabilities June 30, 2014 June 30, 2015 1. Present Value of Projected Benefits a) Active Members $ 143,593,466 145,227,338 b) Transferred Members 8,951,761 7,219,815 c) Terminated Members 1,471,564 2,371,428 d) Members and Beneficiaries Receiving Payments 272,352,372 279,162,280 e) Total $ 426,369,163 433,980,861 2. Present Value of Future Employer Normal Costs $ 39,135,076 37,166,396 3. Present Value of Future Employee Contributions $ 19,755,453 18,879,941 4. Entry Age Normal Accrued Liability a) Active Members [(1a) - (2) - (3)] $ 84,702,937 89,181,001 b) Transferred Members (1b) 8,951,761 7,219,815 c) Terminated Members (1c) 1,471,564 2,371,428 d) Members and Beneficiaries Receiving Payments (1d) 272,352,372 279,162,280 e) Total $ 367,478,634 377,934,524 5. Market Value of Assets (MVA) $ 264,145,000 259,169,591 6. Unfunded Accrued Liability (UAL) [(4e) - (5)] $ 103,333,634 118,764,933 7. Funded Ratio [(5) / (4e)] 71.9% 68.6% CALPERS ACTUARIAL VALUATION - June 30, 2015 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 14 (Gain)/Loss Analysis 6/30/14 – 6/30/15 To calculate the cost requirements of the plan, assumptions are made about future events that affect the amount and timing of benefits to be paid and assets to be accumulated. Each year, actual experience is compared to the expected experience based on the actuarial assumptions. This results in actuarial gains or losses, as shown below. 1. Total (Gain)/Loss for the Year a) Unfunded Accrued Liability (UAL) as of 6/30/14 $ 103,333,634 b) Expected Payment on the UAL during 2014/2015 4,471,850 c) Interest through 6/30/15 [.075 x (1a) - ((1.075)½ - 1) x (1b)] 7,585,360 d) Expected UAL before all other changes [(1a) - (1b) + (1c)] 106,447,144 e) Change due to plan changes 0 f) Change due to assumption change 0 g) Expected UAL after all other changes [(1d) + (1e) + (1f)] 106,447,144 h) Actual UAL as of 6/30/15 118,764,933 i) Total (Gain)/Loss for 2014/2015 [(1h) - (1g)] $ 12,317,789 2. Contribution (Gain)/Loss for the Year a) Expected Contribution (Employer and Employee) $ 10,664,907 b) Interest on Expected Contributions 392,704 c) Actual Contributions 10,610,008 d) Interest on Actual Contributions 390,682 e) Expected Contributions with Interest [(2a) + (2b)] 11,057,611 f) Actual Contributions with Interest [(2c) + (2d)] 11,000,690 g) Contribution (Gain)/Loss [(2e) - (2f)] $ 56,921 3. Asset (Gain)/Loss for the Year a) Market Value of Assets as of 6/30/14 $ 264,145,000 b) Prior Fiscal Year Receivables (949,187) c) Current Fiscal Year Receivables 739,213 d) Contributions Received 10,610,008 e) Benefits and Refunds Paid (21,147,698) f) Transfers and Miscellaneous Adjustments 263,632 g) Expected Int. [.075 x (3a + 3b) + ((1.075)½ - 1) x ((3d) + (3e) + (3f))] 19,361,374 h) Expected Assets as of 6/30/15 [(3a) + (3b) + (3c) + (3d) + (3e) + (3f) + (3g)] 273,022,342 i) Market Value of Assets as of 6/30/15 259,169,591 j) Asset (Gain)/Loss [(3h) - (3i)] $ 13,852,751 4. Liability (Gain)/Loss for the Year a) Total (Gain)/Loss (1i) $ 12,317,789 b) Contribution (Gain)/Loss (2g) 56,921 c) Asset (Gain)/Loss (3j) 13,852,751 d) Liability (Gain)/Loss [(4a) - (4b) - (4c)] $ (1,591,883) CALPERS ACTUARIAL VALUATION - June 30, 2015 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 15 Schedule of Amortization Bases There is a two-year lag between the valuation date and the start of the contribution fiscal year. The assets, liabilities, and funded status of the plan are measured as of the valuation date: June 30, 2015. The required employer contributions determined by the valuation are for the fiscal year beginning two years after the valuation date: Fiscal Year 2017-18. This two-year lag is necessary due to the amount of time needed to extract and test the membership and financial data, and the need to provide public agencies with their required employer contribution well in advance of the start of the fiscal year. The Unfunded Accrued Liability (UAL) is used to determine the employer contribution and therefore must be rolled forward two years from the valuation date to the first day of the fiscal year for which the contribution is being determined. The UAL is rolled forward each year by subtracting the expected payment on the UAL for the fiscal year and adjusting for interest. The expected payment on the UAL for a fiscal year is equal to the Expected Employer Contribution for the fiscal year minus the Expected Normal Cost for the year. The Employer Contribution for the first fiscal year is determined by the actuarial valuation two years ago and the contribution for the second year is from the actuarial valuation one year ago. The Normal Cost Rate for each of the two fiscal years is assumed to be the same as the rate determined by the current valuation. All expected dollar amounts are determined by multiplying the rate by the expected payroll for the applicable fiscal year, based on payroll as of the valuation date. Reason for Base Date Established Amorti- zation Period Balance 6/30/15 Expected Payment 2015-16 Balance 6/30/16 Expected Payment 2016-17 Balance 6/30/17 Scheduled Payment for 2017-18 FRESH START 06/30/04 19 $(929,441) $(68,070) $(928,572) $(70,112) $(925,521) $(72,216) BENEFIT CHANGE 06/30/05 9 $148,354 $17,159 $141,689 $17,674 $133,991 $18,204 ASSUMPTION CHANGE 06/30/09 14 $7,475,235 $654,769 $7,356,998 $674,413 $7,209,527 $694,645 SPECIAL (GAIN)/LOSS 06/30/09 24 $8,832,974 $571,306 $8,903,104 $588,446 $8,960,723 $606,099 SPECIAL (GAIN)/LOSS 06/30/10 25 $4,199,302 $266,144 $4,238,306 $274,129 $4,271,956 $282,353 ASSUMPTION CHANGE 06/30/11 16 $6,229,833 $503,649 $6,174,876 $518,759 $6,100,131 $534,322 SPECIAL (GAIN)/LOSS 06/30/11 26 $2,376,169 $147,751 $2,401,190 $152,183 $2,423,493 $156,749 PAYMENT (GAIN)/LOSS 06/30/12 27 $1,531,406 $93,529 $1,549,288 $96,335 $1,565,603 $99,225 (GAIN)/LOSS 06/30/12 27 $43,831,226 $2,676,951 $44,343,046 $2,757,260 $44,809,987 $2,839,977 (GAIN)/LOSS 06/30/13 28 $39,133,547 $550,415 $41,497,881 $1,133,854 $43,434,617 $1,751,805 ASSUMPTION CHANGE 06/30/14 19 $18,188,169 $(167,241) $19,725,680 $375,729 $20,815,542 $774,001 (GAIN)/LOSS 06/30/14 29 $(24,569,630) $(91,238) $(26,317,755) $(370,160) $(27,907,796) $(762,530) (GAIN)/LOSS 06/30/15 30 $12,317,789 $(150,934) $13,398,115 $(183,242) $14,592,963 $205,251 TOTAL $118,764,933 $5,004,190 $122,483,846 $5,965,268 $125,485,216 $7,127,885 CALPERS ACTUARIAL VALUATION - June 30, 2015 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 20 Page 16 30-Year Amortization Schedule and Alternatives The amortization schedule on the previous page shows the minimum contributions required according to CalPERS amortization policy. There has been considerable interest from many agencies in paying off these unfunded accrued liabilities sooner and the possible savings in doing so. As a result, we have provided alternate amortization schedules to help analyze the current amortization schedule and illustrate the advantages of accelerating unfunded liability payments. Shown on the following page are future year amortization payments based on 1) the current amortization schedule reflecting the individual bases and remaining periods shown on the previous page, and 2) alternate “fresh start” amortization schedules using two sample periods that would both result in interest savings relative to the current amortization schedule. Note that the payments under each alternate scenario increase by 3 percent for each year into the future. The schedules do not attempt to reflect any experience after June 30, 2015 that may deviate from the actuarial assumptions. Therefore, future amortization payments displayed in the Current Amortization Schedule may not match projected amortization payments shown in connection with Projected Employer Contributions provided elsewhere in this report. The Current Amortization Schedule typically contains individual bases that are both positive and negative. Positive bases result from plan changes, assumption changes or plan experience that result in increases to unfunded liability. Negative bases result from plan changes, assumption changes or plan experience that result in decreases to unfunded liability. The combination of positive and negative bases within an amortization schedule can result in unusual or problematic circumstances in future years such as: A positive total unfunded liability with a negative total payment, A negative total unfunded liability with a positive total payment, or Total payments that completely amortize the unfunded liability over a very short period of time In any year where one of the above scenarios occurs, the actuary will consider corrective action such as replacing the existing unfunded liability bases with a single “fresh start” base and amortizing it over a reasonable period. The Current Amortization Schedule on the following page may appear to show that, based on the current amortization bases, one of the above scenarios will occur at some point in the future. It is impossible to know today whether such a scenario will in fact arise since there will be additional bases added to the amortization schedule in each future year. Should such a scenario arise in any future year, the actuary will take appropriate action based on guidelines in the CalPERS amortization policy. For purposes of this display, total payments include any negative payments. Therefore, the amount of estimated savings may be understated to the extent that negative payments appear in the current schedule. CALPERS ACTUARIAL VALUATION - June 30, 2015 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 17 30-Year Amortization Schedule and Alternatives Alternate Schedules Current Amortization Schedule 20 Year Amortization 15 Year Amortization Date Balance Payment Balance Payment Balance Payment 6/30/2017 125,485,216 7,127,885 125,485,216 9,474,815 125,485,216 11,503,171 6/30/2018 127,506,259 8,160,489 125,072,910 9,759,059 122,969,865 11,848,267 6/30/2019 128,608,254 9,248,636 124,334,970 10,051,831 119,908,061 12,203,715 6/30/2020 128,664,682 9,756,645 123,238,133 10,353,386 116,248,085 12,569,826 6/30/2021 128,198,627 10,280,357 121,746,373 10,663,988 111,934,018 12,946,921 6/30/2022 127,154,624 10,588,766 119,820,694 10,983,907 106,905,416 13,335,328 6/30/2023 125,712,553 10,906,430 117,418,888 11,313,425 101,096,960 13,735,388 6/30/2024 123,832,967 11,233,622 114,495,297 11,652,827 94,438,078 14,147,450 6/30/2025 121,473,174 11,570,631 111,000,535 12,002,412 86,852,546 14,571,873 6/30/2026 118,586,973 11,893,997 106,881,210 12,362,484 78,258,047 15,009,030 6/30/2027 115,149,038 12,250,817 102,079,604 12,733,359 68,565,707 15,459,301 6/30/2028 111,083,297 12,618,344 96,533,347 13,115,360 57,679,591 15,923,080 6/30/2029 106,331,570 12,996,892 90,175,053 13,508,821 45,496,160 16,400,772 6/30/2030 100,830,972 13,386,800 82,931,939 13,914,085 31,903,690 16,892,795 6/30/2031 94,513,566 12,737,689 74,725,404 14,331,508 16,781,644 17,399,579 6/30/2032 88,395,365 12,516,885 65,470,586 14,761,453 6/30/2033 82,047,234 11,413,941 55,075,879 15,204,297 6/30/2034 76,366,550 11,116,709 43,442,420 15,660,425 6/30/2035 70,567,994 10,791,366 30,463,527 16,130,238 6/30/2036 64,671,867 10,563,130 16,024,105 16,614,145 6/30/2037 58,570,172 10,880,023 6/30/2038 51,682,284 11,206,425 6/30/2039 43,939,389 11,542,618 6/30/2040 35,267,201 11,888,895 6/30/2041 25,585,573 9,826,468 6/30/2042 17,316,189 9,105,732 6/30/2043 9,173,877 8,161,145 6/30/2044 1,400,264 971,051 6/30/2045 498,476 66,890 6/30/2046 466,509 483,686 Totals 295,292,964 254,591,825 213,946,496 Estimated Savings 40,701,139 81,346,468 CALPERS ACTUARIAL VALUATION - June 30, 2015 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 18 Reconciliation of Required Employer Contributions Normal Cost (% of Payroll) 1. For Period 7/1/16 – 6/30/17 a) Employer Normal Cost 18.977% b) Employee Contribution 9.143% c) Total Normal Cost 28.120% 2. Effect of changes since the prior year annual valuation a) Effect of changes in demographics results (0.091%) b) Effect of plan changes 0.000% c) Effect of changes in assumptions 0.000% d) Net effect of the changes above [sum of (a) through (c)] (0.091%) 3. For Period 7/1/17 – 6/30/18 a) Employer Normal Cost 18.900% b) Employee Contribution 9.129% c) Total Normal Cost 28.029% Employer Normal Cost Change [(3a) – (1a)] (0.077%) Employee Contribution Change [(3b) – (1b)] (0.014%) Unfunded Liability Contribution ($) 1. For Period 7/1/16 – 6/30/17 6,148,510 2. Effect of changes since the prior year annual valuation a) Effect of changes in demographics and financial results 205,251 b) Effect of plan changes 0 c) Effect of changes in assumptions 0 d) Effect of progression of amortization payments 774,124 e) Effect of changes due to Fresh Start 0 f) Effect of elimination of amortization base 0 g) Net effect of the changes above [sum of (a) through (f)] 979,375 3. For Period 7/1/17 – 6/30/18 [(1)+(2g)] 7,127,885 The amounts shown for the period 7/1/16 – 6/30/17 may be different if a prepayment of unfunded actuarial liability is made or a plan change became effective after the prior year’s actuarial valuation was performed. CALPERS ACTUARIAL VALUATION - June 30, 2015 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 19 Employer Contribution History The table below provides a recent history of the required employer contributions for the plan, as determined by the annual actuarial valuation. It does not account for prepayments or benefit changes made during a fiscal year. Required By Valuation Fiscal Year Employer Normal Cost Unfunded Rate Unfunded Liability Payment ($) 2012 - 13 18.015% 13.035% N/A 2013 - 14 18.658% 14.786% N/A 2014 - 15 18.874% 20.654% N/A 2015 - 16 18.627% 23.305% N/A 2016 - 17 18.977% 26.449% N/A 2017 - 18 18.900% N/A 7,127,885 Funding History The table below shows the recent history of the actuarial accrued liability, the market value of assets, the funded ratio and the annual covered payroll. Valuation Date Accrued Liability Market Value of Assets (MVA) Unfunded Liability Funded Ratio Annual Covered Payroll 06/30/10 $ 293,895,452 $ 190,527,731 $ 103,367,721 64.8% $ 23,030,400 06/30/11 313,183,690 225,015,089 88,168,601 71.8% 22,774,462 06/30/12 327,608,300 215,605,457 112,002,843 65.8% 20,919,846 06/30/13 338,666,499 233,417,363 105,249,136 68.9% 21,258,082 06/30/14 367,478,634 264,145,000 103,333,634 71.9% 21,274,021 06/30/15 377,934,524 259,169,591 118,764,933 68.6% 21,186,275 RISK ANALYSIS ANALYSIS OF FUTURE INVESTMENT RETURN SCENARIOS ANALYSIS OF DISCOUNT RATE SENSITIVITY VOLATILITY RATIOS HYPOTHETICAL TERMINATION LIABILITY CALPERS ACTUARIAL VALUATION - June 30, 2015 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 21 Analysis of Future Investment Return Scenarios The investment return for Fiscal Year 2015-16 was not known at the time this report was produced. The investment return in Fiscal Year 2015-16 as of April 30, 2016 is 0.0 percent before administrative expenses. For purposes of projecting future employer contributions, we are assuming a 0.0 percent investment return for Fiscal Year 2015-16. The investment return realized during a fiscal year first affects the required contribution for the fiscal year two years later. For example, the investment return for Fiscal Year 2015-16 will first be reflected in the June 30, 2016 actuarial valuation that will be used to set the employer contribution for Fiscal Year 2018-19. The Fiscal Year 2016-17 investment return will first be reflected in the June 30, 2017 actuarial valuation that will be used to set the employer contribution for Fiscal Year 2019-20 and so forth. As part of this report, a sensitivity analysis was performed to determine the effects of various investment returns during fiscal years 2016-17, 2017-18 and 2018-19 on the 2019-20, 2020-21 and 2021-22 employer contributions. Once again, the projections assume that all other actuarial assumptions will be realized and that no further changes to assumptions, contributions, benefits, or funding will occur. Five different investment return scenarios were selected. The first scenario is a -3.8 percent return for each of the 2016-17, 2017-18, and 2018-19 fiscal years. Based on the current investment allocation, this is what one would expect if the markets were to give us about a 5th percentile return from July 1, 2016 through June 30, 2019. The second scenario is a 2.8 percent return for each of the 2016-17, 2017-18, and 2018-19 fiscal years. Based on the current investment allocation, this is what one would expect if the markets were to give us about a 25th percentile return from July 1, 2016 through June 30, 2019. The third scenario is a 7.5 percent return for each of the 2016-17, 2017-18, and 2018-19 fiscal years. Based on the current investment allocation, this is what one would expect if the markets were to give us about a 49th percentile return from July 1, 2016 through June 30, 2019. The fourth scenario is a 12.0 percent return for each of the 2016-17, 2017-18, and 2018-19 fiscal years. Based on the current investment allocation, this is what one would expect if the markets were to give us about a 75th percentile return from July 1, 2016 through June 30, 2019. Finally, the last scenario is an 18.9 percent return for each of the 2016-17, 2017-18, and 2018-19 fiscal years. Based on the current investment allocation, this is what one would expect if the markets were to give us about a 95th percentile return from July 1, 2016 through June 30, 2019. The table below shows the estimated projected contributions and the estimated increases for the plan under the five different scenarios. 2016-19 Investment Return Scenario Fiscal Year Estimated Change Between 2018-19 and 2021-22 2019-20 2020-21 2021-22 (3.8%) Normal Cost 18.9% 18.9% 18.9% 0.0% UAL Contribution $10,330,611 $12,069,307 $14,275,946 $5,806,755 2.8% Normal Cost 18.9% 18.9% 18.9% 0.0% UAL Contribution $10,070,148 $11,304,826 $12,779,784 $4,310,593 7.5% Normal Cost 18.9% 18.9% 18.9% 0.0% UAL Contribution $9,884,561 $10,739,149 $11,629,663 $3,160,472 12.0% Normal Cost 19.3% 19.6% 20.0% 1.1% UAL Contribution $9,697,002 $10,200,234 $10,548,940 $2,079,749 18.9% Normal Cost 20.0% 21.1% 22.1% 3.2% UAL Contribution $9,409,063 $9,378,430 $8,884,046 $414,855 CALPERS ACTUARIAL VALUATION - June 30, 2015 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 22 For the last two scenarios in the table above the results incorporate the impact of CalPERS Risk Mitigation Policy. A 12.0% return would result in a reduction of the discount rate by 0.05% and a return of 18.9% would reduce the discount rate by 0.15%. Reducing the discount rate increases both the plan’s accrued liability and normal cost. While the projections reflect estimated changes to the normal cost due to lower discount rates, they do not reflect the possible increase in the PEPRA member contribution rate in such scenarios. More details about the Risk Mitigation policy can be found on our website. The projected normal cost percentages do not reflect that the normal cost will decline over time as new employees are hired into PEPRA or other lower cost benefit tiers. Analysis of Discount Rate Sensitivity The following analysis looks at the Fiscal Year 2017-18 total normal cost rates and liabilities under two different discount rate scenarios. Shown below are the total normal cost rates assuming discount rates that are 1 percent lower and 1 percent higher than the current valuation discount rate. This analysis shows the potential plan impacts if the PERF were to realize investment returns of 6.50 percent or 8.50 percent over the long-term. This type of analysis gives the reader a sense of the long-term risk to required contributions. Sensitivity Analysis As of June 30, 2015 6.50% Discount Rate (-1%) 7.50% Discount Rate (assumed rate) 8.50% Discount Rate (+1%) Plan’s Total Normal Cost 35.207% 28.029% 22.530% Accrued Liability $425,987,913 $377,934,524 $338,195,457 Unfunded Accrued Liability $166,818,322 $118,764,933 $79,025,866 CALPERS ACTUARIAL VALUATION - June 30, 2015 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 23 Volatility Ratios The actuarial calculations supplied in this communication are based on a number of assumptions about long-term demographic and economic behavior. Unless these assumptions (terminations, deaths, disabilities, retirements, salary growth, and investment return) are exactly realized each year, there will be differences on a year-to-year basis. The year-to-year differences between actual experience and the assumptions are called actuarial gains and losses and serve to lower or raise required employer contributions from one year to the next. Therefore, employer contributions will inevitably fluctuate, especially due to the ups and downs of investment returns. Asset Volatility Ratio (AVR) Plans that have higher asset-to-payroll ratios experience more volatile employer contributions (as a percentage of payroll) due to investment return. For example, a plan with an asset-to-payroll ratio of 8 may experience twice the contribution volatility due to investment return volatility than a plan with an asset-to- payroll ratio of 4. Shown below is the asset volatility ratio, a measure of the plan’s current volatility. It should be noted that this ratio is a measure of the current situation. It increases over time but generally tends to stabilize as the plan matures. Liability Volatility Ratio (LVR) Plans that have higher liability-to-payroll ratios experience more volatile employer contributions (as a percentage of payroll) due to investment return and changes in liability. For example, a plan with a liability- to-payroll ratio of 8 is expected to have twice the contribution volatility of a plan with a liability-to-payroll ratio of 4. The liability volatility ratio is also included in the table below. It should be noted that this ratio indicates a longer-term potential for contribution volatility. The asset volatility ratio, described above, will tend to move closer to the liability volatility ratio as the plan matures. Contribution Volatility As of June 30, 2015 1. Market Value of Assets without Receivables $ 258,430,378 2. Payroll 21,186,275 3. Asset Volatility Ratio (AVR) [(1) / ( 2)] 12.2 4. Accrued Liability $ 377,934,524 5. Liability Volatility Ratio (LVR) [(4) / (2)] 17.8 CALPERS ACTUARIAL VALUATION - June 30, 2015 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Page 24 Hypothetical Termination Liability The hypothetical termination liability is an estimate of the financial position of the plan had the contract with CalPERS been terminated as of June 30, 2015. The plan liability on a termination basis is calculated differently compared to the plan’s ongoing funding liability. For this hypothetical termination liability calculation, both compensation and service are frozen as of the valuation date and no future pay increases or service accruals are assumed. A more conservative investment policy and asset allocation strategy was adopted by the CalPERS Board for the Terminated Agency Pool. The Terminated Agency Pool has limited funding sources since no future employer contributions will be made. Therefore, expected benefit payments are secured by risk-free assets and benefit security for members is increased while limiting the funding risk. However, this asset allocation has a lower expected rate of return than the PERF and consequently, a lower discount rate assumption. The lower discount rate for the Terminated Agency Pool results in higher liabilities for terminated plans. The effective termination discount rate will depend on actual market rates of return for risk-free securities on the date of termination. As market discount rates are variable the table below shows a range for the hypothetical termination liability based on the lowest and highest interest rates observed during an approximate 2-year period centered around the valuation date. Market Value of Assets (MVA) Hypothetical Termination Liability1,2 @ 2.00% Funded Status Unfunded Termination Liability @ 2.00% Hypothetical Termination Liability1,2 @ 3.25% Funded Status Unfunded Termination Liability @ 3.25% $259,169,591 $772,815,847 33.5% $513,646,256 $647,207,635 40.0% $388,038,044 1 The hypothetical liabilities calculated above include a 7 percent mortality contingency load in accordance with Board policy. Other actuarial assumptions, such as wage and inflation assumptions, can be found in Appendix A. 2 The current discount rate assumption used for termination valuations is a weighted average of the 10-year and 30-year U.S. Treasury yields where the weights are based on matching asset and liability durations as of the termination date. The discount rates used in the table are based on 20-year Treasury bonds, rounded to the nearest quarter percentage point, which is a good proxy for most plans. The 20-year Treasury yield was 2.75 percent on June 30, 2015. In order to terminate the plan, you must first contact our Retirement Services Contract Unit to initiate a Resolution of Intent to Terminate. The completed Resolution will allow the plan actuary to give you a preliminary termination valuation with a more up-to-date estimate of the plan liabilities. CalPERS advises you to consult with the plan actuary before beginning this process. PLAN’S MAJOR BENEFIT PROVISIONS CALPERS ACTUARIAL VALUATION – June 30, 2015 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Plan’s Major Benefit Options Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions is in the following section of this Appendix. Contract Package Active Police Active Fire Active Fire Active Police Active Fire Active Police Active Fire Benefit Provision Benefit Formula 3.0% @ 50 3.0% @ 50 3.0% @ 50 2.7% @ 57 3.0% @ 55 3.0% @ 55 2.7% @ 57 Social Security Coverage No No No No No No No Full/Modified Full Full Full Full Full Full Full Employee Contribution Rate 9.00% 9.00% 9.00% 10.75% 9.00% 9.00% 10.75% Final Average Compensation Period One Year One Year One Year Three Year Three Year Three Year Three Year Sick Leave Credit No No No No No No No Non-Industrial Disability Standard Standard Standard Standard Standard Standard Standard Industrial Disability Yes Yes Yes Yes Yes Yes Yes Pre-Retirement Death Benefits Optional Settlement 2W No Yes Yes No Yes No Yes 1959 Survivor Benefit Level Level 1 Level 1 Level 1 Level 1 Level 1 Level 1 Level 1 Special Yes Yes Yes Yes Yes Yes Yes Alternate (firefighters) No No No No No No No Post-Retirement Death Benefits Lump Sum $500 $500 $500 $500 $500 $500 $500 Survivor Allowance (PRSA) No No No No No No No COLA 2% 2% 2% 2% 2% 2% 2% Page 26 CALPERS ACTUARIAL VALUATION – June 30, 2015 SAFETY PLAN OF THE CITY OF PALO ALTO CalPERS ID: 6373437857 Plan’s Major Benefit Options Shown below is a summary of the major optional benefits for which your agency has contracted. A description of principal standard and optional plan provisions is in the following section of this Appendix. Contract Package Receiving Fire Receiving Police Benefit Provision Benefit Formula Social Security Coverage Full/Modified Employee Contribution Rate Final Average Compensation Period Sick Leave Credit Non-Industrial Disability Industrial Disability Pre-Retirement Death Benefits Optional Settlement 2W 1959 Survivor Benefit Level Special Alternate (firefighters) Post-Retirement Death Benefits Lump Sum $500 $500 Survivor Allowance (PRSA) No No COLA 2% 2% Page 27 APPENDICES APPENDIX A – ACTUARIAL METHODS AND ASSUMPTIONS APPENDIX B – PRINCIPAL PLAN PROVISIONS APPENDIX C – PARTICIPANT DATA APPENDIX D – DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATES APPENDIX E – GLOSSARY OF ACTUARIAL TERMS APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS ACTUARIAL DATA ACTUARIAL METHODS ACTUARIAL ASSUMPTIONS MISCELLANEOUS CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-1 Actuarial Data As stated in the Actuarial Certification, the data which serves as the basis of this valuation has been obtained from the various CalPERS databases. We have reviewed the valuation data and believe that it is reasonable and appropriate in aggregate. We are unaware of any potential data issues that would have a material effect on the results of this valuation, except that data does not always contain the latest salary information for former members now in reciprocal systems and does not recognize the potential for unusually large salary deviation in certain cases such as elected officials. Therefore, salary information in these cases may not be accurate. These situations are relatively infrequent, however, and when they do occur, they generally do not have a material impact on the required employer contributions. Actuarial Methods Actuarial Cost Method The actuarial cost method used is the Entry Age Normal Cost Method. Under this method, projected benefits are determined for all members and the associated liabilities are spread in a manner that produces level annual cost as a percentage of pay in each year from the member’s age of hire (entry age) to their assumed retirement age on the valuation date. The cost allocated to the current fiscal year is called the normal cost. The actuarial accrued liability for active members is then calculated as the portion of the total cost of the plan allocated to prior years. The actuarial accrued liability for members currently receiving benefits and for members entitled to deferred benefits is equal to the present value of the benefits expected to be paid. No normal costs are applicable for these participants. Amortization of Unfunded Actuarial Accrued Liability The excess of the total actuarial accrued liability over the market value of plan assets is called the unfunded actuarial accrued liability (UAL). Funding requirements are determined by adding the normal cost and an amortization payment toward the unfunded liability. Commencing with the June 30, 2013 valuation, all new gains or losses are tracked and amortized over a fixed 30-year period with a 5 year ramp up at the beginning and a 5 year ramp down at the end of the amortization period. All changes in liability due to plan amendments (other than golden handshakes) are amortized over a 20-year period with no ramp. Changes in actuarial assumptions, or changes in actuarial methodology are amortized over a 20-year period with a 5 year ramp up at the beginning and a 5 year ramp down at the end of the amortization period. Changes in unfunded accrued liability due to a Golden Handshake will be amortized over a period of 5 years. Exceptions for Inconsistencies: An exception to the amortization rules above is used whenever their application results in inconsistencies. In these cases, a “fresh start” approach is used. This means that the current unfunded actuarial liability is projected and amortized over a set number of years. For example, a fresh start is needed in the following situations: 1) When a positive payment would be required on a negative unfunded actuarial liability (or conversely a negative payment on a positive unfunded actuarial liability); or 2) When there are excess assets, rather than an unfunded liability. In this situation, a 30-year fresh start is used. It should be noted that the actuary may determine that a fresh start is necessary under other circumstances. In all cases of a fresh start, the period is set by the actuary at what is deemed appropriate; however, the period will not be greater than 30 years. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-2 Exceptions for Inactive Plans: The following exceptions apply to plans classified as Inactive. These plans have no active members and no expectation to have active members in the future. Amortization of unfunded liability is on a “level dollar” basis rather than a “level percent of pay” basis Actuarial judgment will be used to shorten amortization periods for Inactive plans with existing periods that are deemed too long given the duration of the liability. In many cases, a Fresh Start approach with a 20 year closed period will be used. However, the specific demographics of the plan will be used to determine if periods shorter or longer than 20 years may be more appropriate. Asset Valuation Method It is the policy of the CalPERS Board of Administration to use professionally accepted amortization methods to eliminate a surplus or an unfunded accrued liability in a manner that maintains benefit security for the members of the System while minimizing substantial variations in required employer contributions. On April 17, 2013, the CalPERS Board of Administration approved a recommendation to change the CalPERS amortization and rate smoothing policies. Beginning with the June 30, 2013 valuations that set the employer contribution for Fiscal Year 2015-16, CalPERS employs a policy that amortizes all gains and losses over a fixed 30-year period. The increase or decrease in the rate is then spread directly over a 5-year period. This method is referred to as “direct rate smoothing.” CalPERS no longer uses an actuarial value of assets and only uses the market value of assets. The direct rate smoothing method is equivalent to a method using a 5 year asset smoothing period with no actuarial value of asset corridor and a 25-year amortization period for gains and losses. PEPRA Normal Cost Rate Methodology Per Government Code Section 7522.30(b) the “normal cost rate” shall mean the annual actuarially determined normal cost for the plan of retirement benefits provided to the new member and shall be established based on actuarial assumptions used to determine the liabilities and costs as part of the annual actuarial valuation. The plan of retirement benefits shall include any elements that would impact the actuarial determination of the normal cost, including, but not limited to, the retirement formula, eligibility and vesting criteria, ancillary benefit provisions, and any automatic cost-of-living adjustments as determined by the public retirement system. Each non-pooled plan is considered to be stable with a sufficiently large demographic of actives. It is preferable to determine normal cost using a large active population ongoing so that this rate remains relatively stable. The total PEPRA normal cost will be calculated using all active members within a non- pooled plan. Accordingly, plans will be funded equally between employer and employee based on the demographics of the employees of that employer. As each non-pooled plan builds up to either 100+ active PEPRA members or half of their active population is under the PEPRA formula, the total PEPRA normal cost will be based on the active PEPRA population in the plan. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-3 Actuarial Assumptions In 2014, CalPERS completed a 2-year asset liability management study incorporating actuarial assumptions and strategic asset allocation. On February 19, 2014, the CalPERS Board of Administration adopted relatively modest changes to the current asset allocation that will reduce the expected volatility of returns. The adopted asset allocation is expected to have a long-term blended return that continues to support a discount rate assumption of 7.5 percent. The Board also approved several changes to the demographic assumptions that more closely align with actual experience. The most significant of these is mortality improvement to acknowledge the greater life expectancies we are seeing in our membership and expected continued improvements. The new actuarial assumptions were first used in the June 30, 2014 valuation to set the Fiscal Year 2016-17 contribution for public agency employers. The increase in liability due to new actuarial assumptions is amortized over a 20-year period with a 5-year ramp-up/ramp-down in accordance with Board policy. These new actuarial assumptions are set forth in this section. For more details and additional rationale for the selection of the actuarial assumptions, please refer to the CalPERS Experience Study and Review of Actuarial Assumptions report from January 2014 that can be found on the CalPERS website under: “Forms and Publications”. Click on “View All” and search for Experience Study. All actuarial assumptions (except the discount rates used for the hypothetical termination liability) represent an estimate of future experience rather than observations of the estimates inherent in market data. Economic Assumptions Discount Rate 7.5 percent compounded annually (net of expenses). This assumption is used for all plans. Termination Liability Discount Rate The current discount rate assumption used for termination valuations is a weighted average of the 10-year and 30-year U.S. Treasury yields where the weights are based on matching asset and liability durations as of the termination date. The hypothetical termination liabilities in this report are calculated using an observed range of market interest rates. This range is based on the lowest and highest 20-year Treasury bond observed during an approximate 2-year period centered around the valuation date. The 20-year Treasury bond has a similar duration to most plan liabilities and serves as a good proxy for the termination discount rate. The 20-year Treasury yield was 2.75 percent on June 30, 2015. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-4 Salary Growth Annual increases vary by category, entry age, and duration of service. A sample of assumed increases are shown below. Public Agency Miscellaneous Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1220 0.1160 0.1020 1 0.0990 0.0940 0.0830 2 0.0860 0.0810 0.0710 3 0.0770 0.0720 0.0630 4 0.0700 0.0650 0.0570 5 0.0640 0.0600 0.0520 10 0.0460 0.0430 0.0390 15 0.0420 0.0400 0.0360 20 0.0390 0.0380 0.0340 25 0.0370 0.0360 0.0330 30 0.0350 0.0340 0.0320 Public Agency Fire Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.2000 0.1980 0.1680 1 0.1490 0.1460 0.1250 2 0.1200 0.1160 0.0990 3 0.0980 0.0940 0.0810 4 0.0820 0.0780 0.0670 5 0.0690 0.0640 0.0550 10 0.0470 0.0460 0.0420 15 0.0440 0.0420 0.0390 20 0.0420 0.0390 0.0360 25 0.0400 0.0370 0.0340 30 0.0380 0.0360 0.0340 Public Agency Police Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1500 0.1470 0.1310 1 0.1160 0.1120 0.1010 2 0.0950 0.0920 0.0830 3 0.0810 0.0780 0.0700 4 0.0700 0.0670 0.0600 5 0.0610 0.0580 0.0520 10 0.0450 0.0430 0.0370 15 0.0450 0.0430 0.0370 20 0.0450 0.0430 0.0370 25 0.0450 0.0430 0.0370 30 0.0450 0.0430 0.0370 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-5 Salary Growth (continued) Public Agency County Peace Officers Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.1770 0.1670 0.1500 1 0.1340 0.1260 0.1140 2 0.1080 0.1030 0.0940 3 0.0900 0.0860 0.0790 4 0.0760 0.0730 0.0670 5 0.0650 0.0620 0.0580 10 0.0470 0.0450 0.0410 15 0.0460 0.0450 0.0390 20 0.0460 0.0450 0.0380 25 0.0460 0.0450 0.0380 30 0.0460 0.0440 0.0380 Schools Duration of Service (Entry Age 20) (Entry Age 30) (Entry Age 40) 0 0.0900 0.0880 0.0820 1 0.0780 0.0750 0.0700 2 0.0700 0.0680 0.0630 3 0.0650 0.0630 0.0580 4 0.0610 0.0590 0.0540 5 0.0580 0.0560 0.0510 10 0.0460 0.0450 0.0410 15 0.0420 0.0410 0.0380 20 0.0390 0.0380 0.0350 25 0.0370 0.0350 0.0330 30 0.0350 0.0330 0.0310 The Miscellaneous salary scale is used for Local Prosecutors. The Police salary scale is used for Other Safety, Local Sheriff, and School Police. Overall Payroll Growth 3.00 percent compounded annually (used in projecting the payroll over which the unfunded liability is amortized). This assumption is used for all plans. Inflation 2.75 percent compounded annually. This assumption is used for all plans. Non-valued Potential Additional Liabilities The potential liability loss for a cost-of-living increase exceeding the 2.75 percent inflation assumption, and any potential liability loss from future member service purchases are not reflected in the valuation. Miscellaneous Loading Factors Credit for Unused Sick Leave Total years of service is increased by 1 percent for those plans that have accepted the provision providing Credit for Unused Sick Leave. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-6 Conversion of Employer Paid Member Contributions (EPMC) Total years of service is increased by the Employee Contribution Rate for those plans with the provision providing for the Conversion of Employer Paid Member Contributions (EPMC) during the final compensation period. Norris Decision (Best Factors) Employees hired prior to July 1, 1982 have projected benefit amounts increased in order to reflect the use of “Best Factors” in the calculation of optional benefit forms. This is due to a 1983 Supreme Court decision, known as the Norris decision, which required males and females to be treated equally in the determination of benefit amounts. Consequently, anyone already employed at that time is given the best possible conversion factor when optional benefits are determined. No loading is necessary for employees hired after July 1, 1982. Termination Liability The termination liabilities include a 7 percent contingency load. This load is for unforeseen improvements in mortality. Demographic Assumptions Pre-Retirement Mortality Non-industrial death rates vary by age and gender. Industrial death rates vary by age. See sample rates in table below. The non-industrial death rates are used for all plans. The industrial death rates are used for safety plans (except for Local Prosecutor safety members where the corresponding miscellaneous plan does not have the Industrial Death Benefit). Non-Industrial Death Industrial Death (Not Job-Related) (Job-Related) Age Male Female Male and Female 20 0.00031 0.00020 0.00003 25 0.00040 0.00023 0.00007 30 0.00049 0.00025 0.00010 35 0.00057 0.00035 0.00012 40 0.00075 0.00050 0.00013 45 0.00106 0.00071 0.00014 50 0.00155 0.00100 0.00015 55 0.00228 0.00138 0.00016 60 0.00308 0.00182 0.00017 65 0.00400 0.00257 0.00018 70 0.00524 0.00367 0.00019 75 0.00713 0.00526 0.00020 80 0.00990 0.00814 0.00021 Miscellaneous plans usually have industrial death rates set to zero unless the agency has specifically contracted for industrial death benefits. If so, each non-industrial death rate shown above will be split into two components; 99 percent will become the non-industrial death rate and 1 percent will become the industrial death rate. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-7 Post-Retirement Mortality Rates vary by age, type of retirement, and gender. See sample rates in table below. These rates are used for all plans. Healthy Recipients Non-Industrially Disabled Industrially Disabled (Not Job-Related) (Job-Related) Age Male Female Male Female Male Female 50 0.00501 0.00466 0.01680 0.01158 0.00501 0.00466 55 0.00599 0.00416 0.01973 0.01149 0.00599 0.00416 60 0.00710 0.00436 0.02289 0.01235 0.00754 0.00518 65 0.00829 0.00588 0.02451 0.01607 0.01122 0.00838 70 0.01305 0.00993 0.02875 0.02211 0.01635 0.01395 75 0.02205 0.01722 0.03990 0.03037 0.02834 0.02319 80 0.03899 0.02902 0.06083 0.04725 0.04899 0.03910 85 0.06969 0.05243 0.09731 0.07762 0.07679 0.06251 90 0.12974 0.09887 0.14804 0.12890 0.12974 0.09887 95 0.22444 0.18489 0.22444 0.21746 0.22444 0.18489 100 0.32536 0.30017 0.32536 0.30017 0.32536 0.30017 105 0.58527 0.56093 0.58527 0.56093 0.58527 0.56093 110 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 The post-retirement mortality rates above include 20 years of projected on-going mortality improvement using Scale BB published by the Society of Actuaries. Marital Status For active members, a percentage who are married upon retirement is assumed according to member category as shown in the following table. Member Category Percent Married Miscellaneous Member 85% Local Police 90% Local Fire 90% Other Local Safety 90% School Police 90% Age of Spouse It is assumed that female spouses are 3 years younger than male spouses. This assumption is used for all plans. Terminated Members It is assumed that terminated members refund immediately if non-vested. Terminated members who are vested are assumed to follow the same service retirement pattern as active members but with a load to reflect the expected higher rates of retirement, especially at lower ages. The following table shows the load factors that are applied to the service retirement assumption for active members to obtain the service retirement pattern for separated vested members: Age Load Factor Miscellaneous Load Factor Safety 50 190% 310% 51 110% 190% 52 110% 105% 53 through 54 100% 105% 55 100% 140% 56 and above 100% (no change) 100% (no change) Termination with Refund Rates vary by entry age and service for miscellaneous plans. Rates vary by service for safety plans. See sample rates in tables below. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-8 Public Agency Miscellaneous Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45 0 0.1742 0.1674 0.1606 0.1537 0.1468 0.1400 1 0.1545 0.1477 0.1409 0.1339 0.1271 0.1203 2 0.1348 0.1280 0.1212 0.1142 0.1074 0.1006 3 0.1151 0.1083 0.1015 0.0945 0.0877 0.0809 4 0.0954 0.0886 0.0818 0.0748 0.0680 0.0612 5 0.0212 0.0193 0.0174 0.0155 0.0136 0.0116 10 0.0138 0.0121 0.0104 0.0088 0.0071 0.0055 15 0.0060 0.0051 0.0042 0.0032 0.0023 0.0014 20 0.0037 0.0029 0.0021 0.0013 0.0005 0.0001 25 0.0017 0.0011 0.0005 0.0001 0.0001 0.0001 30 0.0005 0.0001 0.0001 0.0001 0.0001 0.0001 35 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 Public Agency Safety Duration of Service Fire Police County Peace Officer 0 0.0710 0.1013 0.0997 1 0.0554 0.0636 0.0782 2 0.0398 0.0271 0.0566 3 0.0242 0.0258 0.0437 4 0.0218 0.0245 0.0414 5 0.0029 0.0086 0.0145 10 0.0009 0.0053 0.0089 15 0.0006 0.0027 0.0045 20 0.0005 0.0017 0.0020 25 0.0003 0.0012 0.0009 30 0.0003 0.0009 0.0006 35 0.0003 0.0009 0.0006 The police termination and refund rates are also used for Public Agency Local Prosecutors, Other Safety, Local Sheriff, and School Police. Schools Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 Entry Age 45 0 0.1730 0.1627 0.1525 0.1422 0.1319 0.1217 1 0.1585 0.1482 0.1379 0.1277 0.1174 0.1071 2 0.1440 0.1336 0.1234 0.1131 0.1028 0.0926 3 0.1295 0.1192 0.1089 0.0987 0.0884 0.0781 4 0.1149 0.1046 0.0944 0.0841 0.0738 0.0636 5 0.0278 0.0249 0.0221 0.0192 0.0164 0.0135 10 0.0172 0.0147 0.0122 0.0098 0.0074 0.0049 15 0.0115 0.0094 0.0074 0.0053 0.0032 0.0011 20 0.0073 0.0055 0.0038 0.0020 0.0002 0.0002 25 0.0037 0.0023 0.0010 0.0002 0.0002 0.0002 30 0.0015 0.0003 0.0002 0.0002 0.0002 0.0002 35 0.0002 0.0002 0.0002 0.0002 0.0002 0.0002 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-9 Termination with Vested Benefits Rates vary by entry age and service for miscellaneous plans. Rates vary by service for safety plans. See sample rates in tables below. Public Agency Miscellaneous Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 5 0.0656 0.0597 0.0537 0.0477 0.0418 10 0.0530 0.0466 0.0403 0.0339 0.0000 15 0.0443 0.0373 0.0305 0.0000 0.0000 20 0.0333 0.0261 0.0000 0.0000 0.0000 25 0.0212 0.0000 0.0000 0.0000 0.0000 30 0.0000 0.0000 0.0000 0.0000 0.0000 35 0.0000 0.0000 0.0000 0.0000 0.0000 Public Agency Safety Duration of Service Fire Police County Peace Officer 5 0.0162 0.0163 0.0265 10 0.0061 0.0126 0.0204 15 0.0058 0.0082 0.0130 20 0.0053 0.0065 0.0074 25 0.0047 0.0058 0.0043 30 0.0045 0.0056 0.0030 35 0.0000 0.0000 0.0000 When a member is eligible to retire, the termination with vested benefits probability is set to zero. After termination with vested benefits, a miscellaneous member is assumed to retire at age 59 and a safety member at age 54. The Police termination with vested benefits rates are also used for Public Agency Local Prosecutors, Other Safety, Local Sheriff, and School Police. Schools Duration of Service Entry Age 20 Entry Age 25 Entry Age 30 Entry Age 35 Entry Age 40 5 0.0816 0.0733 0.0649 0.0566 0.0482 10 0.0629 0.0540 0.0450 0.0359 0.0000 15 0.0537 0.0440 0.0344 0.0000 0.0000 20 0.0420 0.0317 0.0000 0.0000 0.0000 25 0.0291 0.0000 0.0000 0.0000 0.0000 30 0.0000 0.0000 0.0000 0.0000 0.0000 35 0.0000 0.0000 0.0000 0.0000 0.0000 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-10 Non-Industrial (Not Job-Related) Disability Rates vary by age and gender for miscellaneous plans. Rates vary by age and category for safety plans. Miscellaneous Fire Police County Peace Officer Schools Age Male Female Male and Female Male and Female Male and Female Male Female 20 0.0002 0.0001 0.0001 0.0001 0.0001 0.0003 0.0003 25 0.0002 0.0001 0.0001 0.0001 0.0001 0.0001 0.0001 30 0.0002 0.0002 0.0001 0.0002 0.0001 0.0001 0.0002 35 0.0005 0.0008 0.0001 0.0003 0.0004 0.0005 0.0004 40 0.0012 0.0016 0.0001 0.0004 0.0007 0.0015 0.0010 45 0.0019 0.0022 0.0002 0.0005 0.0013 0.0030 0.0019 50 0.0021 0.0023 0.0005 0.0008 0.0018 0.0039 0.0024 55 0.0022 0.0018 0.0010 0.0013 0.0010 0.0036 0.0021 60 0.0022 0.0014 0.0015 0.0020 0.0006 0.0031 0.0014 The miscellaneous non-industrial disability rates are used for Local Prosecutors. The police non-industrial disability rates are also used for Other Safety, Local Sheriff, and School Police. Industrial (Job-Related) Disability Rates vary by age and category. Age Fire Police County Peace Officer 20 0.0001 0.0000 0.0004 25 0.0003 0.0017 0.0013 30 0.0007 0.0048 0.0025 35 0.0016 0.0079 0.0037 40 0.0030 0.0110 0.0051 45 0.0053 0.0141 0.0067 50 0.0277 0.0185 0.0092 55 0.0409 0.0479 0.0151 60 0.0583 0.0602 0.0174 The police industrial disability rates are also used for Local Sheriff and Other Safety. Fifty percent of the police industrial disability rates are used for School Police. One percent of the police industrial disability rates are used for Local Prosecutors. Normally, rates are zero for miscellaneous plans unless the agency has specifically contracted for industrial disability benefits. If so, each miscellaneous non-industrial disability rate will be split into two components: 50 percent will become the non-industrial disability rate and 50 percent will become the industrial disability rate. Service Retirement Retirement rates vary by age, service, and formula, except for the safety ½ @ 55 and 2% @ 55 formulas, where retirement rates vary by age only. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-11 Service Retirement Public Agency Miscellaneous 1.5% @ 65 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.008 0.011 0.013 0.015 0.017 0.019 51 0.007 0.010 0.012 0.013 0.015 0.017 52 0.010 0.014 0.017 0.019 0.021 0.024 53 0.008 0.012 0.015 0.017 0.019 0.022 54 0.012 0.016 0.019 0.022 0.025 0.028 55 0.018 0.025 0.031 0.035 0.038 0.043 56 0.015 0.021 0.025 0.029 0.032 0.036 57 0.020 0.028 0.033 0.038 0.043 0.048 58 0.024 0.033 0.040 0.046 0.052 0.058 59 0.028 0.039 0.048 0.054 0.060 0.067 60 0.049 0.069 0.083 0.094 0.105 0.118 61 0.062 0.087 0.106 0.120 0.133 0.150 62 0.104 0.146 0.177 0.200 0.223 0.251 63 0.099 0.139 0.169 0.191 0.213 0.239 64 0.097 0.136 0.165 0.186 0.209 0.233 65 0.140 0.197 0.240 0.271 0.302 0.339 66 0.092 0.130 0.157 0.177 0.198 0.222 67 0.129 0.181 0.220 0.249 0.277 0.311 68 0.092 0.129 0.156 0.177 0.197 0.221 69 0.092 0.130 0.158 0.178 0.199 0.224 70 0.103 0.144 0.175 0.198 0.221 0.248 Public Agency Miscellaneous 2% @ 60 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.010 0.013 0.015 0.018 0.019 0.021 51 0.009 0.011 0.014 0.016 0.017 0.019 52 0.011 0.014 0.017 0.020 0.022 0.024 53 0.010 0.012 0.015 0.017 0.020 0.021 54 0.015 0.019 0.023 0.025 0.029 0.031 55 0.022 0.029 0.035 0.040 0.045 0.049 56 0.018 0.024 0.028 0.033 0.036 0.040 57 0.024 0.032 0.038 0.043 0.049 0.053 58 0.027 0.036 0.043 0.049 0.055 0.061 59 0.033 0.044 0.054 0.061 0.068 0.076 60 0.056 0.077 0.092 0.105 0.117 0.130 61 0.071 0.097 0.118 0.134 0.149 0.166 62 0.117 0.164 0.198 0.224 0.250 0.280 63 0.122 0.171 0.207 0.234 0.261 0.292 64 0.114 0.159 0.193 0.218 0.244 0.271 65 0.150 0.209 0.255 0.287 0.321 0.358 66 0.114 0.158 0.192 0.217 0.243 0.270 67 0.141 0.196 0.238 0.270 0.301 0.337 68 0.103 0.143 0.174 0.196 0.219 0.245 69 0.109 0.153 0.185 0.209 0.234 0.261 70 0.117 0.162 0.197 0.222 0.248 0.277 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-12 Service Retirement Public Agency Miscellaneous 2% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.014 0.018 0.021 0.025 0.027 0.031 51 0.012 0.014 0.017 0.020 0.021 0.025 52 0.013 0.017 0.019 0.023 0.025 0.028 53 0.015 0.020 0.023 0.027 0.030 0.034 54 0.026 0.033 0.038 0.045 0.051 0.059 55 0.048 0.061 0.074 0.088 0.100 0.117 56 0.042 0.053 0.063 0.075 0.085 0.100 57 0.044 0.056 0.067 0.081 0.091 0.107 58 0.049 0.062 0.074 0.089 0.100 0.118 59 0.057 0.072 0.086 0.103 0.118 0.138 60 0.067 0.086 0.103 0.123 0.139 0.164 61 0.081 0.103 0.124 0.148 0.168 0.199 62 0.116 0.147 0.178 0.214 0.243 0.288 63 0.114 0.144 0.174 0.208 0.237 0.281 64 0.108 0.138 0.166 0.199 0.227 0.268 65 0.155 0.197 0.238 0.285 0.325 0.386 66 0.132 0.168 0.203 0.243 0.276 0.328 67 0.122 0.155 0.189 0.225 0.256 0.304 68 0.111 0.141 0.170 0.204 0.232 0.274 69 0.114 0.144 0.174 0.209 0.238 0.282 70 0.130 0.165 0.200 0.240 0.272 0.323 Public Agency Miscellaneous 2.5% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.004 0.009 0.019 0.029 0.049 0.094 51 0.004 0.009 0.019 0.029 0.049 0.094 52 0.004 0.009 0.020 0.030 0.050 0.095 53 0.008 0.014 0.025 0.036 0.058 0.104 54 0.024 0.034 0.050 0.066 0.091 0.142 55 0.066 0.088 0.115 0.142 0.179 0.241 56 0.042 0.057 0.078 0.098 0.128 0.184 57 0.041 0.057 0.077 0.097 0.128 0.183 58 0.045 0.061 0.083 0.104 0.136 0.192 59 0.055 0.074 0.098 0.123 0.157 0.216 60 0.066 0.088 0.115 0.142 0.179 0.241 61 0.072 0.095 0.124 0.153 0.191 0.255 62 0.099 0.130 0.166 0.202 0.248 0.319 63 0.092 0.121 0.155 0.189 0.233 0.302 64 0.091 0.119 0.153 0.187 0.231 0.299 65 0.122 0.160 0.202 0.245 0.297 0.374 66 0.138 0.179 0.226 0.272 0.329 0.411 67 0.114 0.149 0.189 0.229 0.279 0.354 68 0.100 0.131 0.168 0.204 0.250 0.322 69 0.114 0.149 0.189 0.229 0.279 0.354 70 0.127 0.165 0.209 0.253 0.306 0.385 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-13 Service Retirement Public Agency Miscellaneous 2.7% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.004 0.009 0.014 0.035 0.055 0.095 51 0.002 0.006 0.011 0.030 0.050 0.090 52 0.006 0.012 0.017 0.038 0.059 0.099 53 0.010 0.017 0.024 0.046 0.068 0.110 54 0.032 0.044 0.057 0.085 0.113 0.160 55 0.076 0.101 0.125 0.165 0.205 0.265 56 0.055 0.074 0.093 0.127 0.160 0.214 57 0.050 0.068 0.086 0.118 0.151 0.204 58 0.055 0.074 0.093 0.127 0.161 0.215 59 0.061 0.082 0.102 0.138 0.174 0.229 60 0.069 0.093 0.116 0.154 0.192 0.250 61 0.086 0.113 0.141 0.183 0.225 0.288 62 0.105 0.138 0.171 0.218 0.266 0.334 63 0.103 0.135 0.167 0.215 0.262 0.329 64 0.109 0.143 0.177 0.226 0.275 0.344 65 0.134 0.174 0.215 0.270 0.326 0.401 66 0.147 0.191 0.235 0.294 0.354 0.433 67 0.121 0.158 0.196 0.248 0.300 0.372 68 0.113 0.147 0.182 0.232 0.282 0.352 69 0.117 0.153 0.189 0.240 0.291 0.362 70 0.141 0.183 0.226 0.283 0.341 0.418 Public Agency Miscellaneous 3% @ 60 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.012 0.018 0.024 0.039 0.040 0.091 51 0.009 0.014 0.019 0.034 0.034 0.084 52 0.014 0.020 0.026 0.043 0.044 0.096 53 0.016 0.023 0.031 0.048 0.050 0.102 54 0.026 0.036 0.045 0.065 0.070 0.125 55 0.043 0.057 0.072 0.096 0.105 0.165 56 0.042 0.056 0.070 0.094 0.103 0.162 57 0.049 0.065 0.082 0.108 0.119 0.180 58 0.057 0.076 0.094 0.122 0.136 0.199 59 0.076 0.100 0.123 0.157 0.175 0.244 60 0.114 0.148 0.182 0.226 0.255 0.334 61 0.095 0.123 0.152 0.190 0.214 0.288 62 0.133 0.172 0.211 0.260 0.294 0.378 63 0.129 0.166 0.204 0.252 0.285 0.368 64 0.143 0.185 0.226 0.278 0.315 0.401 65 0.202 0.260 0.318 0.386 0.439 0.542 66 0.177 0.228 0.279 0.340 0.386 0.482 67 0.151 0.194 0.238 0.292 0.331 0.420 68 0.139 0.179 0.220 0.270 0.306 0.391 69 0.190 0.245 0.299 0.364 0.414 0.513 70 0.140 0.182 0.223 0.274 0.310 0.396 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-14 Service Retirement Public Agency Miscellaneous 2% @ 62 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.000 0.000 0.000 0.000 0.000 0.000 51 0.000 0.000 0.000 0.000 0.000 0.000 52 0.010 0.013 0.016 0.019 0.022 0.024 53 0.013 0.017 0.020 0.024 0.027 0.031 54 0.021 0.027 0.033 0.039 0.045 0.050 55 0.044 0.056 0.068 0.080 0.092 0.104 56 0.030 0.039 0.047 0.055 0.063 0.072 57 0.036 0.046 0.056 0.066 0.076 0.086 58 0.046 0.059 0.072 0.085 0.097 0.110 59 0.058 0.074 0.089 0.105 0.121 0.137 60 0.062 0.078 0.095 0.112 0.129 0.146 61 0.062 0.079 0.096 0.113 0.129 0.146 62 0.097 0.123 0.150 0.176 0.202 0.229 63 0.089 0.113 0.137 0.162 0.186 0.210 64 0.094 0.120 0.145 0.171 0.197 0.222 65 0.129 0.164 0.199 0.234 0.269 0.304 66 0.105 0.133 0.162 0.190 0.219 0.247 67 0.105 0.133 0.162 0.190 0.219 0.247 68 0.105 0.133 0.162 0.190 0.219 0.247 69 0.105 0.133 0.162 0.190 0.219 0.247 70 0.125 0.160 0.194 0.228 0.262 0.296 Service Retirement Public Agency Fire ½ @ 55 and 2% @ 55 Age 50 51 52 53 54 55 Rate 0.0159 0.0000 0.0344 0.0199 0.0413 0.0751 Age 56 57 58 59 60 Rate 0.1108 0.0000 0.0950 0.0441 1.00000 Public Agency Police ½ @ 55 and 2% @ 55 Age 50 51 52 53 54 55 Rate 0.0255 0.0000 0.0164 0.0272 0.0095 0.1667 Age 56 57 58 59 60 Rate 0.0692 0.0511 0.0724 0.0704 1.0000 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-15 Service Retirement Public Agency Police 2% @ 50 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.005 0.005 0.005 0.005 0.017 0.089 51 0.005 0.005 0.005 0.005 0.017 0.087 52 0.018 0.018 0.018 0.018 0.042 0.132 53 0.044 0.044 0.044 0.044 0.090 0.217 54 0.065 0.065 0.065 0.065 0.126 0.283 55 0.086 0.086 0.086 0.086 0.166 0.354 56 0.067 0.067 0.067 0.067 0.130 0.289 57 0.066 0.066 0.066 0.066 0.129 0.288 58 0.066 0.066 0.066 0.066 0.129 0.288 59 0.139 0.139 0.139 0.139 0.176 0.312 60 0.123 0.123 0.123 0.123 0.153 0.278 61 0.110 0.110 0.110 0.110 0.138 0.256 62 0.130 0.130 0.130 0.130 0.162 0.291 63 0.130 0.130 0.130 0.130 0.162 0.291 64 0.130 0.130 0.130 0.130 0.162 0.291 65 1.000 1.000 1.000 1.000 1.000 1.000 These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety. Service Retirement Public Agency Fire 2% @ 50 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.009 0.009 0.009 0.009 0.013 0.020 51 0.013 0.013 0.013 0.013 0.020 0.029 52 0.018 0.018 0.018 0.018 0.028 0.042 53 0.052 0.052 0.052 0.052 0.079 0.119 54 0.067 0.067 0.067 0.067 0.103 0.154 55 0.089 0.089 0.089 0.089 0.136 0.204 56 0.083 0.083 0.083 0.083 0.127 0.190 57 0.082 0.082 0.082 0.082 0.126 0.189 58 0.088 0.088 0.088 0.088 0.136 0.204 59 0.074 0.074 0.074 0.074 0.113 0.170 60 0.100 0.100 0.100 0.100 0.154 0.230 61 0.072 0.072 0.072 0.072 0.110 0.165 62 0.099 0.099 0.099 0.099 0.152 0.228 63 0.114 0.114 0.114 0.114 0.175 0.262 64 0.114 0.114 0.114 0.114 0.175 0.262 65 1.000 1.000 1.000 1.000 1.000 1.000 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-16 Service Retirement Public Agency Police 3% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.004 0.004 0.004 0.004 0.015 0.086 51 0.014 0.014 0.014 0.014 0.034 0.114 52 0.026 0.026 0.026 0.026 0.060 0.154 53 0.038 0.038 0.038 0.038 0.083 0.188 54 0.071 0.071 0.071 0.071 0.151 0.292 55 0.061 0.061 0.061 0.061 0.131 0.261 56 0.072 0.072 0.072 0.072 0.153 0.295 57 0.065 0.065 0.065 0.065 0.140 0.273 58 0.066 0.066 0.066 0.066 0.142 0.277 59 0.118 0.118 0.118 0.118 0.247 0.437 60 0.065 0.065 0.065 0.065 0.138 0.272 61 0.084 0.084 0.084 0.084 0.178 0.332 62 0.108 0.108 0.108 0.108 0.226 0.405 63 0.084 0.084 0.084 0.084 0.178 0.332 64 0.084 0.084 0.084 0.084 0.178 0.332 65 1.000 1.000 1.000 1.000 1.000 1.000 These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety. Service Retirement Public Agency Fire 3% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.001 0.001 0.001 0.006 0.016 0.069 51 0.002 0.002 0.002 0.006 0.018 0.071 52 0.012 0.012 0.012 0.021 0.040 0.098 53 0.032 0.032 0.032 0.049 0.085 0.149 54 0.057 0.057 0.057 0.087 0.144 0.217 55 0.073 0.073 0.073 0.109 0.179 0.259 56 0.064 0.064 0.064 0.097 0.161 0.238 57 0.063 0.063 0.063 0.095 0.157 0.233 58 0.065 0.065 0.065 0.099 0.163 0.241 59 0.088 0.088 0.088 0.131 0.213 0.299 60 0.105 0.105 0.105 0.155 0.251 0.344 61 0.118 0.118 0.118 0.175 0.282 0.380 62 0.087 0.087 0.087 0.128 0.210 0.295 63 0.067 0.067 0.067 0.100 0.165 0.243 64 0.067 0.067 0.067 0.100 0.165 0.243 65 1.000 1.000 1.000 1.000 1.000 1.000 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-17 Service Retirement Public Agency Police 3% @ 50 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.050 0.050 0.050 0.099 0.240 0.314 51 0.034 0.034 0.034 0.072 0.198 0.260 52 0.033 0.033 0.033 0.071 0.198 0.259 53 0.039 0.039 0.039 0.080 0.212 0.277 54 0.045 0.045 0.045 0.092 0.229 0.300 55 0.052 0.052 0.052 0.105 0.248 0.323 56 0.042 0.042 0.042 0.087 0.221 0.289 57 0.043 0.043 0.043 0.088 0.223 0.292 58 0.054 0.054 0.054 0.109 0.255 0.333 59 0.054 0.054 0.054 0.108 0.253 0.330 60 0.060 0.060 0.060 0.121 0.272 0.355 61 0.048 0.048 0.048 0.098 0.238 0.311 62 0.061 0.061 0.061 0.122 0.274 0.357 63 0.057 0.057 0.057 0.115 0.263 0.343 64 0.069 0.069 0.069 0.137 0.296 0.385 65 1.000 1.000 1.000 1.000 1.000 1.000 These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety. Service Retirement Public Agency Fire 3% @ 50 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.020 0.020 0.020 0.040 0.130 0.192 51 0.008 0.008 0.008 0.023 0.107 0.164 52 0.023 0.023 0.023 0.043 0.136 0.198 53 0.023 0.023 0.023 0.043 0.135 0.198 54 0.027 0.027 0.027 0.048 0.143 0.207 55 0.043 0.043 0.043 0.070 0.174 0.244 56 0.053 0.053 0.053 0.085 0.196 0.269 57 0.054 0.054 0.054 0.086 0.197 0.271 58 0.052 0.052 0.052 0.084 0.193 0.268 59 0.075 0.075 0.075 0.116 0.239 0.321 60 0.065 0.065 0.065 0.102 0.219 0.298 61 0.076 0.076 0.076 0.117 0.241 0.324 62 0.068 0.068 0.068 0.106 0.224 0.304 63 0.027 0.027 0.027 0.049 0.143 0.208 64 0.094 0.094 0.094 0.143 0.277 0.366 65 1.000 1.000 1.000 1.000 1.000 1.000 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-18 Service Retirement Public Agency Police 2% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.011 0.011 0.011 0.011 0.020 0.036 51 0.009 0.009 0.009 0.009 0.016 0.028 52 0.018 0.018 0.018 0.018 0.034 0.060 53 0.037 0.037 0.037 0.037 0.067 0.119 54 0.049 0.049 0.049 0.049 0.089 0.159 55 0.063 0.063 0.063 0.063 0.115 0.205 56 0.045 0.045 0.045 0.045 0.082 0.146 57 0.064 0.064 0.064 0.064 0.117 0.209 58 0.047 0.047 0.047 0.047 0.086 0.154 59 0.105 0.105 0.105 0.105 0.130 0.191 60 0.105 0.105 0.105 0.105 0.129 0.188 61 0.105 0.105 0.105 0.105 0.129 0.188 62 0.105 0.105 0.105 0.105 0.129 0.188 63 0.105 0.105 0.105 0.105 0.129 0.188 64 0.105 0.105 0.105 0.105 0.129 0.188 65 1.000 1.000 1.000 1.000 1.000 1.000 These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety. Service Retirement Public Agency Fire 2% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.005 0.005 0.005 0.005 0.008 0.012 51 0.006 0.006 0.006 0.006 0.009 0.013 52 0.012 0.012 0.012 0.012 0.019 0.028 53 0.033 0.033 0.033 0.033 0.050 0.075 54 0.045 0.045 0.045 0.045 0.069 0.103 55 0.061 0.061 0.061 0.061 0.094 0.140 56 0.055 0.055 0.055 0.055 0.084 0.126 57 0.081 0.081 0.081 0.081 0.125 0.187 58 0.059 0.059 0.059 0.059 0.091 0.137 59 0.055 0.055 0.055 0.055 0.084 0.126 60 0.085 0.085 0.085 0.085 0.131 0.196 61 0.085 0.085 0.085 0.085 0.131 0.196 62 0.085 0.085 0.085 0.085 0.131 0.196 63 0.085 0.085 0.085 0.085 0.131 0.196 64 0.085 0.085 0.085 0.085 0.131 0.196 65 1.000 1.000 1.000 1.000 1.000 1.000 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-19 Service Retirement Public Agency Police 2.5% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.014 0.014 0.014 0.014 0.025 0.045 51 0.012 0.012 0.012 0.012 0.021 0.038 52 0.025 0.025 0.025 0.025 0.046 0.081 53 0.047 0.047 0.047 0.047 0.086 0.154 54 0.063 0.063 0.063 0.063 0.115 0.205 55 0.076 0.076 0.076 0.076 0.140 0.249 56 0.054 0.054 0.054 0.054 0.099 0.177 57 0.071 0.071 0.071 0.071 0.130 0.232 58 0.057 0.057 0.057 0.057 0.103 0.184 59 0.126 0.126 0.126 0.126 0.156 0.229 60 0.126 0.126 0.126 0.126 0.155 0.226 61 0.126 0.126 0.126 0.126 0.155 0.226 62 0.126 0.126 0.126 0.126 0.155 0.226 63 0.126 0.126 0.126 0.126 0.155 0.226 64 0.126 0.126 0.126 0.126 0.155 0.226 65 1.000 1.000 1.000 1.000 1.000 1.000 These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety. Service Retirement Public Agency Fire 2.5% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.007 0.007 0.007 0.007 0.010 0.015 51 0.008 0.008 0.008 0.008 0.012 0.018 52 0.016 0.016 0.016 0.016 0.025 0.038 53 0.042 0.042 0.042 0.042 0.064 0.096 54 0.057 0.057 0.057 0.057 0.088 0.132 55 0.074 0.074 0.074 0.074 0.114 0.170 56 0.066 0.066 0.066 0.066 0.102 0.153 57 0.090 0.090 0.090 0.090 0.139 0.208 58 0.071 0.071 0.071 0.071 0.110 0.164 59 0.066 0.066 0.066 0.066 0.101 0.151 60 0.102 0.102 0.102 0.102 0.157 0.235 61 0.102 0.102 0.102 0.102 0.157 0.236 62 0.102 0.102 0.102 0.102 0.157 0.236 63 0.102 0.102 0.102 0.102 0.157 0.236 64 0.102 0.102 0.102 0.102 0.157 0.236 65 1.000 1.000 1.000 1.000 1.000 1.000 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-20 Service Retirement Public Agency Police 2.7% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.0138 0.0138 0.0138 0.0138 0.0253 0.0451 51 0.0123 0.0123 0.0123 0.0123 0.0226 0.0402 52 0.0249 0.0249 0.0249 0.0249 0.0456 0.0812 53 0.0497 0.0497 0.0497 0.0497 0.0909 0.1621 54 0.0662 0.0662 0.0662 0.0662 0.1211 0.2160 55 0.0854 0.0854 0.0854 0.0854 0.1563 0.2785 56 0.0606 0.0606 0.0606 0.0606 0.1108 0.1975 57 0.0711 0.0711 0.0711 0.0711 0.1300 0.2318 58 0.0628 0.0628 0.0628 0.0628 0.1149 0.2049 59 0.1396 0.1396 0.1396 0.1396 0.1735 0.2544 60 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 61 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 62 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 63 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 64 0.1396 0.1396 0.1396 0.1396 0.1719 0.2506 65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 These rates also apply to Local Prosecutors, Local Sheriff, School Police, and Other Safety. Service Retirement Public Agency Fire 2.7% @ 57 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.0065 0.0065 0.0065 0.0065 0.0101 0.0151 51 0.0081 0.0081 0.0081 0.0081 0.0125 0.0187 52 0.0164 0.0164 0.0164 0.0164 0.0254 0.0380 53 0.0442 0.0442 0.0442 0.0442 0.0680 0.1018 54 0.0606 0.0606 0.0606 0.0606 0.0934 0.1397 55 0.0825 0.0825 0.0825 0.0825 0.1269 0.1900 56 0.0740 0.0740 0.0740 0.0740 0.1140 0.1706 57 0.0901 0.0901 0.0901 0.0901 0.1387 0.2077 58 0.0790 0.0790 0.0790 0.0790 0.1217 0.1821 59 0.0729 0.0729 0.0729 0.0729 0.1123 0.1681 60 0.1135 0.1135 0.1135 0.1135 0.1747 0.2615 61 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 62 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 63 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 64 0.1136 0.1136 0.1136 0.1136 0.1749 0.2618 65 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX A ACTUARIAL METHODS AND ASSUMPTIONS A-21 Service Retirement Schools 2% @ 55 Duration of Service Age 5 Years 10 Years 15 Years 20 Years 25 Years 30 Years 50 0.005 0.009 0.013 0.015 0.016 0.018 51 0.005 0.010 0.014 0.017 0.019 0.021 52 0.006 0.012 0.017 0.020 0.022 0.025 53 0.007 0.014 0.019 0.023 0.026 0.029 54 0.012 0.024 0.033 0.039 0.044 0.049 55 0.024 0.048 0.067 0.079 0.088 0.099 56 0.020 0.039 0.055 0.065 0.072 0.081 57 0.021 0.042 0.059 0.070 0.078 0.087 58 0.025 0.050 0.070 0.083 0.092 0.103 59 0.029 0.057 0.080 0.095 0.105 0.118 60 0.037 0.073 0.102 0.121 0.134 0.150 61 0.046 0.090 0.126 0.149 0.166 0.186 62 0.076 0.151 0.212 0.250 0.278 0.311 63 0.069 0.136 0.191 0.225 0.251 0.281 64 0.067 0.133 0.185 0.219 0.244 0.273 65 0.091 0.180 0.251 0.297 0.331 0.370 66 0.072 0.143 0.200 0.237 0.264 0.295 67 0.067 0.132 0.185 0.218 0.243 0.272 68 0.060 0.118 0.165 0.195 0.217 0.243 69 0.067 0.133 0.187 0.220 0.246 0.275 70 0.066 0.131 0.183 0.216 0.241 0.270 Miscellaneous Internal Revenue Code Section 415 The limitations on benefits imposed by Internal Revenue Code Section 415 are taken into account in this valuation. Each year the impact of any changes in this limitation since the prior valuation is included and amortized as part of the actuarial gain or loss base. This results in lower contributions for those employers contributing to the Replacement Benefit Fund and protects CalPERS from prefunding expected benefits in excess of limits imposed by federal tax law. Internal Revenue Code Section 401(a)(17) The limitations on compensation imposed by Internal Revenue Code Section 401(a)(17) are taken into account in this valuation. Each year, the impact of any changes in the compensation limitation since the prior valuation is included and amortized as part of the actuarial gain or loss base. The compensation limit for classic members for the 2015 calendar year is $265,000. APPENDIX B PRINCIPAL PLAN PROVISIONS CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B SAFETY PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-1 The following is a description of the principal plan provisions used in calculating costs and liabilities. We have indicated whether a plan provision is standard or optional. Standard benefits are applicable to all members while optional benefits vary among employers. Optional benefits that apply to a single period of time, such as Golden Handshakes, have not been included. Many of the statements in this summary are general in nature, and are intended to provide an easily understood summary of the Public Employees’ Retirement Law. The law itself governs in all situations. Service Retirement Eligibility A classic CalPERS member or PEPRA Safety member becomes eligible for Service Retirement upon attainment of age 50 with at least 5 years of credited service (total service across all CalPERS employers, and with certain other retirement systems with which CalPERS has reciprocity agreements). For employees hired into a plan with the 1.5 percent at 65 formula, eligibility for service retirement is age 55 with at least 5 years of service. PEPRA miscellaneous members become eligible for service retirement upon attainment of age 52 with at least 5 years of service. Benefit The service retirement benefit is a monthly allowance equal to the product of the benefit factor, years of service, and final compensation. The benefit factor depends on the benefit formula specified in your agency’s contract. The table below shows the factors for each of the available formulas. Factors vary by the member’s age at retirement. Listed are the factors for retirement at whole year ages: Miscellaneous Plan Formulas Retirement Age 1.5% at 65 2% at 60 2% at 55 2.5% at 55 2.7% at 55 3% at 60 PEPRA 2% at 62 50 0.5000% 1.092% 1.426% 2.000% 2.000% 2.000% N/A 51 0.5667% 1.156% 1.522% 2.100% 2.140% 2.100% N/A 52 0.6334% 1.224% 1.628% 2.200% 2.280% 2.200% 1.000% 53 0.7000% 1.296% 1.742% 2.300% 2.420% 2.300% 1.100% 54 0.7667% 1.376% 1.866% 2.400% 2.560% 2.400% 1.200% 55 0.8334% 1.460% 2.000% 2.500% 2.700% 2.500% 1.300% 56 0.9000% 1.552% 2.052% 2.500% 2.700% 2.600% 1.400% 57 0.9667% 1.650% 2.104% 2.500% 2.700% 2.700% 1.500% 58 1.0334% 1.758% 2.156% 2.500% 2.700% 2.800% 1.600% 59 1.1000% 1.874% 2.210% 2.500% 2.700% 2.900% 1.700% 60 1.1667% 2.000% 2.262% 2.500% 2.700% 3.000% 1.800% 61 1.2334% 2.134% 2.314% 2.500% 2.700% 3.000% 1.900% 62 1.3000% 2.272% 2.366% 2.500% 2.700% 3.000% 2.000% 63 1.3667% 2.418% 2.418% 2.500% 2.700% 3.000% 2.100% 64 1.4334% 2.418% 2.418% 2.500% 2.700% 3.000% 2.200% 65 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.300% 66 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.400% 67 & up 1.5000% 2.418% 2.418% 2.500% 2.700% 3.000% 2.500% CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B SAFETY PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-2 Safety Plan Formulas Retirement Age ½ at 55 * 2% at 55 2% at 50 3% at 55 3% at 50 50 1.783% 1.426% 2.000% 2.400% 3.000% 51 1.903% 1.522% 2.140% 2.520% 3.000% 52 2.035% 1.628% 2.280% 2.640% 3.000% 53 2.178% 1.742% 2.420% 2.760% 3.000% 54 2.333% 1.866% 2.560% 2.880% 3.000% 55 & Up 2.500% 2.000% 2.700% 3.000% 3.000% * For this formula, the benefit factor also varies by entry age. The factors shown are for members with an entry age of 35 or greater. If entry age is less than 35, then the age 55 benefit factor is 50 percent divided by the difference between age 55 and entry age. The benefit factor for ages prior to age 55 is the same proportion of the age 55 benefit factor as in the above table. PEPRA Safety Plan Formulas Retirement Age 2% at 57 2.5% at 57 2.7% at 57 50 1.426% 2.000% 2.000% 51 1.508% 2.071% 2.100% 52 1.590% 2.143% 2.200% 53 1.672% 2.214% 2.300% 54 1.754% 2.286% 2.400% 55 1.836% 2.357% 2.500% 56 1.918% 2.429% 2.600% 57 & Up 2.000% 2.500% 2.700% The years of service is the amount credited by CalPERS to a member while he or she is employed in this group (or for other periods that are recognized under the employer’s contract with CalPERS). For a member who has earned service with multiple CalPERS employers, the benefit from each employer is calculated separately according to each employer’s contract, and then added together for the total allowance. An agency may contract for an optional benefit where any unused sick leave accumulated at the time of retirement will be converted to credited service at a rate of 0.004 years of service for each day of sick leave. The final compensation is the monthly average of the member’s highest 36 or 12 consecutive months’ full-time equivalent monthly pay (no matter which CalPERS employer paid this compensation). The standard benefit is 36 months. Employers had the option of providing a final compensation equal to the highest 12 consecutive months for classic plans only. Final compensation must be defined by the highest 36 consecutive months’ pay under the 1.5% at 65 formula. PEPRA members have a cap on the annual salary that can be used to calculate final compensation for all new members based on the Social Security contribution and benefit base. For employees that participate in Social Security this cap is $117,020 for 2015 and for those employees that do not participate in Social Security the cap for 2015 is $140,424. Adjustments to the caps are permitted annually based on changes to the CPI for all urban consumers. Employees must be covered by Social Security with the 1.5% at 65 formula. Social Security is optional for all other benefit formulas. For employees covered by Social Security, the modified formula is the standard benefit. Under this type of formula, the final compensation is offset by $133.33 (or by one third if the final compensation is less than $400). Employers may contract for the full benefit with Social Security that will eliminate the offset applicable to the final compensation. For employees not covered by Social Security, the full benefit is paid with CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B SAFETY PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-3 no offsets. Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 if members are not covered by Social Security or $513 if members are covered by Social Security. The miscellaneous and PEPRA safety service retirement benefit is not capped. The classic service retirement benefit is capped at 90 percent of final compensation. Vested Deferred Retirement Eligibility for Deferred Status A CalPERS member becomes eligible for a deferred vested retirement benefit when he or she leaves employment, keeps his or her contribution account balance on deposit with CalPERS, and has earned at least 5 years of credited service (total service across all CalPERS employers, and with certain other retirement systems with which CalPERS has reciprocity agreements). Eligibility to Start Receiving Benefits The CalPERS classic members and PEPRA safety members become eligible to receive the deferred retirement benefit upon satisfying the eligibility requirements for deferred status and upon attainment of age 50 (55 for employees hired into a 1.5% @ 65 plan). PEPRA miscellaneous members become eligible to receive the deferred retirement benefit upon satisfying the eligibility requirements for deferred status and upon attainment of age 52. Benefit The vested deferred retirement benefit is the same as the service retirement benefit, where the benefit factor is based on the member’s age at allowance commencement. For members who have earned service with multiple CalPERS employers, the benefit from each employer is calculated separately according to each employer’s contract, and then added together for the total allowance. Non-Industrial (Non-Job Related) Disability Retirement Eligibility A CalPERS member is eligible for Non-Industrial Disability Retirement if he or she becomes disabled and has at least 5 years of credited service (total service across all CalPERS employers, and with certain other retirement systems with which CalPERS has reciprocity agreements). There is no special age requirement. Disabled means the member is unable to perform his or her job because of an illness or injury, which is expected to be permanent or to last indefinitely. The illness or injury does not have to be job related. A CalPERS member must be actively employed by any CalPERS employer at the time of disability in order to be eligible for this benefit. Standard Benefit The standard Non-Industrial Disability Retirement benefit is a monthly allowance equal to 1.8 percent of final compensation, multiplied by service, which is determined as follows: Service is CalPERS credited service, for members with less than 10 years of service or greater than 18.518 years of service; or Service is CalPERS credited service plus the additional number of years that the member would have worked until age 60, for members with at least 10 years but not more than 18.518 years of service. The maximum benefit in this case is 33 1/3 percent of final compensation. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B SAFETY PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-4 Improved Benefit Employers have the option of providing the improved Non-Industrial Disability Retirement benefit. This benefit provides a monthly allowance equal to 30 percent of final compensation for the first 5 years of service, plus 1 percent for each additional year of service to a maximum of 50 percent of final compensation. Members who are eligible for a larger service retirement benefit may choose to receive that benefit in lieu of a disability benefit. Members eligible to retire, and who have attained the normal retirement age determined by their service retirement benefit formula, will receive the same dollar amount for disability retirement as that payable for service retirement. For members who have earned service with multiple CalPERS employers, the benefit attributed to each employer is the total disability allowance multiplied by the ratio of service with a particular employer to the total CalPERS service. Industrial (Job Related) Disability Retirement All safety members have this benefit. For miscellaneous members, employers have the option of providing this benefit. An employer may choose to provide the increased benefit option or the improved benefit option. Eligibility An employee is eligible for Industrial Disability Retirement if he or she becomes disabled while working, where disabled means the member is unable to perform the duties of the job because of a work-related illness or injury, which is expected to be permanent or to last indefinitely. A CalPERS member who has left active employment within this group is not eligible for this benefit, except to the extent described below. Standard Benefit The standard Industrial Disability Retirement benefit is a monthly allowance equal to 50 percent of final compensation. Increased Benefit (75 percent of Final Compensation) The increased Industrial Disability Retirement benefit is a monthly allowance equal to 75 percent final compensation for total disability. Improved Benefit (50 percent to 90 percent of Final Compensation) The improved Industrial Disability Retirement benefit is a monthly allowance equal to the Workman’s Compensation Appeals Board permanent disability rate percentage (if 50 percent or greater, with a maximum of 90 percent) times the final compensation. For a CalPERS member not actively employed in this group who became disabled while employed by some other CalPERS employer, the benefit is a return of accumulated member contributions with respect to employment in this group. With the standard or increased benefit, a member may also choose to receive the annuitization of the accumulated member contributions. If a member is eligible for service retirement and if the service retirement benefit is more than the industrial disability retirement benefit, the member may choose to receive the larger benefit. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B SAFETY PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-5 Post-Retirement Death Benefit Standard Lump Sum Payment Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree’s designated survivor(s), or to the retiree’s estate. Improved Lump Sum Payment Employers have the option of providing an improved lump sum death benefit of $600, $2,000, $3,000, $4,000 or $5,000. Form of Payment for Retirement Allowance Standard Form of Payment Generally, the retirement allowance is paid to the retiree in the form of an annuity for as long as he or she is alive. The retiree may choose to provide for a portion of his or her allowance to be paid to any designated beneficiary after the retiree’s death. CalPERS provides for a variety of such benefit options, which the retiree pays for by taking a reduction in his or her retirement allowance. Such reduction takes into account the amount to be provided to the beneficiary and the probable duration of payments (based on the ages of the member and beneficiary) made subsequent to the member’s death. Improved Form of Payment (Post-Retirement Survivor Allowance) Employers have the option to contract for the post-retirement survivor allowance. For retirement allowances with respect to service subject to the modified formula, 25 percent of the retirement allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. For retirement allowances with respect to service subject to the full or supplemental formula, 50 percent of the retirement allowance will automatically be continued to certain statutory beneficiaries upon the death of the retiree, without a reduction in the retiree’s allowance. This additional benefit is referred to as post-retirement survivor allowance (PRSA) or simply as survivor continuance. In other words, 25 percent or 50 percent of the allowance, the continuance portion, is paid to the retiree for as long as he or she is alive, and that same amount is continued to the retiree’s spouse (or if no eligible spouse, to unmarried child(ren) until they attain age 18; or, if no eligible child(ren), to a qualifying dependent parent) for the rest of his or her lifetime. This benefit will not be discontinued in the event the spouse remarries. The remaining 75 percent or 50 percent of the retirement allowance, which may be referred to as the option portion of the benefit, is paid to the retiree as an annuity for as long as he or she is alive. Or, the retiree may choose to provide for some of this option portion to be paid to any designated beneficiary after the retiree’s death. Benefit options applicable to the option portion are the same as those offered with the standard form. The reduction is calculated in the same manner but is applied only to the option portion. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B SAFETY PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-6 Pre-Retirement Death Benefits Basic Death Benefit This is a standard benefit. Eligibility An employee’s beneficiary (or estate) may receive the basic death benefit if the member dies while actively employed. A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be eligible for this benefit. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this basic death benefit. Benefit The basic death benefit is a lump sum in the amount of the member’s accumulated contributions, where interest is currently credited at 7.5 percent per year, plus a lump sum in the amount of one month's salary for each completed year of current service, up to a maximum of six months' salary. For purposes of this benefit, one month's salary is defined as the member's average monthly full-time rate of compensation during the 12 months preceding death. 1957 Survivor Benefit This is a standard benefit. Eligibility An employee’s eligible survivor(s) may receive the 1957 Survivor benefit if the member dies while actively employed, has attained at least age 50 for classic and safety PEPRA members and age 52 for miscellaneous PEPRA members, and has at least 5 years of credited service (total service across all CalPERS employers and with certain other retirement systems with which CalPERS has reciprocity agreements). A CalPERS member must be actively employed with the CalPERS employer providing this benefit to be eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married at least one year before death or, if there is no eligible spouse, to the member's unmarried child(ren) under age 18. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this 1957 Survivor benefit. Benefit The 1957 Survivor benefit is a monthly allowance equal to one-half of the unmodified service retirement benefit that the member would have been entitled to receive if the member had retired on the date of his or her death. If the benefit is payable to the spouse, the benefit is discontinued upon the death of the spouse. If the benefit is payable to dependent child(ren), the benefit will be discontinued upon death or attainment of age 18, unless the child(ren) is disabled. The total amount paid will be at least equal to the basic death benefit. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B SAFETY PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-7 Optional Settlement 2W Death Benefit This is an optional benefit. Eligibility An employee’s eligible survivor may receive the Optional Settlement 2W Death benefit if the member dies while actively employed, has attained at least age 50 for classic and safety PEPRA members and age 52 for miscellaneous PEPRA members, and has at least 5 years of credited service (total service across all CalPERS employers and with certain other retirement systems with which CalPERS has reciprocity agreements). A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married at least one year before death. A member’s survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this Optional Settlement 2W Death benefit. Benefit The Optional Settlement 2W Death benefit is a monthly allowance equal to the service retirement benefit that the member would have received had the member retired on the date of his or her death and elected Optional Settlement 2W. (A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that it will continue to be paid after his or her death to a surviving beneficiary.) The allowance is payable as long as the surviving spouse lives, at which time it is continued to any unmarried child(ren) under age 18, if applicable. The total amount paid will be at least equal to the basic death benefit. Special Death Benefit This is a standard benefit for safety members. An employer may elect to provide this benefit for miscellaneous members. Eligibility An employee’s eligible survivor(s) may receive the special death benefit if the member dies while actively employed and the death is job-related. A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried child(ren) under age 22. An eligible survivor who chooses to receive this benefit will not receive any other death benefit. Benefit The special death benefit is a monthly allowance equal to 50 percent of final compensation, and will be increased whenever the compensation paid to active employees is increased but ceasing to increase when the member would have attained age 50. The allowance is payable to the surviving spouse until death at which time the allowance is continued to any unmarried child(ren) under age 22. There is a guarantee that the total amount paid will at least equal the basic death benefit. If the member’s death is the result of an accident or injury caused by external violence or physical force incurred in the performance of the member’s duty, and there are eligible surviving child(ren) (eligible means unmarried child(ren) under age 22) in addition to an eligible spouse, then an additional monthly allowance is paid equal to the following: if 1 eligible child: 12.5 percent of final compensation if 2 eligible children: 20.0 percent of final compensation if 3 or more eligible children: 25.0 percent of final compensation CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B SAFETY PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-8 Alternate Death Benefit for Local Fire Members This is an optional benefit available only to local fire members. Eligibility An employee’s eligible survivor(s) may receive the alternate death benefit in lieu of the basic death benefit or the 1957 Survivor benefit if the member dies while actively employed and has at least 20 years of total CalPERS service. A CalPERS member who is no longer actively employed with any CalPERS employer is not eligible for this benefit. An eligible survivor means the surviving spouse to whom the member was married prior to the onset of the injury or illness that resulted in death. If there is no eligible spouse, an eligible survivor means the member's unmarried child(ren) under age 18. Benefit The Alternate Death benefit is a monthly allowance equal to the service retirement benefit that the member would have received had the member retired on the date of his or her death and elected Optional Settlement 2W. (A retiree who elects Optional Settlement 2W receives an allowance that has been reduced so that it will continue to be paid after his or her death to a surviving beneficiary.) If the member has not yet attained age 50, the benefit is equal to that which would be payable if the member had retired at age 50, based on service credited at the time of death. The allowance is payable as long as the surviving spouse lives, at which time it is continued to any unmarried child(ren) under age 18, if applicable. The total amount paid will be at least equal to the basic death benefit. Cost-of-Living Adjustments (COLA) Standard Benefit Retirement and survivor allowances are adjusted each year in May for cost of living, beginning the second calendar year after the year of retirement. The standard cost-of-living adjustment (COLA) is 2 percent. Annual adjustments are calculated by first determining the lesser of 1) 2 percent compounded from the end of the year of retirement or 2) actual rate of inflation. The resulting increase is divided by the total increase provided in prior years. For any particular year, the COLA adjustment may be less than 2 percent (when the rate of inflation is low), may be greater than the rate of inflation (when the rate of inflation is low after several years of high inflation) or may even be greater than 2 percent (when inflation is high after several years of low inflation). Improved Benefit Employers have the option of providing a COLA of 3 percent, 4 percent, or 5 percent, determined in the same manner as described above for the standard 2 percent COLA. An improved COLA is not available with the 1.5% at 65 formula. Purchasing Power Protection Allowance (PPPA) Retirement and survivor allowances are protected against inflation by PPPA. PPPA benefits are cost-of-living adjustments that are intended to maintain an individual’s allowance at 80 percent of the initial allowance at retirement adjusted for inflation since retirement. The PPPA benefit will be coordinated with other cost-of-living adjustments provided under the plan. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B SAFETY PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-9 Employee Contributions Each employee contributes toward his or her retirement based upon the retirement formula. The standard employee contribution is as described below. The percent contributed below the monthly compensation breakpoint is 0 percent. The monthly compensation breakpoint is $0 for full and supplemental formula members and $133.33 for employees covered by the modified formula. The percent contributed above the monthly compensation breakpoint depends upon the benefit formula, as shown in the table below. Benefit Formula Percent Contributed above the Breakpoint Miscellaneous, 1.5% at 65 2% Miscellaneous, 2% at 60 7% Miscellaneous, 2% at 55 7% Miscellaneous, 2.5% at 55 8% Miscellaneous, 2.7% at 55 8% Miscellaneous, 3% at 60 8% Miscellaneous, 2% at 62 50% of the Total Normal Cost Miscellaneous, 1.5% at 65 50% of the Total Normal Cost Safety, 1/2 at 55 Varies by entry age Safety, 2% at 55 7% Safety, 2% at 50 9% Safety, 3% at 55 9% Safety, 3% at 50 9% Safety, 2% at 57 50% of the Total Normal Cost Safety, 2.5% at 57 50% of the Total Normal Cost Safety, 2.7% at 57 50% of the Total Normal Cost The employer may choose to “pick-up” these contributions for classic members (Employer Paid Member Contributions or EPMC). EPMC is prohibited for new PEPRA members. An employer may also include Employee Cost Sharing in the contract, where employees agree to share the cost of the employer contribution. These contributions are paid in addition to the member contribution. Auxiliary organizations of the CSUC system may elect reduced contribution rates, in which case the offset is $317 and the contribution rate is 6 percent if members are not covered by Social Security. If members are covered by Social Security, the offset is $513 and the contribution rate is 5 percent. Refund of Employee Contributions If the member’s service with the employer ends, and if the member does not satisfy the eligibility conditions for any of the retirement benefits above, the member may elect to receive a refund of his or her employee contributions, which are credited with 6 percent interest compounded annually. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX B SAFETY PLAN OF THE CITY OF PALO ALTO PRINCIPAL PLAN PROVISIONS B-10 1959 Survivor Benefit This is a pre-retirement death benefit available only to members not covered by Social Security. Any agency joining CalPERS subsequent to 1993 is required to provide this benefit if the members are not covered by Social Security. The benefit is optional for agencies joining CalPERS prior to 1994. Levels 1, 2 and 3 are now closed. Any new agency or any agency wishing to add this benefit or increase the current level may only choose the 4th or Indexed Level. This benefit is not included in the results presented in this valuation. More information on this benefit is available on the CalPERS website at www.calpers.ca.gov. APPENDIX C PARTICIPANT DATA SUMMARY OF VALUATION DATA ACTIVE MEMBERS TRANSFERRED AND TERMINATED MEMBERS RETIRED MEMBERS AND BENEFICIARIES CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX C SAFETY PLAN OF THE CITY OF PALO ALTO PARTICIPANT DATA C-1 Summary of Valuation Data June 30, 2014 June 30, 2015 1. Active Members a) Counts 187 179 b) Average Attained Age 40.06 40.91 c) Average Entry Age to Rate Plan 29.11 29.21 d) Average Years of Service 10.95 11.70 e) Average Annual Covered Pay $ 113,765 $ 118,359 f) Annual Covered Payroll 21,274,021 21,186,275 g) Projected Annual Payroll for Contribution Year 23,246,697 23,150,815 h) Present Value of Future Payroll 214,199,671 205,334,914 2. Transferred Members a) Counts 63 59 b) Average Attained Age 44.06 43.87 c) Average Years of Service 3.71 3.22 d) Average Annual Covered Pay $ 106,767 $ 109,275 3. Terminated Members a) Counts 31 39 b) Average Attained Age 42.38 42.63 c) Average Years of Service 3.10 3.54 d) Average Annual Covered Pay $ 81,322 $ 89,331 4. Retired Members and Beneficiaries a) Counts 411 414 b) Average Attained Age 67.44 67.81 c) Average Annual Benefits $ 50,485 $ 51,863 5. Active to Retired Ratio [(1a) / (4a)] 0.45 0.43 Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records may exist for those who have service in more than one valuation group. This does not result in double counting of liabilities. Average Annual Benefits represents benefit amounts payable by this plan only. Some members may have service with another agency and would therefore have a larger total benefit than would be included as part of the average shown here. CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX C SAFETY PLAN OF THE CITY OF PALO ALTO PARTICIPANT DATA C-2 Active Members Counts of members included in the valuation are counts of the records processed by the valuation. Multiple records may exist for those who have service in more than one valuation group. This does not result in double counting of liabilities. Distribution of Active Members by Age and Service Years of Service at Valuation Date Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total 15-24 1 0 0 0 0 0 1 25-29 14 3 0 0 0 0 17 30-34 16 12 3 0 0 0 31 35-39 12 12 11 2 0 0 37 40-44 3 5 6 17 0 0 31 45-49 1 1 10 8 13 4 37 50-54 1 1 4 4 6 3 19 55-59 0 1 0 1 0 2 4 60-64 0 0 0 0 0 1 1 65 and over 0 0 0 0 1 0 1 All Ages 48 35 34 32 20 10 179 Distribution of Average Annual Salaries by Age and Service Years of Service at Valuation Date Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Average 15-24 $98,189 $0 $0 $0 $0 $0 $98,189 25-29 94,483 102,706 0 0 0 0 95,934 30-34 103,209 118,641 120,152 0 0 0 110,822 35-39 106,808 119,764 126,296 142,715 0 0 118,745 40-44 102,889 109,100 129,234 128,829 0 0 123,215 45-49 110,592 124,726 106,715 113,144 126,869 151,310 120,599 50-54 199,617 113,398 116,143 116,219 130,059 146,263 129,558 55-59 0 119,177 0 144,632 0 189,123 160,514 60-64 0 0 0 0 0 120,678 120,678 65 and over 0 0 0 0 122,007 0 122,007 All Ages $103,601 $116,337 $119,319 $124,694 $127,583 $154,296 $118,359 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX C SAFETY PLAN OF THE CITY OF PALO ALTO PARTICIPANT DATA C-3 Transferred and Terminated Members Distribution of Transfers to Other CalPERS Plans by Age and Service Years of Service at Valuation Date Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total Average Salary 15-24 0 0 0 0 0 0 0 $0 25-29 3 0 0 0 0 0 3 99,443 30-34 7 0 0 0 0 0 7 101,136 35-39 10 0 0 0 0 0 10 95,837 40-44 9 1 0 0 0 0 10 118,340 45-49 8 5 2 0 0 0 15 116,876 50-54 7 1 1 0 0 0 9 101,475 55-59 0 2 1 0 0 0 3 131,220 60-64 0 1 1 0 0 0 2 119,533 65 and over 0 0 0 0 0 0 0 0 All Ages 44 10 5 0 0 0 59 109,275 Distribution of Terminated Participants with Funds on Deposit by Age and Service Years of Service at Valuation Date Attained Age 0-4 5-9 10-14 15-19 20-25 25+ Total Average Salary 15-24 0 0 0 0 0 0 0 $0 25-29 2 0 0 0 0 0 2 91,679 30-34 2 1 0 0 0 0 3 87,002 35-39 9 4 0 0 0 0 13 89,779 40-44 2 3 0 0 0 0 5 109,949 45-49 4 3 1 0 0 0 8 93,514 50-54 4 0 0 0 0 0 4 55,820 55-59 2 1 0 0 0 0 3 81,607 60-64 0 1 0 0 0 0 1 106,475 65 and over 0 0 0 0 0 0 0 0 All Ages 25 13 1 0 0 0 39 89,331 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX C SAFETY PLAN OF THE CITY OF PALO ALTO PARTICIPANT DATA C-4 Retired Members and Beneficiaries Distribution of Retirees and Beneficiaries by Age and Retirement Type* Attained Age Service Retirement Non- Industrial Disability Industrial Disability Non- Industrial Death Industrial Death Death After Retirement Total Under 30 0 0 0 0 0 0 0 30-34 0 0 1 0 0 0 1 35-39 0 0 2 0 0 0 2 40-44 0 0 5 0 0 0 5 45-49 0 1 5 0 0 0 6 50-54 30 0 14 0 1 0 45 55-59 40 2 20 0 2 0 64 60-64 27 0 18 0 0 4 49 65-69 37 1 18 0 0 4 60 70-74 29 0 23 0 0 9 61 75-79 30 2 19 0 0 5 56 80-84 19 0 14 0 0 7 40 85 and Over 14 0 5 0 0 6 25 All Ages 226 6 144 0 3 35 414 Distribution of Average Annual Amounts for Retirees and Beneficiaries by Age and Retirement Type* Attained Age Service Retirement Non- Industrial Disability Industrial Disability Non- Industrial Death Industrial Death Death After Retirement Average Under 30 $0 $0 $0 $0 $0 $0 $0 30-34 0 0 57,268 0 0 0 57,268 35-39 0 0 55,085 0 0 0 55,085 40-44 0 0 58,085 0 0 0 58,085 45-49 0 83 38,337 0 0 0 31,962 50-54 86,847 0 64,408 0 51,611 0 79,083 55-59 77,689 17,165 69,460 0 36,032 0 71,924 60-64 65,796 0 45,778 0 0 43,294 56,606 65-69 64,576 17,011 47,573 0 0 35,097 56,717 70-74 48,202 0 31,568 0 0 38,700 40,528 75-79 43,580 11,519 35,814 0 0 11,765 36,959 80-84 39,546 0 27,744 0 0 27,485 33,305 85 and Over 28,572 0 19,084 0 0 18,893 24,351 All Ages $60,776 $12,410 $45,216 $0 $41,225 $29,327 $51,863 CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX C SAFETY PLAN OF THE CITY OF PALO ALTO PARTICIPANT DATA C-5 Retired Members and Beneficiaries (continued) Distribution of Retirees and Beneficiaries by Years Retired and Retirement Type* Years Retired Service Retirement Non- Industrial Disability Industrial Disability Non- Industrial Death Industrial Death Death After Retirement Total Under 5 Yrs 60 1 17 0 0 5 83 5-9 36 1 20 0 0 6 63 10-14 42 0 14 0 1 11 68 15-19 24 1 19 0 1 6 51 20-24 31 0 16 0 0 2 49 25-29 15 1 19 0 0 3 38 30 and Over 18 2 39 0 1 2 62 All Years 226 6 144 0 3 35 414 Distribution of Average Annual Amounts for Retirees and Beneficiaries by Years Retired and Retirement Type* Years Retired Service Retirement Non- Industrial Disability Industrial Disability Non- Industrial Death Industrial Death Death After Retirement Average Under 5 Yrs $84,922 $2,048 $72,095 $0 $0 $10,154 $76,792 5-9 61,093 83 74,237 0 0 30,179 61,353 10-14 64,481 0 64,971 0 51,611 40,369 60,492 15-19 43,320 32,282 41,727 0 45,687 34,148 41,478 20-24 50,538 0 42,127 0 0 30,323 46,967 25-29 34,925 17,011 26,541 0 0 27,070 29,641 30 and Over 33,461 11,519 23,591 0 26,376 1,902 25,412 All Years $60,776 $12,410 $45,216 $0 $41,225 $29,327 $51,863 * Counts of members do not include alternate payees receiving benefits while the member is still working. Therefore, the total counts may not match information on page 25 of the report. Multiple records may exist for those who have service in more than one coverage group. This does not result in double counting of liabilities. APPENDIX D DEVELOPMENT OF PEPRA MEMBER CONTRIBUTION RATES CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX D SAFETY PLAN OF THE CITY OF PALO ALTO PARTICIPANT DATA D-1 Development of PEPRA Members Contribution Rates The table below shows the determination of the Member contribution rates based on 50 percent of the Total Normal Cost for each respective plan on June 30, 2015. Assembly Bill (AB) 340 created PEPRA that implemented new benefit formulas and a final compensation period as well as new contribution requirements for new employees. In accordance with Section Code 7522.30(b), “new members … shall have an initial contribution rate of at least 50 percent of the normal cost rate.” The normal cost for the plan is dependent on the benefit levels, actuarial assumptions and demographics of the plan particularly the entry age into the plan. The PEPRA total normal cost for the plan is calculated assuming the entire active population, including classic members, is subject to the adopted PEPRA formula and applicable compensation limits. Should the total normal cost of the plan change by one percent or more from the base total normal cost established for the plan, the new member rate shall be 50% of the new normal cost rounded up to the next highest quarter percent. Basis for Current Rate Rates Effective July 1, 2017 Rate Plan Identifier Plan Total Normal Cost Member Rate Total Normal Cost Change Change Needed Member Rate 25006 Safety Fire PEPRA 21.276% 10.750% 21.336% 0.060% No 10.750% 25007 Safety Police PEPRA 21.276% 10.750% 21.336% 0.060% No 10.750% APPENDIX E GLOSSARY OF ACTUARIAL TERMS CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX E SAFETY PLAN OF THE CITY OF PALO ALTO GLOSSARY OF ACTUARIAL TERMS E-1 Glossary of Actuarial Terms Accrued Liability (also called Actuarial Accrued Liability or Entry Age Normal Accrued Liability) The total dollars needed as of the valuation date to fund all benefits earned in the past for current members. Actuarial Assumptions Assumptions made about certain events that will affect pension costs. Assumptions generally can be broken down into two categories: demographic and economic. Demographic assumptions include such things as mortality, disability and retirement rates. Economic assumptions include discount rate, salary growth and inflation. Actuarial Methods Procedures employed by actuaries to achieve certain funding goals of a pension plan. Actuarial methods include funding method, setting the length of time to fund the Accrued Liability and determining the Value of Assets. Actuarial Valuation The determination, as of a valuation date of the Normal Cost, Accrued liability, and related actuarial present values for a pension plan. These valuations are performed annually or when an employer is contemplating a change to their plan provisions. Amortization Bases Separate payment schedules for different portions of the Unfunded Liability. The total Unfunded Liability of a Risk Pool or non-pooled plan can be segregated by "cause,” creating “bases” and each such base will be separately amortized and paid for over a specific period of time. However, all bases are amortized using investment and payroll assumptions from the current valuation. This can be likened to a home having a first mortgage of 24 years remaining payments and a second mortgage that has 10 years remaining payments. Each base or each mortgage note has its own terms (payment period, principal, etc.) Generally, in an actuarial valuation, the separate bases consist of changes in unfunded liability due to contract amendments, actuarial assumption changes, actuarial methodology changes, and/or gains and losses. Payment periods are determined by Board policy and vary based on the cause of the change. Amortization Period The number of years required to pay off an Amortization Base. Classic Member (under PEPRA) A classic member is a member who joined CalPERS prior to January, 1, 2013 and who is not defined as a new member under PEPRA. (See definition of new member below) Discount Rate Assumption The actuarial assumption that was called “investment return” in earlier CalPERS reports or “actuarial interest rate” in Section 20014 of the California Public Employees’ Retirement Law (PERL). Entry Age The earliest age at which a plan member begins to accrue benefits under a defined benefit pension plan. In most cases, this is the age of the member on their date of hire. Entry Age Normal Cost Method An actuarial cost method designed to fund a member's total plan benefit over the course of his or her career. This method is designed to yield a rate expressed as a level percentage of payroll. (The assumed retirement age less the entry age is the amount of time required to fund a member’s total benefit. Generally, the older a member on the date of hire, the greater the entry age normal cost. This is mainly because there is less time to earn investment income to fund the future benefits.) CALPERS ACTUARIAL VALUATION – June 30, 2015 APPENDIX E SAFETY PLAN OF THE CITY OF PALO ALTO GLOSSARY OF ACTUARIAL TERMS E-2 Fresh Start A Fresh Start is when multiple amortization bases are collapsed to one base and amortized together over a new funding period. Funded Status A measure of how well funded, or how "on track" a plan or risk pool is with respect to assets versus accrued liabilities. A ratio greater than 100% means the plan or risk pool has more assets than liabilities and a ratio less than 100% means liabilities are greater than assets. GASB 68 Statement No. 68 of the Governmental Accounting Standards Board. The accounting standard governing a state or local governmental employer’s accounting and financial reporting for pensions. GASB 68 replaces GASB 27 effective the first fiscal year beginning after June 15, 2014. New Member (under PEPRA) A new member includes an individual who becomes a member of a public retirement system for the first time on or after January 1, 2013, and who was not a member of another public retirement system prior to that date, and who is not subject to reciprocity with another public retirement system. Normal Cost The annual cost of service accrual for the upcoming fiscal year for active employees. The normal cost should be viewed as the long term contribution rate. Pension Actuary A business professional that is authorized by the Society of Actuaries, and the American Academy of Actuaries to perform the calculations necessary to properly fund a pension plan. PEPRA The California Public Employees’ Pension Reform Act of 2013 Prepayment Contribution A payment made by the employer to reduce or eliminate the year’s required employer contribution. Present Value of Benefits (PVB) The total dollars needed as of the valuation date to fund all benefits earned in the past or expected to be earned in the future for current members. Superfunded A condition existing when a plan’s Actuarial Value of Assets exceeds its Present Value of Benefits. Prior to the passage of PEPRA, when this condition existed on a given valuation date for a given plan, employee contributions for the rate year covered by that valuation could be waived. Unfunded Liability (UAL) When a plan or pool’s Value of Assets is less than its Accrued Liability, the difference is the plan or pool’s Unfunded Liability. If the Unfunded Liability is positive, the plan or pool will have to pay contributions exceeding the Normal Cost. City of Palo Alto (ID # 7385) City Council Staff Report Report Type: Informational Report Meeting Date: 12/12/2016 City of Palo Alto Page 1 Summary Title: Annual Report Development Impact Fees - Early Memo Title: Annual Report Development Impact Fees - Early Memo From: City Manager Lead Department: Administrative Services Executive Summary The Annual Status Report on Development Impact Fees provides specific information about development impact fees imposed by the City. The schedule prepared in accordance with Government Code Section 66006 (AB1600) must be made available to the public at least 15 days before the Council meeting at which it is considered and within 180 days of the close of the fiscal year. Since the report is scheduled on the City Council Agenda of February 6, 2017, it is being included in this early packet to allow time for public review. Additional information will be available in the February 6, 2017 report. Attachments: Attachment A: FY16 Development Impact Fees (XLS) Attachment A City of Palo Alto Annual Report on Development Impact Fees for Period Ending June 30, 2016 Stanford Research Park/San Antonio/West FUND El Camino Fund Bayshore Fund Purpose and Authority Traffic impact fees imposed on new Traffic impact fees imposed on new for Collection nonresidential development in the nonresidential development in the Stanford Research Park/El Camino San Antonio/West Bayshore Areas Real CS zone to fund improvements to fund capacity improvements at at eight identified intersections.four identified intersections. PAMC Ch. 16.45 PAMC Ch. 16.46 Amount of the Fee $11.94 per square foot $2.46 per square foot Fund Balance July 1, 2015 $3,183,028 $865,227 Activity in 2015-16 Revenues Fees Collected 0 0 Interest Earnings 60,220 16,373 Unrealized Gain/Loss Investments 36,275 9,619 -------------------------------------------------------------------------------------------------------------------- Total Revenues $96,495 $25,992 -------------------------------------------------------------------------------------------------------------------- Total Expenditures 0 0 -------------------------------------------------------------------------------------------------------------------- Ending Balance June 30, 2016 $3,279,523 $891,219 Other Commitments/AppropriationsReserve for unrealized gain on investments (55,874)(14,656)-------------------------------------------------------------------------------------------------------------------- Net Funds Available $3,223,649 $876,563 Unexpended balance at next finding date (FY 2017-18)$2,343,008 $823,819 USE OF FEES:USE OF FEES: No expenditures have been made from this fund in Fiscal Year 2016. No expenditures have been made from this fund in Fiscal Year 2016. Page 1 of 11 Attachment A City of Palo Alto Annual Report on Development Impact Fees for Period Ending June 30, 2016 Commercial Housing University Avenue Parking FUND In-Lieu Fund In-Lieu Fund Purpose and Authority Fees imposed on large commercial Fees collected from non-residential for Collection and industrial development to development within the University Ave. contribute to programs that increase Parking Assessment District in lieu of the City's low income and moderate-providing the required number of income housing stock.parking spaces. PAMC Ch.16.47 PAMC Ch 16.57 Amount of the Fee $19.85 per square foot $65,475 per space Fund Balance July 1, 2015 $14,642,107 $4,963,059 Activity in 2015-16 Revenues Fees Collected 48,156 Prior year fees refunded (209,616) Sale of Property 78,651 Interest Earnings 244,973 81,572 Unrealized Gain/Loss Investments 121,424 54,653 Operating Transfers Transfer from Housing In-Lieu Fund 375,000 Transfer from SUMC 1,720,488 -------------------------------------------------------------------------------------------------------------------- Total Revenues 2,588,692 (73,391) Expenditures Planning (500) Other Contract Services (2,777) Transfer to Capital Projects (1,300,000) Reclassify prior year expense to loan 500,000 -------------------------------------------------------------------------------------------------------------------- Total Expenditures 496,723 (1,300,000) -------------------------------------------------------------------------------------------------------------------- Ending Balance June 30, 2016 $17,727,522 $3,589,668 Other Commitments/Appropriations Reserve for Notes Receivable include:$1,290,000 for 2811 Alma, and $4,137,254 for 801 Alma.(5,427,254) Reserve for Buena Vista (7,700,000) Reserve for Encumbrance (12,278) Reserve for unrealized gain on investments (171,287)(75,110) --------------------------------------------------------------------------------------------------------------------Net Funds Available $4,416,704 $3,514,558 Page 2 of 11 Attachment A City of Palo Alto Annual Report on Development Impact Fees for Period Ending June 30, 2016 Unexpended balance at next finding date (FY 2017-18)7,263,289 $0 USE OF FEES:USE OF FEES: Expenditures of funds have been made in Fiscal Year 2016 for $3K housing nexus study. The $500K previously reported as expenditure for 801 Alma St. in fiscal year 2006 was reclassified to notes receivable. The $7.7 million Reserve for Buena Vista is included for unexpended balance calculation purposes because this was only set aside by council motion. Expenditures of funds have been made in Fiscal Year 2016 for $1.3M to PE-15007 (New Downtown Parking Garage). Page 3 of 11 Attachment A City of Palo Alto Annual Report on Development Impact Fees for Period Ending June 30, 2016 Residential & Non-Residential Housing Residential & Non-Residential Housing Community Facilities Community Facilities FUND Parks Community Centers Purpose and Authority Fees imposed on new residential and Fees imposed on new residential and for Collection non-residential development approved non-residential development approved after Jan 28, 2002 for Parks. after Jan 28, 2002 for Community Centers. PAMC Ch. 16.58 PAMC Ch. 16.58 Amount of the Fee Residential: Single family $11,465/residence (or $17,120/residence larger than 3,000 sq ft); Multi-family $7,505/unit (or $3,794/unit smaller than or equal to 900 sq ft) Residential: Single family $2,972/residence (or $4,450/residence larger than 3,000 sq ft); Multi-family $1,956/unit (or $987/unit smaller than or equal to 900 sq ft) Nonresidential: Commercial/industrial $4,869 per 1,000 sq ft; Hotel/Motel $2,202 per 1,000 sq ft Nonresidential: Commercial/industrial $275 per 1,000 sq ft; Hotel/Motel $124 per 1,000 sq ft Fund Balance July 1, 2015 $3,830,075 $5,222,588 Activity in 2015-16 Revenues Fees Collected 62,771 428,903 Interest Earnings 73,349 105,611 Unrealized Gain/Loss 46,961 64,277 -------------------------------------------------------------------------------------------------------------------- Total Revenues $183,081 $598,791 -------------------------------------------------------------------------------------------------------------------- Total Expenditures 0 0 -------------------------------------------------------------------------------------------------------------------- Ending Balance June 30, 2016 $4,013,156 $5,821,379 Other Commitments/Appropriations Reserve for unrealized gain on investments (66,866)(94,345)--------------------------------------------------------------------------------------------------------------------Net Funds Available $3,946,290 $5,727,034 Unexpended balance at next finding date (FY 2016-17)446,005 $843,809 USE OF FEES:USE OF FEES: No expenditure of funds have been made from this Fund in Fiscal Year 2016. No expenditure of funds have been made from this Fund in Fiscal Year 2016. Page 4 of 11 Attachment A City of Palo Alto Annual Report on Development Impact Fees for Period Ending June 30, 2016 Residential & Non-Residential Housing Residential Housing Community Facilities In-Lieu Fund FUND Libraries Purpose and Authority Fees imposed on new residential and Fees collected from residential for Collection non-residential development approved developments of three or more units in after Jan 28, 2002 for Libraries. lieu of providing the required below- PAMC Ch. 16.58 market rate unit(s) to low and moderate income households. PA Comprehensive Plan and PAMC Chapter 18 Amount of the Fee Residential: Single family $1,038/residence (or $1,545/residence larger than 3,000 sq ft); Multi-family $620/unit (or $341/unit smaller than or equal to 900 sq ft)Varies Nonresidential: Commercial/industrial $262 per 1,000 sq ft or fraction thereof; Hotel/Motel $110 per 1,000 sq ft or fraction thereof Fund Balance July 1, 2015 $803,697 $17,620,964 Activity in 2015-16 Revenues Fees Collected 142,591 2,035,025 Monroe Litigation Settlement 2,801,474 Webster Wood Property Rental 5,650 Interest Earnings 17,481 382,924 Unrealized Gain/Loss Investments 11,060 148,702 -------------------------------------------------------------------------------------------------------------------- Total Revenues $171,132 $5,373,775 Expenditures Legal (36,730) Housing Program Expense (147,698) Interest Expense (7,106) Principal Retired (135,060) Transfer to SUMC (720,220) Transfer to Housing Commerical (375,000) -------------------------------------------------------------------------------------------------------------------- Total Expenditures 0 (1,421,814) -------------------------------------------------------------------------------------------------------------------- Ending Balance June 30, 2016 $974,829 $21,572,925 Other Commitments/Appropriations Page 5 of 11 Attachment A City of Palo Alto Annual Report on Development Impact Fees for Period Ending June 30, 2016 Reserve for Reappropriations (375,000) Reserve for Encumbrances (65,937) Reserve for Buena Vista (6,800,000)Reserve for unrealized gain on investments (15,572)(195,102) Reserve for Notes Receivable include $375,000 for 3053 Emerson, $3,804,850 for Tree House Apts, $68,033 for Oak Manor, $747,734 for Sheridan Apts., $2,285,026 for 801 Alma, $1,000,000 for Palo Alto Housing Project, $600,000 for 2811-2825 Alma St., and $203,561 for Colorado Park Housing.(9,084,204) --------------------------------------------------------------------------------------------------------------------Net Funds Available $959,257 $5,052,683 Unexpended balance at next finding date (FY 2016-17-Residential & Non Residential Housing Communities Facilities Libraries, FY2017-18- Residential Housing In-Lieu)$541,529 $2,316,406 USE OF FEES:USE OF FEES: No expenditure of funds have been made from this Fund in Fiscal Year 2016. Expenditures in Fiscal Year 2016 include $148K to Palo Alto Housing Corp for BMR fees, $135K for Oak Manor Apts. loan forgiveness, $37K for legal fees, and $720K and $375K return of funds to SUMC and Housing Commercial, respectively. The $6.8 million Reserve for Buena Vista is included for unexpended balance calculation purposes because this was only set aside by council motion Page 6 of 11 Attachment A City of Palo Alto Annual Report on Development Impact Fees for Period Ending June 30, 2016 Parkland Dedication Charleston-Arastradero Corridor Pedestrian and Bicyclist Safety FUND Purpose and Authority Fees on parkland dedication imposed Fees collected from new development and for Collection on new residential and non-residential re-development within the Charleston- development Arastradero Corridor to provide for pedest- Govt Code Sec.66477 (Quimby Act) rian and bicyclist safety improvements. PAMC Ch. 16.60 Amount of the Fee Single Family: $58,812 per unit; Multi- Family: $40,103 per unit. This applies only to residential projects that require a subdivision or pacel map. Land dedications is required for subdivisions resulting in more than 50 parcels. Parkland Dedication Fee -Land: Single Family: 531 sq. ft, per unit; Multi-Family: 366 sq. ft. per unit. When parkland dedication applies, park impact fees do not apply. Residential: $1,256 per unit; Commercial: $0.37 per sq ft Fund Balance July 1, 2015 $2,553,156 $254,690 Activity in 2015-16 Revenues Fees Collected 624,270 1,225 Interest Earnings 51,478 4,268 Unrealized Gain/Loss 34,929 357 -------------------------------------------------------------------------------------------------------------------- Total Revenues $710,677 $5,850 Expenditures Operating Transfer to Capital Projects Fund 0 (250,000) -------------------------------------------------------------------------------------------------------------------- Total Expenditures 0 (250,000) -------------------------------------------------------------------------------------------------------------------- Ending Balance June 30, 2016 $3,263,832 $10,540 Other Commitments/ReappropriationsReserve for unrealized gain on investments (49,462)(1,832) --------------------------------------------------------------------------------------------------------------------Net Funds Available $3,214,370 $8,708 Unexpended balance at next finding date (FY 2016-17-Parkland Dedication, FY2017-18-Charleston)$757,744 $0 USE OF FEES:USE OF FEES: No expenditure of funds have been made from this Fund in Fiscal Year 2016. Expenditure have been made in Fiscal Year 2016 for $250K to PL-13011 (Charleston Arastadero). Page 7 of 11 Attachment A City of Palo Alto Annual Report on Development Impact Fees for Period Ending June 30, 2016 New Public Safety Facilities General Government Facilities FUND Purpose and Authority Fees imposed on residential and Fees imposed on residential and non- for Collection non-residential development to fund residential development to fund facilities police and fire facilities (including fire associated with municipal administration. apparatus and vehicles) PAMC Ch. 16.58 Amount of the Fee Residential: Single family $996 per unit; Multi-family $797 per unit Residential: Single family $1,255 per unit; Multi-family $1,004 per unit Nonresidential: Commercial $557 per 1,000 sq ft. or fraction thereof; Industrial $186 per 1,000 sq. ft. or fraction thereof; Hotel/Motel $743 per 1,000 sq ft or fraction thereof Nonresidential: Commercial $702 per 1,000 sq ft. or fraction thereof; Industrial $234 per 1,000 sq. ft. or fraction thereof; Hotel/Motel $937 per 1,000 sq ft or fraction thereof Fund Balance July 1, 2015 $1,596 $2,011 Activity in 2015-16 Revenues Fees Collected 19,139 24,105 Interest Earnings 248 314 -------------------------------------------------------------------------------------------------------------------- Total Revenues $19,387 $24,419 -------------------------------------------------------------------------------------------------------------------- Total Expenditures 0 0 -------------------------------------------------------------------------------------------------------------------- Ending Balance June 30, 2016 $20,983 $26,430 Other Commitments/Reappropriations --------------------------------------------------------------------------------------------------------------------Net Funds Available $20,983 $26,430 Unexpended balance at next finding date FY 2019-20 $1,596 $2,011 USE OF FEES:USE OF FEES: No expenditure of funds have been made from this Fund in Fiscal Year 2016. No expenditure of funds have been made from this Fund in Fiscal Year 2016. Page 8 of 11 Attachment A City of Palo Alto Annual Report on Development Impact Fees for Period Ending June 30, 2016 Citywide Transportation FUND Purpose and Authority Transportation impact fees imposed for Collection on new development in all parts of the City to fund congestion reduction projects. PAMC Ch. 16.59 Amount of the Fee $3,439 per net new PM peak hour trip Fund Balance July 1, 2015 $2,460,395 Activity in 2015-16 Revenues Fees Collected 482,832 Interest Earnings 54,426 Unrealized Gain/Loss Investments 28,085 -------------------------------------------------------- Total Revenues $565,343 -------------------------------------------------------- Total Expenditures 0 -------------------------------------------------------- Ending Balance June 30, 2016 $3,025,738 Other Commitments/Reappropriations Reserve for unrealized gain on investments (46,715)-------------------------------------------------------- Net Funds Available $2,979,023 Unexpended balance at next finding date (FY 2017-18)$1,216,124 USE OF FEES: No expenditure of funds have been made from this Fund in Fiscal Year 2016. Page 9 of 11 Attachment A City of Palo Alto Annual Report on Development Impact Fees for Period Ending June 30, 2016 (INFORMATION ONLY) Public Art Fund FUND Purpose and Authority for collection Fees imposed on new commercial develoments (including mixed use projects), including new construction, remodels, additions and reconstruction that (i) have a floor area of 10,000 square feet or more, and (ii) have a construction value of $200,000, or more, exclusive of costs for architecture, design, engineering, and required studies; and all new residential projects of five or more units to fund public art for private developments. PAMC Ch. 16.61 Amount of the Fee 1% of first $105.21 million construction valuation and .9% of construction valuation for valuation in excess of $105.21 million Fund Balance July 1, 2015 $154,716 Activity in 2015-16 Revenues Fees Collected 141,206 Interest Earnings 8,812 Unrealized Gain/Loss Investments 4,866 Operating Transfer from General Fund 107,000 -------------------------------------------------------- Total Revenues $261,884 Expenditures Salaries and benefits (135,051) -------------------------------------------------------- Total Expenditures (135,051) -------------------------------------------------------- Ending Balance June 30, 2016 $281,548 Reserve for unrealized gain on investments (6,412) --------------------------------------------------------Net Funds Available $275,136 This fund is not subject to AB1600 requirements and is listed only for information purposes Page 10 of 11 Attachment A City of Palo Alto Annual Report on Development Impact Fees for Period Ending June 30, 2016 (INFORMATION ONLY) FUND Water and Wastewater Collection Purpose and Authority Capacity fees charged to developers that for Collection are adding load to the water and sewer systems effective July 1, 2005. California Government Code Sect 66000 Amount of the Fee Water Capacity Fees: 5/8 in., 3/4 in E- Meter. $5,000, 1 in. E-Meter $9,400, 1 1/2 in. E-Meter $18,850, 2 in. E-Meter $56,250 , 4 in. Compound Meter by est. $125/FU (min. 5,000 FU) , 6 in. Compound Meter by est. $125/FU (min. 7,000 FU) Fire Service Capacity Fees: 2 in. $750, 4 in. $9,000, 6 in. $22,530, 8 in. $43,080, 10in. $69,510 Sewer Capacity Charges: 4 in. connection with 5/8 in Water Meter (WM) $5,250, 4 in connection. with 1-in WM $15,750, 4 or 6 in. connection with 1-1/2 in WM $31,668, 6 in. connection with 2 in. WM $94,500, 6 in. and larger connection with 4 in. or larger WM by est. at $210/FU Activity in 2015-16 Capacity Fees Collected Water $641,283 Wastewater Collection 288,206 Total $929,489 USE OF FEES: The fees are used exclusively for water and sewer system improvements Page 11 of 11 City of Palo Alto (ID # 7444) City Council Staff Report Report Type: Informational Report Meeting Date: 12/12/2016 City of Palo Alto Page 1 Council Priority: Environmental Sustainability Summary Title: Annual Report on Renewable and Carbon Neutral Electricity Supplies Title: Annual Review of the City’s Renewable Procurement Plan, Renewable Portfolio Standard Compliance, and Carbon Neutral Electric Supplies From: City Manager Lead Department: Utilities Executive Summary Like all electric utilities in California, Palo Alto is subject to the state’s Renewable Portfolio Standard (RPS) mandate of 50% by 2030. The City has also adopted a Carbon Neutral Plan, which led to the achievement of a carbon neutral electric supply portfolio starting in 2013. In December 2011, the Council also formally adopted an RPS Procurement Plan and Enforcement Program that recognizes certain elements of the state’s RPS law applicable to publicly-owned utilities. The RPS Enforcement Program requires the Utilities Director to conduct an annual review of the Electric Utility’s compliance with the procurement targets set forth in the City’s RPS Procurement Plan. This staff report satisfies the reporting requirements of the City’s RPS Enforcement Program, while also providing an update on the City’s renewable energy goals set forth in its Long-term Electric Acquisition Plan (LEAP). The City is currently on track to meet its objectives under LEAP, the RPS Procurement Plan, and the Carbon Neutral Plan, and expects to satisfy the state RPS mandate of 50% well in advance of the 2030 deadline. Background The City currently has three procurement targets related to renewable and carbon neutral electricity contained in three different plans: LEAP Renewable Energy Goal (33% by 2015): The City’s first renewable energy goal is contained in LEAP: procuring renewable electricity supplies equal to at least 33% of retail sales starting in 2015, with no more than a 0.5 cents per kilowatt-hour (¢/kWh) impact on rates. This LEAP goal was last updated in April 2012 (Staff Report 2710, City of Palo Alto Page 2 Resolution 9241) to clarify that the 33% goal is a minimum and renewable energy supplies beyond the 33% level should be pursued as long as the aggregate rate impact does not exceed the 0.5 ¢/kWh limit. In 2017, staff plans to update the LEAP renewable energy goal to bring it in line with the state’s 50% by 2030 RPS mandate. RPS Procurement Plan (33% by 2020): The second goal is contained in the RPS Procurement Plan that the City was required to adopt under Section 399.30(a) of California’s Public Utilities Code. This was adopted in December 2011 (Staff Report 2225, Resolutions 9214 and 9215) and updated in November 2013 (Staff Report 4168, Resolution 9381). Staff plans to update the RPS Procurement Plan again in the near future to bring it into conformance with the 50% RPS law (SB 350), after the regulations implementing this law are finalized. The RPS Procurement Plan and Enforcement Program complement each other: the Procurement Plan sets forth procurement targets, while the Enforcement Program specifies the reporting and monitoring that is required of the Utilities Director while working to achieve those targets. The procurement requirements in the City’s RPS Procurement Plan are that the City achieve renewable supplies equal to 33% of retail sales by 2020, which is in line with the state’s RPS mandate but less ambitious than the City’s LEAP goals (33% by 2015). The RPS Procurement Plan also contains interim targets for three separate periods (2011- 2013, 2014-2016, and 2017-2020), which are not part of the City’s LEAP goal. The reason the City adopted the less ambitious state-mandated levels for the official compliance plan is because the City would face penalties for failing to meet the state targets, but the City’s achievement of its more ambitions LEAP targets is not subject to state enforcement procedures. Carbon Neutral Plan (100% Carbon Neutral Electricity by 2013): The Carbon Neutral Plan was adopted in March 2013 (Staff Report 3550, Resolution 9322), and requires that the City procure a carbon neutral electric supply portfolio starting in calendar year (CY) 2013. In the long term, this goal is expected to be achieved primarily through purchases made under the City’s long-term renewable power purchase agreements (PPAs) and output from its hydroelectric resources. But until the contracted long-term renewable resources are all constructed and operating (and in dry hydro years when hydroelectric resources are lower than expected), carbon neutrality may be achieved through the purchase of renewable energy certificates (RECs) to offset fossil fuel-based market power purchases. Discussion LEAP Renewable Energy Goals In 2015, the City received 241,262 MWh of renewable energy through its long-term contracts for wind, solar, landfill gas, and small hydro resources. This volume represents 25.9% of the City’s total retail sales for 2015. To satisfy the Carbon Neutral Plan, the City also purchased 479,000 RECs from RPS-eligible wind resources for 2015. The LEAP Renewable Energy Goal City of Palo Alto Page 3 states that all supplies must be deemed “eligible” under the state’s RPS eligibility criteria, and does not limit eligible resources to generation-based resources only. Counting the 479,000 RPS- eligible RECs along with the renewable energy from long-term contracts, the City’s overall RPS level in 2015 was 77.2%, or more than twice as large as the LEAP renewable energy goal for 2015. For CY 2016, when three more solar resources under long-term PPAs began operating, staff projects that energy from long-term contracts for renewable electricity supplies will equal 39.4% of retail sales. In CY 2017, renewable supplies are projected to be 57.5% of retail sales. Table 1 shows the renewable resources currently under contract, the status of the projects, their annual output in Gigawatt-hours (GWh), and the rate impact of each resource that was calculated at the time it was added to the electric supply portfolio. Table 1: Summary of Contracted Renewable Electricity Resources Resource Delivery Begins Delivery Ends Annual Generation (GWh) Rate Impact (¢/kWh) Small Hydro Before 2000 N/A 10.0 0 High Winds Dec. 2004 Jun. 2028 48.2 0.013 Shiloh I Wind June 2006 Dec. 2021 64.5 (0.043) Santa Cruz Landfill Gas (LFG) Feb. 2006 Feb. 2026 9.9 0.003 Ox Mountain LFG Apr. 2009 March 2029 43.9 (0.039) Keller Canyon LFG Aug. 2009 July 2029 14.9 (0.020) Johnson Canyon LFG May 2013 May 2033 10.4 0.061 San Joaquin LFG April 2014 April 2034 30.3 0.133 Kettleman Solar Aug. 2015 Aug. 2040 53.5 0.094 Hayworth Solar Dec. 2015 Dec. 2042 63.7 0.024 Frontier Solar July 2016 July 2046 52.5 0.010 Elevation Solar C Nov. 2016 Nov. 2041 100.8 (0.041) W. Antelope Blue Sky Ranch B Nov. 2016 Nov. 2041 50.4 (0.002) Total Operating Resources 553.0 0.192 Wilsona Solar June 2021 June 2046 75.0 (0.068) CLEAN Program @ 3 MW Cap TBD TBD 5.1 0.027 Total Non-Operating Resources 80.1 (0.041) Total Committed Resources 633.1 0.151 RPS Procurement Plan Compliance Annually, the Utilities Director reviews CPAU’s RPS Procurement Plan to determine compliance with the state’s RPS Program. Under the state RPS Program, the California Energy Commission (CEC) developed portfolio balancing requirements, which dictate what percentage of renewable procurement must come from resources interconnected to a California Balancing Area (as opposed to an out-of-state transmission grid balancing area). These requirements also City of Palo Alto Page 4 determine the eligibility criteria for renewable resource products as determined by their eligible Portfolio Content Categories1, found in the CEC RPS Enforcement Procedures for local publicly owned utilities2 In accordance with the state’s RPS Program requirements, CPAU’s Procurement Plan develops a renewable electric supply portfolio that balances environmental goals with system reliability while maintaining stable and low retail electric rates. The state RPS program requires retail electricity suppliers like CPAU to procure progressively larger renewable electricity supplies across three separate Compliance Periods, as outlined below. 1. Compliance Period 1 (2011 – 2013) For Compliance Period 1 retail electricity providers were required to procure renewable electricity supplies equaling 20% of total retail sales, which CPAU did. In this period, CPAU supplied 21.4% of the City’s retail electricity sales volumes from renewable energy sources. The procurement results for Compliance Period 1 are displayed in Table 2 below: Table 2: Compliance Period 1 Procurement Results Year Retail Sales (MWh) Procurement Target (MWh)* Actual Procurement (MWh) % of Retail Sales 2011 949,517 189,903 207,974 21.9% 2012 935,021 187,004 200,621 21.5% 2013 953,235 190,647 199,145 20.9% TOTAL 2,837,773 567,555 607,740 21.4% * Annual procurement targets are “soft” targets. The RPS Procurement Plan requires that the target be met for the compliance period as a whole, not in each year of the - compliance period. All of the renewable energy procured in Compliance Period 1 came from resources whose contracts were executed before June 1, 2010. The RPS Procurement Plan considers these contracts “grandfathered,” and since all of the renewable energy procurement for Compliance Period 1 was from these types of contracts, there was no need to meet the Portfolio Balancing Requirements included in Section B.4 of the RPS Procurement Plan. 2. Compliance Period 2 (2014 – 2016) In Compliance Period 2, renewable procurement must equal or exceed the sum of the three annual RPS procurement targets described by the following equations: 1 RPS Portfolio Content Categories are defined as follows: Category 1 is energy and RECs delivered to a California Balancing Authority (CBA) without substituting electricity from another source, Category 2 is energy and RECs that cannot be delivered to a CBA without substituting electricity from another source, and Category 3 is unbundled RECs. 2 CA Code of Regulations, Title 20, Chapter 13, Section 3203. City of Palo Alto Page 5 2014 RPS Target = 20% × (Retail Sales in 2014) 2015 RPS Target = 20% × (Retail Sales in 2015) 2016 RPS Target = 25% × (Retail Sales in 2016) As shown in Table 3 below, CPAU is projected to easily exceed this mandated procurement level as well. Renewable electricity procurement is projected to equal 29% of retail sales for Compliance Period 2. Table 3: Compliance Period 2 Procurement Target Year Retail Sales (MWh) Procurement Target (MWh)* Actual/Projected Procurement (MWh) % of Retail Sales 2014 953,386 190,677 210,250 22.1% 2015 932,922 186,584 241,262 25.9% 2016 955,828 246,442 376,609 39.4% TOTAL 2,842,136 616,219 828,121 29.1% * Annual procurement targets are “soft” targets. The RPS Procurement Plan requires that the target be met for the compliance period as a whole, not in each year of the compliance period. Also in Compliance Period 2, the RPS Portfolio Balancing Requirements will apply to the procurement levels described above. The specific requirements are: (1) CPAU must procure at least 65% of its renewable supplies from Portfolio Content Category 1, and (2) no more than 15% from Portfolio Content Category 3 (unbundled RECs). Staff projects that CPAU will easily meet the Compliance Period 2 overall procurement requirement and the RPS Portfolio Balancing Requirement with existing renewable energy supplies, combined with the output from the five solar projects coming online before 2017 (all of which are classified as Portfolio Content Category 1 resources) as shown in Table 1. 3. Compliance Period 3 (2017 – 2020) For Compliance Period 3, CPAU is subject to “soft” targets to supply at least 27% of its retail sales volume from renewable resources in 2017, with that level increasing by 2% each year until reaching 33% in 2020, as described by the following four equations: 2017 RPS Target = 27% × (Retail Sales in 2017) 2018 RPS Target = 29% × (Retail Sales in 2018) 2019 RPS Target = 31% × (Retail Sales in 2019) 2020 RPS Target = 33% × (Retail Sales in 2020) The overall Compliance Period 3 target is equal to the sum of these four equations. With all five of the City’s solar contracts expected to come online by the end of 2016, as shown in Table 1, CPAU is expected to easily comply with the Compliance Period 3 overall procurement requirement, as well as the Portfolio Balancing Requirement that at least 75% of the renewable City of Palo Alto Page 6 electricity supplies come from Portfolio Content Category 1 and no more than 10% come from Portfolio Content Category 3. Staff projects that renewable electricity supplies will satisfy 57% of retail sales for Compliance Period 3, and that all of these supplies will come from either Portfolio Content Category 1 or “grandfathered” resources. As required by the CEC RPS Enforcement Procedures and Section D of the City’s Procurement Plan, staff reported all of the above information to the California Energy Commission in June 2016 (Attachment A). Carbon Neutral Plan With the purchase of unbundled RECs in May 2016 to offset the CY 2015 market power purchases, CPAU achieved its goal, set forth in the Carbon Neutral Plan, of an electric supply portfolio with zero net greenhouse (GHG) emissions for the third year in a row. Along with the purchase of RECs, carbon neutrality was achieved in CY 2015 through existing hydro and renewable generation (wind, solar, and landfill gas). As in CYs 2013 and 2014, the amount of carbon neutral generation from these long-term contracts was lower than expected due to the ongoing severe drought limiting hydroelectric output. This resulted in a higher volume of purchases of market power and the offsetting RECs. The carbon content of CPAU’s electric supply portfolio for CY 2015 is undergoing a formal verification process at this time. Third-party verification is not a state requirement, but is good practice to maintain public confidence in the City’s claims of carbon neutrality. For CY 2016 staff projects that roughly 80% of the City’s electric supply resources will be from carbon-free generating sources, with the remainder being procured through market purchases. In early 2017, staff will establish the actual carbon content of the 2016 supply portfolio, and will procure RECs to offset the remainder of the portfolio’s emissions, in accordance with the City’s adopted emissions calculation protocol (Staff Report 3194). Assuming that the projects listed in Table 1 that are still being developed come online in 2016 as expected and the ongoing drought finally comes to an end, by 2018 CPAU’s entire electric supply portfolio is expected to be sourced from carbon neutral resources under long-term contracts (see Figure 1 below). City of Palo Alto Page 7 Figure 1: CPAU Carbon Neutral Supply Resources Policy Implications This report implements Sections 4 and 5 of the City’s RPS Enforcement Program, which require an annual review of the Electric Utility’s compliance with the CPAU RPS Procurement Plan to ensure that CPAU is making reasonable progress toward meeting the December 31, 2016 compliance obligation of 25% of retail sales with eligible renewable resources, consistent with the CPAU RPS Procurement Plan. Environmental Review Staff’s preparation of this report does not meet the definition of a “project” pursuant to Public Resources Code Sections 21065 and 21080(b)(8), 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, thus California Environmental Quality Act review is not required. Attachments: Attachment A: City of Palo Alto Report to CEC on RPS Compliance for Calendar Year 2015 (PDF) STATE OF CALIFORNIA Compliance Report Form for Local Publicly Owned Electric Utilities CEC-RPS-POU (Revised 04/2016) CALIFORNIA ENERGY COMMISSION CEC-RPS-POU April 2016 Energy Commission staff may request additional information from the POU to verify the generation and RPS procurement claims of electricity products reported in this report. If requested, an authorized officer or agent of the POU shall submit additional information. Sacramento, CA 95814-5555 This report is due on July 1st of each year for retirements made for the previous reporting year. Renewable Energy Office California Energy Commission e-mail: RPSTrack@energy.ca.gov Attn: RPS Verification California Energy Commission 1516 9th Street, MS-45 (TO BE COMPLETED BY PUBLICLY OWNED UTILITIES) COMPLIANCE REPORT to the CALIFORNIA ENERGY COMMISSION ON THE RENEWABLES PORTFOLIO STANDARD PROGRAM POU Reporting for the Renewables Portfolio Standard Program (RPS), by tab: Reporting Year Covered in Report 2015 Compliance Period Accounting: Complete at the end of each compliance period. Palo Alto, City of Annual Report Accounting: Complete and update annually for previous, current, and forecasted years. Static Contract Information: Complete with information only from contracts, ownership agreements, and amendments that were executed in the previous calendar year or that were not previously reported. Enter the name of the Local Publicly Owned Electric Utility (POU) submitting this report and the Reporting Year covered by the report. E-mail the electronic file of the completed report to the address shown below, with all supporting documentation. Then print and sign the attestation page of the report, and either email or mail the signed attestation to the address shown below: Contracted RPS Facilities Information: Complete with information for facilities associated with reported contracts. The Energy Commission’s Enforcement Procedures for the Renewables Portfolio Standard for Local Publicly Owned Electric Utilities are codified in Title 20, California Code of Regulations, sections 1240 and 3200 - 3208, may be referred to this form as the “RPS POU Regulations.” ATTACHMENT A STATE OF CALIFORNIA Compliance Report Form for Local Publicly Owned Electric Utilities CEC-RPS-POU (Revised 04/2016) CALIFORNIA ENERGY COMMISSION CEC-RPS-POU April 2016 Annual RPS Report: Accounting To be completed annually. Input Required Actual Data Forecasted Data Forecasted Annual RPS Procurement and Percentages (MWh)2014 2015 2016 Annual Retail Sales 953,386.000 932,922.151 955,828.000 Annual RPS Procurement Retired 210,250.000 241,262.000 376,609.000 Soft Targets 20.00%20.00%25.00% Procurement Target (MWh)2014 2015 2016 Procurement Target Category 0 RECs Retired 210,250.000 216,058.000 227,530.000 Category 1 RECs Retired 0.000 25,204.000 149,079.000 Pre-June 1, 2010 Category 1 RECs Retired1 0.000 0.000 0.000 Category 2 RECs Retired 0.000 0.000 0.000 Pre-June 1, 2010 Category 2 RECs Retired2 0.000 0.000 0.000 Category 3 RECs Retired 0.000 0.000 0.000 Pre-June 1, 2010 Category 3 RECs Retired3 0.000 0.000 0.000 Total RECs Retired (Compliance Period) 616,218.630 828,121.0000 Compliance Period 2 Compliance Period 2 Actual STATE OF CALIFORNIA Compliance Report Form for Local Publicly Owned Electric Utilities CEC-RPS-POU (Revised 04/2016) C A L IF O R N IA E N E R G Y C O M M IS S IO N CEC-RPS-POU April 2016 RPS Compliance Period Report: Accounting To be completed at the end of each compliance period. Input Required Actual Data Annual RPS Procurement and Percentages (MWh)2014 2015 2016 Annual Retail Sales 953,386.000 932,922.151 955,828.000 Annual RPS Procurement Retired 210,250.000 241,262.000 376,609.000 Soft Targets 20.00%20.00%25.00% Procurement Target (MWh)2014 2015 2016 Procurement Target Category 0 RECs Retired 210,250.000 216,058.000 227,530.000 Category 1 RECs Retired 0.000 25,204.000 149,079.000 Pre-June 1, 2010 Category 1 RECs Retired 0.000 0.000 0.000 Category 2 RECs Retired 0.000 0.000 0.000 Pre-June 1, 2010 Category 2 RECs Retired 0.000 0.000 0.000 Category 3 RECs Retired 0.000 0.000 0.000 Pre-June 1, 2010 Category 3 RECs Retired 0.000 0.000 0.000 Historic Carryover (HCO) Applied1 Total RECs Retired Including HCO Total RECs Retired for the Compliance Period 828,121.000 828,121.000 Compliance Period 2 Compliance Period 2 Actual 0.000 616,218.630 STATE OF CALIFORNIA Compliance Report Form for Local Publicly Owned Electric Utilities CEC-RPS-POU (Revised 04/2016) C A L IF O R N IA E N E R G Y C O M M IS S IO N CEC-RPS-POU April 2016 Portfolio Balance Requirements (MWh)Total Retired Applied to Target2 Potential Excess Category 0 RECs Retired 653,838.000 0.000 653,838.000 Historic Carryover Applied 0.000 0.000 n/a Category 1 RECs Retired 174,283.000 0.000 174,283.000 Pre-June 1, 2010 Category 1 RECs Retired 0.000 0.000 0.000 Category 2 RECs Retired 0.000 0.000 0.000 Pre-June 1, 2010 Category 2 RECs Retired 0.000 0.000 0.000 Category 3 RECs Retired 0.000 0.000 n/a Pre-June 1, 2010 Category 3 RECs Retired 0.000 0.000 n/a Total RECs applied to the Target Category 1 Balance Requirement Category 3 Balance Limitation Disallowed Category 3 RECs Additional Procurement (MWh)Starting Balance Applied to Current Compliance Period Accumulated in Current Compliance Period Remaining Balance Total Excess Procurement 0.000 0.000 828,121.000 828,121.000 Excess Category 0 RECs 0.000 0.000 0.000 0.000 Excess Category 1 RECs 0.000 0.000 0.000 0.000 Excess Pre-June 1, 2010 Cat. 1 RECs 0.000 0.000 0.000 0.000 Excess Category 2 RECs 0.000 0.000 0.000 0.000 Excess Pre-June 1, 2010 Cat. 2 RECs 0.000 0.000 0.000 0.000 Total Historic Carryover6 0.000 0.000 n/a 0.000 92,432.795 Compliance Period 2 0.000 0.000 400,542.110 STATE OF CALIFORNIA Compliance Report Form for Local Publicly Owned Electric Utilities CEC-RPS-POU (Revised 04/2016) C A L IF O R N IA E N E R G Y C O M M IS S IO N CEC-RPS-POU April 2016 RPS Procurement Enforcement (MWh)2014 2015 2016 Deficit of RECs Necessary to Meet Target Deficit of RECs Necessary to Meet PCC 1 Portfolio Balance Requirement Total RECS retired, less disallowed PCC 3 828,121.000 Cost Limitations No Procurement Target 616,218.630 Delay of Timely Compliance No Potential Excess 828,121.000 Reduction of PCC 1 No Short-Term RECs8 0.000 Excess RECs Eligible 828,121.000 Excess Category 0 RECs 0.000 Excess Category 1 RECs 0.000 Excess Pre-June 1, 2010 Category 1 RECs 0.000 Excess Category 2 RECs 0.000 Excess Pre-June 1, 2010 Category 2 RECs 0.000 Other Optional Compliance Measures Applied Yes/NoExcess Procurement Calculation (MWh)7 Compliance Period 2 400,542.110 616,218.630 Compliance Period 2 City of Palo Alto (ID # 7506) City Council Staff Report Report Type: Informational Report Meeting Date: 12/12/2016 City of Palo Alto Page 1 Summary Title: Utilities Quarterly Report Title: City of Palo Alto Utilities Update for the First Quarter of Fiscal Year 2017 From: City Manager Lead Department: Utilities This update, on water, gas, electric, wastewater collection and fiber utilities, efficiency programs, legislative/regulatory issues, utility-related capital improvement programs, operations reliability impact measures and a utility financial summary, is for the Council and Utilities Advisory Commission’s (UAC’s) information. This update has been prepared to keep the UAC and Council apprised of the major issues that are facing the water, gas, electric, wastewater collection and fiber utilities. Items of special interest this quarter include: an accounting of the use of the cap-and-trade allowance revenues for the electric fund since 2012 (page 6 and Table 1 on page 7) a discussion of the use of cap-and-trade allowance revenues for the gas fund (page 12) a chart showing that actual gas prices for fiscal year (FY) 2017 to date have been higher than expected when the budget was prepared (Figure 10 on page 15) a notice of the Power Content Label with a link to the location on the City’s website (page 20) a discussion of the legislative and regulatory issues expected in the coming year (page 21) the first quarter of FY 2017 financial summary for each fund is not included in this quarterly report due to the City’s focus on completion of the FY 2016 Comprehensive Annual Financial Report. A full financial summary and reserve level status update will be provided in the second quarter update. Attachments: Attachment A: Utilities Fiscal Year 2017 First Quarter Report (PDF) Utilities Quarterly Update First Quarter of Fiscal Year 2017 December 2016 ATTACHMENT A Quarterly Update for First Quarter of FY 2017 December 2016 i Utilities Quarterly Update Table of Contents I. Electricity ................................................................................................................... 3 Electric Supplies ............................................................................................................................................ 3 Cap-and-Trade: Use of Allowance Revenue.................................................................................................. 6 Electric Budget and Portfolio Performance Measures ................................................................................. 8 II. Natural Gas............................................................................................................... 12 Gas Supply Retail Rates ............................................................................................................................... 12 Cap-and-Trade: Use of Allowance Revenue................................................................................................ 12 Gas Budget and Portfolio Performance Measures ..................................................................................... 13 III. Water ....................................................................................................................... 15 Water Availability ........................................................................................................................................ 15 Water Use Compared to Targets ................................................................................................................ 15 Recycled Water Strategic Plan .................................................................................................................... 16 Water Budget Performance Measures ....................................................................................................... 16 IV. Fiber Optics .............................................................................................................. 18 Commercial Dark Fiber Service ................................................................................................................... 18 Citizen Advisory Committee ........................................................................................................................ 18 V. Public Benefit, Demand Side Management Programs and Communications ............... 18 Energy Efficiency Program Achievements .................................................................................................. 18 Local Renewable Energy Programs ............................................................................................................. 19 Communications Activities ......................................................................................................................... 19 VI. Research and Development and Innovation .............................................................. 20 Program for Emerging Technologies ........................................................................................................... 20 VII. Legislative and Regulatory Issues .............................................................................. 21 Summary ..................................................................................................................................................... 21 State Regulatory Proceedings ..................................................................................................................... 22 VIII. Utility Financial Summary ......................................................................................... 22 Residential Bill Comparisons (based on 30-day bills).................................................................................. 22 Non-Residential Bill Comparisons (based on 30-day bills) ......................................................................... 24 Quarterly Update for First Quarter of FY 2017 December 2016 ii List of Figures Figure 1: Electric Supply Resource Actual and Projection, 2015 to 2017 (as of Oct. 26, 2016) .................... 5 Figure 2: CY 2017 Monthly Electric Supply Resource Projection .................................................................. 5 Figure 3: Northern California Peak Electric Prices (as of October 25, 2016) ................................................ 6 Figure 4: FY 2016 Electric Load and Resource Balance ............................................................................... 10 Figure 5: FY 2016 Electric Market Purchase Costs and Market Prices ........................................................ 11 Figure 6: CPAU’s Gas Commodity Rates—July 2012 through November 2016 .......................................... 12 Figure 7: Cumulative Redwood Pipeline Cost vs. Market Benchmarks ...................................................... 13 Figure 8: Natural Gas Consumption – Budget vs. Actual ............................................................................ 14 Figure 9: Natural Gas Supply Cost – Budget vs. Actual ............................................................................... 14 Figure 10: FY 2016 Natural Gas Prices ($/MMBtu) – Expected vs. Actual .................................................. 15 Figure 11: Water Use Compared to Voluntary Target ................................................................................ 16 Figure 12: Water Consumption – Budget vs. Actual ................................................................................... 17 Figure 13: Water Cost – Budget vs. Actual.................................................................................................. 17 List of Tables Table 1: Use of Cap-and-Trade Allowance Auction Revenue and Expenditures .......................................... 7 Table 2: FY 2016 Electric Utility Supply Cost Summary ................................................................................ 8 Table 3: FY 2016 Electric Load and Generation Compared to Budget Projections ....................................... 9 Table 4: Status to date of all applications to the Program for Emerging Technologies ............................. 21 Table 5: Residential Electric Bill Comparison ($/month) ............................................................................ 22 Table 6: Residential Natural Gas Bill Comparison ($/month) ..................................................................... 23 Table 7: Residential Water Bill Comparison ($/month) .............................................................................. 23 Table 8: Residential Wastewater Collection (Sewer) Bill Comparison ($/month) ...................................... 23 Table 9: Median Residential Overall Bill Comparison ($/month) ............................................................... 23 Table 10: Non-Residential Electric Bill Comparison ($/month) .................................................................. 24 Table 11: Non-Residential Natural Gas Bill Comparison ($/month) ........................................................... 24 Quarterly Update for First Quarter of FY 2017 December 2016 3 I. Electricity Electric Supplies Western Area Power Administration (Western) Issues Unfortunately the ongoing drought continues to keep projected Western Base Resource generation levels well below long-term average levels (399 gigawatt-hours, or GWh). For the first quarter of FY 2017, Western supply delivered 119 GWh (28 GWh below long-term average levels, but 22 GWh higher than in FY 2016). For the first quarter of FY 2017, Western supplied only 119 GWh (19% below long-term average levels) and cost $4.1M (6% lower than the FY 2017 Adopted Budget). At the October 5, 2016 Western Customer Meeting, the Bureau of Reclamation (“Reclamation”) announced that $4.2 million will be reimbursed to Western Base Resource power customers to reflect a loss of value in energy resulting for excess releases from the Trinity Reservoir. Reclamation had released water in excess of what was mandated to support fisheries over the course of several years creating an adverse impact to power customers in foregone power opportunities. The $4.2 million reimbursement will be disbursed to power customers in the form of lower Western Base Resource bills going forward. In December, 2015, the California Independent System Operator (CAISO) and Western signed the Market Efficiency Enhancement Agreement (MEEA), which changed the pricing points applied to Western Base Resource schedules imported into the CAISO. Prior to the MEEA, Western Base Resources were was priced as if they wereit was imported into the CAISO at the California-Oregon border, resulting in substantial congestion price risk with an inability to manage such risk. Since the implementation of the MEEA, savings to Western customers are estimated to be $1.6 million, with Palo Alto’s share about $200,000. Palo Alto staff along with staff from the City of Santa Clara and the Northern California Power Agency (NCPA) invested substantial time assisting with Western’s negotiations with the CAISO. Western officially started the development of its 2025 Power Marketing Plan. The Plan sets allocations and terms for marketing energy from Central Valley Project hydroelectric generation after 2024 when the current Western Base Resource Contract expires. The proposed 2025 Marketing Plan would extend the current Western Base Resource Contract 30 years through 2054 with allocations up to 98% of current allocations. Palo Alto submitted comments on the plan to include certain termination, allocation reduction and cost containment provisions. Western will publish the Final 2025 Power Marketing Plan in June 2017. Staff will bring this item to the UAC and Council for discussion along with a tentative schedule and decision points. Calaveras Hydroelectric Project Issues Drought conditions are lessening their impact on Calaveras, as the reservoir has benefited from average precipitation during the El Niño winter. For the first quarter of FY 2017 Palo Alto’s Quarterly Update for First Quarter of FY 2017 December 2016 4 share of this project’s generation was 10.9 GWh (75% below the long-term average level, and 185% higher than in FY 2016). NCPA staff is monitoring the impacts of the Bay Delta Water Quality Control Plan (WQCP) on the Calaveras hydroelectric facilities which is on the Stanislaus River and part of the San Joaquin watershed. The proposed Bay Delta WQCP would require a 40% unimpaired flow criteria1 on the San Joaquin River, potentially resulting in a shift of water available for discretionary generation from the Calaveras hydroelectric project and other hydro projects in the same watershed. While the flow criteria may not alter the amount of water which will flow through the project the timing of such flows may be impacted, resulting in a potential loss of energy value. Electric Load and Resource Balance The size of the committed and planned market purchases over the last and current calendar years (CYs) (shown in Figure 1 below) reflects a below average level of hydroelectric output, as discussed above. For CYs 2015 and 2016 combined, net committed fixed-price forward market purchases currently account for approximately 543 GWh, which represents 28% of the City’s total load for the two-year period. For CY 2017, near normal hydro output is projected along with a surge in solar resources. Long-term renewable resources (landfill gas, wind and solar) are projected to provide 54% of the City’s total CY 2017 load. Overall electric supply resources are expected to be surplus to load by about 1% for CY 2017; however, some periods will see significant surplus positions while other periods will be deficit (see Figure 2 below). 1 Unimpaired flow is defined as “the flow that would occur if all runoff from the watershed remained in the river, without storage in reservoirs or diversions, such as irrigation, power generation, or water supply.” Quarterly Update for First Quarter of FY 2017 December 2016 5 Figure 1: Electric Supply Resource Actual and Projection, 2015 to 2017 (as of Oct. 26, 2016) Figure 2: CY 2017 Monthly Electric Supply Resource Projection Quarterly Update for First Quarter of FY 2017 December 2016 6 Electric Market Price History and Projections As of October 25, 2016, the price for on-peak energy for November 2016 in Northern California was $33.66 per megawatt-hour (MWh)2, while the prices for December 2016 and January 2017 were $38.99/MWh and $39.62/MWh, respectively. These values are approximately $3.83/MWh lower than they were at the time of the last quarterly report.3 On-peak prices for calendar year strips are in the range of $35 to $37/MWh for 2016 through 2018. These prices are approximately $1.90/MWh lower than they were at the time of the last quarterly report. Figure 3 below illustrates historical monthly on-peak prices and projected monthly forward prices for Northern California from 2005 through 2023. Figure 3: Northern California Peak Electric Prices (as of October 25, 2016) Cap-and-Trade: Use of Allowance Revenue As of the end of CY 2015, CPAU received $11.98 million in revenue from auctioning the emissions allowances allocated to its electric utility. The City Council adopted a resolution on December 10, 2012 (Staff Report 3342) that identified the following permissible uses for allowance revenue: 1) the cost of RECs to fulfill carbon neutrality goals, 2) RPS-eligible 2 Note that $30 per megawatt-hour is equal to 3 cents per kilowatt-hour. 3 Market prices for the previous quarterly report were from September 13, 2016. Quarterly Update for First Quarter of FY 2017 December 2016 7 renewable energy purchases above State mandated purchases, 3) energy efficiency costs that are not funded by Public Benefits collections, and 4) rebates to electric ratepayers. For CY 2012 through 2014, there was a surplus of allowance revenue over expenditures. Table 1 Table 1 shows the actual expenses and revenues for CY 2012 through CY 2015. For CY 2016, staff anticipates that all allowance revenue will be spent on Carbon Neutral REC purchases and renewable energy. Table 1: Use of Cap-and-Trade Allowance Auction Revenue and Expenditures CY 2012 CY 2013 CY 2014 CY 2015 Projected Allowance Revenue Annual Revenue 1,145,326 2,912,695 3,913,232 4,008,407 Prior Year Carryover 0 1,145,326 1,041,501 951,363 Total Allowance Revenue 1,145,326 4,058,021 4,954,733 4,959,771 Funding from Auction Revenues for Eligible Expenditures Carbon Neutral REC Purchases 0 0 434,088 361,642 Additional Renewables 0 1,710,388 1,620,838 4,598,129 Additional Energy Efficiency 0 1,306,133 1,948,444 0 Total Expenditures 0 3,016,520 4,003,370 4,959,771 Remaining Funds 1,145,326 1,041,501 951,363 0 Quarterly Update for First Quarter of FY 2017 December 2016 8 Electric Budget and Portfolio Performance Measures Electric Supply Cost Summary Compared to Budget Estimates Table 2Table 2 below shows the City of Palo Alto Utilities’ (CPAU’s) supply cost by cost category through the first quarter of FY 2017. Supply costs were $2.2 million (9.4%) under budget primarily due to less than expected market purchases. Table 2: FY 2016 Electric Utility Supply Cost Summary Quarterly Update for First Quarter of FY 2017 December 2016 9 Electric Usage and Generation Summary Compared to Budget Estimates Table 3Table 3 and Figure 4Figure 4 below summarize the City’s electric supply sources through the first quarter of FY 2017. Load was 7% lower than budget. Solar generation was below budget (-20%), but was mostly balanced out by Western hydro generation, which was above budget (+12%). Some spot market purchases were expected; however, the City ended up selling power on the spot market instead due to a combination of the above factors. As a result, total supply was just a little below budget. Table 3: FY 2016 Electric Load and Generation Compared to Budget Projections Quarterly Update for First Quarter of FY 2017 December 2016 10 Figure 4: FY 2016 Electric Load and Resource Balance Quarterly Update for First Quarter of FY 2017 December 2016 11 Electric Market Prices and Costs Compared to Budget Estimates Figure 5 shows monthly market prices and the cost of purchasing energy from the market. Electric market prices through the first quarter of FY 2017 were lower due to continued lower natural gas prices that impact the electricity markets. The cost of market purchases through the first quarter of FY 2017 was equal to what it would have been if all energy had been purchased in the spot market4. The total cost of market purchases in the first quarter was lower than budget mainly due to lower than expected load. Figure 5: FY 2016 Electric Market Purchase Costs and Market Prices 4 Note that some market purchases are made on a forward basis to lock in market prices. Quarterly Update for First Quarter of FY 2017 December 2016 12 II. Natural Gas Gas Supply Retail Rates Since July 1, 2012, the commodity portion of CPAU’s retail gas rates for all customers varies every month depending on the market price of natural gas. Figure 6 below shows the actual commodity rates charged from July 2012 through November 2016. These rates can also be found on the web site at: http://www.cityofpaloalto.org/civicax/filebank/documents/30399. Note that gas commodity rates have risen from the low rates in the spring of 2016. Figure 6: CPAU’s Gas Commodity Rates—July 2012 through November 2016 Cap-and-Trade: Use of Allowance Revenue Calendar year 2015 was the first year the CPAU Gas utility had a compliance obligation in CARB’s cap-and-trade program. As of the end of CY 2015, CPAU received $501,000 in revenue from auctioning the emissions allowances allocated to its gas utility. The City Council adopted a resolution on January 26, 2015 (Staff Report 5397) that identified the following permissible uses for allowance revenue: 1) Investment in energy efficiency programs for the City’s natural gas portfolio and retail customers, 2) purchases or investment in cost effective renewable bio- gas resources for the City’s gas portfolio, 3) Investment in other carbon reduction activities for the City’s natural gas utility, including system maintenance or replacement to reduce fugitive gas emissions; and 4) Rebates to natural gas retail ratepayers provided on a non-volumetric Quarterly Update for First Quarter of FY 2017 December 2016 13 basis. All available funds were carried over into CY 2016 and are planned to be expended this year. Gas Budget and Portfolio Performance Measures Value of CPAU’s Share of Redwood Pipeline Capacity Figure 7Figure 7 below shows the cost of the Redwood gas transmission line compared to the value at month-ahead spot market prices as well as daily spot market prices. The Redwood pipeline allows the City to buy gas at the receipt point of Malin, Oregon and transport the gas to “PG&E Citygate”, which is normally a higher value receipt point. The City’s share of the Redwood pipeline was a net benefit to the Gas Utility of approximately $76,000 through the first quarter of FY 2017. This is the difference between the value of Redwood capacity of $246,000 (the difference of the monthly index prices at the ends of the Redwood pipeline in Malin, Oregon and PG&E Citygate) and the transportation cost of using the Redwood pipeline of $170,000. Figure 7: Cumulative Redwood Pipeline Cost vs. Market Benchmarks Natural Gas Consumption and Costs: Budget vs. Actual Figure 8Figure 8 and Figure 9Figure 9 compare actual natural gas use and supply costs with the FY 2017 budget. Natural gas use through the first quarter of FY 2017 was 2.6% below the budget forecast, and costs were 3.3% lower than budgeted amounts. Quarterly Update for First Quarter of FY 2017 December 2016 14 Figure 8: Natural Gas Consumption – Budget vs. Actual Figure 9: Natural Gas Supply Cost – Budget vs. Actual Quarterly Update for First Quarter of FY 2017 December 2016 15 Figure 10Figure 10 shows actual gas prices at PG&E Citygate (CG) versus gas prices that were projected at the time the FY 2017 budget was developed. During FY 2017 thus far, gas prices have been higher than budget. Figure 10: FY 2016 Natural Gas Prices ($/MMBtu) – Expected vs. Actual III. Water Water Availability Because the rainy season is just beginning, more information regarding water supply will be available for the next quarterly report. Water Use Compared to Targets The City is conserving water at a rate far beyond the San Francisco Public Utilities Commission (SFPUC) request for 10% voluntary water use reductions. As of October 21, the City’s water use was 24.3% less than 2013 as shown in Figure 11 below Quarterly Update for First Quarter of FY 2017 December 2016 16 Figure 11: Water Use Compared to Voluntary Target Recycled Water Strategic Plan On October 11, 2016 the SCVWD approved the proposed cost share distribution for the Northwest County Recycled Water Strategic Plan (see Staff Report 6700). The cost share distribution states anticipates a 90% cost share for SCVWD (not to exceed $1.8 million) and a combined 10% cost share for all the partners of the Regional Water Quality Control Plant. Water Budget Performance Measures Figure 12Figure 12 and Figure 13Figure 13 below compare actual water consumption and water supply cost to the FY 2017 budget projections. Actual water use through the first of FY 2017 was 10% higher than budget estimates. Actual supply costs through the first quarter of FY 2017 were 10% above budget, due to the higher consumption. These increases are likely due to the loosening of drought restrictions. Quarterly Update for First Quarter of FY 2017 December 2016 17 Figure 12: Water Consumption – Budget vs. Actual Figure 13: Water Cost – Budget vs. Actual Quarterly Update for First Quarter of FY 2017 December 2016 18 IV. Fiber Optics Commercial Dark Fiber Service The total number of commercial dark fiber customers increased from 107 to 108 in the first quarter of FY 2017. The total number of active dark fiber service connections serving commercial customers decreased from 219 to 216 in the first quarter of FY 2017 (some customers have multiple connections). Commercial customers generate 81% of the dark fiber license revenues. Through the end of FY 2016, 22 new dark fiber service connections to existing and new customers were completed, while 30 service connections were disconnected. Dark fiber Engineering and Operations are installing additional fiber along key routes between the Stanford Research Park and Downtown due to fiber capacity issues. This effort represents the beginning of a larger project to overlay fiber along the entire system. Fiber-to-the-Premises Master Plan and Wireless Network Plan Staff is currently working on the following tasks for the FTTP and Wireless Plans as directed by the Council on September 28, 2015: 1. “Dig Once” ordinance: Staff, including the City Attorney’s office and the City’s consultant CTC Technology & Energy (CTC), is working to evaluate existing dig once models, ordinances and strategies implemented by other municipalities and counties. Staff anticipates bringing a recommendation to the Council late this year or in early 2017. 2. In May 2016, a Request for Information (RFI) was issued for a partnership for deployment of citywide fiber-to-the-premises. Eight responses were received and reviewed by staff and CTC. CTC recommended conducting additional discussions with three of the respondents. Meetings were held with these respondents in early October 2016. CTC and staff are currently evaluating the information collected in these meetings to determine if additional discussions are warranted with these respondents. 3. Staff is working with CTC to develop RFPs for a Mobile Broadband Network for Public Safety (e.g. “in-vehicle” broadband access) and a Point-to-Multipoint Network for Secure City Enterprise Access to improve command and control of critical City infrastructure for Public Safety and Utilities. The RFPs are expected to be released in mid-November 2016. Citizen Advisory Committee Staff continues to meet on a regular basis with the committee regarding fiber and wireless initiatives. Five new members have been appointed by the City Manager which expands the committee to eleven members. V. Public Benefit, Demand Side Management Programs and Communications Energy Efficiency Program Achievements CPAU offers a wide range of customer programs and services to encourage energy and water efficiency and customer-owned renewable generation. The Annual DSM Report summarizes Quarterly Update for First Quarter of FY 2017 December 2016 19 overall savings goals versus achievements, program-level achievements and expenditures, as well as key initiatives undertaken by CPAU. The Annual DSM Report for FY 2015 was provided to Council on April 18, 2016 and UAC in May 2016 (Staff Report 6715). The Annual DSM Report for FY 2016 will be completed in early 2017. Below are highlights from selected programs. 2016 Summer Demand Response Program The Demand Response pilot program called two Peak Load Reduction events in 2016—on June 3rd and September 26th. These events are called only when the temperature is projected to be the highest of the year for the purpose of alleviating stress on the electrical grid. The 2016 citywide peak load occurred on September 26th (one of the event days), with an hourly peak load of 168.9 MW at 5 p.m. On this day, 237 kW of reduction was achieved. Local Renewable Energy Programs Net Energy Metering Cap On August 22, 2016 Council approved the Net Energy Metering (NEM) Successor Program and revised the NEM cap to 10.8 MW. As of October 12, 2016 Palo Alto has had 7.8 MW of local solar photovoltaic (PV) capacity installed, representing 73% of the NEM cap. Staff will launch a NEM Reservation program in November to allow customers who have signed PV purchase or lease contracts to apply for a reservation for the remaining NEM capacity. Once the remaining NEM capacity is fully reserved customers will be placed on the NEM Successor program. CPAU will maintain a NEM Reservation wait list in the event that a project with an approved NEM Reservation is cancelled. Communications Activities Education, Workshops and Community Outreach Activities The following activities were held since the last quarterly report: September 17: Residential Solar and EV Workshop for SunShares program September 18: CPAU tabled at the Midtown Residents Association Ice Cream Social September 24, CPAU hosted a Landscape Design and Planting Workshop w/ BAWSCA October 2: CPAU tabled at the Bike ‘n Roll Event in front of City Hall October 15: CPAU hosted a Pruning, Propagation & Dead Heading Workshop w/BAWSCA November 5: CPAU hosted a workshop featuring the Home Efficiency Genie Program Communications Highlights This section summarizes communications highlights, updates on major campaigns and noteworthy events. Copies of all current and past ads and bill inserts are available online at cityofpaloalto.org/UTLbillinsert Advocacy for Electrification At the invitation of California Energy Commissioner Hochschild, on August 30 CPAU staff Shiva Swaminathan and Christine Tam made a presentation to CEC on Palo Alto electrification initiatives. The presentation covered four areas under evaluation: customer programs to incentivize replacement of gas appliances with electric alternatives, building code changes to Comment [AmyB1]: Is a word missing here, like ‘reserved’, ‘installed’, etc? Quarterly Update for First Quarter of FY 2017 December 2016 20 require electric appliances for new construction and renovation projects, changes to the utility rate structures, and support for electric vehicle adoption. The presentation also discussed the role of electrification to meet the Governor’s greenhouse gas reduction goal of 80% by 2050, and how policy makers, utilities, and local governments can coordinate their efforts to support electrification. Bay Area SunShares Solar PV & Zero-Emissions Vehicle Program Staff worked on a promotional campaign this quarter for the Bay Area SunShares program, which offered discounted rates on solar PV systems and zero-emissions vehicles (ZEVs). The program was designed to make it simpler and cheaper to go solar or purchase a ZEV by leveraging the bulk buying power of homeowners and vehicle buyers. Participation was open to residents and employees of companies located in the nine Bay Area counties and Yolo and Sacramento counties. Since this was a limited time only program that closed on November 4, CPAU engaged in a great deal of outreach to increase participation, including workshops, bill inserts, ads, email blasts, webpages, and social media posts. Information on Palo Alto solar programs is available at www.cityofpaloalto.org/solar No Better Time to Go Solar! Staff developed communication materials to inform customers and other solar stakeholders that customers can take advantage of the NEM rate, which offers full retail value for their solar production, before the program closes (when the NEM cap is reached). Messaging centered around the idea that with the expansion of the NEM cap and availability of the SunShares program, there was no better time to go solar! Power Content Label CPAU produces a Power Content Label each year and typically distributes it to customers via utility bill inserts, email newsletters, on the website and in social media during the month of September. This year, CPAU developed two Power Content Labels: one for residential customers and one for non-residential customers. Two different versions are necessary in order to accommodate information on the PaloAltoGreen program, as that program is no longer available for residential customers, but is still available to non-residential customers. View these at www.cityofpaloalto.org/PowerContentLabel VI. Research and Development and Innovation Program for Emerging Technologies CPAU’s Program for Emerging Technologies, or PET, (www.cityofpaloalto.org/UTLInnovation) provides the opportunity for local businesses and organizations to submit proposals for innovative and impactful products to CPAU for review as a prospective partner. The goal is to find and nurture creative products and services that will manage and better use electricity, gas, water and fiber optic services. From the program’s inception in June 2012 through the first quarter of FY 2017, the program received a total of 61 applications. Table 4 below summarizes the status of all applications through the first quarter of FY 2017. Quarterly Update for First Quarter of FY 2017 December 2016 21 Table 4: Status to date of all applications to the Program for Emerging Technologies Deadline Total Received Under Review Declined/Closed Active Completed FY 2013 13 0 11 0 2 FY 2014 15 0 11 1 3 FY 2015 15 1 10 2 2 FY 2016 14 5 4 0 5 FY 2017 4 4 0 0 0 TOTAL 61 10 36 3 12 VII. Legislative and Regulatory Issues While the City operates on the (July through June) Fiscal Year, the State legislature operates on the Calendar Year and Congress on the Federal Fiscal Year (October to September). In order to provide accurate information in this report, staff notes below current issues and those items appearing since the last quarterly report, regardless of each entity’s operating year. Summary As noted in the last quarterly report, the State Legislature has ended its 2016 session. Congress will be in recess for part of November and will return for only a few weeks before ending its session. While state and federal elected officials are between sessions, CPAU staff has time to collaborate with stakeholders on continuing issues or those items we anticipate will appear in 2017. These issues are noted below. Water: lead testing in schools In 2016, a failed bill would have water suppliers testing lead in private and public schools, health care centers, and other locations. While that legislation did not move far, there is a current regulatory move to mandate lead testing in schools. The issue is under consideration now at the State Water Resources Control Board (Water Board) and CPAU staff is discussing the issue with other members of the California Municipal Utilities Association (CMUA). CMUA has expressed its desire for the Water Board to set direction that clearly notes the reasonable roles of water suppliers and school districts regarding testing and any potential mitigation, as well as to ensure the number of samples and timelines are appropriate. As this issue moves forward, CMUA staff will relay these comments to Water Board staff. Energy: Changing market structure In 2015, SB 350 created the provision for a fundamental change in California’s energy market by allowing other states to join the California market. Colloquially called regionalization, CPAU staff and many other stakeholders have spent more than a year thus far discussing the issue of combining markets and sharing energy resources. Governor Brown attempted to introduce legislation formalizing the regional structure, however; too many concerns and questions remained at the end of the legislative session and a bill was never filed. Quarterly Update for First Quarter of FY 2017 December 2016 22 Now, legislative staff has begun holding stakeholder meetings to ensure such a bill is introduced in 2017. The Northern California Power Agency (NCPA) is an engaged member at these meetings and keeps CPAU well informed, as does CMUA. Staff will continue to work with these agencies to ensure any market changes do not adversely affect CPAU’s energy customers. State Regulatory Proceedings California Air Resources Board CARB continues to hold public workshops regarding a proposed regulation to create publicly- owned utility (POU) compliance penalties supporting enforcement of the Renewable Portfolio Standard (RPS) Program. It also continues work on cap-and-trade regulations for post 2020 implementation and updates to the climate scoping plan. CARB also released its draft plan to comply with the federal Clean Power Plan. California Energy Commission The CEC continues to work on implementing SB 350 and CPAU, through NCPA, is active in this process, particularly on the requirements for integrated resource plans (IRPs). The CEC also continues its efforts on power source disclosure regulations (i.e. the “Power Content Label”), and has created reporting templates. Like CARB, the CEC is also working on RPS enforcement and recently promulgated draft pre-rulemaking amendments to current procedures. One such amendment would potentially harm Palo Alto by impeding its ability to contract for hydroelectric generation through its agreement with Western. CPAU staff recognized the issue and worked with NCPA to gain an audience with CEC staff to describe the problem and suggest different language. VIII. Utility Financial Summary Due to City accounting staff working on the FY 2016 Comprehensive Annual Financial Report, financial reserve estimates and other financial details for the first quarter of FY 2017 are not available in time for this report. The next Utilities quarterly update (for the second quarter of FY 2017) will contain all relevant financial information, including the estimated levels of financial reserves. Residential Bill Comparisons (based on 30-day bills) Table 5: Residential Electric Bill Comparison ($/month) As of November 1, 2016 Season Usage (KWh/mo) Palo Alto PG&E Santa Clara Roseville Winter (Nov -Apr) 300 33.09 55.06 34.16 53.70 453 (Median) 57.18 69.24 52.21 69.87 650 90.48 145.72 138.43 98.42 1200 183.43 365.63 359.47 184.87 Quarterly Update for First Quarter of FY 2017 December 2016 23 Table 6: Residential Natural Gas Bill Comparison ($/month) As of November 1, 2016 Season Usage (therms) Palo Alto Menlo Park, Redwood City, Mountain View, Los Altos, and Santa Clara (PG&E Zone X) Roseville (PG&E Zone S) Winter (Nov-Mar) 18 25.70 27.52 27.52 54 (Median) 56.45 82.56 82.56 80 89.43 134.28 135.32 150 186.92 281.96 283.01 Table 7: Residential Water Bill Comparison ($/month) As of November 1, 2016 Usage CCF/month Palo Alto Menlo Park Redwood City Mountain View Los Altos Santa Clara Hayward 4 43.69 44.46 46.47 34.63 33.37 19.80 31.20 (Winter median) 7 67.18 63.03 65.43 53.68 45.20 34.65 52.62 (Annual median) 9 87.24 75.43 78.07 66.38 53.09 44.55 66.90 (Summer median) 14 137.39 107.95 119.47 98.13 73.81 69.30 104.51 25 247.72 180.33 229.94 206.08 119.91 123.75 197.02 Based on the FY 2015 BAWSCA survey, the fraction of SFPUC as the source of potable water supply was 100% for Palo Alto, 100% for Menlo Park, 100% for Redwood City, 94% for Mountain View, 11% for Santa Clara and 100% for Hayward. Table 8: Residential Wastewater Collection (Sewer) Bill Comparison ($/month) As of November 1, 2016 Palo Alto Menlo Park Redwood City Mountain View Los Altos Santa Clara Hayward 34.83 85.91 75.11 34.30 33.93 41.65 29.80 Table 9: Median Residential Overall Bill Comparison ($/month) As of Novemberr 1, 2016 Utility and Usage Palo Alto Menlo Park Redwood City Mountain View Los Altos Santa Clara Hayward Electricity (453 kWh/mo) $ 57.18 $ 69.24 $ 69.24 $ 69.24 $ 69.24 $ 52.21 $ 69.24 Gas (54 th/mo) 56.45 82.56 82.56 82.56 82.56 82.56 82.56 Wastewater 34.83 85.91 75.11 34.30 33.93 41.65 29.80 Water (9 CCF/mo) 87.24 75.43 78.07 66.38 53.09 44.55 66.90 TOTAL $235.70 $313.14 $304.98 $252.48 $238.82 $220.97 $248.50 Quarterly Update for First Quarter of FY 2017 December 2016 24 Non-Residential Bill Comparisons (based on 30-day bills) Table 10: Non-Residential Electric Bill Comparison ($/month) As of November 1, 2016 Usage (KWh/mo) Palo Alto PG&E Santa Clara Roseville 1,000 114 209 175 140 160,000 18,494 24,364 19,963 19,921 500,000 54,285 67,335 61,122 50,460 2,000,000 171,790 283,628 236,301 190,599 Table 11: Non-Residential Natural Gas Bill Comparison ($/month) As of November 1, 2016 Usage (therms/mo) Palo Alto PG&E 500 597 683 5,000 5,266 6,054 10,000 10,673 11,071 50,000 51,857 49,323 City of Palo Alto (ID # 7512) City Council Staff Report Report Type: Informational Report Meeting Date: 12/12/2016 City of Palo Alto Page 1 Summary Title: Property Leases Entered into by City Manager in Fiscal Year 2016 Title: Property Leases Entered Into by the City Manager Under Palo Alto Municipal Code Section 2.30.310(h), and Reported per Section Code 2.30.710 Fiscal Year 2016 From: City Manager Lead Department: Administrative Services This is an informational report and no Council action is required. Discussion The Palo Alto Municipal Code (PAMC), Section 2.30.710 requires an annual report to the City Council of all leases and rentals of City property with third parties approved by the City Manager. The attached report transmits this information for Fiscal Year (FY) 2016 (Attachment A). In addition, PAMC Section 2.30.210 (h) authorizes the City Manager to award and sign contracts to rent, lease or license City property to other parties regardless of the price for a term not exceeding three years. Notwithstanding the preceding sentence, the City Manager may enter into and sign contracts to rent, lease or license property at the Cubberley site for terms up to five years. Rental revenues for leases authorized by the City Manager for FY 2016 totaled $651,252. This represents an increase of $266,064 over FY 2015 revenues. This change is attributed to more active management of City properties. Attachments: 2016annualcitymgreaseagreementinfocmr.doc (DOCX) ATTACHMENT A CITY OF PALO ALTO ADMINISTRATIVE SERVICES DEPARTMENT/REAL ESTATE DIVISION 2016 Annual Report – Lease Agreements Entered Into By City Manager For PAMC Section Under Section 2.30.210 (h) Fiscal Year: 2015/2016 Number Property Address Property/Space Type Size in Square Foot** Tenant Term Monthly Rent Total Term Rent* Agreement Date 1 4000 Middlefield Road Cubberley Artist Studio 568 Conrad Johnson 12 months $477 $5,724 7/01/2015 2 4000 Middlefield Road Cubberley Artist Studio 360/600 Marianne Lettieri 12 months $558 $ 6,696 7/01/2015 3 4000 Middlefield Road Cubberley Artist Studio 360 Barbara Boissevain 12 months $ 305 $ 3,660 7/01/2015 4 4000 Middlefield Road Cubberley Artist Studio 360 Pantea Karimi 12 months $ 335 $4,020 7/01/2015 5 4000 Middlefield Road Cubberley Artist Studio 520 Rachel Doorley 12 months $ 437 $ 5,244 7/01/2015 6 4000 Middlefield Road Cubberley Artist Studio 360 Ken Edwards 12 months $ 302 $ 3,624 7/01/2015 7 4000 Middlefield Road Cubberley Artist Studio 480 Ann McMillian 12 months $446 $ 5,352 7/01/2015 8 4000 Middlefield Road Cubberley Artist Studio 360 Barbara Gunther 12 months $317 $3,804 7/01/2015 9 4000 Middlefield Road Cubberley Artist Studio 480 Inge Infante 12 months $403 $4,836 7/01/2015 10 4000 Middlefield Road Cubberley Artist Studio 360 Jennifer Gonsalves 12 months $605 $7,260 7/01/2015 ATTACHMENT A Number Property Address Property/Space Type Size in Square Foot Tenant Term Monthly Rent Total Term Rent* Agreement Date 11 4000 Middlefield Road Cubberley Artist Studio 360/ 480 Lessa Bouchard 12 months $403 $ 4,836 7/01/2015 12 4000 Middlefield Road Cubberley Artist Studio 430 Michal Gavish 12 months $ 361 $ 4,332 7/01/2015 13 4000 Middlefield Road Cubberley Artist Studio 480 Nancy White 4 months $ 437 $ 1,748 7/01/2015 14 4000 Middlefield Road Cubberley Artist Studio 480 Linda Gass 12 months $446 $ 5,352 7/01/2015 15 4000 Middlefield Road Cubberley Artist Studio 360/720 Andy Muonio 12 months **$335/$670 $ 6,665 7/01/2015 16 4000 Middlefield Road Cubberley Artist Studio 360/435 Paloma Lucas 12 months $405 $4,860 7/01/2015 17 4000 Middlefield Road Cubberley Artist Studio 360/435 Servane Briand 12 months $365 $4,380 7/01/2015 18 4000 Middlefield Road Cubberley Artist Studio 360/480 Daniele Archambault 12 months **$302/$403 $4,230 7/01/2015 19 4000 Middlefield Road Cubberley Artist Studio 1,200 Sahba Shere 12 months $1.008 $12,096 7/01/2015 20 4000 Middlefield Road Cubberley Artist Studio 360 Charles Coats 12 months $335 $4,020 7/01/2015 21 4000 Middlefield Road Cubberley Artist Studio 390 Christine Gray 12 months $328 $3,936 7/01/2015 22 4000 Middlefield Road Cubberley Artist Studio 480 Mel Day 12 months $403 $4,836 7/01/2015 23 4000 Middlefield Road Cubberley Artist Studio 390 Ernest Regua 12 months $363 $4,356 7/01/2015 24 4000 Middlefield Road Cubberley Artist Studio 360 Elizabeth Foggie 1 month $302 $302 7/01/2015 25 2300 Wellesley Street College Terrace Library 2,000 Palo Alto Community Child Care 3 years $ 0 $ 0 7/1/2013 26 3990 Ventura Court Ventura School Site 21,000 Palo Alto Community Child Care 3 years $ 0 $ 0 7/1/2013 ATTACHMENT A Number Property Address Property/Space Type Square Footage* * Tenant Term Monthly Rent Total Term Rent Agreement Date 27 1305 Middlefield Road Lucie Stern Community Center 500 Palo Alto Players 3 years $1,211.50 $14,538 7/01/2015 28 1237 San Antonio Rd LATP Land 3,000 Pacheco M2M $ 1,350 $16,200 7/01/2013 29 1237 San Antonio Rd LATP Land 14,000 Golden Bay Construction M2M $1,690.20 $ 1,690.20 2/01/2014 30 1237 San Antonio Rd LATP Land 10,000 Harris & Sequoia Landscaping 2 years s $ 3,000 $ 36,000 6/1/2014 31 1237 San Antonio Rd LATP Land 38,859 PG&E 9 mo. $ 16,709 $ 149,844.65 3/15/2015 32 1237 San Antonio Rd LATP Land 1,000 Davis Paving M2M $ 350 $3,500 7/01/2014 33 1237 San Antonio Rd LATP Land 7,000 MV Transportation M2M $ 2,800 $22,400 11/01/2014 34 3281 E. Bayshore Rd. Animal Shelter Land 13,500 Anderson Honda M2M **$5,400/$5, 562 $66,744 5/06/2014 35 1925 Embarcadero Rd Airport Land 13,250 Audi of Palo Alto M2M $7,950 $95,400 12/15/2014 36 1925 Embarcadero Rd Airport Land 3,000/11 ,554 NexLevel of California M2M **$3,000/$6, 932.40 $46,662 3/23/2015 37 1925 Embarcadero Rd Airport Land 3,000 Cal Electric M2M $1,800 $5,980.60 5/23/2015 38 1925 Embarcadero Rd Airport Land 10,000/1 9,700 Anderson Honda M2M **$6,000/$1 1,820 $20,924 4/01/2016 39 1925 Embarcadero Rd Airport Land 5,000 Graham Contractors M2M $3,000 $3,000 9/01/2015 40 1925 Embarcadero Rd Airport Land 6,000 Par Electrical Contractors M2M $6,000 $24,000 9/01/2015 41 1925 Embarcadero Rd Airport Land 2,000/7, 500 Precision Engineering M2M $3,000 $28,200 9/01/2015 ATTACHMENT A SUMMARY – PAMC SECTION 2.30.210 (g) (h) AGREEMENTS Type Number of Transactions 2016 Total Annual Revenue Resulting from Lease Agreements $651,252.45 Total 41 $651,252.45 *Please, note that tenancy terms ranged from three to twelve months for the tenants. **Tenant changed their suites or square footage and rent payment changed.