HomeMy WebLinkAbout2009-08-03 City Council Agenda Packet
Agenda posted according to PAMC Section 2.04.070. A binder containing supporting materials is available in the Council Chambers on the Friday preceding the meeting.
Special Meeting
Council Chambers
August 3, 2009
6:00 PM
ROLL CALL
CLOSED SESSION
This item may occur during the recess or after the Regular Meeting.
Public Comments: Members of the public may speak to the Closed Session item(s); three minutes per
speaker.
1. PUBLIC EMPLOYEE PERFORMANCE EVALUATION
Title: City Clerk Donna Grider
Authority: Government Code section 54957
2. CONFERENCE WITH LABOR NEGOTIATOR
Agency Negotiator: City Manager and his designees pursuant to
Merit Rules and Regulations (James Keene, Kelly Morariu, Russ
Carlsen, Sandra Blanch, Darrell Murray, Marcie Scott,
Joe Saccio)
Employee Organization: Local 521 Service Employees
International Union
Authority: Government Code Section 54957.6(a)
CONFERENCE WITH LABOR NEGOTIATOR
Agency Negotiator: City Manager and his designees pursuant to
the Merit System Rules and Regulations (James Keene, Kelly
Morariu, Russ Carlsen, Sandra Blanch, Darrell Murray,
Joe Saccio, Marcie Scott)
Employee Organization: Unrepresented Employee Group
Management and Professional Personnel and Council Appointees
Authority: Government Code section 54957.6(a)
CONFERENCE WITH LABOR NEGOTIATOR
Agency Negotiator: City Manager and his designees pursuant to
Merit Rules and Regulations (James Keene, Kelly Morariu, Russ
Carlsen, Sandra Blanch, Darrell Murray, Marcie Scott,
Joe Saccio)
Employee Organization: Palo Alto Peace Officers’ Association
Authority: Government Code Section 54957.6(a)
CONFERENCE WITH LABOR NEGOTIATOR
Agency Negotiator: City Manager and his designees pursuant to
the Merit System Rules and Regulations (James Keene, Kelly
Morariu, Russ Carlsen, Sandra Blanch, Darrell Murray, Joe
Saccio, Marcie Scott)
Employee Organization: Local 1319, International Association of
Fire Fighters and Professional Personnel and Council Appointees
Authority: Government Code section 54957.6(a)
CONFERENCE WITH LABOR NEGOTIATOR
Agency Negotiator: City Manager and his designees pursuant to
Merit Rules and Regulations (James Keene, Kelly Morariu, Russ
Carlsen, Lalo Perez, Sandra Blanch, Darrell Murray, Marcie Scott,
Joe Saccio)
Employee Organization: Palo Alto Fire Chiefs’ Association
Authority: Government Code Section 54957.6(a)
1 08/03/09
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.
8:00 PM or as soon as possible thereafter
SPECIAL ORDERS OF THE DAY
3. Proclamation for National Night Out 2009
ATTACHMENT
4. Presentation of the Circle of Excellence Award by the Association of
Government Accountants (AGA) to the City of Palo Alto for the City
Auditor’s 7th Annual Service Efforts and Accomplishments (SEA)
Report.
CITY MANAGER COMMENTS
ORAL COMMUNICATIONS
Members of the public may speak to any item not on the agenda; three minutes per speaker. Council
reserves the right to limit the duration or Oral Communications period to 30 minutes.
CONSENT CALENDAR
Items will be voted on in one motion unless removed from the calendar by two Council Members.
5. Designation of Voting Delegate and Alternate for 2009 League
Conference
ATTACHMENT
6. Direction to City Clerk to Use the Secretary of States’ Randomized
Alphabet Drawing for the Order of Candidates’ Names on the Ballot
ATTACHMENT
7. Approval of a Utilities Electric Fund Contract with West Valley
Construction in the Amount of $3,193,143 for Trenching and
Installation of Utility Substructure for Underground Utility District No.
45, and for Rebuilding of Underground Districts 17, 19, & 24 (Capital
Improvement Program Projects – EL-06002, EL-09003, EL-11008, and
2 08/03/09
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.
EL-10006), and Approval of Addendum No. 1 to the Agreement for
Joint Participation in the Installation of the Underground Facilities
System Between the City of Palo Alto, AT&T and Comcast Corporation
of California IX, Inc.
CMR 346:09 and ATTACHMENTS
8. Approval of a Utilities Enterprise Fund Contract with Casey
Construction, Inc. in the Total Amount of $652,066 for the 2009-2010
Utility Trench and Substructure Installation Throughout the City
CMR 337:09 and ATTACHMENTS
9. Finance Committee Recommendation to Adopt a Resolution Approving
the Ameresco Johnson Canyon Landfill Gas Renewable Energy Power
Purchase Agreement for the Acquisition of Up to Two Average
Megawatts of Energy Over Twenty Years at an Estimated Cost Not to
Exceed $30 Million
343:09 and ATTACHMENTS
10. Appointment of Lalo Perez as City Manager Pro Tem for the September
14, 2009 City Council Meeting
CMR 341:09 and ATTACHMENTS
11. Adoption of a Park Improvement Ordinance for the Renovation of
Lytton Plaza – Capital Improvement Program Project PE-08004;
Approve an Agreement with the Friends Of Lytton Plaza, L.L.C.,
for the Design, Construction and Installation of Park Facilities
and Other Improvements at Lytton Plaza;and Adoption of an
Ordinance Amending the Budget for Fiscal Year 2010 to Accept
Donations and to Provide an Additional Appropriation in the
Amount of $348,800 and Accept a Donation in the Same Amount
From the Friends of Lytton Plaza, L.L.C., and to Allocate an
3 08/03/09
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 $50,000 From the Infrastructure Reserve for the City’s
Contribution (Not to Exceed $400,000) to Capital Improvement
Program Project PE-08004
CMR 306:09 and ATTACHMENTS
12. Finance Committee Recommendation to Direct Staff to Re-examine the
Electric Power Acquisition and Energy Efficiency Policies and Plans
CMR 342:09 and ATTACHMENTS
13. Approval of transfer of $70,000 from Council Contingency to Fund High
Speed Rail Informational Symposium, Design Workshop, and Technical
Consulting Services related to City review of the San Francisco to San
Jose High Speed Train (HST) Project EIR
CMR 344:09 and ATTACHMENTS
14. Approval of Recommendation to Direct Staff to Design a Third-Party
City of Palo Alto Utilities Department Zero-Interest Energy Efficiency
Loan Program for Small Commercial Customers
CMR 336:09 and ATTACHMENTS
15. Approval of a New Contract with the Independent Police Auditor, OIR
(Office of Independent Review) for Up to Three Years in an Amount
Not to Exceed $27,500 Per Year and Approval of $1,500 from the
Council Contingency
ATTACHMENTS
4 08/03/09
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.
16. Adoption of a Resolution Amending Resolution No. 8904 to Change the
City Council Vacation Schedule for Calendar Year 2009 to End on
September 7, 2009
CMR 348:09 and ATTACHMENTS
AGENDA CHANGES, ADDITIONS, AND DELETIONS
HEARINGS REQUIRED BY LAW: Applications and/or appellants may have up to ten minutes at the
outset of the public discussion to make their remarks and put up to three minutes for concluding
remarks after other members of the public have spoken.
OTHER AGENDA ITEMS: Public comments or testimony on agenda items other than Oral Communications shall be limited to a maximum of three minutes per speaker.
PUBLIC HEARINGS
17. Public Hearing to Confirm Weed Abatement Report and Adoption of a
Resolution Confirming Weed Abatement Report and Ordering Cost of
Abatement to be a Special Assessment on the Respective Properties
Described Therein
CMR 310:09 and ATTACHMENTS
REPORTS OF OFFICIALS
18. Adoption of a Budget Amendment Amending the Budget for
Fiscal Year 2010 to Provide Additional Appropriations of
$688,038 for Retiree Medical Expenditures as Updated with the
Retiree Medical Actuarial Study Completed 2009
CMR 331:09 and ATTACHMENTS
19. Adoption of a Resolution Amending Green Building Standards for
Compliance, Tables A & B for Non-Residential and Residential Projects,
and Review of Report on Implementation of the City’s Green Building
Ordinance
5 08/03/09
MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER
DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY
CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS.
CMR 332:09 and ATTACHMENTS
20. Adoption of a Resolution Amending the Structure of the Palo
Alto/Stanford Citizen Corps Council and Establishing the Citizen Corps
Council as a Member of the Palo Alto Emergency Services Council
CMR 327:09 and ATTACHMENTS
21. Acceptance of City Manager’s Responses to Independent Police
Auditor’s Systemic Recommendations Regarding the Children’s Theatre
Criminal Investigation
CMR 349:09 and ATTACHMENTS
22. Adoption of a Resolution Approving Amendment One to the Northern
California Power Agency Third Phase Agreement for Western GeoPower
Incorporated Renewable Energy Power Purchase Agreement for the
Acquisition of up to Seven Average Megawatts of Energy over Twenty
Years at an Estimated Cost Not to Exceed $128 Million
CMR 347:09 and ATTACHMENTS
23. Approval of Changes to the Compliance Procedures for Private
Intrusion Alarms
CMR 340:09 and ATTACHMENTS
COUNCIL MATTERS
24. Approval of City Manager Performance Evaluation Criteria
ATTACHMENTS
6 08/03/09
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.
COUNCIL COMMENTS, ANNOUNCEMENTS, AND REPORTS FROM CONFERENCES
Members of the public may not speak to the item(s).
ADJOURNMENT
Persons with disabilities who require auxiliary aids or services in using City facilities, services, or
programs or who would like information on the City’s compliance with the Americans with Disabilities Act (ADA) of 1990, may contact 650-329-2550 (Voice) 24 hours in advance.
CITY OF PALO ALTO
PROCLAMATION
National Night Out 2009
WHEREAS, the National Association of Town Watch (NATW) is sponsoring a unique,
nationwide crime, drug and violence prevention program on August 4th, 2009 entitled “National
Night Out”; and
WHEREAS, the “26th Annual National Night Out” provides a unique opportunity for Palo
Alto to join forces with thousands of other communities across the country in promoting
cooperative, police-community crime prevention efforts; and
WHEREAS, the City of Palo Alto plays a vital role in assisting the Police Department
through joint crime prevention efforts in Palo Alto and is supporting “National Night Out”
locally; and
WHEREAS, it is essential that all citizens of Palo Alto be aware of the importance of crime
prevention programs and the impact that their participation can have on reducing crime, drugs
and violence in Palo Alto; and
WHEREAS, police-community partnerships, neighborhood safety awareness and
cooperation are important themes of the “National Night Out” program.
NOW, THEREFORE, I, Peter Drekmeier, Mayor of the City of Palo Alto, on behalf of the
City Council do hereby call upon all citizens of the Palo Alto community to join the City of Palo
Alto and The National Association of Town Watch in supporting the “26th Annual National
Night Out” on August 4, 2009, and hereby proclaim Tuesday, August 4, 2009, as “National
Night Out” in the City of Palo Alto.
Presented August 3, 2009
______________________________
Peter Drekmeier
Mayor
REPORT
FROM
CllY
CLERK
TO: HONORABLE CITY COUNCIL
DATE: August 3, 2009
SUBJECT: Designation of Voting Delegate and Alternate for
2009 League Conference
RECOMMENDATIONS
The City Council, by unanimous consent should designate a voting delegate and up to
two alternates for the 2009 League Conference.
BACKGROUND
The League's 2009 Annual Conference is scheduled for September 16-18 in San Jose.
The Annual Business Meeting is scheduled for 3: 15 p.m., Friday, September 18, at the
San Jose Convention Center. At this meeting, the League membership considers and
takes action on resolutions that establish League policy.
In order to vote at the Annual Business Meeting, the City Council must designate a
voting delegate and could appoint up to two alternate voting delegates. Council Member
Espinosa has registered to attend the conference.
Attached please find correspondence received :from the League of California Cities.
CITY CLERK APPROVAL:
r Attachment
DONNA J. GRIDE ....... , ............ ...
City Clerk
LEAG"UE
OF CAll FORNIA
CITIES
1400 K Street, Suite 400. Sacramento, California 95814
Phone: 916.658.8200 Fax: 916.658.8240
www.cacities.org
Council Action Required by August 21, 2009
June 5,2009
TO: Mayors, City Managers and City Clerks
RE: DESIGNATION OF VOTING DELEGATES AND ALTERNATES
League of California Cities Annual Conference -September 16-18, San Jose
The League's 2009 Annual Conference is scheduled for September 16-18 in San Jose. An
important part of the Annual Conference is the Annual Business Meeting, scheduled for 3: 15 p.m.,
Friday, September 18, at the San Jose Convention Center. At this meeting, the League
membership considers and takes action on cresolutions that establish League policy.
In order to vote at the Annual Business Meeting, your city council must designate a voting
delegate. Your city may also appoint up to two alternate voting delegates, one of whom may vote
in the event that the designated voting delegate is unable to serve in that capacity.
In order to establish voting delegate/alternates' records prior to the conference, please
complete the attached Voting Delegate form and return it to the League's office no later
than Friday, August 21,2009.
Please note the following procedures that are intended to ensure the integrity of the voting
process at the Annual Business Meeting.
• Action by Council Required. Consistent with League bylaws, a city's voting delegate
and up to two alternates must be designated by the city council. When completing the
attached Voting Delegate form, please attach either a copy of the council resolution that
reflects the council action taken. or have your city clerk or mayor sign the form affirming
that the names provided are those selected by the city council. Please note that
designating the voting delegate and alternates must be done by city council action and
cannot be accomplished by individual action of the mayor or city manager alone.
• Conference Registration Required. The voting delegate and alternates must be
registered to attend the conference. They need not register for the entire conference; they
may register for Friday only. In order to cast a vote, at least one person must be present
at t}le Business Meeting and in possession of the voting delegate card. Voting delegates
and alternates need to pick up their conference badges before signing in and picking up
the voting delegate card at the Voting Delegate Desk. This will enable them to receive
the special sticker on their name badges that will admit them into the voting area during
the Business Meeting.
-more-
• Transferring Voting Card to Non-Designated Individuals Not Allowed. The voting
delegate card may be transferred freely between the voting delegate and alternates, but
only between the voting delegate and alternates. If the voting delegate and alternates find
themselves unable to attend the Business Meeting, they may not transfer the voting card
to another city official.
• Seating Protocol during General Assembly. At the Business Meeting, individuals with
the voting card will sit in a separate area. Admission to this area will be limited to those
individuals with a special sticker on their name badge identifying them as a voting delegate
or alternate. If the voting delegate and alternates wish to sit together, they must sign in at
the Voting Delegate Desk and obtain the special sticker on their badges.
The Voting Delegate Desk, located in the conference registration area of the San Jose
Convention Center, will be open at the following times: Wednesday, September 16, 10:00 a.m.;
Thursday, September 17, 7:30 a.m.; and September 18, 7:30 a.m. The Voting Delegate Desk
will also be open at the Business Meeting, but not during a roll call vote, should one be
undertaken.
The voting procedures that will be used at the conference are attached to this memo. Please
share these procedures and this memo with your council and especially with the individuals that
your council designates as your city's voting delegate and alternates.
Once again, thank you for completing the voting delegate and alternate form and returning it to
the League office by Friday, August 21st. If you have questions, please call Mary McCullough
at (916) 658-8247.
Attachments:
• 2009 Annual Conference Voting Procedures
• Voting Delegatel Alternate Form
r i
LEAGUE
OF CAU FORN 1A
CITIES IICITY:--
2009 ANNUAL CONFERENCE
VOTING DELEGATE/ALTERNATE FORM
Please complete this form and return it to the League office by Friday, August 21.2009.
Forms not sent by this deadline may be submitted to the Voting Delegate Desk located in
the Annual Conference Registration Area. Your city council may designate one voting
delegate and up to two alternates.
In order to vote at the Annual Business Meeting, voting delegates and alternates must be designated by
your city council. Please attach the council resolution as proof of designation. As an alternative, the
Mayor or City Clerk may sign this form, afftrming that the designation reflects the action taken by the
council.
Please note: Voting delegates and alternates will be seated in a separate area at the Annual Business
Meeting. Admission to this special area will be limited to individuals (voting delegates and alternates)
who are identifted with a special sticker on their conference badge. This sticker can be obtained only at
the Voting Delegate Desk.
1. VOTING DELEGATE
Name: ------------------------Title: ________________________ __
2. VOTING DELEGATE -ALTERNATE 3. VOTING DELEGATE -ALTERNATE
Name: -----------------------Name: -----------------------
Title: ________________ _ Title: ___________________ ___
PLEASE ATTACH COUNCIL RESOLUTION DESIGNATING VOTING DELEGATE
AND ALTERNATES.
OR
ATTEST: I affirm that the information provided reflects action by the city council to
designate the voting delegate and alternate(s).
Name: _________________ E-mail ________________________ _
Title: __________________ Phone: __________________ _
Date: __ -'-__________ _
r
Please com'plete and return by Friday, August 21 to:
. League of California Cities
ATTN: Mary McCullough
1400 K Street
Sacramento, CA 95814
FAX: (916) 658-8240
E-mail: mccullom@cacities.org
(916) 658-8247
VolingDelegateLetter09.doc
LEAGUE
OF CALIFORNIA
CITIES
1400 K Street, Suite 400. Sacramento, California 95814
Phone: 916.658.8200 Fax: 916.658.8240
WINW. cacities. org
Annual Conference Voting Procedures
2009 Annual Conference
1. One City One Vote. Each member city has a right to cast one vote on matters pertaining to
League policy.
2. Designating a City Voting Representative. Prior to the Annual Conference, each city
council may designate a voting delegate and up to two alternates; these individuals are
identified on the Voting Delegate FOl1ll provided to the League Credentials Committee.
3. Registering with the Credentials Committee. The voting delegate, or alternates, may pick
up the city's voting card at the Voting Delegate Desk in the conference registration area.
Voting delegates and alternates must sign in at the Voting Delegate Desk. Here they will
receive a special sticker on their name badge and thus be admitted to the voting area at the
Business Meeting.
4. Signing Initiated Resolution Petitions. Only those individuals who are voting delegates
(or alternates) and who have picked up their city's voting card by providing a signature to
the Credentials Committee at the Voting Delegate Desk may sign petitions to initiate a
resolution.
5. Voting. To cast the city's vote, a city official must have in his or her possession the city's
voting card and be registered with the Credentials Committee. The voting card may be
transferred freely between the voting delegate and alternates, but may not be transferred to
another city official who is neither a voting delegate or alternate.
6. Voting Area at Business Meeting. At the Business Meeting, individuals with a voting card
will sit in a separate area. Admission will be limited to those individuals with a special
sticker on their name badge identifying them as a voting delegate or alternate.
7. Resolving Disputes. In case of dispute, the Credentials Committee will determine the
validity of signatures on petitioned resolutions and the right of a city official to vote at the
Business Meeting.
('
f
1400 K STREET
SACRAMENTO, CA 95814
PH: (916) 658-8200
FX: (916) 658-8240
July 24, 2009
TO: Mayors, City Managers and City Clerks
League Board of Directors
General Resolutions Committee Members
09
Members, League Policy Committees to Which Resolutions Are Referred
RE: Annual Conference Resolutions Packet
Notice of League Annual Meeting
Enclosed please find the 2009 Annual Conference Resolutions Packet.
WW\'(/.CACITIES.ORG
Annual Conference in San Jose. This year's League Annual Conference will be held September
16-18 at the San Jose Convention Center. The conference announcement has previously been sent
to all cities and we hope that you and your colleagues will be able to join us. More information
about the conference is available on the League's Web site at wvvw.cacities.org/ac. We look
forward to welcoming city officials to the conference.
Annual Business Meeting -Friday, September 18,3:15 p.m. The League's Annual Business
Meeting will be held at the San Jose Convention Center, Exhibit Hall 1
Resolutions Packet. At the Annual Conference, the League will consider the two resolutions
introduced by the deadline Friday, July 17,2009,5 p.m., for submittals by regular mail, or
Saturday, July 18, midnight, for submittals bye-mail or fax. These resolutions are included in this
packet. We request that you distribute this packet to your city counciL
We encourage each city council to consider the resolutions and to determine a city position so that
your voting delegate can represent your city's position on each resolution. A copy of the resolutions
packet is posted on the League's Web site for your convenience: wv.'W.cacities.org/resolutions.
This resolutions packet contains additional information related to consideration of the resolutions
at the Annual Conference. This includes the date, time and location of the meetings at which
resolutions will be considered.
Voting Delegates. Each city council is encouraged to designate a voting delegate and two alternates
to represent.their city at the Annual Business Meeting. A letter asking city councils to designate their
voting delegate and two alternates has already been sent to each city. Copies of the letter, voting
delegate form, and additional information are also available at: ..:..:...:..:...:..:..====~====.
I
I Please Bring This Packet to the Annual Conference
: September 16-18 -San Jose I 1 _________________________________________________________ I
I.
INFORMATION AND PROCEDURES
,
RESOLUTIONS CONTAINED IN THIS PACKET: This year,two resolutions have been
introduced for consideration by the Annual Conference and referred to the League policy
committees. The League bylaws provide that resolutions shall be referred ,by the president to an
appropriate policy committee for review and recommendation. Resolutions with committee
recommendations shall then be considered by the General Resolutions Committee at the Annual
Conference.
POLICY COMIVIITTEES: Two policy committees will meet at the Annual Conference to consider
and take action on resolutions referred to them. They are: Public Safety and Revenue and Taxation.
Both committees will meet at 11 a.m. on Wednesday, September 16,2009 at the Marriott San Jose,
located next to the San Jose Convention Center. Please see page iii for the policy committee meeting
schedule. The sponsors of the resolutions have been notified of the time and location of the meetings.
In addition, one policy committee, Employee Relations, will meet at the Annual Conference even
though a resolution was not referred to them.
GENERAL RESOLUTIONS COMMITTEE: This committee will meet at 4:00 p.m. on Thursday,
September 17, at the Marriott San Jose, Salon IV -VI, to consider the reports of the two policy
committees regarding the two resolutions. This committee includes one representative from each of
the League's regional divisions, functional departments, standing policy committees, as well as other
individuals.
ANNUAL BUSINESS MEETING/GENERAL ASSEMBLY: This meeting will be held at
3:15 p.m~ on Friday, September 18, at the San Jose Convention Center, Exhibit Hall I.
PETITIONED RESOLUTIONS: For those issues that develop after the normal 60-day deadline,
a resolution may be introduced at the Annual Conference with a petition signed by designated
voting delegates of 10 percent of all member cities (48 valid signatures required) and presented to
the Voting Delegates Desk at least 24 hours prior to the time set for convening the Annual
Business Session of the General Assembly. This year, that deadline is 3:15 p.m., Thursday,
September 17. If the petitioned resolution is substantially similar in substance to a resolution
already under consideration, the petitioned resolution may be disqualified by the General
Resolutions Committee.
Resolutions can be viewed on the League's Web site: www.cacities.org/resolutions.
Any questions concerning the resolutions procedure may be directed to Linda Welch Hicks at the
League of;fice: lhicks(a),cacities.org or (916) 658-8224.
II.
GUIDELINES FOR ANNUAL CONFERENCE RESOLUTIONS ,
Policy development is a vital and ongoing process within the League. The principal means for
deciding policy on the important issues facing cities and the League is through the League's eight
standing policy committees and the board of directors. The process allows for timely consideration of
. issues in a changing environment and assures city officials the opportunity to both initiate and
influence policy decisions.
Annual conference resolutions constitute an additional way to develop League policy. Resolutions
should adhere to the following criteria.
Guidelines for Annual Conference Resolutions
1. Only issues that have a direct bearing on municipal affairs should be considered or adopted at
the Annual Conference.
2. The issue is not of a purely local or regional concern.
3. The recommended policy should not simply restate existing League policy.
4. The resolution should be directed at achieving one ofthe following objectives:
(a) Focus public or media attention on an issue ofmajor importance to cities.
(b) Establish a new direction for League policy by establishing general principals around
which more detailed policies may be developed by policy committees and the Board of
Directors.
(c) Consider important issues not adequately addressed by the policy committees and Board
of Directors.
(d) Amend the League bylaws (requires 2/3 vote at General Assembly).
(' ;
11
III.
LOCATION OF MEETINGS
Policy Committee Meetings
Wednesday, September 16, 2009
Marriott San Jose
301 South Market Street, San Jose, CA 95113 -(408) 280-1300
(Located next to the San Jose Convention Center)
POLICY COMMITTEES MEETING AT ANNUAL CONFERENCE TO
DISCUSS AN ANNUAL CONFERENCE RESOLUTION *
11 a.m. -12:30 p.m.
* Public Safety -Salon IV
* Revenue and Taxation -Salon III
Note: Employee Relations will also meet,
but they have no resolution to consider -Salon I
Note: These committees will NOT meet at the Annual Conference:
Administrative Services; Community Services; Environmental Quality;
Housing, Community & Economic Development; and
Transportation, Communication & Public Works
Gel)eral Resolutions Committee
Thursday, September 17, 2009, 4:00 p.m.
Marriott San Jose, Salon IV-VI
301 South Market Street, San Jose, CA 95113 -(408) 280-1300
(Located next to the San Jose Convention Center)
Annual Business Meeting and General Assembly
Friday, September 18, 2009, 3:15 p.m.
San Jose McEnery Convention Center, Exhibit Hall 1
150 West San Carlos Street, San Jose, CA 95113 -(408) 295-9600
III
IV.
KEY TO ACTIONS TAKEN ON RESOLUTIONS
Resolutions have been grouped by policy committees to which they have been assigned.
Number
I I
Key Word Index
I 1 2 I 3
1 -Policy Committee Recommendation
to General Resolutions Committee
2 -General Resolutions Committee
3 -General Assembly
PUBLIC SAFETY POLICY COMMITTEE
1 2 3
I 1 Social Host Liability
REVENUE AND TAXATION POLICY COMMITTEE
2 Divesting From Banks/Financial Institutions That Fail To
Cooperate With Foreclosure Prevention Efforts
1 2 3
Please note: One policy committee, Employee Relations, without a resolution will still meet. Notification will
be mailed to all committee members. Information will also be posted on each committee's page on the League
Web site: www.cacities.org.
RESOLUTIONS INITIATED BY PETITION AT THE ANNUAL CONFERENCE
iv
General
Resolutions
Committee
Recommendation
General
Assembly
Action
KEY TO ACTIONS TAKEN ON RESOLUTIONS (Continued)
KEY TO REVIEWING BODIES
1. PolicyCommittee
2. General Resolutions Committee
3. General Assembly
Action Footnotes
* Subject matter covered in another resolution
** Existing League policy
KEY TO ACTIONS TAKEN
A-Approve
D-Disapprove
N-No Action
R -Refer to appropriate policy committee for
study
a-Amend
Aa -Approve as amended
Aaa -. Approve with additional amendment(s)
Ra -Amend and refer as amended to
*** Local authority presently exists appropriate policy committee for study
Raa -Additional amendments and refer
Da -Amend (for clarity or brevity) and
Disapprove
Na -Amend (for clarity or brevity) and take No
Action
W -Withdrawn by Sponsor
Procedural Note: Resolutions that are approved by the General Resolutions Committee, as well as all
qualified petitioned resolutions, are reported to the floor of the General Assembly. In addition, League policy
provides the following procedure for resolutions approved by League policy committees but not approved by
the General Resolutions Committee:
Resolutions initially recommended for approval and adoption by all the League policy committees to which
the resolution is assigned, but subsequently recommended for disapproval, referral or no action by the
General Resolutions Committee, shall then be placed on a consent agenda for consideration by the General
Assembly. The consent agenda shall include a brief description of the basis for the recommendations by
both the policy committee(s) and General Resolutions Committee, as well as the recommended action by
each. Any voting delegate may make a motion to pull a resolution from the consent agenda in order to
request the oPP9rtunity to fully debate the resolution. If, upon a majority vote ofthe General Assembly, the
request for deJ;Jate is approved, the General Assembly shall have the opportunity to debate and subsequently
vote on the re~olution. .
v
v.
2009 ANNUAL CONFERENCE RESOLUTIONS
RESOLUTION REFERRED TO PUBLIC SAFETY POLICY COMMITTEE
1. RESOLUTION RELATING TO SOCIAL HOST LIABILITY
Source: City of Elk Grove
Referred to: Public Safety Policy Committee
Recommendation to General Resolutions Committee:
WHEREAS, underage persons often obtain alcoholic beverages at gatherings held at private
residences or at rented residential and commercial premises that are under the control of a person who
knows or should know of the underage service and/or consumption of alcohol; and
WHEREAS, loud or unruly parties on private property where alcoholic beverages are served to,
or consumed by an underage person, are harmful to the underage person themselves and are a threat to
public health, safety, quiet enjoyment of residential property and general welfare, and constitute a public
nuisance; and
WHEREAS, persons responsible for the occurrence of loud or unruly parties on private property
over which they have possession or control have a duty to ensure that alcoholic beverages are not served
to, or consumed by underage persons; and
WHEREAS, adults who provide alcohol to adolescents explicitly indicate an approval of
underage alcohol use; and
WHEREAS, law enforcement, fire, or other emergency responders repeatedly respond to
underage drinking parties, resulting in a disproportionate expenditure of public safety resources on these
parties, delaying police responses to other emergency calls throughout the community; and
WHEREAS, law enforcement has inadequate enforcement authority and resources to respond to
underage drinking on private property; and
WHEREAS, cities and counties require a variety of enforcement strategies to abate underage
drinking parties; now, therefore, be it
RESOLVED, by the General Assembly of the League of California Cities, assembled in Annual
Conference in San Jose, September 18,2009, that the League support policies that hold social hosts
responsible for underage drinking that occurs on property under their possession, control, or authority;
and, be it further
RESOLVED, that the League also oppose policies that make it easy for those who are underage
to access alcohol through adults, and on private property.
1/1/11/111
1
Background Information on Resolution No.1
Source: City of Elk Grove
Title: Resolution ~elating to Social Host Liability
Background:
The City of Elk Grove is located just south of the state capital of Sacramento. According to the 2007
U.S. Census, the City's population was estimated at 140,000. After incorporating in July of 2000, for six
years the City contracted with the Sacramento County Sheriff's Department for police services; however
in 2006, the City formed its own police department and began serving this rapidly growing community.
Since the Deprutment's inception, the city has continued to grow in size, leading to an increasing need
for additional officers to patrol the streets, investigate crimes, and respond to calls for service.
Between January 1,2007 and December 31,2008, the Elk Grove Police Department (EGPD) responded
to more than 2,000 reports of loud and unruly parties, noise and/or music at private residences. The
majority of these calls involved persons under the age of 21 who were consuming alcohoL This is a
dangerous combination not only for those participating and in attendance, but also for surrounding
neighbors, the community, and law enforcement personnel.
Underage drinking and unruly parties lead to,an array of problems such as; alcohol related traffic
accidents, gang activity, fights, noise disturbances, sexual assault, property damage, and other forms of
crime. When law enforcement personnel responds to gatherings involving the consumption of alcohol by
minors, it takes away valuable resources from other service calls in the community, thereby placing the
community at an increased risk. Additionally, adults who give alcohol to minors are explicitly approving
underage drinking while showing a complete disregard for the law, the well-being of minors, and the
community as a whole.
Currently, law enforcement is somewhat limited in its authority to control what occurs on private
propelty. California state law prohibits furnishing alcoholic beverages to underage persons; however, the
law does not address the consequences when a minor possesses or consumes alcohol while on private
propelty, or when such alcohol consumption is done with the consent of an adult, parent, relative, or legal
guardian.
When law enforcement officers receive a complaint regarding an unruly party or event on private
propelty where underage drinking is occurring; it is extremely difficult to take any action that results in
the responsible individual or host being held accountable. FurthemlOre, law enforcement, fire and
emergency response services are not currently reimbursed for the costs associated with responding to a
location where minors obtain, possess, and consume alcoholic beverages.
The goal of Social Host Liability is: 1) to protect public health, safety and general welfare; 2) provide a
legal means of prohibiting the service to and consumption of alcoholic beverages by minors on private
property; and 3 ) to reduce the costs of providing law enforcement, fire, and other emergency response
services to premises where alcoholic beverages are being served to or consumed by minors.
('
i
»»»»»
2
, .
RESo.LUTION REFERRED TO. REVENUE AND TAXATIo.N Po.LICY COMMITTEE
2. RESo.LUTIo.N URGING CITY GOVERNMENTS AND o.THERS TO. DIVEST FROM
BANKS THAT FAIL TO. COOPERATE WITH Fo.RECLo.SURE PREVENTIo.N
EFFORTS
Richard Alarcon, Council Member, Los Angeles
Revenue and Taxation Policy Committee
Recommendation to General Resolutions Committee:
WHEREAS, there is currently a financial crisis in oUf nation, where people are losing their jobs
and homes and no longer have the financial security that was once possible and which contributed to the
growing prosperity of our economy; and
WHEREAS, this crisis is affecting communities at all levels, with working class communities the
most severely affected, as they were often explicitly targeted and preyed upon by lenders and brokers
offering unconventional loans and financing options; and
WHEREAS, as the local, state, and federal governments work on resolving the current
foreclosure crisis, one of the key factors that must be addressed is the modification ofloans that are
"upside-down," and which need to be modified to the current market value of the home, not the original
loan amount, so that homeowners facing foreclosure receive true relief from the burden of the loans they
were unjustly pushed into by aggressive lenders and brokers; and
WHEREAS, currently, there is active pressure on financial institutions to modifY loans for
homeowners susceptible to foreclosure by reducing the principal to the current market value and many
financial institutions are not inclined to do this, particularly with no financial incentive; and .
WHEREAS, as with local government, financial institutions have an obligation in assisting their
customers to preserve the American Dream; now, therefore, be it
RESOLVED, by the General Assembly of the League of California Cities, assembled in the
Annual Conference in San Jose, September 18,2009, that the League support the City of Los Angeles,
and other member cities, to explore the potential divestiture of all deposits in banking and other financial '
institutions that faj) to cooperate with foreclosure prevention efforts that include temporary moratoriums
on foreclosures, renegotiation of mortgage principles to reflect CWTent values, and good faith
negotiations with mortgagees; and, be it further
RESOLVED, that the League of California Cities also support City retirement programs and
other similar organizations which adopt a similar divestiture policy; and, be it fmiher
RESOLVED, that the League of California Cities request the National League of Cities to
consider adoption of a similar resolution.
r
I 1/////////
3
Source:
Title:
Background:
Background Information on Resolution No.2
Richard Alarcon, Council Member, Los Angeles
Resolution Relating to City Governments And Others To Divest From Banks
That Fail To Cooperate With Foreclosure Prevention Efforts
The foreclosure crisis in America today is profound. In 2008, about 1 million homes were foreclosed.
With rising unemployment, this trend is only projected to continue. While foreclosure is devastating to
homeowners, it also harms property values, neighborhood safety and govel11ment revenue. Local
govel1unents are hit especially hard by the foreclosure crisis due to the decrease in property taxes
collected, as well as costs related to foreclosures -particularly for safety. A single foreclosure costs up to
$34;000 for local government agencies, through inspections, court actions, police and fire department
effOlis, potential demolition, unpaid water and sewage, and trash removal. Foreclosures eat up money
that could have been available for housing, transportation, parks and recreation, public safety, etc.
It is therefore incumbent on cities to take action to protect their communities and their finances. Cities
must step in to force financial institutions to be responsible neighbors and protect the property from
vandalism, return it to the market quickly, and find a buyer. Doing this remediation work is difficult but
many cities have already been at work on solutions for the last two years. Unfortunately, the key
"patiner" in this work -the financial institutions holding the property title -have in many cases not
upheld their side of the bargain. So what can cities do when the title holding bank will not cooperate?
Cities can and should use their financial clout and divest their funds from financial institutions which do
not cooperate with foreclosure prevention and remediation efforts, thus providing pressure for these
groups to change their policies.
Earlier this year Councilmember Alarcon introduced a motion in the City of Los Angeles to do just that.
The idea came from his effort in 1998 to assist Holocaust victims and their heirs in seeking restitution
from the Swiss government and banks for money and assets confiscated during WWII. After the
Councilmember introduced a motion to have the City of Los Angeles divest all funds from Swiss banks,
negotiations involving the banks and the World Jewish Congress began and ultimately resulted in a
settlement of $1.25 billion later that year. If it worked then, it can work now.
It is Councilmember Alarcon's belief that if cities all around California were to take action and begin the
process towards divestment, it would result in banks and other financial institutions, which do not
currently work with foreclosure prevention efforts, to reverse their policies. This could help thousands of
families throughout California and put us back on track to a prosperous economy.
»»»»»
[NOTE: No resolutions were assigned to the following policy committees: Administrative Services;
Community Services; Employee Relations; Environmental Quality; Housing; Community &
Economic Development; and Transportation, Communication & Public Works.] r ,
##########
4
REPORT
mOM
CITY
CLERK
TO:
DATE:
SUBJECT:
RECOMMENDATION
HONORABLE CITY COUNCIL
August 3, 2009
I .I
Direction to City Clerk to use the Secretary
of States' Randomized Alphabet Drawing
for the Order of Candidates' Names on the
Ballot
Direct the City Clerk to notify the Registrar of Voters that the City of Palo Alto will
be utilizing the Secretary of States' randomized alphabet drawing for the
purposes of the order of the candidates' names on the ballot.
BACKGROUND
The City Council has passed Resolution No. 8930 calling a General Municipal
Election for five Council seats on November 3, 2009. The City Charter, Section'
3, requires that the order of listing of the candidates' names on the ballot shall be
determined by lot. The Nomination Period:-for candidacy does not end until
August 7,2009, which is when the City Council is on their summer break.
Past practice is for the City Clerk to hold a Special Council meeting in order to
satisfy the Charter requirement. In August of 2007 due to a lack of quorum for
the Special Council meeting, the City Clerk was left with no choice but to use the
randomized alphabet drawing of the Secretary of State. This year there has
been difficulty getting a solid quorum for a Special Council meeting during the
summer break; because of this difficulty. I am asking that the City Council defer
the ballot order to the drawing of the Secretary of State.
CITY CLERK APPROVAL: __ ~~-:--::'--:::-:~~~~_-I--___ _
TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: UTILITIES
DATE: AUGUST 3, 2009 CMR: 346:09
REPORT TYPE: CONSENT
SUBJECT: Approval of a Utilities Electric Fund Contract with West Valley
Construction in the Amount of $3,193,143 for Trenching and
Installation of Utility Substructure for Underground Utility District
No. 45, and for Rebuilding of Underground Districts 17, 19, & 24
(Capital Improvement Program Projects -EL-06002, EL-09003, EL-
B008, and EL-I0006), and Approval of Addendum No.1 to the
Agreement for .Joint Participation in the Installation of the
Underground Facilities System Between the City of Palo Alto, AT&T
and Comcast Corporation of California IX, Inc.
RECOMMENDATION
Staff recommends that Council:
I. Approve and authorize the City Manager or his designee to execute the attached contract
with West Valley Construction in the amount of$3,193,143 for trenching and installation
of the utility substructure system for the Underground Utility District No. 45 (UUD 45),
17(UUD 17), 19 (UUD 19), &24 (UUD 24) Projects. Districts 17, 19, and 24 are
electric district system rebuild projects.
2. Authorize the City Manager or his designee to negotiate and execute one or more change
orders to the contract with West Valley Construction for related, additional but
unforeseen work which may develop during the project, the total value of which shall not
exceed $319,314 or approximately 10% of the contract value.
3. Approve and authorize the City Manager or designee to execute the attached Specific
Supplementary Agreement for Joint Participation Installation of Underground Facilities
System between the City of Palo Alto, AT&T California and Comcast Corporation of
California IX, Inc.
CMR: 346:09 Page 1 of 4
BACKGROUND
At its meeting on May 5, 2008, the City Council adopted Ordinance No. 5003 creating
Underground Utility District No. 45 (CMR 220:08, Attachment F). This project involves
constructing an underground electric distribution system in an area that meets both City and
AT&T guidelines for undergrounding. The new underground system (reference Attachment E,
Project Boundary Maps) is to be installed in the public right-of-way and constructed in four
phases:
Phase I Substructure installation by the contractor, consisting of trenching
and placement of conduits, vaults, boxes and pads in the public
right-of-way and in public utility easements.
Phase II Installation, testing and energizing of new underground distribution
cables, switches and transformers.
Phase III Customer service conversions -all affected property owners will be
required to connect to the new underground system.
Phase IV Removal of all overhead lines and poles.
In addition, in order to maximize economies of scale and minimize disruption downtown, the
rebuilds of UUD 17, 19, and 24 require separate Phase I substructure modifications and
installations, which have been coordinated to occur at the same time as UUD 45. The existing
UUDs were built in the 70s and early 80s and are near the end of their design lives and are
approved for rebuild as part of the 2009/2010 Capital Improvement Program.
The attached contract is for Phase I of the projects for all four UUDs. This work needs to be
performed by a contractor because the City does not have the staff and the equipment to install
the substructure required for this project.
DISCUSSION
Summary of Bid Process
sed Length of Project
Number of Bids Mailed
Contractors
Under round District No.45, 17, 19, & 24
3 months -Phase I
to 26
Number of Bids Mailed to Builder's 5
Exchanges ~------------------~------------------------------------------~ Total Days to R~spond to Bid 23
e-Bid Meeting Yes
umber of Company Attendees at 17
Pre-Bid Meeting
Number of Bids Received: 6*
Bid Price From a low of$3,193,143 to a hi h of $4,430,610
*Bid summary provided in Attachment B.
CMR: 346:09 Page 2 of4
Staff has reviewed all bids submitted and recommends that the bid of $3,193,143 submitted by
West Valley be accepted and that West Valley be declared the lowest responsible bidder. The bid
is eight percent below the engineer's estimate of $3,500,000, which was based on construction
costs for similar work in previous projects. The change order amount of$319,143, which equals
10% percent of the total contract, is requested for related unforeseen work, which may develop
during the project.
Staff confirmed with the Contractor's State License Board that the selected contractor has an
active license on file. Staff checked references supplied by the contractor for previous work
performed and found no significant complaints.
Joint Agreement
To take advantage of the economics of joint use of trenches, the City, AT&T California and
Comcast Corporation executed a Master Agreement in 2008 (originally a master agreement between
City and Pacific Bell executed in 1975, amended in 1986 and again in 1990) for participation in
joint underground construction projects. This agreement is primarily a cost sharing agreement for
undergrounding overhead lines, which is applicable to the UUD 45 portion of this contract.
The Master Agreement limits the undergrounding expenditures to $85,000 per project. Whenever
the amount involved in a project exceeds the $85,000 limit, as this one does, an Addenda to this
Master Agreement is required. The Addenda, which is a Specific Agreement, references the Master
Agreement for general terms and conditions and requires, when the work is contracted, the use of
the exact unit prices quoted by the contractor to determine the costs shared between the utilities.
Accordingly, the City, who will administer the contract for this project, will invoice AT&T
California and Comcast Corporation on the basis of prices quoted and the terms agreed upon in
Exhibit "A" of the Specific Agreement. Staff recommends approval of the Specific Agreement for
the Underground Utility District # 45.
Project Coordination
The undergrounding work was coordinated with the Public Works Department street paving
program. Since the start of this project staff has been in frequent communication with the
property owners directly affected by this project via letters and neighborhood meetings.
Additional details of Phase I construction performed under this contract will be communicated
to the neighborhoods and other affected project stakeholders in advance of the construction, and
every effort will be made to minimize inconvenience to customers.
RESOURCE IMPACT
Funds for this project are included in the FY 2009-2010 Electric Capital Improvement Program
Budgets EL-06002, EL-09003, 11008, and EL-10006. Based on the low bid, the estimated
costs for the City, AT&T and Comcast are $2,253,143, $440,000 and $500,000 respectively.
POLICY IMPLICATIONS
This project supports CPAU Key Strategy number 7 -Implement programs that improve the
quality of the environment and Supporting Objective number 2 -Invest in utility infrastructure to
deliver reliable service.
CMR: 346:09 Page 3 of4
ENVIRONMENTAL REVIEW
This project is categorically exempt from the California Environmental Quality Act (CEQA)
under CEQA Guidelines Section 15 302( d) (conversion of overhead electric utility facilities to
underground).
ATTACHMENTS
A: Contract
B: Bid Summary
C: Certificate of Non-Discrimination
D: Addendum 1 -Specific Agreement for Joint Participation Installation of Underground
Facilities System in UDD 45
E: Project Boundary Maps
F. CMR 2208:08 -Adoption of an Ordinance Amending Section 12.16.020 of Chapter 12.16 of
Title 12 of the Palo Alto Municipal Code by Establishing Underground Utility District No.
45 (Palo Alto Avenue, Alma Street, High Street, Lytton Avenue and Cambridge Avenue)
PREPARED BY: JAMES S. BUJTOR
Senior Electric Project Engineer
REVIEWED BY:
Assistant Director, Utilities Engineering
DEPARTMENT HEAD:
CITY MANAGER APPROVAL:
J
City Manager
CMR: 346:09 Page 4 of4
CONTRACT No. C10131437
(Public work)
Utilities Department
ATTACHMENT A
This Contract, number C10131437 dated ___ is entered into by and between the City of Palo Alto, a California
Charter City and a municipal corporation of the State of California ("City") , and West Valley Construction Company, Inc.
("Contractor").
For and in consideration of the covenants, terms, and conditions (*the provisions*) of this Contract, City and Contractor
("the parties") agree:
1. Term. This Contract shall commence and be binding on the parties on the Date of Execution of this Contract,
and shall expire on the date of recordation of the Notice of Substantial Completion, or, if no such notice is
required to be filed, on the date that final payment is made hereunder, subject to the earlier termination of this
Contract.
2. General Scope of Project and Work. Contractor shall furnish labor, services, materials and equipment in
connection with the construction of the Project and complete the Work in accordance with the covenants, terms
and conditions of this Contract to the satisfaction of City. The Project and Work is generally described as
follows:
Title of Project: Underground District 45,17,19 & 24, Invitation for Bids (IFB) No. 131437
Bid: § 3,193,143
3. Contract Documents. This Contract shall consist ofthe documents set forth below, which are on file with the City
Clerk and are hereby incorporated by reference. For the purposes of construing, interpreting and resolving
inconsistencies between and among the provisions of this Contract, these documents and the provisions thereof
are set forth in the following descending order of precedence.
a. This Contract.
b. Invitation for Bid.
c. Project SpeCifications.
d. Drawings.
e. Change Orders.
f. Bid.
g. Supplementary Conditions.
h. General Conditions.
I. City of Palo Alto Dept. of Public Works Standard Drawings and Specifications (2007).
j. Certificate of Insurance, Performance Surety Bond, Labor & Materials (Payment) Surety Bond.
k. Other SpeCifications, or part thereof, not expressly incorporated in the Contract Specifications or the
City of Palo Alto Dept. of Public Works Standard Drawings and SpeCifications (2007).
I. Any other document not expressly mentioned herein which is issued by City or entered into by the
parties.
4. Compensation. In consideration of Contractor's performance of its obligations hereunder, City shall pay to
Contractor the amount set forth in Contractor's Bid in accordance with the provisions of this Contract and upon
the receipt of written invoices and all necessary supporting documentation within the time set forth in the
Contract Specifications and the City of Palo Alto Dept. of Public Works Standard Drawings and SpeCifications
(1992), or, if no time is stated, within thirty (30) Days of the date of receipt of Contractor's invoices.
5. Insurance. On or before the Date of Execution, Contractor shall obtain and maintain the policies of insurance
coverage described in the Invitation For Bid on terms and conditions and in amounts as may be required by the
Risk Manager. City shall not be obligated to take out insurance on Contractor's personal property or the
personal property of any person performing labor or services or supplying materials or equipment under the
Project. Contractor shall furnish City with the certificates of insurance and with original endorsements affecting
coverage required under this Contract on or before the Date of Execution. The certificates and endorsements for
CITY OF PALO ALTO IFB 131437
rev. 12100
PAGE 1 OF7
each insurance policy shall be signed by a person who is authorized by that insurer to bind coverage in its behalf.
Proof of insurance shall be mailed to the Project Managertothe address set forth in Section 16 of this Contract.
6. Indemnification. Contractor agrees to protect, defend, indemnify and hold City, its Council members, officers,
employees, agents and representatives harmless from and against any and all claims, demands, liabilities,
losses, damages, costs, expenses, liens, penalties, suits, or judgments, arising, in whole or in part, directly or
indirectly, at any time from any injury to or death of persons or damage to property as a result of the willful acts or
the negligent acts or omissions of Contractor, or which results from Contractor's noncompliance with any Law
respecting the condition, use, occupation or safety of the Project site, or any part thereof, or which arises from
Contractor's failure to do anything required under this Contract or for doing anything which Contractor is required
not to do under this 'Contract, or which arises from conduct for which any Law may impose strict liability on
Contractor in the performance of or failure to perform the provisions of this Contract, except as may arise from
the sole willful acts or negligent acts or omissions of City or any of its Council members, officers, employees,
agents or representatives. This indemnification shall extend to any and all claims, demands, or liens made or
filed by reason of any work performed by Contractor under this Contract at any time during the term of this
Contract, or arising thereafter.
To the extent Contractor will use hazardous materials in connection with the execution of its obligations under
this Contract, Contractor further expressly agrees to protect, indemnify, hold harmless and defend City, its City
Council members, officers and employees from and against any and.all claims, demands, liabilities, losses,
damages, costs, expenses, liens, penalties, suits, or judgments City may incur, ariSing, in whole or in part, in
connection with or as a result of Contractor's willful acts or negligent acts or omissions under this Contract, under
the Comprehensive Environmental Response. Compensation and Liability Act (42 U.S.C. 'H9601-6975, as
amended); the Resource Conservation and Recovery Act (42 U.S.C. :n6901-6992k, as amended); the Toxic
Substances Control Act (15 U.S.C. :n2601-2692, as amended); the Carpenter-Presley-Tanner Hazardous
Substance Account Act (Health & Safety Code, 3325300-25395, as amended); the Hazardous Waste Control
Law (Health & Safety Code, 3325100-25250.25, as amended); the Safe Drinking Water and Toxic Enforcement
Act (Health & Safety Code, 3325249.5-25249.13, as amended); the Underground Storage of Hazardous
Substances Act (Health & Safety Code, 3325280-25299.7, as amended); or under any other local, state or
federal law, statute or ordinance, or at common law.
7. Assumption of Risk. Contractor agrees to voluntarily assume any and all risk of loss, damage, or injury to the
property of Contractor which may occur in, on, or about the Project site at any time and in any manner, excepting
such loss, injury, or damage as may be caused by the sole willful act or negligent act or omission of City or any
of its Council members, officers, employees, agents or representatives.
8. Waiver. The acceptance of any payment or performance, or any part thereof, shall not operate as a waiver by
City of its rights under this Contract. A waiver by City of any breach of any part or provision of this Contract by
Contractor shall not operate as a waiver or continuing waiver of any subsequent breach of the same or any other
provision, nor shall any custom or practice which may arise between the parties in the administration of any part
or provision of this Contract be construed to waive or to lessen the right of City to insist upon the performance of
Contractor in strict compliance with the covenants, terms and conditions of this Contract.
9. No Exoneration Bv Inspection: The City has the right, but not the duty, to inspect Contractor's Work. The right of
inspection is solely for the benefit of City. Contractor has the obligation to complete the Work in a satisfactory
manner in compliance with Contract requirements. The presence of a City inspector does not shift that obligation
to the City or relieve Contractor from its obligations to complete the Work in a satisfactory manner in compliance
with the Contract requirements.
10. Compliance with Laws. Contractor shall comply with all Laws now in force or which may hereafter be in force
pertaining to the Project and Work and this Contract, with the requirement of any bid security or fire underwriters
or other similar body now or hereafter constituted, with any discretionary license or permit issued pursuant to any
Law of any public agency or official as well as with any provision of all recorded documents affecting the Project
site, insofar as any are required by reason of the use or occupancy of the Project site, and with all Laws
pertaining to nondiscrimination in employment and hazardous materials.
11. Bid Security Bonds. As a condition precedent to City's obligation to pay compensation to Contractor, and on or
before the Date of Execution, Contractor shall furnish to the Project Manager the Bid Security as required under
CITY OF PALO ALTO IFB 131437
rev. 12100
PAGE 2 OF7
the Invitation For Bid.
12. Representations and Warranties. In the supply of any materials and equipment and the rendering of labor and
services during the course and scope of the Project and Work, Contractor represents and warrants:
a. Any materials and equipment which shall be used during the course and scope of the Project and Work
shall be vested in Contractor;
b. Any materials and equipment which shall be used during the course and scope of the Project and Work
shall be merchantable and fit to be used for the particular purpose for which the materials are required;
c. Any labor and services rendered and materials and equipment used or employed during the course and
scope of the Project and Work shall be free of defects in workmanship for a period of one (1) year after
the recordation of the Notice of Substantial Completion, or, if no such notice is required to be filed, on
the date that final payment is made hereunder;
d. Any manufacturer's warranty obtained by Contractor shall be obtained or shall be deemed obtained by
Contractor for and in behalf of City.
e. Any information submitted by Contractor prior to the award of Contract, or thereafter, upon request,
whether or not submitted under a continuing obligation by the terms of the Contract to do so, is true and
correct at the time such information is submitted or made available to the City;
f. Contractor has not colluded, conspired, or agreed, directly or indirectly, with any person in regard to the
terms and conditions of Contractor's Bid, except as may be permitted by the Invitation For Bid;
g. Contractor has the power and authority to enter into this Contract with City, that the individual executing
this Contract is duly authorized to do so by appropriate resolution, and that this Contract shall be
executed, delivered and performed pursuant to the power and authority conferred upon the person or
persons authorized to bind Contractor;
h. Contractor has not made an attempt to exert undue influence with the Purchasing Manager or Project
Manager or any other person who has directly contributed to City's decision to award the contract to
Contractor;
I. There are no unresolved claims or disputes between Contractor and City which would materially affect
Contractor's ability to perform under the Contract;
j. Contractor has furnished and will furnish true and accurate statements, records, reports, resolutions,
certifications, and other written information as may be requested of Contractor by City from time to time
during the term of this Contract;
k. Contractor and any person performing labor and services under this Project are duly licensed by the
State of California as required by California Business & Professions Code Section 7028, as amended;
and
I. Contractor has fully examined and inspected the Project site and has full knowledge of the physical
conditions of the Project site.
13. Assignment This Contract and the performance required hereunder is personal to Contractor, and it shall not be
assigned by Contractor. Any attempted assignment shall be null and void.
14. Claims of Contractor. All claims pertaining to extra work, additional charges, or delays within the Contract Time
or other disputes arising out of the Contract shall be submitted by Contractor to City in writing by certified or
registered mail within ten (10) Days after the claim arose or within such other time as may be permitted or
required by law, and shall be described in sufficient detail to give adequate notice of the substance of the claim
to City.
CITY OF PALO ALTO IFB 131437
rev; 12100
PAGE 3 OF7
15. Audits by City. During the term of this Contract and for a period of not less than three (3) years after the
expiration or earlier termination of this Contract, City shall have the right to audit Contractor's Project-related and
WOrk-related writings and business records, as such terms are defined in California Evidence Code Sections 250
and 1271, as amended, during the regular business hours of Contractor, or, if Contractor has no such hours,
during the regular business hours of City.
16. Notices. All agreements, appointments, approvals, authorizations, claims, demands, Change Orders, consents,
designations, notices, offers, requests and statements given by either party to the other shall be in writing and
shall be sufficiently given and served upon the other party if (1) personally served, (2) sent by the United States
mail, postage prepaid, (3) sent by private express delivery service, or (4) in the case of a facsimile transmission,
if sent to the telephone FAX number set forth below during regular business hours of the receiving party and
followed within two (2) Days by delivery of a hard copy of the material sent by facsimile transmission, in
accordance with (1), (2) or (3) above. Personal service shall include, without limitation, service by delivery and
service by facsimile transmission.
To City:
Copy to:
To Contractor:
City of Palo Alto
City Clerk
250 Hamilton Avenue
P.O. Box 10250
Palo Alto, CA 94303
City of Palo Alto
Dept -Utilities
Division -Engineering
Address -250 Hamilton Avenue
Palo Alto, CA 94303
Jim Bujtor, Project Manager
West Valley Construction Company, Inc.
P.O. Box 5639
San Jose, CA 95150
Attn: Dennis Poncato
17. Appropriation of City Funds. This Contract is subject to the fiscal provisions of Article III, Section 12 of the
Charter of the City of PalO Alto. Any charges hereunder for labor, services, materials and equipment may accrue
only after such expenditures have been approved in advance in writing in accordance with applicable Laws. This
Contract shall 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 year and funds for this Contract are no longer available. This Section 17
shall control in the event of a conflict with any other provision of this Contract.
18. Miscellaneous.
a. Bailee Disclaimer. The parties understand and agree that City does not purport to be Contractor's
bailee, and City is, therefore, not responsible for any damage to the personal property of Contractor.
b. Consent. Whenever in this Contract the approval or consent of a party is required, such approval or
consent shall be in writing and shall be executed by a person having the express authority to grant such
approval or consent.
c. ContrOlling Law. The parties agree that this Contract shall be governed and construed by and in
accordance with the Laws of the State of California.
d. Definitions. The definitions and terms set forth in Section 1 of the City of Palo Alto Dept. of Public
Works Standard Drawings and Specifications (1992) of this Contract are incorporated herein by
reference.
CITY OF PALO ALTO IFB 131437
rev. 12/00
PAGE4 OF 7
e. Force Majeure. Neither party shall be deemed to be in default on account of any delay or failure to
perform its obligations under this Contract which directly results from an Act of God or an act of a
superior governmental authority.
f. Headings. The paragraph headings are not a part of this Contract and shall have no effect upon the
construction or interpretation of any part of this Contract.
g. Incorporation of Documents. All documents constituting the Contract documents described in Section 3
hereof and all documents which may, from time to time, be referred to in any duly executed amendment
hereto are by such reference incorporated in this Contract and shall be deemed to be part of this
Contract.
h. Integration. This Contract and any amendments hereto between the parties constitute the entire
agreement between the parties concerning the Project and Work, and there are no other prior oral or
written agreements between the parties that are not incorporated in this Contract.
I. Modification of Agreement. This Contract shall not be modified or be binding upon the parties, unless
such modification is agreed to in writing and signed by the parties.
j. Provision. Any agreement, covenant, condition, clause, qualification, restriction, reservation, term or
other stipulation in the Contract shall define or otherwise control, establish, or limit the performance
required or permitted or to be required of or permitted by either party. All provisions, whether
covenants or conditions, shall be deemed to be both covenants and conditions.
k. Resolution. Contractor shall submit with its Bid a copy of any corporate or partnership resolution or
other writing, which authorizes any director, officer or other employee or partner to actfor or in behalf of
Contractor or which authorizes Contractor to enter into this Contract.
I. Severability. If a court of competent jurisdiction finds or rules that any provision of this Contract is void
or unenforceable, the provisions of this Contract not so affected shall remain in full force and effect.
m. Status of Contractor. In the exercise of rights and obligations under this Contract, Contractor acts as
an independent contractor and not as an agent or employee of City. Contractor shall not be entitled to
any rights and benefits accorded or accruing to the City Council members, officers or employees of
City, and Contractor expressly waives any and all claims to such rights and benefits.
n. Successors and Assigns. The provisions of this Contract shall inure to the benefit of, and shall apply to
and bind, the successors and assigns of the parties.
o. Time of the Essence. Time is of the essence of this Contract and each of its provisions. In the
calculation of time hereunder, the time in which an act is to be performed shall be computed by
excluding the first Day and including the last. If the time in which an act is to be performed falls on a
Saturday, Sunday, or any Day observed as a legal holiday by City, the time for performance shall be
extended to the following Business Day.
p. Alternative Dispute Resolution. The parties shall endeavor to resolve any disputes or claims arising out
of or relating to this Contract by mediation. which, unless the parties agree otherwise, shall be
conducted under the auspices of the Judicial Arbitration and Mediation Service (JAMS). San Jose,
California. The intent ofthe parties is that the mediation shall proceed in advance of litigation; however,
if any party should commence litigation before the conclusion of mediation, such litigation, including
discovery, shall be stayed pending completion of mediation, and by executing this Contract the parties
stipulate to mediation in accordance with Santa Clara County Superior Court Local Rule 1.15 or Rule 2-
3(b) of the ADR Local Rules of the U.S. District Court for the Northern District of California, as such
rules may be amended from time to time. The parties shall share the cost of the mediation, including
the mediator's fee, equally. Any written agreement reached in mediation shall be enforceable pursuant
to California Code of Civil Procedure § 664.6, as amended.
CITY OF PALO ALTO IFB 131437
rev. 12100
PAGE 5 OF7
q. Venue. Unless the parties mutually agree otherwise, mediation shall take place in San Jose, California,
In the event that litigation is commenced by any party hereunder, the parties agree that such action
shall be vested exclusively in the state courts of California in the County of Santa Clara or in the United
States District Court for the Northern District of California.
r. Recovery of Costs. Each Party shall bear its own costs, including attorney's fees, through the
completion of mediation. If the claim or dispute is not resolved through mediation, or if litigation is
necessary to enforce a settlement reached at mediation pursuant to California Code of Civil Procedure
§ 664.6, as amended, then the prevailing party in any subsequent litigation may recover its reasonable
costs, including attorney's fees, incurred subsequent to conclusion of the mediation.
s, Flow-down. Contractor agrees to include provisions of this Contract relating to Alternative Dispute
Resolution, Venue. and Recovery of Costs in any subcontracts or major material purchase agreements
which it enters into in connection with this Contract, and to require its subcontractors to include those
provisions in any sub-contracts or major material purchase agreements, such that any mediation or
litigation of any claim or dispute asserted by a subcontractor or major material supplier will be
consolidated with any related claim or dispute between the Contractor and the City. Should the
Contractor fail to do so, such that the City is required to defend an action brought by a subcontractor or
material supplier inconsistent with the Alternative Dispute and Venue provisions of this Contract,
Contractor shall indemnify City for City's costs of defense, including reasonable attorney's fees.
IN WITNESS WHEREOF, the parties have by their duly appOinted representatives executed this Contract in the city of
Palo Alto, County of Santa Clara, State of California on the date first stated above.
APPROVED:
CITY OF PALO ALTO
City Manager
APPROVED AS TO FORM:
City Attorney
CITY OF PALO ALTO IFB 131437
rev. 12100
WEST VALLEY CONSTRUCTION COMPANY, INC.
8y: __________________________________ _
Name: __________________ _
Title: __________________ _
PAGE 6 OF7
CERTIFICATE OF ACKNOWLEDGMENT
(Civil Code;} 1189)
STATE OF __________ _
COUNTY OF _________ -'
On , before me, _______________ a
notary public in and for said County, personallyaPloeclre(j ________________ ,
personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that he/shelthey executed the
same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the
person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature _________________ _
CITY OF PALO ALTO IFB 131437
rev. 12100
(Seal)
PAGE 7 OF7
"ISLe:{ SuVVtVVtCwtj § c;V~Lu~tLDV\..
Bidder UG 45 UG 17 UG 19 UG 24
$1,703,6781 $340,7591 $119,4051 $579,249
$416.800 $106.250 $368,130
$430,875 $126,790 $453,040
$2,040,851 $432,080 $132,550 $498,732
$2,337,803 $387,206 $171,927 $636.713
$2,279.595 $519,670 $163,120
anal Items Grand Totals
$450,0521 $3,193,143
$541 $3,669,495
$847,300 $3,860,550
$764,240 $3,868,453
595 $3,917
$792,950 $4,430,610
::J> --I --I
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ATTACHMENT C
CERTIFICATION OF NONDISCRIMINA1"ION FORM 410
PROJECT: Underground District 45, 17. 19 & 24 Substructure Installation
Certification of Nondiscrimination: As suppliers of goods and/or services to the City of Palo Alto in excess
of $5,000. the firm. contractor or Individual(s) listed below certify that: they do not and in the performance of
this contract they will not discriminate in employment of any person because of race, skin color, gender, age,
religion, disability, national origin, ancestry. sexual orientation, housing status, marital status, familial status,
weight or height of such person; and further certify that they are in compliance with all Federal. State and local
directives and executive orders regarding nondiscrimination in' employment.
........
Firm: ___ \Vl_~_,\!_YG.U_~_~_('~_"3m_ucttM_",,_._. Comp_, _mly,_. _,_tnc. ___ DATE: 6 .. ~5.og
Title of Officer Signing: AssISTANT VICSPmJDiNf
Signature: ~~
NlS • PONCA:l'O
.
CITY OF PALO ALTO IFB 131437 PAGE 1 OF 1
ATTACHMENT D
ADDENDUM NO.1
AGREEMENT FOR JOINT PARTICIPATION IN THE
INSTALLATION OF UNDERGROUND FACILITIES IN
UNDERGROUND UTILITY DISTRICT NO. 45
THIS AGREEMENT FOR JOINT P ARTICIPA TION IN THE INSTALLATION OF
UNDERGROUND FACILITIES ("Specific Agreement"), made and entered into this day of
____ , 2009, by and among THE CITY OF PALO ALTO, a California municipal corporation
("City"), PACIFIC BELL TELEPHONE COMPANY, a California corporation, doing business as
AT&T CALIFORNIA ("AT&T"), and COMCAST OF CALIFORNIA IX, INC., a California
corporation ("Comcast"), individually "Party" and collectively "Parties", in reference to the
following facts and circumstances:
1. The terms of the MASTER AGREEMENT FOR INSTALLATION OF
UNDERGROUND FACILITIES IN THE CITY OF P ALO ALTO ("Master Agreement"), executed
by the Parties on ,2009, are hereby incorporated in this Specific Agreement and
made a part hereof by reference.
2. City will act as the Trenching Agent for purposes of this Specific Agreement.
3. The project description is as follows: Installation of Underground Facilities in
Underground Utility District 45.
(or in accordance with the attachments).
1/
1/
1/
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/I
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/I
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1
090728 jb 0073200
IN WITNESS WHEREOF, the Parties by their duly authorized representatives have
caused this Master Agreement to be executed on the date first above written.
ATTEST:
City Clerk
APPROVED AS TO FORM:
Senior Asst. City Attorney
APPROVED:
City Manager
Director of Administrative
Services
Director of Utilities
Attachments:
CITY OF PALO ALTO
Mayor
PACIFIC BELL TELEPHONE COMPANY
DBA AT&T CALIFORNIA
COMCAST OF CALIFORNIA IX, INC.
Name: --------------------
Title: ---------
EXHIBIT "A": Supplemental Terms of Agreement for Underground Conversion Project
Utility and Trench Substructure
2
090728 jb 0073200
EXHIBIT" A"
SUPPLEMENTAL TERMS OF AGREEMENT
FOR UNDERGROUND CONVERSION PROJECT
UTILITY AND TRENCH SUBSTRUCTURE
A. CONSTRUCTION CONTRACT is awarded by the Trenching Agent, and is hereby
incorporated by reference (see attached bid items for breakdown of cost estimate).
1. All bid items dedicated to the City's sole benefit and use shall be charged 100% to
the City.
2. All bid items dedicated to AT&T's sole benefit and use shall be charged 100% to
AT&T.
3. All bid items dedicated to Comcast's sole benefit and use shall be charged 100% to
Comcast.
4. All joint trench bid item costs incurred for the collective benefit of the Parties will
be determined using a space/cost allocation formula, which divides the minimum
trench area required for each trench occupant, individually, by the sum of the
minimum trench areas for all occupants.
For example, __ ... ______________ _
5. Pavement and surface restoration over joint trench costs shall be shared equally by
the number of occupants in the trench.
6. All optional bid items, whenever used, shall be charged, individually or jointly
depending on how the items are used.
7. Cost of compaction testing shall be shared equally by the number of occupants in the
trench.
8. The Trenching Agent shall require its construction contractor to provide a two-year
warranty on materials provided and work performed from the date of acceptance of
the Project by the Trenching Agent.
9. The City shall abide by AT&T's Tariff with respect to obtaining the necessary
permits and licenses in accordance with applicable law. In the event of a conflict
between the terms of this Master Agreement or any Amended Master Agreement
and the terms of the Tariff, the terms of the Tariff shall govern.
3
090728 jb 0073200
B. BID PACKAGE AND CONTRACT ADMINISTRATION
1. Fifteen percent (15%) of each ofthe Non-Trenching Parties' share of the actual cost
of construction shall be added, respectively, for engineering, Project's plans and
specifications, and contract administration by the Trenching Agent, including costs
of inspections perfonned by the Trenching Agent.
Formula
Palo Alto (Electric) % = {PW x PD/(PW x PD + TW x TD + CW x CD)) * 100
AT&T (Telephone) % = {TW x TD/(PW x PD + TW x TD + CW x CD)} * 100
Corncast (Cable TV) % {CW x CD/(PW x PD + TW x TD + CW x CD)} * 100
P -City of Palo Alto -Electric
T AT&T Telephone
C Corncast -Cable TV
D Depth of Trench required for individual utility
W -Width of Trench required for individual utility
Section C (1 thru 6)
C. FORCE ACCOUNT AND WHEN CITY'S SHARE IS LESS THAN $85,000
These prices shall apply when the joint installation is to be perfonned by City's force
account using annual contracted services. The prices shall be revised every 12 to 18
months.
1. Trenching
Cost of trenching in all surfaces shall include all labor and material for saw cutting,
digging, hauling, disposal of spoil, backfill, compaction, and complete surface
restoration. The cost for AT&T or Corncast shall be:
a. $26.33 per foot when trench is shared by City, AT&T and Corncast.
b. $39.50 per foot when trench is shared between City and either AT&T or
Corncast.
c. $79 per foot when trench is for AT&T or Corncast use only.
2. Placing Boxes
4
090728 jb 0073200
Cost of placing splice boxes shall include all material cost where applicable and all labor
for excavating, grading, and backfilling around the boxes and all restoration work The
cost for AT&T or Comcast shall be:
a. $340 each for -11 tlxl7t1
-N9 box (box to be furnished by City)
b. $874 each for -I7"x30" -PO 1730 (box to be furnished by City)
d. Unit cost for larger splice boxes will be based on the actual cost charged by
contractor.
3. Conduit Installation
Cost of installing conduits shall include all material cost and labor for conduit
termination at each end and pulling rope between points of termination. The cost for
AT&T or Comcast shall be:
a. $2.50 per foot for I-inch conduits
b. $4.00 per foot for 2-inch conduits
c. $6.00 per foot for 4-inch conduits
Note: No end-bells will be installed
Installation of2" Riser will be $150.00 each.
4. Resurfacing
Cost of resurfacing shall include all labor and materials for forming, pouring, finishing,
removal of debris and restoration of all adjacent surfaces. The cost for AT&T or
Comcast shall be:
5
090728 jb 0073200
Description Sidewalk! 2" AC over 7" Curb and Gutter per In.
Driveway per PCC or 8" Agg ft.
sq. ft. base per sq. ft.
a. When construction $10.00 $10.00 $25.00
involves City, AT&T and
Corncast
b. When construction $15 $15 $37.5
involves City and
either AT&T or Corncast
5. Saw Cutting
The cost for AT&T or Corncast shall be:
a. $12.00 per lineal feet
6. Incidental
Incidental cost shall include administration, inspecting and compaction testing. Cost for
AT&T or Corncast shall be fifteen percent (15%) of the total individual cost.
6
090728 jb 0073200
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LEGEND ---Project Boundary
APPROVED 27 Feb 2008
Jim Suitor
SR. ENGINEER I MANAGER
ENGR. JB
DRWN PD
CHKD. JB
I --l'ri ;1 _
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S.P.R.R.
Underground Utility District No. 45 REV. DATE APPR. DESCRIPTION Bounda~Map r-~~~+-~~~~~
Palo Av, Alma St, High St & Lytton Av Area 1-;--+----1-------1
City of Palo Alto tM;-:;AP~#tC:::;KT;-:#~SC=-AL:iE -~----J
California
UTILITIES, ELECTRIC ENGINEERING NTS r-;;;-;;::;:::;:--:--~::--:-:'---1 OF 2
4
LEGEND ---
Project Boundary ~~~~~~~~ ______ -A~
APPROVED 27 Feb 2008
Jim Sujtor
SR. ENGINEER I MANAGER
ENGR. JB
DRWN PO
CHKD. JB
Underground Utility District No. 45 t-R_E_V't--DA_TE-t-AP...:.-PR~. f----=D:::ES:::.CR~IP..:..:TIO::N~__I
Boundary Map
Cambridge Avenue Area _ ......... City of Palo Alto t:M::':A~P#~C:::KT:-:#t.S::-:::C~ALE f--w~.-O.#-I-DRA--WI-NG-#--I
California SAP 40009247
UTILITIES, ELECTRIC ENGINEERING NTS [------;;;-;;::-;::~~:..:;;~-I SHEET 2 OF 2
ATT ACHMENT F
11
TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: UTILITIES
DATE: MAY 5,2008 CMR: 220:08
SUBJECT: ADOPTION OF AN ORDINANCE AMENDING SECTION 12.16.020 OF
CHAPTER 12.16 OF TITLE 12 OF THE PALO ALTO MUNICIPAL CODE
BY ESTABLISHING UNDERGROUND UTILITY DISTRICT NO. 45
(PALO ALTO AVENUE, ALMA STREET, HIGH STREET, LYTTON
A VENUE AND CAMBRIDGE A VENUE)
RECOMMENDATION
Staff recommends that Council adopt the attached Ordinance to create Underground Utility
District No. 45 (UUD 45) and thereby amend Section 12.16.020 of Chapter 12.16 of TitIe 12 of
the Palo Alto Municipal Code.
BACKGROUND
The Electric Utility's undergrounding project areas are selected and recommended to AT&T and
Comcast based on the age and ability to maintain the existing overhead electric system. AT&T
and Comcast determine whether the recommended area meets the criteria for undergrounding
based on the guidelines established by the California Public Utilities Commission (CPUC).
UUD 45 meets the City's and CPUC's guidelines for undergrounding overhead utility lines. The
attached Exhibits "B" and "c" show the boundaries of UUD 45. The attached Exhibit "D"
provides additional background and history on undergrounding of electric utilities.
Cost-sharing of underground utility district projects has been determined by agreement between
the City, AT&T, and Comcast. The cost for joint trench bid items is determined using a
space/cost allocation formula, which divides the minimum trench area required for each trench
occupant individually by the sum of the minimum trench areas for all occupants.
At the March 10, 2008 meeting, Council passed Resolution of Intent No. 8802 to establish UUD
45. The May 5, 2008 Council meeting has been set as the date of the public hearing on the
matter. Notices announcing the meeting with a description of the project and a copy of the
Resolution were mailed to all property owners in the proposed district on April 4, 2008.
CMR: 220:08 Page 1 of3
DISCUSSION
This underground project will result in the removal of 45 poles and provision of underground
service to 45 properties, of which a small percentage are residential properties. Completion of
this project will eliminate overhead distribution lines in an area bordered by existing
underground districts and will enhance reliability of the electric distribution system while
improving aesthetics.
If an underground district is created, the Utilities Department will prepare plans and
specifications and obtain bids for installation of the underground substructure. Underground
substructure construction consists of the installation of conduits, vaults, concrete pads and boxes.
The Utilities Department will install the electric distribution cables, transformers and switches
upon completion of the substructure installation. After the new underground system (cable,
transformers, switches, etc.) has been tested and energized, the property owners will be notified
that they have 60 days to connect to the new underground system. Upon completion of the new
connections, utility crews will remove the overhead power lines, and telephone crews will
complete the project by removing the remaining telephone and cable television facilities and
poles.
TIMELINE
Upon Council approval and completion of the public hearing, the following will occur as
proposed:
May 5, 2008* Introduction and first reading of Ordinance Establishing Project Area as
Underground Utility District No. 45
May19,2008*
November 2008*
January 2009
March 2009*
May 2009
through July 2009
July 2009
through Sept 2009
Second reading and adoption of Ordinance.
Award of construction contract and Joint Construction Agreement with
AT&T IComcast.
Substructure (conduits, vaults, etc.) installation by Contractor
Resolution determining properties electing to pay service conversion cost
over a period of 10 years
Installation of underground facilities (cable, switches, etc.)
Service conversion work by property owners
October 2009 Pole removal and project completion
through Jan 2010
* Denotes Council Action
CMR: 220:08 Page 2 of3
RESOURCE IMPACT
The total cost of the project is estimated at $2,350,000. The majority of the cost will be for the
substructure installation of underground facilities ($1,450,000). The remaining funds will be
utilized for engineering ($100,000), electric equipment & cables ($680,000), and removal of
overhead facilities ($120,000). AT&T and Comcast will reimburse approximately $700,000 to
the City for the installation of telephone and cable television conduits and boxes in accordance
with an agreement with the three parties. Construction and installation costs of this project have
been budgeted in the FY 2008-09 and 2009-10 Utilities Department Electric Capital
Improvement Program budget.
The cost of the required service conversions on private property is to be borne by the individual
owners in accordance with Utility Rule and Regulation No.17. The total cost for the property
owners requiring service conversions from overhead to underground has been estimated at
$200,000. The property owners have been offered the option of financing their service
conversions under Section 12.16.091 of Palo Alto Municipal Code which provides for City loans
to property owners to fund the service conversions. Property owners repay the loan and
administrative costs, which are added to their property tax bills, over a ten-year period, at an
interest rate approved by the Council.
POLICY IMPLICATIONS
This recommendation is consistent with the Council-approved Utilities Strategic Plan to invest in
utility infrastructure to deliver reliable service. The project furthers Program L-80 (the
continuation of Citywide undergrounding of utility wires) and L-81 (the use of compact and
well-designed utility elements) of the Comprehensive Plan.
ENVIRONMENTAL REVIEW
This project is categorically exempt from the California Environmental Quality Act under
California Public Resources Code Section 15302(d) (conversion of overhead electric utility
distribution system facilities to underground).
ATTACHMENTS
A: Ordinance
B: Underground Utility District No. 45 Boundary Map -Palo Alto A venue, Alma Street, High
Street and Lytton Avenue area
C: Underground Utility District No. 45 Boundary Map Cambridge Avenue area
D: Background and History on Underground of Electric Utilities
PREPARED BY:
DEPARTMENT HEAD:
CITY MANAGER APPROVAL:
CMR: 220:08
JAMES BUJTOR
Sr. Electric Project Engineer
VALERIE FONG
Director of Utilities
STEVE EMSLIEIKELLY MORARIU
Deputy City Managers
Page 3 of3
fol1ows:
NOT YET APPROVED , ATTACHMENT A
ORDINANCE NO.
ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO
AMENDING SECTION 12.16.020 OF CHAPTER 12.16 OFTITLE 12 OF
THE PALO ALTO MUNICIPAL CODE BY ESTABliSHING
UNDERGROUND UTILITY DISTRICT NO. 45
The Council of the City of Palo Alto does ORDAIN as follows:
SECTION 1.. Findings and Declarations. The City Council finds and declares as
(a) This Council, on March 10, 2008, adopted Resolution No. 8802, declaring its
intention to amend Section 12.16.020 of Chapter 12.16 of Title 12 of the Palo Alto Municipal Code
by establishing Underground Utility District No. 45 in the City and by such Resolution appointed
Monday, MayS, 2008, at the hourof7:00 p.m., in theCounci1 Chambers, City Han, at 250 Hamilton
A venue, Palo Alto, California. as the time and place of hearing protests and receiving evidence for
and against the proposed action and notice of direction.
(b) Notice was given of the time and place therein stated in the manner provided by
law, as appears from the affidavits on file in the office of the City Clerk.
(c) This matter came on regularly for hearing at the time therein fixed.
(d) All written protests and other written communications were publicly read at this
meeting and evidence duly taken and all persons desiring to be heard were fully heard.
(e) The public necessity, health and safety require the removal of poles and overhead
lines and associated overhead structures from that certain area described in Resolution No. 8802.
SECTION 2. Section 12.16.020 of Chapter 12.16 of Title 12 of the Palo Alto Municipal
Code is hereby amended by adding Subsection (41) thereto to read as follows:
"(45) District No. 45. All of the area in the County of Santa Clara, City of Palo
Alto, encompassing the areas contiguous with portions of Palo Alto A venue,
Alma Street, High Street, Lytton A venue and Cambridge A venue Underground
Utility District Number 45, on file in the office of the City Clerk."
SECTION 3. The "Underground Utility District Maps" referred to in Section 12.16.020
shall be amended to add to the areas shown on the map those referred to in Resolution No. 8802.
SECTION 4. The City Council hereby finds that the adoption of this ordinance
constitutes the approval of a project that is categorically exempt from environmental review under
the California Environmental Quality Act pursuant to CaJiforniaPubJic Resources Code § 15302(d)
(Conversion of Overhead Electric Utility Distribution System Facilities to Underground).
1
NOT YET APPROVED
SECTION 5. This ordinance shall become effective upon the expiration of thirty (30)
days from its passage.
INTRODUCED:
PASSED:
AYES:
NOES:
ABSTENTIONS:
ABSENT:
ATTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Deputy City Attorney City Manager
Director of Utilities
2
LEGEND ---Project Boundary
APPROVED 27 Feb 2008
Jim Bujtor
SR. ENGINEER / MANAGER
ATTACHMENT B
Underground Utility District No~ 45 I---+---+--.J.-------I
Boundary Map
Av, Alma St, High St & Lytton Av Area I---t--+--+--------I
Citx of Palo Alto
California'
UTILITIES, ELECTRIC ENGINEERING
LEGEND
APPROveD 27 Feb 2008 Underground Utility District No. 45
Boundary Map
cambridge Avenue Area
City of Palo Alto
California
UTILITIES, ELECTRIC ENGINEERING
ATTACHMENT C
BACKGROUND
BACKGROUND AND HISTORY ON
UNDERGROUNDING OF ELECTRIC UTILITIES
History 0/ Undergrounding
ATTACHMENT D
The City of Palo Alto began a program to underground overhead electric, telephone, and cable TV
facilities in 1965 with a project along Oregon Expressway. Since that time 42 Underground Districts
have been fonned. The main reasons for starting the undergrounding program in Palo Alto were to
improve the aesthetics of the neighborhoods and to improve service reliability by reducing the impacts of
weather on the electric distribution system.
To establish the undergrounding program, the city amended the Municipal Code adding Chapter 12.16
titled Underground Utilities. All new development after 1965 was required to have underground
facilities. This requirement resulted in the undergrounding of electric facilities for most of the
commercial areas outside of the older commercial developments in the University Avenue and California
A venue districts.
Types 0/ Underground Districts
Rules for establishing an underground district in the City are covered by Utility Rule and Regulation 17.
This rule establishes three types of underground districts: General Public Benefit, Primarily of Local
Public Benefit, and areas that do not qualifY under the preceding types. General Public Benefit projects
are established by the City and the City pays for the installation of the electric system in the public right-
of-way (ROW) and the residents pay for conversion of the facilities on their property. In the remaining
two conversion area types, the residents must request the underground district and fund the service
conversion on their property as well as a portion oftheutility costs in the public ROW.
Most of the projects completed have been established under the General Public Benefit provision.
Joint Construction on Utilities Poles
The poles within the City of Palo Alto are jointly owned with AT&T or in some cases jointly owned with
AT&T and PG&E. Comcast leases space on the poles from AT&T for the attachment of cable TV cables.
Due to the joint ownership of the poles, underground districts require agreement by the other joint
owners. Once agreement on the Underground District boundaries has been reached, the conduits and
structures are jointly constructed. Joint construction is used to reduce costs and coordinate the
construction to minimize impacts on the neighborhoods.
Agreement on Underground District boundaries by AT&T is subject to AT&T's ability to recover its
costs pursuant to California Public Utilities Commission's (CPUC) Schedule A2Rule 32 on
undergrounding which specifies the criteria for different levels of financial participation by AT&T.
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The applicable section of Rule 32 is critical to the financial viability of the underground project. If a
:."'" project qualifies under section A.I of Rule 32, the project has been found to have General Public Benefits,
and AT&T and Comcast fund all the their improvements in the public right-of-way. If it is detennined
that Rule 32A.2 or 32A.3 are applicable to the project, the cost responsibility for the Cable TV and
Telephone conduits and other structures shifts either to the City or to the residents. In the past, once
AT&T had detennined that the proposed area did not qualify under Rule 32A. I the City has canceHed the
underground project because of the increased costs to the Electric Utility and moved forward on
undergrounding projects in areas where the telephone company would participate. Currently there are
only a few small areas where the telephone company will participate.
To facilitate the coordination between the parties in an Underground District, a master agreement has
been signed by the City, AT&T, and Cable TV. This master agreement is amended each time an
underground district is formed to include the new Underground District.
Funding for Underground Districts
General Benefit Undergrounding was funded at approximately 2% of annual electric revenues. Beginning
in 1998, funding was reduced to 1% per year due to the need to shift electric resources to rebuilding aging
infrastructure. The current funding which has been recently returned to 2% of annual electric revenues
converts, on average, electric facilities for approximately 150 to 200 homes per year.
The reduction in funding to 1 % of revenues for underground districts was initiated about J 0 years ago to
"free up" revenues and resources to focus on replacing underground facilities reaching the end of their
useful lives. Cables installed in the sixties and seventies had an expected cable life of 30 years. In the
late nineties a significant portion of the city's underground system had exceeded its expected life and
failures were beginning to occur at an increasing rate. To reduce the rate of failure, an accelerated
infrastructure program was initiated to replace the cables that had exceeded their life expectancies.
Because of staffing constraints the underground program was temporarily scaled back.
Costs that AT&T can recover from its rate payers for funding General Public Benefit Undergrounding
under Rule 32A.l are limited. The restrictions on AT&T's funding limit the City'S abiJity to accelerate
the undergrounding program beyond 2% of revenues while still receiving the fulJ rule 32A.l level of
participation from AT&T.
In addition the cost of the required service conversions on private property is borne by the individual
owners in accordance with Utility Rule and Regulation No.1? This cost can range from $5,000 to
$8,000. In order to reduce the burden of the service conversion cost to property owners in underground
districts the property owners are offered the option of financing their service conversion cos·ts over a
period of ten years with interest in accordance with the procedure given in Section 12.]6.090 through
12.16.096 of the Palo Alto Municipal Code. The CMR that accompanies this document seeks approval of
a resolution listing property owners electing to participate in the service conversion financing offered by
the City.
Budgeting
Funding for the Underground Districts is approved by the City Council during the annual budget process.
In addition to the current fiscal year's funding, staff also provides four additional years of projected
funding for proposed undergrounding projects. These future projects are not approved for construction
. until the budget for these projects is approved each fiscal year. Each year staff reevaluates the future year
recommendations. and proposes changes based on additional information acquired since the last budget
cycle including AT&T's participation in covering project costs.
.'
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Selecting Underground Districts
Proposed undergrounding districts are detennined by applying the priorities in Rule 17 and negotiations
with AT&T as joint pole owners. In addition, Comcast, which leases pole space from AT&T, must also
fund part of the underground costs to move their facilities.
The City Electric Utility takes the lead in proposing boundaries for an underground project. AT&T's
agreement is driven by its ability to recover costs under rules that differ from Utility Rule and Regulation
No. '7. Recently the City was advised by AT&T that the proposed underground district planned for FY
2007-08 did not qualifY under section A.I of Rule 32, and that AT&T would be unable to fund all the
improvements in the public right-of-way, resulting in the cost responsibility for the telephone substructure
shifting to the City or the residents within the proposed districts.
To give a perspective on this impact, the present cost to the City for undergrounding is about $ J 5,000 per
home. This does not include the additional cost for each homeowner of about $5,000 for their service
conversion. If the City continues undergrounding without AT&T and Comcast reimbursements, the cost
to the City per home increases to approximately $20,000, '~m increase of 33%.
Future of Program
The overhead lines for approximately ] 4, ] 00 homes remain to be undergrounded and the current program
undergrounds facilities for approximately 200 homes per year.
If the City were to proceed with the program without AT&T and Comeast reimbursements at the present
funding rate of 2% of annual electric revenues, it is expected to take approximately ] 00 years more to
complete the undergrouriding of the entire city at a cost of $296,100,000. This is based on the current
value of the dollar. Under the current program the electric rate payers would be responsible for funding
approximately $225,600,000 and the property owners would be responsible for funding about
$70,500,000 of total cost.
In light of the recent position taken by AT&T to suspend participation in undergrounding of utilities
where AT&T is not able to recover costs from its ratepayers, staff is reviewing with AT&T and Comcast
potential undergrounding project areas in the City. If an agreement is reached with AT&T on additional
areas for undergrounding of utilities, then staff wiU obtain Council approval for undergrounding of such
areas to continue the undergrounding program.
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TO:
FROM:
DATE:
REPORT TYPE:
SUBJECT:
HONORABLE CITY COUNCIL
CITY MANAGER DEPARTMENT: UTILITIES
AUGUST 3, 2009 CMR: 337:09
CONSENT
Approval of a Utilities Enterprise Fund Contract with Casey
Construction, Inc. in the Total Amount of $652,066 for the 2009-2010
Utility Trench and Substructure Installation Throughout the City
RECOMMENDATION
Staff recommends that Council approve and authorize the City Manager or designee to execute
the attached contract with Casey Construction, Inc. (Attachment A) for a period of twelve (12)
months in the amount of $652,066 to provide utility trench and substructure installation services
throughout the City.
Staff also recommends that Council approve and authorize the City Manager or his designee to
negotiate and execute one or more change orders to the contract with Casey Construction, Inc.
for related, additional but unforeseen work that may develop during the project, the total value of
which shall not exceed $98,000, 15% of the contract price.
Staff also recommends that Council approve and authorize the City Manager or his designee to
exercise the option to renew the contract for up to two additional twelve month periods at a cost
of $684,670 for the first renewal (FY 201012011) and $718,903 for the second renewal (FY
201112012), provided the contractor is responsive to the City's needs, and the quality of the
contractor's work is acceptable during the first year of the contract.
DISCUSSION
Proiect Description
The Electric Utility establishes an annual contract with a general contractor to provide trenching
services and to install electric utility substructure such as conduits, boxes, and vaults. The
trenching and substructure is for customer service installations, replacements to the existing
underground electric system, and for fiber optic, street light, and communication services. Each
job is individually quoted, a price agreed upon, and payment made upon completion of work.
The City does not possess the staff resources to provide electric substructure and trench services.
Electric substructure and trench services have been contracted out for over 16 years. A ward of
CMR: 337:09 Page 1 of3
the contract is necessary to complete customer connection requests and Capital Improvement
Program (CIP) projects in a timely and cost-effective manner.
Summary of Bid Process
~Bid Name!Number 2009-2010 Utility Trench & Substructure Installation
Proposed Length of Project 12 months
• Number of Bids Mailed to 18
Contractors
Number of Bids Mailed to Builder's 5
Exchanges
Total Days to Respond to Bid 28
Pre-Bid Meeting? Yes
Number of Company Attendees at 16
Pre-Bid Meeting
Number of Bids Received: 5*
Bid Price Range From a low of $652,066 to a high of$I,239,462.
*Bid summary provIded In Attachment B.
Staff has reviewed all bids submitted and recommends that the bid of $652,066 submitted by
Casey Construction, Inc. be accepted and that Casey Construction, Inc. be declared the lowest
responsible bidder. The bid is 19 percent below the staff/engineer's estimate of $800,000. The
difference between the bid price and the estimate was anticipated by staff due to the lack of
demand for construction projects. The change order amount of $98,000, which equals 15 percent
of the total contract, is requested due to fluctuations and uncertainty in new business customer
connection requests.
Staff confirmed with the Contractor's State License Board that the contractor has an active
license on file. Staff checked references supplied by the contractor for previous work performed
and found no significant complaints.
RESOURCE IMPACT
Funds for this project are available in the FY 2009/2010 Electric Capital Improvement Program
Budget. Continued work Uflder this contract for FY 2010/2011 and FY 2011/2012 will be
subject to satisfactory performance by the contractor and appropriation of required funds in the
respective fiscal years.
POLICY IMPLICATIONS
The approval of this contract is consistent with existing City policies, including the Council
approved Utilities Strategic Plan Key Strategy No.1: Operate distribution system in a cost
effective manner and Strategy No.2: Invest in utility infrastructure to deliver reliable service.
CMR: 337:09 Page 2 of3
ENVIRONMENTAL REVIEW
This project is categorically exempt from the California Environment Quality Act (CEQA),
pursuant to Section 15301 of the CEQA Guidelines (minor alteration of existing public or private
facilities and equipment).
ATTACHMENTS
A: Contract
B: Bid Summary
C: Certificate of Non-Discrimination
PREPARED BY:
APPROVED BY:
DEPARTMENT HEAD:
CITY MANAGER APPROVAL:
CMR: 337:09
enior Electric Project Engineer
~~~~--------
Assistant Director ofUti1ities Engineering
VA~NG
JAMES KEENE
City Manager
Page 3 of3
CONTRACT No.C10131112
(Public work)
Utilities Department
ATTACHMENT A
This Contract, number C10131112 dated is entered into by and between the City of Palo Alto, a
California Charter City and a municipal corporation of the State of California ("City") , and Casey Construction Inc.
("Contractor").
For and in consideration of the covenants, terms, and conditions ("the provisions") of this Contract, City and Contractor
("the parties") agree:
1. Term. This Contract shall commence and be binding on the parties on the Date of Execution of this Contract,
and shall expire on the date of recordation of the Notice of Substantial Completion, or, if no such notice is
required to be filed, on the date that final payment is made hereunder, subject to the earlier termination of this
Contract.
2. General Scope of Project and Work. Contractor shall furnish labor, services, materials and equipment in
connection with the construction of the Project and complete the Work in accordance with the covenants, terms
and conditions of this Contract to the satisfaction of City. The Project and Work is generally described as
follows:
Title of Project: 2009·2010 Utility Trench and Substructure Installation, Invitation for Bids (IFB) No.
131112
Bid: $ 652.066.00
3. Contract Documents. This Contract shall consist ofthe documents set forth below, which are on file with the City
Clerk and are hereby incorporated by reference. For the purposes of construing, interpreting and resolving
inconsistencies between and among the provisions of this Contract, these documents and the provisions thereof
are set forth in the following descending order of precedence.
a. This Contract.
b. Invitation for Bid.
c. Project Specifications.
d. Drawings.
e. Change Orders.
f. Bid.
g. Supplementary Conditions.
h. General Conditions.
I. City of Palo Alto Dept. of Public Works Standard Drawings and Specifications (2007).
j. Certificate of Insurance, Performance Surety Bond, Labor & Materials (Payment) Surety Bond.
k. Other Specifications, or part thereof, not expressly incorporated in the Contract Specifications or the
City of Palo Alto Dept. of Public Works Standard Drawings and Specifications (2007).
L Any other document not expressly mentioned herein which is issued by City or entered into by the
parties.
4. Compensation. In consideration of Contractor's performance of its obligations hereunder, City shall pay to
Contractor the amount set forth in Contractor's Bid in accordance with the provisions of this Contract and upon
the receipt of written invoices and all necessary supporting documentation within the time set forth in the
Contract SpeCifications and the City of Palo Alto Dept. of Public Works Standard Drawings and SpeCifications
(1992), or, if no time is stated, within thirty (30) Days of the date of receipt of Contractor's invoices.
5. Insurance. On or before the Date of Execution, Contractor shall obtain and maintain the policies of insurance
coverage described in the Invitation For Bid on terms and conditions and in amounts as may be required by the
Risk Manager. City shall not be obligated to take out insurance on Contractor's personal property or the
personal property of any person performing labor or services or supplying materials or equipment under the
Project. Contractor shall furnish City with the certificates of insurance and with original endorsements affecting
CITYOFPALOALTOC10131112 PAGE 1 OF7
rev. 12100
coverage required under this Contract on or before the Date of Execution. The certificates and endorsements for
each insurance policy shall be signed by a person who is authorized by that insurer to bind coverage in its behalf.
Proof of insurance shall be mailed to the Project Managerto the address set forth in Section 16 ofthis Contract.
6. Indemnification. Contractor agrees to protect, defend, indemnify and hold City, its Council members, officers,
employees, agents and representatives harmless from and against any and all claims, demands, liabilities,
losses, damages, costs, expenses, liens, penalties, suits, or judgments, arising, in whole or in part, directly or
indirectly, at any time from any injury to or death of persons or damage to property as a result of the willful acts or
the negligent acts or omissions of Contractor, or which results from Contractor's noncompliance with any Law
respecting the condition, use, occupation or safety of the Project site, or any part thereof, or which arises from
Contractor's failure to do anything required under this Contract or for doing anything which Contractor is required
not to do under this Contract, or which arises from conduct for which any Law may impose strict liability on
Contractor in the performance of or failure to perform the provisions of this Contract, except as may arise from
the sole willful acts or negligent acts or omissions of City or any of its Council members, officers, employees,
agents or representatives. This indemnification shall extend to any and all claims, demands, or liens made or
filed by reason of any work performed by Contractor under this Contract at any time during the term of this
Contract, or arising thereafter.
To the extent Contractor will use hazardous materials in connection with the execution of its obligations under
this Contract, Contractor further expressly agrees to protect, indemnify, hold harmless and defend City, its City
Council members, officers and employees from and against any and all claims, demands, liabilities, losses,
damages, costs, expenses, liens, penalties, suits, or judgments City may incur, arising, in whole or in part, in
connection with or as a result of Contractor's willful acts or negligent acts or omissions under this Contract, under
the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. 339601-6975, as
amended); the Resource Conservation and Recovery Act (42 U.S.C. cn6901-6992k, as amended); the Toxic
Substances Control Act (15 U.S.C. 332601-2692, as amended); the Carpenter-Presley-Tanner Hazardous
Substance Account Act (Health & Safety Code, 3325300-25395, as amended); the Hazardous Waste Control
Law (Health & Safety Code, 3325100-25250.25, as amended); the Safe Drinking Water and Toxic Enforcement
Act (Health & Safety Code, 3325249.5-25249.13, as amended); the Underground Storage of Hazardous
Substances Act (Health & Safety Code, 3325280-25299.7, as amended); or under any other local, state or
federal law, statute or ordinance, or at common law.
7. Assumption of Risk. Contractor agrees to voluntarily assume any and all risk of loss, damage, or injury to the
property of Contractor which may occur in, on, or about the Project site at any time and in any manner, excepting
such loss, injury, or damage as may be caused by the sole willful act or negligent act or omission of City or any
of its Council members, officers, employees, agents or representatives.
8. Waiver. The acceptance of any payment or performance, or any part thereof, shall not operate as a waiver by
City of its rights under this Contract. A waiver by City of any breach of any part or prOVision ofthis Contract by
Contractor shall not operate as a waiver or continuing waiver of any subsequent breach of the same or any other
provision, nor shall any custom or practice which may arise between the parties in the administration of any part
or provision of this Contract be construed to waive or to lessen the right of City to insist upon the performance of
Contractor in strict compliance with the covenants, terms and conditions of this Contract.
9. No Exoneration By Inspection: The City has the right, but notthe duty, to inspect Contractor's Work. The right of
inspection is solely for the benefit of City. Contractor has the obligation to complete the Work in a satisfactory
manner in compliance with Contract requirements. The presence of a City inspector does not shift that obligation
to the City or relieve Contractor from its obligations to complete the Work in a satisfactory manner in compliance
with the Contract requirements.
10. Compliance with Laws. Contractor shall comply with all Laws now in force or which may hereafter be in force
pertaining to the Project and Work and this Contract, with the requirement of any bid security or fire underwriters
or other similar body now or hereafter constituted, with any discretionary license or permit issued pursuant to any
Law of any public agency or official as well as with any provision of all recorded documents affecting the Project
site, insofar as any are required by reason of the use or occupancy of the Project site, and with all Laws
pertaining to nondiscrimination in employment and hazardous materials.
11. Bid Security Bonds. As a condition precedent to City's obligation to pay compensation to Contractor, and on or
CITYOFPALOALTOC10131112 PAGE 2 OF7
rev. 12/00
before the Date of Execution, Contractor shall furnish to the Project Manager the Bid Security as required under
the Invitation For Bid.
12. Representations and Warranties. In the supply of any materials and equipment and the rendering of labor and
services during the course and scope of the Project and Work, Contractor represents and warrants:
a. Any materials and equipment which shall be used during the course and scope ofthe Project and Work
shall be vested in Contractor;
b. Any materials and equipment which shall be used during the course and scope of the Project and Work
shall be merchantable and fit to be used for the particular purpose for which the materials are required;
c. Any labor and services rendered and materials and equipment used or employed during the course and
scope of the Project and Work shall be free of defects in workmanship for a period of one (1) year after
the recordation of the Notice of Substantial Completion, or, if no such notice is required to be filed, on
the date that final payment is made hereunder;
d. Any manufacturer's warranty obtained by Contractor shall be obtained or shall be deemed obtained by
Contractor for and in behalf of City.
e. Any information submitted by Contractor prior to the award of Contract, or thereafter, upon request,
whether or not submitted under a continuing obligation by the terms ofthe Contract to do so, is true and
correct at the time such information is submitted or made available to the City;
f. Contractor has not colluded, conspired, or agreed, directly or indirectly, with any person in regard to the·
terms and conditions of Contractor's Bid, except as may be permitted by the Invitation For Bid;
g. Contractor has the power and authority to enter into this Contract with City, that the individual executing
this Contract is duly authorized to do so by appropriate resolution, and that this Contract shall be
executed, delivered and performed pursuant to the power and authority conferred upon the person or
persons authorized to bind Contractor;
h. Contractor has not made an attempt to exert undue influence with the Purchasing Manager or Project
Manager or any other person who has directly contributed to City's decision to award the contract to
Contractor;
I. There are no unresolved claims or disputes between Contractor and City which would materially affect
Contractor's ability to perform under the Contract;
j. Contractor has furnished and will furnish true and accurate statements, records, reports, resolutions,
certifications, and other written information as may be requested of Contractor by City from time to time
during the term of this Contract;
k. Contractor and any person performing labor and services under this Project are duly licensed by the
State of California as required by California Business & Professions Code Section 7028, as amended;
and
r. Contractor has fully examined and inspected the Project site and has full knowledge of the physical
conditions of the PrOject site.
13. Assignment. This Contract and the performance required hereunder is personal to Contractor, and it shall not be
assigned by Contractor. Any attempted assignment shall be null and void.
14. Claims of Contractor. All claims pertaining to extra work, additional charges, or delays within the Contract Time
or other disputes arising out of the Contract shall be submitted by Contractor to City in writing by certified or
registered mail within ten (10) Days after the claim arose or within such other time as may be permitted or
required by law, and shall be described in suffiCient detail to give adequate notice of the SUbstance of the claim
to City.
CITY OF PALO ALTO C10131112
rev. 12100
PAGE 3 OF7
15. Audits by City. During the term of this Contract and for a period of not less than three (3) years after the
expiration or earlier term ination ofthis Contract, City shall have the right to audit Contractor's Project-related and
Work-related writings and business records, as such terms are defined in California Evidence Code Sections 250
and 1271, as amended, during the regular business hours of Contractor, or, if Contractor has no such hours,
during the regular business hours of City.
16. Notices. All agreements, appointments, approvals, authorizations, claims, demands, Change Orders, consents,
designations, notices, offers, requests and statements given by either party to the other shall be in writing and
shall be sufficiently given and served upon the other party if (1) personally served, (2) sent by the United States
mail, postage prepaid, (3) sent by private express delivery service, or (4) in the case of a facsimile transmission,
if sent to the telephone FAX number set forth below during regular business hours of the receiving party and
followed within two (2) Days by delivery of a hard copy of the material sent by facsimile transmission, in
accordance with (1), (2) or (3) above. Personal service shall include, without limitation, service by delivery and
service by facsimile transmission.
To City:
Copy to:
To Contractor:
City of Palo Alto
City Clerk
250 Hamilton Avenue
P.O. Box 10250
Palo Alto, CA 94303
City of Palo Alto
Dept -Utility
Division -Engineering
Address -1007 Elwell Court
Palo Alto, CA 94303
Jim Thompson, Project Manager
Casey Construction. Inc.
620 Handley Trail
Emerald Hills. CA 94062
Attn: Mel Casey
17. Appropriation of City Funds. This Contract is subject to the fiscal provisions of Article III, Section 12 of the
Charter ofthe City of Palo Alto. Any charges hereunder for labor, services, materials and equipment may accrue
only after such expenditures have been approved in advance in writing in accordance with applicable Laws. This
Contract shall 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 year and funds for this Contract are no longer available. This Section 17
shall control in the event of a conflict with any other provision of this Contract.
18. Miscellaneous.
a. Bailee Disclaimer. The parties understand and agree that City does not purport to be Contractor's
bailee, and City is, therefore, not responsible for any damage to the personal property of Contractor.
b. Consent. Whenever in this Contract the approval or consent of a party is required, such approval or
consent shall be in writing and shall be executed by a person having the express authority to grant such
approval or consent.
c. ContrOlling Law. The parties agree that this Contract shall be governed and construed by and in
accordance with the Laws of the State of California.
d. Definitions. The definitions and terms set forth in Section 1 of the City of Palo Alto Dept. of Public
Works Standard Drawings and Specifications (1992) of this Contract are incorporated herein by
CITY OF PALO ALTO C10131112
rev. 12100
PAGE 4 OF7
reference.
e. Force Majeure. Neither party shall be deemed to be in default on account of any delay or failure to
perform its obligations under this Contract which directly results from an Act of God or an act of a
superior governmental authority.
f. Headings. The paragraph headings are not a part of this Contract and shall have no effect upon the
construction or interpretation of any part of this Contract.
g. Incorporation of Documents. All documents constituting the Contract documents described in Section 3
hereof and all documents which may, from time to time, be referred to in any duly executed amendment
hereto are by such reference incorporated in this Contract and shall be deemed to be part of this
Contract.
h. Integration. This Contract and any amendments hereto between the parties constitute the entire
agreement between the parties concerning the Project and Work, and there are no other prior oral or
written agreements between the parties that are not incorporated in this Contract.
I. Modification of Agreement. This Contract shall not be modified or be binding upon the parties, unless
such modification is agreed to in writing and signed by the parties.
j. Provision. Any agreement, covenant, condition, clause, qualification, restriction, reservation, term or
other stipulation in the Contract shall define or otherwise control, establish, or limit the performance
required or permitted or to be required of or permitted by either party. All provisions, whether
covenants or conditions, shall be deemed to be both covenants and conditions.
k. Resolution. Contractor shall submit with its Bid a copy of any corporate or partnership resolution or
other writing, which authorizes any director, officer or other employee or partner to act for or in behalf of
Contractor or which authorizes Contractor to enter into this Contract.
I. Severability. If a court of competent jurisdiction finds or rules that any provision of this Contract is void
or unenforceable, the provisions of this Contract not so affected shall remain in full force and effect.
m. Status of Contractor. In the exercise of rights and obligations under this Contract, Contractor acts as
an independent contractor and not as an agent or employee of City. Contractor shall not be entitled to
any rights and benefits accorded or accruing to the City Council members, officers or employees of
City, and Contractor expressly waives any and all claims to such rights and benefits.
n. Successors and Assigns. The provisions of this Contract shall inure to the benefit of, and shall apply to
and bind, the successors and assigns of the parties.
o. Time of the Essence. Time is of the essence of this Contract and each of its provisions. In the
calculation of time hereunder, the time in which an act is to be performed shall be computed by
excluding the first Day and including the last. If the time in which an act is to be performed falls on a
Saturday, Sunday, or any Day observed as a legal holiday by City, the time for performance shall be
extended to the following Business Day.
p. Alternative Dispute Resolution. The parties shall endeavor to resolve any disputes or claims arising out
of or relating to this Contract by mediation, which, unless the parties agree otherwise, shall be
conducted under the auspices of the Judicial Arbitration and Mediation Service (JAMS), San Jose,
California. The intent of the parties is that the mediation shall proceed in advance of litigation; however,
if any party should commence litigation before the conclusion of mediation, such litigation, including
discovery, shall be stayed pending completion of mediation, and by executing this Contract the parties
stipulate to mediation in accordance with Santa Clara County Superior Court Local Rule 1.15 or Rule 2-
3(b) of the ADR Local Rules of the U. S. District Court for the Northern District of California, as such
rules may be amended from time to time. The parties shall share the cost of the mediation, including
the mediator's fee, equally. Any written agreement reached in mediation shall be enforceable pursuant
to California Code of Civil Procedure § 664.6, as amended.
CITY OF PALO ALTO C10131112
rev. 12100
PAGES OF7
q. Venue. Unless the parties mutually agree otherwise, mediation shall take place in San Jose, California.
In the event that litigation is commenced by any party hereunder, the parties agree that such action
shall be vested exclusively in the state courts of California in the County of Santa Clara or in the United
States District Court for the Northern District of California.
r. Recovery of Costs. Each Party shall bear its own costs, including attorney's fees, through the
completion of mediation. If the claim or dispute is not resolved through mediation, or if litigation is
necessary to enforce a settlement reached at mediation pursuant to California Code of Civil Procedure
§ 664.6, as amended, then the prevailing party in any subsequent litigation may recover its reasonable
costs, including attorney's fees, incurred subsequent to conclusion of the mediation.
s. Flow-down. Contractor agrees to include provisions of this Contract relating to Altemative Dispute
Resolution, Venue. and Recovery of Costs in any subcontracts or major material purchase agreements
which it enters into in connection with this Contract, and to require its subcontractors to include those
provisions in any sub-contracts or major material purchase agreements, such that any mediation or
litigation of any claim or dispute asserted by a subcontractor or major material supplier will be
consolidated with any related claim or dispute between the Contractor and the City. Should the
Contractor fail to do so, such that the City is required to defend an action brought by a subcontractor or
material supplier inconsistent with the Alternative Dispute and Venue provisions of this Contract,
Contractor shall indemnify City for City's costs of defense, including reasonable attorney's fees.
IN WITNESS WHEREOF, the parties have by their duly appointed representatives executed this Contract in the city of
Palo Alto, County of Santa Clara, State of California on the date first stated above.
CITY OF PALO ALTO
APPROVED
City Manager
APPROVED AS TO FORM:
Senior Asst. City Attorney
CITY OF PALO ALTO C10131112
rev. 12100
CASEY CONSTRUCTION, INC.
8y: ________________ _
Name: __________________ _
PAGE 6 OF7
CERTIFICATE OF ACKNOWLEDGMENT
(Civil Code 3 1189)
STATE OF ___________ ,
COUNTY OF _________ -1
On _______________ , before me, _______________ ,a
notary public in and for said County, personallyappeared, ________________ ,
personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the
same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the
person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature _________________ _
CITY OF PALO ALTO C10131112
rev. 12100
(Seal)
PAGE 7 OF7
BID SUMMARY
-------l Invitation For Bids 131112
Title 2009-10 Utility Trench and Substructure Installation
,----~~~~~
6/16/2009
Li~!~fBidders (Company Name) Base Bid Total First Renewal Second Renewal
--------
Cast;y Construction $652,066.00 $684,669.30 $718,902.77
Irish Construction $1,098,449.49 $1,153,371.96 $1,211,040.56
Lewis & Tibbits $1,082,704.44 $1,190,974.88 ~L299,~45 .33
West Valley $1,226,722.00 $1,263,523.66 $1,301,429.37
Underground Construction $1,239,462.00 $1,301,435.10 $1,363,408.20
Attachment B
CITY OF PALO ALTO
-------
-----------~~~ ~ ~ ~ ~ ~~~-~~~~
----------
Total
~~-,-Q55,638.07
$3,462,862.02
$3,572,924.65
~~~~~ c-~~~ -------~3,791,675.03
$3,904,305.30
-------
~-~~
:x:-
--I --I :x:-
C'"':) ::c :s:: rn :=ii2!:
--I
t::C
ATT ACHMENT C
CERTIFICATION OF NONDISCRIMINATION FORM 410
PROJECT: 2009·2010 UTILITY TRENCH AND SUBSTRUCTURE INSTALI.ATION
Certification of Nondiscrimination: As suppliers of goods andJor services to the City of Palo Alto in ~xcess
of $5,000, the firm, contractor or Indlvldual(s) lis led below certify that: they do not and in the performance of
. "; ,;'ttlis contract they will not discriminate In employment of any person because of race, skin color, gender, age,
religion. disability, national or1g1n.,ancestry, sexual orientation, housing status. marital status, familial status.
weight or height of such person; and further certify that they are In compliance with all Federal. State and local
directives and executive orders regarding nondiscrimination In. employment.
.. ~.
Firm: C'a~eRl C' OM~~\on~\X\C..... , .
Tille of Officer Signing: .~ r
~ignature: '~ ~ ~ .
, "., " ..
f" •
CITY OF PALO ALTO IFB 131112
. DATE: ::S:u.<:'e 9.. accf\ \
PAGE 1 OF 1
TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: UTILITIES
DATE: AUGUST 3, 2009 CMR: 343:09
REPORT TYPE: CONSENT
SUBJECT: Finance Committee Recommendation to Adopt a Resolution Approving
the Ameresco Johnson Canyon Landfill Gas Renewable Energy Power
Purchase Agreement for the Acquisition of Up to Two Average
Megawatts of Energy Over Twenty Years at an Estimated Cost Not to
Exceed $30 Million
RECOMMENDA TION
Staff and the Finance Committee recommend that Council adopt a resolution approving the
Power Purchase Agreement (PPA) with Ameresco Johnson Canyon LLC, a Delaware limited
liability company. Additionally, for this agreement, staff and the Finance Committee
recommend the Council waive the application of the investment-grade credit rating requirement
of Section 2.30.340(d) of the Palo Alto Municipal Code to this transaction.
BACKGROUND
One of the Council-adopted Long-term Electric Acquisition Plan (LEAP) Guidelines is to meet
33 percent of the City's electrical load with renewable resources by 2015, while ensuring the
retail rate impact does not exceed 0.5 cents per kilowatt-hour (¢/kWh) on average, or
approximately 5 percent of the average retail rate premium (CMR: 158:07).
By 2010, the City expects to meet 20 percent of the City's annual electrical usage with
renewable resources with minimal impact on retail rates, thus needing approximately 13 percent
of annual usage to meet the 33 percent renewable portfolio goal by 2015. The City issued a
Request for Proposals (RFP) in March 2009 for renewable electric power supplies. The proposal
from Ameresco Johnson Canyon LLC is deemed to be one of the best and, since the City already
has several current PPAs with Ameresco, the contract details were completed relatively quickly.
DISCUSSION
Ameresco owns and operates several landfill gas-fired plants in the greater Bay Area and Palo
Alto currently has PPAs with four other Ameresco landfill gas-fired power projects. This project
is to be built at Johnson Canyon Landfill in Gonzales, California.
Under the PPA, the City would receive and pay for the entire net output from the 1.4 Megawatt
(MW) first unit. The expected output is equal to about 11,200 Megawatt-hours (MWh) per year,
CMR: 343:09 Page 1 of 4
an amount roughly equal to 1.1% of the City's total electric load. The City would pay for actual
output delivered for a starting price of 10.9 cents per kilowatt-hour (kWh) escalating at 1.5% per
year for a term of 20 years. The price is approximately equal to the Market Price Referent
(MPR) that is used by the California Public Utilities Commission (CPUC) when evaluating bids
submitted by the state's investor-owned utilities, such as the Pacific Gas and Electric Company.
After the initial project is built and operational in 2010, Ameresco expects to expand it
approximately every four years as increased amounts of landfill gas are produced by the growing
landfill. The PPA allows Ameresco to sell to Palo Alto the output from any future expansions at
the project at a 15% discount to the then current MPR for alternative generation. Thus, Palo Alto
is committed to buy from Ameresco the output from any future expansions at the project only if
Ameresco offers them at a rate of 85% of the then current MPR for alternative generation, up to
a maximum price of $150 per MWh. The expansions could result in Palo Alto receiving up to 7
MW of the expansions (5 additional 1.4 MW expansions over the 20 year term of the PPA). This
would equate to approximately an additional 5.5% of the City's current total electric load. A
new PPA would be developed for each of the expansions and each one would require Council
approval.
If Ameresco cannot, or chooses not to, sell the output from the expansions for 85% of the MPR,
Palo Alto is neither committed to take, nor to pay for, the output from the expansions. However,
Palo Alto has the right of first refusal on a price for which Ameresco is willing to sell the output
of the expansions.
The City has previously executed four contracts with Ameresco, and the completion of this PP A
would increase Ameresco's total share of renewable energy deliveries to 91.6 gigawatt hours per
year, about 9% of the City's electric needs. Ameresco's share of the City's renewable energy
purchases is a relatively high percentage of the City's committed eligible renewable energy
contract volumes to date, but the risks to the City are mitigated by a number of factors including
the City's step-in rights to operate the plants in the event of default, the absence of a cross-
default provision, which isolates each contract from default of one of the other contracts, and
Ameresco's positive record of performance with the City.
Ameresco is a relatively small company that does not have a credit rating by Moody's Investor
Services or Standard and Poor's. Ameresco is a rapidly growing company and, as such, does
face some of the stresses inherent in rapid growth. These stresses have led to an increase in the
estimated default frequency (EDF) from 0.4% to 1.1% based on staff analysis of the 2007 and
2008 audited financial reports. Despite this increase in risk, Ameresco does demonstrate
continued financial strength in several areas given its size and growth, and when compared with
many other renewable energy companies.
Since energy deliveries will be tied to a specific generator at a specific location, in contrast to
market contracts whose deliveries are often backed by the financial strength or collateral of
companies rather than a physical asset, staff recommends that the Council waive the investment-
grade credit requirement for public agency contracts required under Section 2.20.340 (d) of the
Palo Alto Municipal Code. This conforms to Council action on prior renewable resource
contracts with similar characteristics (CMR: 461:04). This waiver is intended to benefit only
small but sound companies that do not have credit ratings. The agreement between Palo Alto
and Ameresco (Attachment C) was reviewed by Utilities staff, the City Attorney's office, and the
CMR: 343:09 Page 2 of 4
Energy Risk Manager to determine that the combination of value, price, terms, creditworthiness
of provider, and credit assurances warrant Palo Alto's participation.
COMMITTEE REVIEW AND RECOMMENDATIONS
The Finance Committee considered the contract on July 21,2009 (Attachment B: CMR: 305:09).
The committee discussed the current high prices for renewable power compared to renewable
power contracts entered into in 2005 and 2006. They stated that these high prices should prompt
a review of the policies and guidelines related to the acquisition of renewable power and the
emphasis on efficiency improvements that could reduce electricity use. Staff advised that such a
review was already underway and that the Utilities Advisory Commission would first review and
make recommendations to Council for any changes to policies, guidelines, or resource or
efficiency plans. A report requesting Council direct staff to conduct this review is also under
consideration by the Council on August 3,2009 (CMR: 342:09).
The Finance Committee voted unanimously (3-0) to recommend that the City Council adopt a
resolution approving the Power Purchase Agreement (PPA) with Ameresco Johnson· Canyon
LLC, a Delaware limited liability company. Additionally, for this agreement, staff recommends
the Council waive the application of the investment-grade credit rating requirement of Section
2.30.340(d) of the Palo Alto Municipal Code to this transaction. The notes from the Finance
Committee meeting are provided as Attachment D.
RESOURCE IMPACT
The cost of renewable supplies under the agreement is expected to be about $90 million over 20
years if all expansions are completed. The annual expected cost is $1.2 million in the first year
with the cost escalating 1.5% per year over the 20-year term of the PPA. The initial plant and
PPA is expected to have a total 20-year cost of about $28 million. The additional $62 million in
total future costs assumes that expansions are built about every 4 years and that the MPR
escalates at about 1.5% per year. However, each of these expansions would require separate
PPAs to be approved by Council prior to execution.
Staff does not expect this PPA to push the portfolio beyond the 0.5¢/kWh limit RPS guideline
adopted by Council. The PPA costs about $500,000 per year more than the cost of non-
renewable power, adding about 0.05¢/kWh, or about 10% of the allowed guideline limit adopted
by Council.
POLICY IMPLICATIONS
Adoption of this resolution allows the City to participate in the agreement to purchase renewable
energy and thereby is consistent with one of Council's top three priorities of Environmental
Protection.
ENVIRONMENTAL REVIEW
Execution of the agreement does not meet the definition of a project, pursuant to section 21065
of the California Environmental Quality Act (CEQA). However, the City intends to receive
output from projects that will constitute a project for the purposes of CEQA. Project developers
will be responsible for acquiring necessary environmental reviews and permits on projects to be
developed.
CMR: 343:09 Page 3 of 4
ATTACHMENTS
A. Resolution approving Renewable Energy Power Purchase Agreement between Palo Alto
and Ameresco
B. CMR: 305:09 Adoption of a Resolution Approving the Ameresco Johnson Canyon
Landfill Gas Renewable Energy Power Purchase Agreement for the Acquisition of Up to
Two Average Megawatts of Energy Over Twenty Years at an Estimated Cost Not to
Exceed $30 Million (without attachments)
C. Renewable Energy Power Purchase Agreement between Palo Alto and Ameresco
D. Draft excerpted notes from the July 21,2009 Finance Committee meeting
PREPARED BY: ~OMKABAT W Senior Resource Originator
olrANE RA TCHYE \J Assistant Director, Resource Management
VALE~NG
REVIEWED BY:
DEPARTMENT APPROVAL:
CITY MANAGER APPROVAL:
JAMES KEENE
City Manager
CMR: 343:09 Page 4 of 4
Not Yet Approved All ACHMENl A
Resolution -----
Resolution of the Council of the City of Palo Alto Approving
the Long Term Power Purchase Agreement (Landfill Gas
Power) with Ameresco Johnson Canyon L.L.C. for the
Purchase of Electricity Generated by Landfill Gas Electric
Generating Facilities
WHEREAS, the City of Palo Alto("City"), a municipal utility and a chartered city
is a member of the Northern California Power Agency ("NCP A");
WHEREAS, on March 5, 2007, the City approved eight electric portfolio
planning and management guidelines to guide the development and management of the
City's long-term electricity acquisition plan; one of the guidelines is to pursue and target
levels of new renewable resource energy purchases equal to thirty percent and thirty three
percent of the City's expected energy load by 2012 and 2015, respectively;
WHEREAS, the City is interested in purchasing power generated by renewable
resources for the benefit of its electric customers;
WHEREAS, by purchasing these sources of renewable energy, the City will help
reduce the production of greenhouse gases and assist in reducing volatile organic
compound emissions;
WHEREAS, Ameresco Johnson Canyon L.L.C. proposed its project in response
to the City's Request for Proposals 130699 in March 2009 and it was competitive with
other RFP respondents;
WHEREAS, executing a power purchase agreement with Ameresco Johnson
Canyon L.L.C. will not eliminate the City's need for renewable energy from other RFP
respondents;
WHEREAS, the City is allocated a 100 percent share of the power from the initial
project, amounting to 1.4 megawatts plant net output;
WHEREAS, the power purchase agreement allows Ameresco Johnson Canyon
L.L.C. to sell the City additional output, if developed, at 85% of the applicable Market
Price Referent;
WHEREAS, Monterey County will be the lead agency for the purposes of
California Environmental Quality Act ("CEQA");
NOW, THEREFORE, the Council of the City of Palo Alto hereby RESOLVE as
follows:
The Council hereby approves the City'S execution of the Long
Term Power Purchase Agreement (Landfill Gas Power) made between Ameresco
090630 jb 0073186 1
Not Yet Approved
Johnson Canyon L.L.C., as Seller and the City of Palo alto, as Purchaser. The Term of
the contract is 20 years, commencing on the Commercial Operation Date of the proposed
generation facility. Quantity is a 100 percent share of the 1.4 average megawatt plant net
output. Spending authority under the contract is up to thirty million dollars
($30,000,000). The City Manager or his designee is hereby authorized to sign the
contract with Ameresco Johnson Canyon L.L.C. on behalf of the City.
SECTION 2. With respect to the Council's award of the Long Term Power
Purchase Agreement referred to in Section 1 above, the Council hereby waives the choice
of venue and credit rating terms and conditions requirements of Palo Alto Municipal
Code section 2.30.340(c).
The Council finds that the adoption of this resolution does not
constitute a project under the California Environmental Quality Act and no
environmental assessment is required.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENTIONS:
ABSENT:
ATTEST:
City Clerk
APPROVED AS TO FORM:
Senior Asst. City Attorney
090630 jb 0073186 2
APPROVED:
Mayor
City Manager
Director of Utilities
Director of Administrative
Services
ATTACHMENT B
TO: HONORABLE CITY COUNCIL
ATTN: FINANCE COMMITTEE
FROM: CITY MANAGER DEPARTMENT: UTILITIES
DATE: JUL Y 21, 2009 CMR: 305:09
SUBJECT: Adoption of a Resolution Approving the Ameresco Johnson Canyon Landfill
Gas Renewable Energy Power Purchase Agreement for the Acquisition of Up
to Two Average Megawatts of Energy Over Twenty Years at an Estimated
Cost Not to Exceed $30 Million
RECOMMENDATION
Staff recommends that the Finance Committee recommend that Council adopt a resolution
approving the Power Purchase Agreement (PPA) with Ameresco Johnson Canyon LLC, a
Delaware limited liability company. Additionally, for this agreement, staff recommends the
Council waive the application of the investment-grade credit rating requirement of Section
2.30.340(d) ofthe Palo Alto Municipal Code to this transaction.
BACKGROUND
In 2002, the Council adopted a renewable resource portfolio standard with the objective of
meeting 20 percent of the City'S electrical load with renewable resources by 2015, while
ensuring the retail rate impact does not exceed 0.5 cents per kilowatt-hour (¢/kWh) on average,
or approximately 5 percent of the average retail rate premium (CMR:398:02).
In March 2007, the Council advanced and increased the Renewable Portfolio Standard (RPS)
with a target to meet 20 percent of City loads with renewable resources by 2008 and 33 percent
by 2015. The new target was to be achieved while maintaining the retail rate impact measure of
0.5¢/kWh (CMR:158:07). It should be noted that California's RPS measure excludes large
hydroelectric resources that account for approximately 50 percent of the City's electric supply in
an average hydro year. If the City was able to include its hydroelectric resources in the RPS
calculation, approximately 68% of the load would currently be met with renewable resources.
The City expects to meet the 20 percent RPS goal by 2010 (about two years later than targeted)
with minimal impact on retail rates. The City is still seeking new renewable energy equal to
approximately 13% of annual usage to meet the 33 percent renewable portfolio goal by 2015.
The City issued a Request for Proposals (RFP) in March 2009 for renewable electric power
supplies. Sixteen project proposals were received by the RFP closing date of April 28, 2009.
CMR: 305:09 Page 1 of4
Staff is still evaluating some of the proposals and negotiating with some of the proposers. The
proposal from Ameresco Johnson Canyon LLC is deemed to be one of the best and, since the
City already has several current PPAs with Ameresco, the contract details were able to be
completed relatively quickly.
DISCUSSION
Ameresco owns and operates several landfill gas-fired plants in the greater Bay Area and is
executing a landfill gas fuel agreement with the Johnson Canyon Landfill in Gonzales,
California. The project was proposed in Palo Alto's 2009 RFP process. Palo Alto currently has
PPAs with four other Ameresco landfill gas-fired power projects. As a result of negotiations,
Ameresco would like to enter into a new PP A with the City to sell the full output of the first unit
at Johnson Canyon to Palo Alto for a price starting at 10.9¢/kWh and escalating at 1.5% per year
for a term of 20 years. The price is approximately equal to the Market Price Referent (MPR) that
is used by the California Public Utilities Commission (CPUC) when evaluating bids submitted
by the state's investor-owned utilities, such as the Pacific Gas and Electric Company. If bid
prices are at or below the MPR, then they are accepted as per se reasonable by the CPUC.
Therefore, the MPR acts as a market price benchmark for renewable power supplies.
The plant would be built by Ameresco and would qualifY as a renewable power project under
State-adopted definitions. It would be electrically connected to the transmission system operated
by the California Independent System Operator. Under the terms of the PP A, Palo Alto would
pay predetermined rates over the term of the agreement for any energy delivered. If delivered
volumes should decline, Palo Alto's payments to Ameresco would be reduced proportionately,
freeing up money to purchase replacement renewable energy from other sources.
Palo Alto would receive and pay for the entire net output from the 1.4 Megawatt (MW) plant.
The expected plant output is equal to about 1.28 average MWs, or 11,200 Megawatt-hours
(MWh) per year, an amount roughly equal to 1.1 % of the City's total electric load.
The project has a relatively high initial cost to develop the site and the interconnections needed
to operate the first engine. After the initial project is built and operational in 2010, Ameresco
expects to be able to expand it approximately every four years as increased amounts of landfill
gas are produced by the growing landfilL The expansions are envisioned as an additional 1.4
MW engine and generator set each time there is sufficient gas to support its operation.
The PP A allows Ameresco to sell to Palo Alto the output from any future expansions at the
project at a 15% discount to the then current MPR for alternative generation. This arrangement
means that Palo Alto is committed to buy from Ameresco the output from any future expansions
at the project at a rate of 85% of the then current MPR for alternative generation, up to a
maximum price of $150 per MWh. A risk of this arrangement is that the future MPR is not
known and could be very high relative to the then current market prices for renewable power.
Staff does not believe the risk is high and anticipates a continued seller's market for renewable
electricity. In addition, the risk is mitigated in the PPA by the maximum price of $150 per
MWh. This discount recognizes Palo Alto's assistance in bringing the initial project to fruition.
Just like the initial plant, if the expansions do not deliver power to Palo Alto, the City will not
have to pay for their output. The expansions could result in Palo Alto receiving up to 7 MW of
the expansions (5 additional 1.4 MW expansions over the 20 year term of the PPA). A new PPA
would be developed for each of the expansions and each one would require Council approval.
CMR: 305:09 Page 2 of4
If Ameresco cannot, or chooses not to, sell the output of the expansions for 85% of the MPR,
Palo Alto is not committed to take, nor to pay for, the output from the expansions. However,
Palo Alto has the right of first refusal on a price for which Ameresco is willing to sell the output
of the expansions. This means that if Ameresco offers the output to another party at a particular
price, Palo Alto can choose to take the output at the offered price.
The City has previously executed 4 contracts with Ameresco, and the completion of the Johnson
Canyon contract would increase Ameresco's share of delivery of renewable energy to 9l.6
gigawatt hours per year, about 9% of the City's electric needs or about 37% of the City's RPS
committed contract volume to date. Ameresco' s share of renewable generation purchases by the
City is relatively high, but the risks to the City are mitigated by a number of factors including the
City's step-in rights to operate the plant in the event of default, the absence of a cross-default
provision, which isolates each contract from default of one of the other contracts, and
Ameresco's record of performance with the City.
Ameresco is a relatively small company that does not have a credit rating by Moody's Investor
Services or Standard and Poor's. Ameresco is a rapidly growing company and as such does face
some of the stresses inherent in rapid growth. These stresses have led to an increase in the
estimated default frequency (EDF) from 0.4% to l.1 % based on staff analysis of the 2007 and
2008 audited financial reports. Despite this increase in risk, Ameresco does demonstrate
continued financial strength in several areas given its size and growth, and when compared with
many other renewable energy companies.
Since energy deliveries will be tied to a specific generator at a specific location, in contrast to
market contracts whose deliveries are often backed by the financial strength or collateral of
companies rather than a physical asset, staff recommends that the Council waive the investment-
grade credit requirement for public agency contracts required under Section 2.20.340 (d) of the
Palo Alto Municipal Code. This conforms to Council action on prior renewable resource
contracts with similar characteristics (CMR: 461 :04). This waiver is intended to benefit only
small but sound companies that do not have credit ratings. Palo Alto has had a positive
experience to date with Ameresco in regards to its four existing landfill gas-to-energy
agreements that provide a total of 9 MW. The agreement between Palo Alto and Ameresco
(Attachment B) was reviewed by Utilities staff, the City Attorney's office, and the Energy Risk
Manager to determine that the combination of value, price, terms, creditworthiness of provider,
and credit assurances warrant Palo Alto's participation .
. RESOURCE IMPACT
The cost of renewable supplies under the agreement is expected to be about $90 million over 20
years if the expansions are all completed. The annual expected cost is $1.2 million in the first
year with the cost escalating 1.5% per year over the 20-year term of the PPA. The initial plant
and PPA is expected to have a total 20-year cost of about $28 million. The additional $62
million in total future costs assumes that expansions are built about every 4 years and that the
MPR escalates at about 1.5% per year. However, each of these expansions would require
separate PP As to be approved by Council prior to execution.
Staff does not expect this PPA to push the portfolio beyond the 0.5¢/kWh limit RPS guideline
adopted by Council. The PPA costs about $500,000 per year more than the cost of non-
renewable power, adding about 0.05¢/kWh, or about 10% of the allowed guideline limit adopted
by Council.
CMR: 305:09 Page 3 of4
POLICY IMPLICATIONS
Adoption of this resolution allows the City to participate in the agreement to purchase renewable
energy and thereby is consistent with the Council's Top Four Priority of Environmental
Protection. Participating in the agreement is also consistent with the following City policies and
guidelines:
1. The Council-approved Climate Protection Plan, adopted December 3, 2007, containing
Utilities Goal 2: Reduce carbon intensity of energy supply provided by Utilities;
2. The Council-approved Utilities Strategic Plan with regard to employing balanced
environmental solutions;
3. The energy risk management policies;
4. The rate impact limits and the renewable portfolio targets ill Long-term Electric
Acquisition Plan Guideline (LEAP) #6;
5. The portfolio diversification goals in LEAP Guideline #3;
6. The City's Sustainability Policy Statement, adopted April 2, 2001 (CMR 175:01) and
revised June 18, 2007 (CMR 260:07);
7. The Green Government Pledge, adopted July 19, 1999 (CMR 284:99);
8. The US Mayors' Climate Protection Agreement; and
9. The Comprehensive Plan, specifically:
a. GOAL N-9: A clean, efficient, competitively-priced energy supply that makes use of
cost-effective renewable resources.
b. POLICY N-44: Maintain Palo Alto's long-term supply of electricity and natural gas
while addressing environmental and economic concerns.
c. POLICY N-48: Encourage the appropriate use of alternative energy technologies.
ENVIRONMENTAL REVIEW
Execution of the agreement does not meet the definition of a project, pursuant to section 21065
of the California Environmental Quality Act (CEQA). However, the City intends to receive
output from projects that will constitute a project for the purposes of CEQA. Project developers
will be responsible for acquiring necessary environmental reviews and permits on projects to be
developed.
ATTACHMENTS
A: Resolution approving Renewable Energy Power Purchase Agreement between Palo Alto and
Ameresco
B: Renewable Energy Power Purchase Agreement between Palo Alto and Ameresco
PREPARED BY:
REVIEWED BY:
DEPARTMENT APPROVAL:
CITY MANAGER APPROVAL:
CMR: 305:09
TOM KABAT
Senior Resource Originator
JANE RATCHYE
Assistant Director, Resource Management
VALERIE O. FONG
Director of Utilities
JAMES KEENE
City Manager
Page 4 of4
ATTACHMENT C
POWER PURCHASE AGREEMENT
This Power Purchase Agreement is entered into this __ day of ___ _
2009 by and between The City of Palo Alto, a California chartered municipal
corporation and Arneresco Johnson Canyon LLC, a Delaware limited liability
company.
RECITALS
1. Seller intends to develop, finance, build, own and operate a Landfill Gas
electric generating facility to be located at the Johnson Canyon Landfill (the
"Landfill") located at 31400 Johnson Canyon Road, Gonzales, California, on a
site leased from SVSWA, which owns the LandfilL
2. Buyer is engaged in the procurement and supply of electricity to residential
and commercial customers in the City of Palo Alto.
3. Buyer wishes to purchase a portion of the Output of the Plant and intends to
resell related Energy to its residential and commercial customers.
4. Buyer is willing to purchase, and Seller is willing to sell, a portion of the
Output of the Plant, on the terms and conditions and at the prices set forth in
this Agreement.
5. Seller may determine to expand the Plant in the future depending on the
availability of Landfill Gas and other factors in accordance with the terms of
this Agreement.
6. Buyer will have a right of first refusal to purchase Expansion Plant Output,
such right to be exercisable as provided in this Agreement.
7. In addition, Seller will have a right to sell, and Buyer must, if Seller exercises
such right, purchase, the Expansion Plant Output, such right to be exercisable
as provided in this Agreement.
NOW THEREFORE, in consideration of these premises and the mutual
promises set forth below, Seller and Buyer agree as follows.
SANFRAN 90103 (2K)
AGREEMENT
ARTICLE I -DEFINITIONS
Initially capitalized terms, whenever used in this Agreement, have the meanings set
forth below unless otherwise herein defined. The term "including," when used in
this Agreement, shall mean to include "without limitation."
1.1 Agreement: This Power Purchase Agreement, including all appendices, as it
may be amended from time to time.
1.2 Availability Threshold: The mechanical availability of the Plant calculated
as of the end of each calendar month during the Term as a percentage in
accordance with the following:
A 100 x Available Hours
Base Hours
Where:
A Availability Threshold
Available Hours = the number of hours during the twenty-four (24) prior
months in which the Plant is capable of delivering Energy to the
Point of Interconnection; provided that, to the extent that the
Plant is not capable of delivering all of the net Initial Capacity in
any hour, the Available Hours with respect to such hour shall be
reduced pro rata to reflect the fraction of the net Initial Capacity
the Plant is capable of delivering in such hour.
Base Hours = the number of hours during the twenty-four (24) prior
months; provided that, to the extent that the Plant is partially or
wholly incapable or otherwise unable to deliver Energy in any
hour as a result of a Force Majeure Event or because of fuel
unavailability in any hour due to no fault or negligence of Seller,
that hour (or if the Plant's capacity is only partially constrained,
the pro rata portion of that hour) shall be excluded from the Base
Hours.
There shall be no Availability Threshold during the first twelve (12) months
following the Commercial Operation Date. Starting with the thirteenth (13th)
month after the Commercial Operation Date and continuing through the
twenty-fourth (24th) month, the above formula will be used to determine the
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SANFRAN 90103 (2K)
Availability Threshold with the exception that both Available Hours and Base
Hours will be calculated starting with the first hour of operation on the
Commercial Operation Date and including all relevant hours thereafter to the
end of the month relevant. Starting with the twenty-fifth (25th) month, the
Availability Threshold shall be calculated on a rolling basis using the previous
twenty-four (24) months.
1.3 Buyer: The City of Palo Alto, a California chartered municipal corporation,
and any successor or permitted assignee.
1.4 Commercial Operation: The condition of the Plant whereupon it (a) is
certified by Seller to be complete in accordance with manufacturers'
recommendations except for punch list items, and (b) has passed the
performance test set forth in Appendix E while synchronized with the LDC
System or ISO transmission grid.
1.5 Commercial Operation Date: The date upon which Commercial Operation
first occurs.
1.6 Contractual Obligations: As to Seller, any material agreement, instrument or
undertaking to which Seller is a party or by which it or any of its property is
bound.
1. 7 EA Agency: Any local, state or federal entity, or any other Person, that has
responsibility for or jurisdiction over a program involving transferability of
Environmental Attributes, including the Clean Air Markets Division of the
United States Environmental Protection Agency, the California Resources,
Conservation and Development Commission, the California Public Utilities
Commission, and any successor agency thereto.
1.8 Emergency: Any condition or situation which (i) endangers life or property or
(ii) affects Buyer's physical ability to maintain safe, adequate, and continuous
electric power and energy to Buyer's customers.
1.9 Energy: The electricity generated by the Plant and delivered to Buyer by the
Seller, pursuant to this Agreement, respectively, at the Point of
Interconnection, as expressed in units of kilowatt-hours (kWh) or megawatt-
hours (MWh), including Test Energy.
3 SANFRAN 90103 (2K)
1.10 Environmental Attributes: Any and all credits, benefits, emISSIOns
reductions, offsets, and allowances, howsoever entitled, attributable to the
generation from the Plant or Expansion Plant(s), as the case may be, and its
displacement of conventional energy generation. Environmental Attributes
include but are not limited to: (1) any avoided emissions of pollutants to the
air, soil or water such as sulfur oxides (SOx), nitrogen oxides (NOx), carbon
monoxide (CO) and other pollutants; (2) any avoided emissions of carbon
dioxide (C02), methane (CH4) and other greenhouse gases (GHGs) that have
been determined by the United Nations Intergovernmental Panel on Climate
Change to contribute to the actual or potential threat of altering the Earth's
climate by trapping heat in the atmosphere; and (3) the reporting rights to
these avoided emissions such as Green Tag Reporting Rights. Green Tag
Reporting Rights are the right of a Green Tag purchaser to report the
ownership of accumulated Green Tags in compliance with federal or state law,
if applicable, and to a federal or state agency or any other party at the Green
Tag purchaser's discretion, and include without limitation those Green Tag
Reporting Rights accruing under Section 1605(b) of The Energy Policy Act of
1992 and any present or future federal, state, or local law, regulation or bill,
and international or foreign emissions trading program. Green Tags are
accumulated on kWh basis and one Green Tag represents the Environmental
Attributes associated with one (1) MWh of energy. Environmental Attributes
do not include (i) any energy, capacity, reliability or other power attributes
from the Plant or Expansion Plant(s), (ii) production tax credits associated
with the construction or operation of the Plant, Expansion Plant(s), Landfill, or
any other associated contract or right, and other financial incentives in the
form of credits, reductions, or allowances associated with the Plant, Expansion
Plant(s), Landfill, or any other associated contract or right, that are applicable
to a state or federal income taxation obligation. (iii) fuel-related subsidies or
"tipping fees" that may be paid to Seller to accept certain fuels, or local
subsidies received by the Seller or the owner of the Landfill for the destruction
of particular pre-existing pollutants or the promotion of local environmental
benefits, or (iv) emission reduction credits encumbered or used by the Plant or
Expansion Plante s) for compliance with local, state, or federal operating
and/or air quality permits.
1.11 Environmental Attributes Reporting Rights: All rights to report ownership
of the Environmental Attributes to any person or entity, under Section 1605(b)
of the Energy Policy Act of 1992 or otherwise.
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SANFRAN90I03 (2K)
1.12 Environmental Law: Any federal, state and local laws including statutes,
regulations, rulings, orders, administrative interpretations and other
governmental restrictions and requirements relating to the discharge of air
pollutants, water pollutants or process waste water or otherwise relating to the
environment or hazardous substances, as amended from time to time.
1.13 Expansion Plant: Any expansion of the Plant from its Initial Capacity, or any
other electricity generating facility owned or controlled by Seller or its
affiliate(s) located at the Landfill and fueled by Landfill Gas. Each such
expansion of the Plant or additional facility shall be deemed to be an
"Expansion Plant."
1.14 Expansion Plant Output: All capacity, energy, associated Environmental
Attributes, ancillary services, contributions towards resource adequacy or
reserve requirements (if any) and any other reliability or power attributes
produced by Seller at any Expansion Plant.
1.15 FERC: Federal Energy Regulatory Commission and its successor
organization, if any.
1.16 Force Majeure Event: Any act or event that delays or prevents a Party from
timely performing obligations under this Agreement or from complying with
conditions required under this Agreement to the extent that such act or event is
reasonably unforeseeable and beyond the reasonable control of and without the
fault or negligence of the Party relying thereon as justification for such delay,
nonperformance, or noncompliance. Force Majeure Events typically include:
(i) acts of God or the elements, extreme or severe weather conditions,
explosion, fire, epidemic, landslide, mudslide, sabotage, lightning, earthquake,
flood or similar cataclysmic event, acts of public enemy, war, blockade, civil
insurrection, riot, civil disturbance or strike or other labor difficulty caused or .
suffered by a Party; (ii) any restraint or restriction imposed by law or by rule,
regulation or other acts or omissions of governmental authorities, whether
federal, state or local which by exercise of due diligence and in compliance
with applicable law a Party could not reasonably have been expected to avoid
and to the extent which, by exercise of due diligence and in compliance with
applicable law, has been unable to overcome (so long as the affected Party has
not applied for or assisted such act by a governmental authority); and (iii)
electric transmission interruptions or curtailments (not including any such
event that results from a failure by Buyer to obtain firm transmission or similar
5 SANFRAN 90103 (2K)
rights, or otherwise to make congestion-related payments); provided that the
term "Force Majeure Event" does not include (a) economic conditions that
render a Party's performance of this Agreement at the Price unprofitable or
otherwise uneconomic (including Buyer's ability to buy Energy or
Environmental Attributes at a lower price, or Seller's ability to sell Energy or
Environmental Attributes at a higher price, than the Price), (b) a governmental
act by Buyer that delays or prevents Buyer from timely performing its
obligations under this Agreement, (c) a Plant Outage, including as a result of a
failure or shortage of landfill gas, except, in any case, if caused by an event or
circumstance that meets the requirements set forth in this Section 1.19 (other
than as described in (iii) above), (d) failure or delay in grant of Permits, or (e)
failures or delays by the LDC or the ISO in entering into all agreements with
Seller contemplated by this Agreement.
1.17 Governmental Authority: Any federal or state government, or political
subdivision thereof, including, without limitation, any municipality, township
or county, or any entity or authority exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government,
including, without limitation, any corporation or other entity owned or
controlled by any of the foregoing.
1.18 Initial Capacity: The installed gross capacity of the Plant on the Commercial
Operation Date, such capacity to be not less than 1.0 MW and not more than
2.8 MW (gross nameplate), and not less than 0.8 MW and not more than 2.38
MW (net at the Point of Interconnection) and as further specified pursuant to
Section 4.3( c).
1.19 Interconnection: Construction, installation, operation and maintenance of all
Interconnection Facilities.
1.20 Interconnection Agreement: The agreement between Seller and LDC
pursuant to which Seller and LDC set forth the terms and conditions for
Interconnection of the Plant to the LDC System, as amended from time to
time.
1.21 Interconnection Facilities: All the facilities installed for the purpose of
interconnecting the Plant to the LDC System, including, but not limited to,
transformers and associated equipment, relay and switching equipment and
safety equipment.
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SANFRAN 90103 (2K)
1.22 ISO: The California Independent System Operator Corporation, or its
functional successor.
1.23 kWh: kilowatt-hour.
1.24 Landfill Gas: The gas (and its constituent elements) generated from
decomposition of materials deposited in the Landfill.
1.25 LD Amount: The Monthly LD Amount multiplied by 12 (twelve).
1.26 LDC: Pacific Gas and Electric Company, a California corporation.
1.27 LDC System: The electric power generation, transmission, substation and
distribution facilities owned, operated and/or maintained by LDC, which shall
include, without limitation, after construction and installation, the circuit
reinforcements, extensions, and associated terminal facility reinforcements or
additions required to interconnect LDC's facilities with the Plant.
1.28 Lender(s): Any Person(s) providing money or extending credit (including any
capital lease) to Seller for (i) the construction of the Plant, (ii) the term or
permanent financing of the Plant, or (iii) working capital or other ordinary
business requirements for the Plant. "Lender(s)" shall not include trade
creditors of Seller.
1.29 LFG Agreement: As defined in Section 4.2( d).
1.30 Monthly LD Amount: The product of (i) $7000 per MW, (ii) Buyer's
Percentage Share and (iii) the Initial Capacity specified under Section 4.3( c)
(net at the Point of Interconnection).
1.31 MPR: The Market Price Referent established, from time to time, by the
California Public Utility Commission ("CPUC"). For purposes of this
Agreement, the Market Price Referent for electricity will be based on the
prices determined by the CPUC for a Baseload facility represented in
dollarslkwh for a duration equal to the remaining term for purchasing the
Expansion Plant Output.
1.32 MW: Megawatt.
7 SANFRAN 90103 (2K)
1.33 MWh: Megawatt hour.
1.34 NCPA: As defined in Section 5.1.
1.35 Outage: A physical state in which all or a portion of the Plant is unavailable
to provide Energy to the Point of Interconnection, or in which any portion of
the LDC System is unavailable to receive Energy, to the extent that the
unavailability affects the LDC System's ability to accept delivery of Energy at
the Point of Interconnection, whether planned or unplanned.
1.36 Output: All actual capacity of the Initial Capacity and associated Energy, as
well as the following, as associated with the Initial Capacity and/or associated
Energy: Environmental Attributes; ancillary services; contributions towards
resource adequacy or reserve requirements (if any) and any other reliability or
power attributes.
1.37 Parties: Buyer and Seller, and their respective successors and permitted
assIgnees.
1.38 Party: Buyer or Seller, and each such Party's respective successors and
permitted assignees.
1.39 Percentage Share: One Hundred percent (100%).
1.40 Permits: All material federal, state or local authorizations, certificates,
permits, licenses and approvals required by any Governmental Authority for
the construction, ownership, operation and maintenance of the Plant.
1.41 Person: An individual, partnership, corporation (including a business trust),
limited liability company, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity.
1.42 Plant: The generation facilities described in the Recitals to be constructed
and owned by Seller and located on the Site for the generation and delivery of
electricity, including the step-up transformer, revenue quality meter and all
other facilities up to the Point of Interconnection, but not including any
Expansion Plant.
8 SANFRAN 90103 (2K)
1.43 Point of Interconnection: The point on the electrical system where the Plant
is physically interconnected with the LDC System, which is anticipated to be
at the high side of Seller's step-up transformers at the Plant.
1.44 Price: As defined in Section 2.3.
1.45 Production Incentives: Any and all tax credits, deductions, allowances and
exemptions applicable to federal, state and local taxes and any other payment,
credit, deduction, benefit, grant or monetary incentive provided by any federal,
state or local governmental authority or any Person, and all air emission
credits, reductions or offsets, whether now in effect or arising in the future, in
each case arising from the activities contemplated by this Agreement,
including the extraction, sale, purchase, processing and/or distribution of
Landfill Gas and! or the generation and sale of electricity using Landfill Gas as
a fuel, including "Renewable Energy Production Incentive Payments" from the
U.S. Department of Energy, emission credits, reductions, offsets or any other
similar benefits arising from the generation, collection, production, purchase,
use, reduction, conversion, destruction or resale of Landfill Gas.
Notwithstanding the foregoing, ,Production Incentives shall not include
anything that qualifies as Output as defined herein (including any
Environmental Attributes), and shall include Section 29 Credits and Section 45
Credits.
1.46 Prudent Utility Practice: Those practices, methods and equipment, as
changed from time to time, that:
(i) when engaged in are commonly used in the United States of America in
prudent electrical engineering and operations to operate landfill gas
generation electric equipment and related electrical equipment lawfully
and with safety, reliability, efficiency and expedition; or
(ii) in the exercise of reasonable judgment considering the facts known,
when engaged in could have been expected to achieve the desired result
consistent with applicable law, safety, reliability, efficiency and
expedition.
Prudent Utility Practices are not limited to an optimum practice, method,
selection of equipment or act, but rather are a range of acceptable practices,
methods, selections of equipment or acts.
9 SANFRAN 90 !OJ (2K)
1.47 Requirements of Law: Collectively, any federal or state law, treaty,
franchise, rule, regulation, order, writ, judgment, injunction, decree, award or
determination of any arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon Seller or Buyer or any of their
property or to which Seller or Buyer or any of their respective properties are
subject.
1.48 Section 29 Credits: Those tax credits available under Section 29 of Subtitle
A, Chap. lA, Part IV of the Internal Revenue Code of 1986, as amended as of
the date of this Agreement.
1.49 Section 45 Credits: Those tax credits available under Section 45 of Subtitle
A, Chap. lA, Part IV of the Internal Revenue Code of 1986, as amended, or
any other similar state, federal or local tax credits, deductions, payments or
benefits arising from the purchase of Landfill Gas or the generation and sale of
electricity using Landfill Gas as a fuel, not including any Environmental
Attributes.
1.50 Seller: Ameresco Johnson Canyon LLC, a Delaware limited liability
company, and any successor or permitted assignee.
1.51 Site: The real property in Gonzales, California on which the Plant is to be
built and located, as more particularly described in Appendix A.
1.52 Site Control: The point at which Seller satisfies one or more of the following
conditions: (1) Seller is (a) the lessee under a lease, or (b) the grantee under
an exclusive easement, with the owner (or its subsidiary) of the Landfill that
allows Seller to construct and operate the Plant at the Site during the Term in
accordance with this Agreement; (2) Seller has a fee ownership of the Site; or
(3) any other form of site control acceptable to Buyer in its reasonable
discretion.
1.53 SVSW A: Salinas Valley Solid Waste Authority, a joint powers authority under
the laws of the State of Cali fomi a with principal offices at 128 Sun Street, #101,
Salinas, California 93901.
1.54 Term: The period of time during which the Agreement is in effect.
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SANFRAN 90!O3 (2K)
1.55 Test Energy: Energy generated by the Plant and delivered to the Point of
Interconnection prior to the Commercial Operation Date.
1.56 WREGIS: Western Renewable Energy Generation Information System, or its
successor; provided that said successor is capable of performing substantially
similar functions and is acceptable to both Parties.
1.57 WREGIS Certificates: The meaning set forth in WREGIS Operating Rules.
1.58 WREGIS Operating Rules: The rules describing the operations of the
Western Renewable Energy Generation Information System, as published by
WREGIS and as may be amended from time to time.
ARTICLE II
TERM, PURCHASE AND SALE
2.1 Term
This Agreement shall be effective upon execution by authorized
representatives of both Parties and, unless earlier terminated pursuant to an
express provision of this Agreement, shall continue until the twentieth (20th)
anniversary of the Commercial Operation Date.
2.2 Purchase and Sale of the Output
(a) In accordance with the terms and conditions hereof, commencing on the
Commercial Operation Date and continuing throughout the Term, Seller shall
sell and deliver at the Point of Interconnection, and Buyer shall purchase,
accept from Seller at the Point of Interconnection and pay for, its Percentage
Share of the Output produced during the Term pursuant to the terms of this
Agreement. Prior to the Commercial Operation Date, Buyer shall purchase
and accept from Seller at the Point of Interconnection and pay for, the
Percentage Share of Output relating to Test Energy pursuant to the terms of
this Agreement. All Test Energy shall be scheduled in accordance with the
procedures set forth in Appendix D. Seller shall not sell to any other party,
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SAJ'lFRAN 90103 (2K)
and Buyer may claim credit for, Buyer's Percentage Share of the Output as
may be available from time to time.
(b) Throughout the Term, Seller shall sell and transfer to Buyer, and Buyer
shall purchase and receive from Seller, all right, title and interest in and to the
Environmental Attributes associated with Buyer's Percentage Share of the
Output, if any, whether now existing or subsequently generated or acquired
(other than by direct purchase from a third party) by Seller, or that hereafter
come into existence, during the Term, as a component of the Output purchased
by Buyer from Seller hereunder. Seller agrees to transfer and make such
Environmental Attributes available to Buyer immediately to the fullest extent
allowed by applicable law upon Seller's production or acquisition of the
Environmental Attributes. If Seller receives any tradable Environmental
Attributes based on the greenhouse gas reduction benefits or other emission
offsets attributed to its fuel usage, it shall be entitled to retain sufficient
Environmental Attributes to ensure that there are zero net emissions associated
with the production of electricity from such facility. Seller shall not assign,
transfer, convey, encumber, sell or otherwise dispose of all or any portion of
the Buyer's Percentage Share of the Environmental Attributes to any Person
other than Buyer. Seller makes no written or oral representation or warranty,
either express or implied, regarding the current or future existence of any
Environmental Attributes.
( c) Use of WREGIS to Evidence Transfer of WREGIS Certificates.
Seller shall use commercially reasonable efforts to use WREGIS to evidence
the transfer of or "WREGIS Certificates" from Seller to Buyer in accordance
with WREGIS reporting protocols and the terns of this Agreement. Seller
shall use commercially reasonable efforts to register the Plant with WREGIS.
After the Plant is registered with WREGIS, Seller agrees to use commercially
reasonable efforts to transfer WREGIS Certificates to Buyer using the Forward
Certificate Transfer method, as described in WREGIS Operating Rules and as
designated by Buyer. Buyer shall be responsible for providing required
information and taking any action that may be necessary for the registration of
the Plant and for transfer of WREGIS Certificates to Buyer's WREGIS
account.
Except as the Parties may otherwise agree in writing, in the event that
WREGIS is not in operation, or WREGIS does not track Seller's transfer of
WREGIS Certificates to Buyer, or its designees, on or before the 30th day of
each calendar month, Seller shall document the production and transfer of
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SANFRAN 90 lOJ (2K)
Environmental Attributes under this Agreement by delivering to Buyer an
attestation for the Environmental Attributes produced by the Plant, in whole
MWh, in the preceding calendar quarter. The form of attestation shall be
substantially in the form as set forth in Appendix B.
Seller shall be responsible for the WREGIS expenses associated with
registering the Plant, maintaining its account, WREGIS Certificate issuance
fees, and transferring WREGIS Certificates to Buyer. Buyer shall be
responsible for the WREGIS expenses associated with maintaining its account
and subsequent transferring or retiring of WREGIS Certificates. Seller shall,
as instructed by Buyer and at Buyer's cost, dispute data with WREGIS.
Notwithstanding anything herein to the contrary, if Seller's cost (including
labor billed at standard external rates) associated with WREGIS in connection
with this Agreement or compliance with this Section 2.2 exceeds $2,500 in
any calendar year, Buyer shall reimburse Seller for the amount in excess of
$2,500; provided, however, Buyer may designate an alternate accounting
system( s), at no cost to Seller, to evidence that transfer of RECs or other
Environmental Attributes if Seller's WREGIS costs exceed $2,500 in any
calendar year. Buyer shall defend, indemnify and hold Seller and its officers,
directors, employees and agents harmless from and against all claims,
demands, losses, liabilities and expenses (including reasonable attorneys fees)
arising out of or connected with the interaction with third parties in connection
with WREGIS or any alternate accounting system(s) designated by Buyer.
For the purposes of this Section 2.2, "commercially reasonable efforts" shall
exclude (i) making any changes to the Plant or any Expansion Plant or the
method of operation thereof and (ii) expenditure of any funds other than
nominal filing fees.
(d) During the Term, Seller shall not report to any person or entity that the
Environmental Attributes granted hereunder to Buyer belong to anyone other
than Buyer, and Buyer may report under any program that such Environmental
Attributes purchased hereunder belong to it.
2.3 Price
Subject to the provisions of Section 4. 1 (k), Buyer shall pay Seller $0.109 per
kWh of Energy delivered or tendered to Buyer at the Point of Interconnection,
which price shall be escalated at a rate of 1.5% (of the then-current price)
13 SANFRAN 90103 (2K)
annually on the anniversary of (i) the first day of the first full month following
the Commercial Operation Date or (ii) if the Commercial Operation Date falls
on the first day of the month, the Commercial Operation Date. The Price shall
be the total compensation owed by Buyer for Output delivered or tendered to
Buyer hereunder.
2.4 Tax Credits
Buyer agrees and acknowledges that all Production Incentives shall be owned
by Seller and/or the owner of the Landfill; provided, that to the extent Buyer
pays in full for emission offsets and otherwise makes any additional payments
pursuant to Section 4.3G) in full, Seller shall pay Buyer the Percentage Share
of up to one hundred percent (1000/0) of the net economic value (net of
reasonable transaction fees) realized by Seller from the Section 45 Credits
until Seller has reimbursed Buyer for all such payments made by Buyer
pursuant to Section 4.3G). Buyer shall not claim Production Incentives. Buyer
agrees to cooperate with Seller and/or the owner of the Landfill as may be
necessary to allow maximization of the value of, and realization of, all
Production Incentives; provided that Buyer shall not be required to incur
additional costs or accept any diminution in value of its rights under this
Agreement or of the Output purchased hereunder. In addition, Buyer shall not
take any action (except as otherwise permitted under this Agreement), that
would in any way reduce or eliminate the availability to Seller or the owner of
the Landfill of any Production Incentive, including without limitation the
Section 29 Credits, and Buyer shall forego any credits or benefits available to it
(other than Environmental Attributes) to the extent necessary to allow Seller and
the owner of the Landfill to obtain the full benefit of the Production Incentives,
but in no event shall Buyer be required to forego receipt of Energy.
2.5 Right of First Refusal for Expansion Plant and Expansion Plant Output
(a) Seller may in its sole discretion determine, from time to time, during the
Term to develop, finance, construct and/or operate an Expansion Plant. Each
time such a determination is made, Seller shall notify Buyer of such
determination and shall offer in writing to sell the Percentage Share of the
Expansion Plant Output to Buyer. The offer shall include the price to be paid
by Buyer for the Percentage Share of the Expansion Plant Output, the term of
the proposed power purchase agreement and the other principal terms and
conditions of the proposed sale. If Buyer wishes to accept such offer to
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SANFRAN 90103 (2K)
purchase all (but not less than all) of such Percentage Share of the Expansion
Plant Output, Buyer shall so notify Seller within sixty (60) days of its receipt
of such offer. Buyer and Seller shall promptly thereafter enter into good faith
negotiation of a definitive power purchase agreement incorporating the terms
of such offer. Until such an Expansion Plant power purchase agreement is
executed, the Seller's proposal, accepted by Buyer (including any
modifications agreed upon in writing by both parties), shall control all
dealings between the Parties relating to the Expansion Plant. Should any issue
arise that is not covered by such documentation, the terms of this Agreement
shall apply.
(b) If Buyer does not accept Seller's offer to purchase its Percentage Share
of the Expansion Plant Output within sixty (60) days of receipt of Seller's
offer, Seller shall be free to offer to sell that portion of the Expansion Plant
Output to one or more third parties at a price and on other terms and
conditions which, taken as a whole, are at least as favorable to Seller as the
price and other terms and conditions set forth in Seller's offer to Buyer. If
Seller offers to break up Buyer's Percentage Share of the Expansion Plant
Output to sell to multiple independent buyers, Seller shall notify Buyer in
writing of the terms and conditions of such offers and Buyer shall again have
the right of first refusal consistent with the terms set forth above for each of
the lesser amounts being offered to the third parties. If Buyer does not
purchase its Percentage Share of the Expansion Plant Output and Seller sells
such Expansion Plant Output to a third party, it shall promptly certify in
writing to Buyer that the terms and conditions of sale of such Expansion Plant
Output to such third party, taken as a whole, are at least as favorable to Seller
as the price and other terms and conditions set forth in Seller's offer to Buyer,
and Seller shall provide the relevant contract and any other supporting
documentation for such certification. Upon the sale of such Expansion Plant
Output in compliance with this Agreement, Buyer shall have no further rights
to be offered or to purchase such Expansion Plant Output. Buyer's refusal of
its Percentage Share of the Expansion Plant Output from one Expansion Plant
shall not affect Buyer's right to purchase its Percentage Share of the
Expansion Plant Output from a later Expansion Plant under the terms of this
Agreement. Seller shall not sell or provide Buyer's Percentage Share of the
Expansion Plant Output to any third party unless it can do so without
compromising in any material way its ability to provide Buyer's Percentage
Share of the Output to Buyer hereunder. The materiality of any such impact
shall be determined by Buyer in its reasonable discretion. If Seller sells or
15 SANFRAN 90103 (2K)
provides Expansion Plant Output to any third party, Seller shall not employ
Landfill Gas to fuel such Expansion Plant in any hour unless the Landfill Gas
flow requirements of the Initial Capacity have been, and shall continue to be,
met.
2.6 Seller's RiJ::::ht to Sell Expansion Plant Output to Buyer
Seller may in its sole discretion determine, from time to time, during the Term
to develop, finance, construct and/or operate one or more Expansion Plants.
Each time such a determination is made, if the aggregate capacity of such
Expansion Plant and all Previous Expansion Plants with respect to which
Seller has exercised its rights under this Section 2.6 does not exceed 7.0 MW,
then Seller shall have the right, at its sole discretion, to (i) notifY Buyer of such
determination and (ii) require Buyer to Purchase the Percentage Share of the
Expansion Plant Output at a price equal to the lesser of (a) eighty-five percent
(85%) of the MPR price at the time of such notification from Seller to Buyer
and (b) $ 1501MWh. The term of the power purchase agreement for the
purchase of the Expansion Plant Output will be as specified in such
notification, but shall not exceed the term remaining on the LFG Agreement
(including any extension thereof if Seller has the rights to such under the LFG
Agreement). All other terms and conditions, unless otherwise agreed to by the
Parties, each in their sole discretion, shall be the same as this Agreement. If
Seller gives Buyer such notification, then Buyer shall execute the power
purchase agreement for the Expansion Plant Output, as detailed above, within
one hundred and twenty (120) days from such notification by Seller to Buyer.
2.7 Option to Install Emission Controls
Buyer may at its option, exercised from time to time, install emission controls
on the Plant in connection with the Initial Capacity and on any Expansion
Plant from which Buyer purchases Expansion Plant Output (so long as Buyer
purchase all such Expansion Plant Output) beyond those then required to meet
the Requirements of Law applicable to Seller or the Plant; provided that (a)
Buyer shall (i) bear all costs and financial, regulatory and operational risks
thereof, including without limitation the capital cost thereof and any increase
in operation or maintenance expenses, and (ii) shall keep Seller whole in all
respects, including for decreases in Output and other adverse effects on the
Initial Capacity and the Expansion Plant and its performance, increases in
operations and maintenance costs and failures of such emission controls to
16 SA.,'lFRAN 90103 (2K)
operate, and (b) Buyer shall not make any such changes to the Initial Capacity
or the Expansion Plant without the consent of Seller to the design and plan for
implementation of such changes, such approval not to be unreasonably
withheld.
ARTICLE III
METERING AND BILLING
3.1 Metering Requirements
The transfer of Energy from Seller to Buyer shall be measured by revenue
quality metering equipment at the Point of Interconnection. Such metering
equipment, including any equipment required for communicating meter data
(e.g., a dedicated data line) to Buyer or the ISO, shall be selected, provided,
installed, owned, maintained and operated, at Seller's sole cost and expense,
by Seller or its designee in accordance with applicable ISO rules. Seller shall
exercise reasonable care in the maintenance and operation of any such
metering equipment, and shall test and verify the accuracy of each meter at
least annually. Seller shall inform Buyer in advance of the time and date of
these tests, and shall permit Buyer to be present at such tests and to receive the
results of such tests. Subject to Buyer paying for its Percentage Share of the
cost of any update or upgrade to such metering equipment pursuant to a new
requirement of the ISO, the LDC or any other Governmental Authority
adopted following the Commercial Operation Date, each of Seller's meters
shall be accurate to the metering specifications then in effect for ISO meter
accuracy. Seller shall further install and maintain all equipment and data
circuits necessary to transmit all monitored real time supervisory control and
data acquisition ("SCADA") system data and real time data from the ISO
meter to the ISO and the Northern California Power Agency ("NCP A"), while
adhering to both ISO and NCP A communications protocols. Seller shall
provide a copy of each Certificate of Compliance issued by ISO, if any.
Buyer and NCP A shall be provided access to all monitored SCADA points to
be used at their discretion in real time monitoring. Buyer may further, at its
sole cost and expense, install and maintain check meters and all associated
measuring equipment necessary to permit an accurate determination of the
quantities of Energy delivered under this Agreement provided that said
17 SANFRAN 90!O3 (2K)
equipment does not interfere with the Seller's metering equipment. Seller
shall permit Buyer or Buyer's representative access to its Plant for the purpose
of installing and maintaining such check meters. Seller shall submit to the
ISO, or allow the ISO to retrieve, any meter data required by the ISO related to
the Plant output in accordance with the ISO's settlement and billing protocol
and meter data tariffs. Buyer shall have reasonable access to relevant meters
and associated facilities, as well as real time access to all meter data, as is
necessary for Buyer or its agent to perform its duties as scheduling coordinator
and comply with the requirements of the ISO tariff.
3.2 Billing
Seller shall read the meter at the end of each calendar month of the Term, and
provide to Buyer on or before the 10th day of the following month an invoice
based upon the meter data for Energy delivered in such calendar month and the
corresponding attestation pursuant to Section 2.2( c). Such invoice may be
transmitted electronically via e-mail to[*AcctsPayable@ncpa.com ], or to any
other email address designated in writing by Buyer, with a copy to follow via
United States Mail to the notice address designated below. Should either the
Seller or the Buyer determine at a later date, but in no event later than two (2)
years after the original invoice date, that the invoice amount was incorrect, that
Party shall promptly notify the other Party of the error. If the amount invoiced
was too low, Buyer shall, upon receiving verification of the error and
supporting documentation from the Seller, pay any undisputed portion of the
difference within thirty (30) days of receipt of verification. If the amount
invoiced was too high, Seller shall, upon receiving verification of the error and
supporting documentation from the Buyer, pay any undisputed portion of the
difference within thirty (30) days of receipt of verification. Any such amount
shall be subject to the interest rate as designated in Section 3.3 running from
the original due date of payment.
3.3 Payment
For Energy delivered to Buyer pursuant this Agreement, Buyer or its agent
shall pay Seller by electronic transfer of funds by the later of the 20th day of
the month or the 10th business day after the invoice is received in accordance
with Section 3.2. If such due date falls on a weekend or legal holiday, such
due date shall be the next day which is not a weekend or legal holiday.
18 SA."IFRAN 90103 (2K)
Payments made after the due date shall be considered late and shall bear
interest on the unpaid balance at an annual rate equal to two percent (2%) plus
the average daily prime rate as determined from the "Money Rates" section of
the West Coast Edition of The Wall Street Journal for the days of the late
payment period multiplied by the number of days elapsed from and including
the day after the due date, to and including the payment date. Interest shall be
computed on the basis of a 365-day year. In the event this index is
discontinued or its basis is substantially modified, the Parties shall agree on a
substitute equivalent index. Should Buyer in good faith dispute the amount of
an invoice, Buyer or its agent may withhold such disputed amounts until the
dispute is resolved by arbitration or other permissible method. Such disputed
amounts shall bear interest at the interest rate described above. Failure of
Buyer or its agent to withhold any amount is not a waiver of Buyer's right to
challenge such amount. Both Parties shall maintain all records relating to the
other Party or this Agreement for a minimum of two (2) years, and shall permit
the other Party, upon reasonable notice, to inspect and audit such records as
the requesting Party deems reasonably necessary to protect its rights.
ARTICLE IV
SELLER'S OBLIGATIONS
During the Term, Seller hereby agrees to perform the following affirmative
obligations:
4.1 Development, Finance, Construction and Operation of the Plant
Seller shall:
(a) Develop, finance and construct the Plant.
(b) Provide Buyer access to a "real time" Plant monitoring system (which,
at a minimum, shall provide "real time" information regarding the net output
of the Plant) that is anticipated to be internet-based and include alarms.
( c) Seek, obtain, maintain, comply with and, as necessary, renew and
modifY from time to time, all Permits, certificates or other authorizations
which are required by any Requirements of Law or Governmental Authority as
19
SANFRAN 90103 (2K)
prerequisites to engaging in the activities required of Seller by the Agreement
and to meeting Seller's obligation to operate the Plant consistently with the
terms of the Agreement.
(d) Operate, maintain, and repair the Plant in accordance with this
Agreement, all Requirements of Law applicable to Seller or the Plant,
Contractual Obligations, Permits and in accordance with Prudent Utility
Practice, including with respect to efforts to maintain availability of the Initial
Capacity.
(e) Obtain and maintain the policies of insurance in amounts and with
coverages as set forth in Appendix C.
(1) Operate and maintain in a manner consistent with Prudent Utility
Practice the facilities it will own and otherwise cooperate with LDC in the
physical interconnection of the Plant to the LDC System in accordance with
the Interconnection Agreement.
(g) By October 1 st of each year of the Term, provide Buyer and NCP A with
an annual projection of scheduled Outages for the following calendar year.
Should Seller make any changes to such projection, it will notify Buyer and
NCPA of such changes at least fourteen (14) days in advance of any newly
scheduled or rescheduled Outage. If Buyer requests a change to the scheduled
date of any Outage (including to a date set forth in a change notice from
Seller), Seller shall consider such request in good faith and notify Buyer of its
decision within seven (7) days. In no instance will Seller schedule Outages of
more than twenty-four (24) hours between June 1st and September 30th during
the Term. In connection with any Outage, whether a scheduled or unscheduled
Outage, Seller shall notify Buyer and NCP A, as soon as practicable, of the
percentage of Plant expected to be out of service and how long the Outage is
expected to last. If the Outage is total and is due to failure of the Plant rather
than the transmission and distribution system beyond the Point of
Interconnection, Seller shall give Buyer and NCP A at least four (4) hours
notice before re-energizing the Plant. In addition, Seller will comply with
NCPA's reasonable scheduling protocols, as they may be changed from time
to time. A copy of the current version of NCP A's scheduling protocols, which
the Parties agree are reasonable, is attached as Appendix D.
20 SA..1IIFRAN 90!O3 (2K)
(h) Negotiate and enter into an Interconnection Agreement with LDC to
enable Buyer to transmit Energy received at the Point of Interconnection
through the ISO-controlled grid. Seller shall be responsible for and pay all
initial non-recurring costs and charges arising under the Interconnection
Agreement (even if not actually incurred) prior to the Commercial Operation
Date in compliance with the Interconnection Agreement and associated rules
and requirements in place as of the Commercial Operation Date. All other out-
of-pocket costs and charges related to interconnection other than these initial
non-recurring costs and charges will be reimbursed, on a pro rata, energy
basis, by the purchasers of energy from the Plant. During the Term of this
Agreement prior to any Expansion Plant becoming available for commercial
service, Buyer will reimburse Seller for its Percentage Share of such other out-
of-pocket costs and charges under the Interconnection Agreement paid or
required to be paid by Seller to LDC or its successor; provided, however,
Buyer shall be responsible for its Percentage Share of such other out-of-pocket
costs and charges under the Interconnection Agreement only to the extent
Buyer has approved in writing, in the sole discretion of Buyer, the
Interconnection Agreement, including any amendments (which shall not
include changes in relevant tariffs) from time to time. Upon completion of an
Expansion Plant which uses the Interconnection Facilities, such other out-of-
pocket costs and charges shall be prorated, on a Percentage Share of energy
basis, and Buyer's share would be based on its Percentage Share of Energy
compared to the energy of the Expansion Plant delivered to the Point of
Interconnection. Seller shall cooperate with Buyer to minimize any such costs
as are to be reimbursed by Buyer.
(i) Negotiate and enter into a Participating Generator Agreement and a
Meter Service Agreement for ISO Metered Entities with the ISO, who is the
load control area operator for the LDC System to which the Plant is
interconnected. Buyer shall pay for or reimburse Seller for its Percentage
Share of any such costs or charges associated with these agreements, except to
the extent such cost or charge is required to be paid by Seller under this
Agreement in Sections 3.1 and 4.1 (h). Seller shall cooperate with Buyer to
minimize any such costs as are to be reimbursed by Buyer.
G) Coordinate all Plant start-ups and shut-downs, in whole or in part, with
Buyer in accordance with ISO scheduling protocols and the reasonable
protocols established by Buyer that are not inconsistent with the ISO tariff and
ISO procedures.
21 SANFRAN 90103 (2K)
(k) Maintain an Availability Threshold of seventy percent (70%). Should
Seller fail to maintain such an Availability Threshold, the Price applicable to
Output sold and purchased during each month during which the Availability
Threshold is below seventy percent (70%) shall be seven and one-half percent
(7.5%) below the Price that would otherwise be in effect pursuant to Section
2.3 until the Availability Threshold is increased to at least seventy percent
(70%). Except as otherwise expressly stated in Sections 6.4 and 7.6, the
foregoing shall be Buyer's sole remedy for any shortfall of or failure to
produce Output or failure to maintain any particular Availability Threshold.
4.2 General Obligations
(a) Seller shall obtain in its own name and at its own expense any and all
pollution or environmental credits or offsets necessary to operate the Plant in
compliance with the Environmental Laws.
(b) Seller shall keep complete and accurate operating and other records and
all other data for the purposes of proper administration of the Agreement,
including such records as may be required by any Governmental Authority or
Prudent Utility Practice.
(c) Seller shall continue to (i) preserve, renew and keep in full force and
effect its organizational existence and good standing, and take all reasonable
action to maintain all applicable Permits, rights, privileges, licenses and
franchises necessary or desirable in the ordinary course of its business; and (ii)
comply with all Contractual Obligations and Requirements of Law applicable
to Seller or the Plant.
(d) Prior to the date ninety (90) days following the date of this Agreement,
Seller shall make available for review by Buyer, and its representatives, at
Seller's attorney's offices in San Francisco, California, a fully executed copy
of its contract with SVSW A, including all exhibits, attachments, and other
supporting documents thereto, for the purchase of Landfill Gas (the "LFG
Agreement"). Such contract may be redacted to remove pricing information.
If (i) Seller does not fulfill its obligations under the first two sentences of this
Section 4.2( d) in the time allowed, or (ii) Seller fulfills such obligations but
Buyer in its reasonable discretion does not approve of the terms of the LFG
Agreement, then Buyer may, as its sole remedy and without liability of one
22 Sk"fFRAN 90103 (2K)
party to the other, terminate this Agreement by written notice given no later
than sixty (60) days after Seller has fulfilled, or failed to fulfill, as the case
may be, such obligations under such first two sentences. Other than increasing
the amount of fuel purchased thereunder, Seller shall not allow such contract
to be amended or otherwise modified, nor shall it waive or fail to enforce any
of its rights thereunder, without Buyer's prior written approval, whose
approval shall not be unreasonably withheld. Seller shall make the LFG
Agreement available to Buyer for review during normal business hours at
Seller's attorney's offices in San Francisco, California throughout the term of
this Agreement within seven (7) days of a written request by Buyer.
(e) Seller shall provide to Buyer such other information regarding the
permitting, engineering, construction or operations of the Plant as Buyer may
from time to time reasonably request, subject to licensing or other restrictions
of Seller or a third party with respect to confidentiality, disclosure or use.
(t) Seller shall enter into any agreements with the ISO required by the ISO
for generators delivering power into the ISO-controlled grid. Except for such
costs and charges as are expressly identified in this Agreement as Seller's
costs, Buyer shall reimburse Seller for all costs and charges under such
agreements. Seller shall cooperate with Buyer to minimize any such costs as
are to be reimbursed by Buyer.
(g) Seller shall provide Buyer with a copy of its ultimate corporate parent's
audited financial statements as at the end of its accounting year prepared in
accordance with GAAP, no later than four (4) months after the end of such
accounting year of such entity. Seller shall also provide, on a quarterly basis,
an unaudited financial statement in the form of Appendix F, prepared in
accordance with GAAP consistently applied for Seller and for Seller's ultimate
corporate parent. Such financial statements shall be certified by an officer of
Seller as fairly presenting the financial condition of the Seller subject only to
what would typically be included in year-end audit adjustments and footnotes.
If, from time to time, an audited year-end financial statement is prepared for
Seller, Seller shall provide it to Buyer no later than four (4) months after the
end of Seller's accounting year.
4.3 Construction Milestones
23 SANFRAN 90103 (2K)
( a) The Parties agree that time is of the essence and that certain milestones
("Milestones") for the development, financing and construction of the Plant
must be achieved in a timely fashion or Buyer shall suffer damages. Seller
shall provide Buyer with documentation satisfactory to Buyer, in Buyer's
reasonable discretion, to support the achievement of Milestones by the dates
set forth below.
(b) The following events are all of the Milestones:
(i) By the date ninety (90) days following the date of this Agreement,
Seller shall have signed an LFG Agreement with SVSWA and
have obtained Site Control.
(ii) By the date twenty (20) months following the date that Buyer
approves the LFG Agreement, Seller shall (a) have obtained all
Permits necessary, in final form, to commence construction of the
Plant and (b) have entered into an Interconnection Agreement.
(iii) By the date one (1) month following the later of (a) the
finalization of all necessary Permits described in Section
4.3(b )(ii), and (b) entering into an Interconnection Agreement,
Seller shall have arranged financing for construction of the Plant
or otherwise made funds available to commence and complete
construction.
(iv) By the date twelve (12) months following the later of (a) the
finalization of all necessary Permits described in Section
4.3(b )(ii), and (b) entering into an Interconnection Agreement,
Seller shall have commenced construction of the Plant.
(v) By the date eighteen (18) months following the arrangement of
financing or availability of funds for construction, Seller shall
have achieved the Commercial Operation Date.
(c) Starting on the effective date of this Agreement, Seller shall provide to
Buyer monthly progress reports concerning the progress towards completion
of the Milestones. In addition, within five business days of the completion of
each Milestone, Seller shall provide a certification to Buyer along with any
supporting documentation, demonstrating the satisfaction of the Milestone.
Seller shall provide to Buyer additional information concerning Seller's
progress towards, or confirmation of, achievement of the Milestones, as Buyer
may reasonably request from time to time. Within seven (7) days of the later
of (i) obtaining the authority to construct for the Plant from the applicable air
quality management district or (ii) Seller's receipt of the system impact and
24
SANFRAN 90!OJ (2K) ,
facility cost studies from the LDC, but in no event later than the date set forth
in Section 4.3(b )(ii), Seller shall specify the Initial Capacity of the Plant
(which shall be subject to the limits contained in Section 1.18).
(d) Upon becoming aware that it will, or is reasonably likely to, fail to
achieve a Milestone by the required date, for any reason including Force
Majeure Event, Seller shall so notify Buyer in writing as soon as is reasonably
practical. Such notice shall explain the cause of the delay, provide an updated
date for achievement of the Milestone(s) and describe Seller's plan for meeting
the Milestone. Seller's notice will also explain any impact such delay mayor
will have on any other Milestone, and measures to be taken to mitigate such
impact.
(e) In the event that a Force Majeure Event causes any delay to the
achievement of the Milestones set forth in Sections 4.3(b)(iii), (iv), or (v), such
Milestone's deadline may be extended, together with any Force Majeure Event
extensions for other Milestones, for a period not to exceed six (6) months. The
extension of the deadline for any Milestone shall extend the deadline for all
subsequent Milestones, provided that in no event shall the combined
extensions for Force M~jeure Events for any or all of the Milestones exceed
six (6) months.
(f) In the event that Seller fails to meet the Milestone set forth in Section
4.3(b )(i) for any reason, Buyer may terminate this Agreement, without liability
of either Party to the other, by giving notice to Seller in writing of such
termination at any time prior to Seller curing its failure. Such option to
terminate shall be Buyer's sole remedy for any failure to meet the Milestone
set forth in Section 4.3(b )(i).
(g) In the event that Seller fails to meet the Milestone set forth in Section
4.3(b)(ii) for any reason, Buyer may terminate this Agreement, without
liability of either Party to the other, within ten (l0) business days after the
Milestone date by giving notice to Seller in writing of such termination. If
Seller meets the Milestone set forth in Section 4.3(b )(ii) prior to Buyer giving
written notice of termination, this Agreement shall remain in full force and
effect. If Buyer does not terminate this Agreement within ten (l0) business
days after the Milestone date, Seller shall continue to pursue satisfaction of the
relevant Milestone and Buyer must give Seller sixty (60) days notice to
terminate this Agreement, during which period if Seller cures such defect and
25 SANFRAN 90103 (2K)
achieves the relevant Milestone, such termination shall be void and this
Agreement shall remain in full force and effect. Such option to terminate shall
be Buyer's sole remedy for any failure to meet the Milestone set forth in
Section 4.3(b )(ii).
(h) In the event that Seller fails to meet the Milestone set forth in Section
4.3(b)(iv) within six (6) months after the relevant Milestone date for any
reason (or up to twelve (12) months if also delayed by a Force Majeure Event),
Seller may deposit an amount, per month, equal to the Monthly LD Amount
into a segregated escrow account reasonably acceptable to Buyer by the first
day of such month, for every month after such date until the Milestone is met.
Such funds will be used towards any liquidated damages as set forth in Section
7 A( c), and shall be held in escrow until such time that liquidated damages, if
any, become payable to Buyer. Should the amount in the escrow account
exceed the final amount of liquidated damages, such excess funds shall be
returned to Seller. Should Seller (i) at any time fail to make such monthly
deposits or (ii) fail to satisfY the Milestone set forth in Section 4.3(b )(iv) for
more than twelve (12) months, Buyer may terminate this Agreement upon
written notice to Seller of such termination. Upon such termination, Seller
will pay to Buyer, within thirty (30) days of the termination notice, an amount
equal to the LD Amount as liquidated damages. Such Seller escrow option,
Buyer option to terminate, and liquidated damages shall be Buyer's sole
remedy for any failure of Seller to meet the Milestones set forth in Section
4.3(b )(iii) or (iv).
(i) Seller covenants that it will diligently pursue all Milestones including
the Commercial Operation Date, which Seller envisions will occur within
thirty (30) months following the execution of this Agreement.
U) In the event that any of the approvals described in Section 4.3(b )(ii) are
not obtained by the date specified in Section 4.3(b )(ii) for satisfaction of the
relevant Milestone or are obtained on a basis not reasonably satisfactory to
Seller, including without limitation, in the case of the air permit, approval of
construction and operation of the Plant on a basis not consistent with internal
combustion engines without emission controls, pollution or environmental
credits or offsets, Seller may terminate this Agreement without liability of
either Party to the other by giving notice to Buyer in writing of such
termination; provided that such notice must be given no later than fourteen
(14) days following the earlier of (a) the date on which a given approval not
26 SANFRAN 90 I 03 (2K)
satisfactory to Seller is received in writing or (b) the date specified in Section
4.3(b )(ii) for satisfaction of the relevant Milestone; further provided, that such
notice and such termination shall not be effective if Buyer, by written notice to
Seller within fourteen (14) days following such notice from Seller, agrees (i) to
pay Seller with the first invoice following the Commercial Operation Date the
reasonable all-in cost (including reasonable broker fees, if any) to purchase all
such offsets sufficient to operate the Plant at full Initial Capacity (less
reasonably projected scheduled Outages for maintenance) for the term of this
Agreement, and (ii) to adjust equitably the price payable under Section 2.3 of
this Agreement and within thirty (30) days thereafter agrees with Seller in
writing (each in their sole discretion) to an amendment of this Agreement
revising such price. Failure to provide notice of termination by the date
specified above shall constitute a waiver of the right to terminate this
Agreement as provided in this Section 4.3U). In the event that Seller exercises
such termination right, Buyer shall have a right of first refusal to purchase the
output of any electricity generating facility owned or controlled by Seller or its
affiliate(s) located at the Landfill and fueled by Landfill Gas. Such right of
first refusal shall conform to the provisions of Section 2.5. The provisions of
this Section 4.3U) shall survive termination of this Agreement under this
Section 4.3U) for a period of five (5) years from such termination.
ARTICLE V
BUYER'S OBLIGATIONS
5.1 Delivery and Transmission
Except for Seller's obligations pursuant to Sections 3.1 and 4.1(h), Buyer shall
be solely responsible for paying its Percentage Share of costs and charges
associated with the receipt of Energy, under this Agreement, at the Point of
Interconnection and for the transmission and delivery of the Energy from the
Point of Interconnection to any other point downstream of the Point of
Interconnection (including, without limitation, transmission costs and charges,
competition transition charges, applicable control area service charges,
transmission congestion charges, inadvertent energy flows, any other ISO
charges related to the transmission of such Energy by the ISO and any charge
assessed or collected in the future pursuant to any utility tariff or rate schedule,
however defined, for transmission or transmission-related service rendered by
27
SANFRAN 90 10J (2K)
or for any transmission-owning or operating entity). NCPA, acting on behalf
of Buyer, shall be scheduling coordinator for the transmission of Energy from
the Plant in accordance with applicable ISO rules. Buyer's duties as
scheduling coordinator shall be limited to those duties as are specifically
required of scheduling coordinators in the ISO tariff and the ISO protocols.
Commercial arrangements for such transmission and delivery services will be
coordinated and settled by NCP A directly with the ISO or other third parties.
At the option of Buyer, the Plant may be included within NCPA's metered
sub-system in connection with the scheduling of power over the ISO grid and
related functions; provided that such inclusion shall have no adverse effect on
Plant operations or Seller (or any such effect shall be fully mitigated by
Buyer). Seller will do all things reasonably needed to allow Buyer to comply
with any obligations, and minimize any potential liability, under the ISO tariff;
provided, that if such actions require any actions beyond the giving of notice
provided by Buyer, then Buyer shall reimburse its Percentage Share of all out-
of-pocket costs and charges of such actions. If and to the extent that Seller
fails to comply with the notice provision in Section 4.1 (g) concerning Outages
or with its obligations as outlined in the previous sentence, Seller shall be
wholly responsible for all imbalances, deviations, or any other ISO charges or
penalties associated with such Outage or ISO tariff obligation. Buyer may
replace NCP A as Scheduling Coordinator for the Plant. If NCP A ceases to be
Scheduling Coordinator for the Plant and Buyer is unable, upon fourteen days
notice from Seller, to appoint a replacement Scheduling Coordinator, Seller
shall have the right to appoint a replacement Scheduling Coordinator on its
behalf, and Buyer shall enter into all reasonable and appropriate agreements
with such replacement Scheduling Coordinator at its own cost.
5.2 Taxes
Buyer shall pay and be fully responsible for any sales, use, gross receipts,
utility or other taxes, assessments or fees, if any, incurred or imposed on the
sale or transfer of Energy from Seller to Buyer under this Agreement. Buyer
shall not be responsible for any taxes measured on the net income of Seller or
ad valorem taxes paid by Seller or SVSW A associated with the Site or the
Landfill.
5.3 Notification of Transmission Outages
28
SANFRAN 90103 (2K)
Buyer will exercise reasonable efforts to provide Seller with as much advance
notice as practicable of any Outage on the LDC System or other transmission
or delivery facilities which may adversely affect the delivery of Energy to
Buyer.
ARTICLE VI
FORCE MAJEURE
6.1 Force Majeure Events
It is understood that at times unavoidable delays or interruptions in delivery or
performance may result from Force Majeure Events. The performance of each
Party under this Agreement may be subject to interruptions or reductions due
to a Force Majeure Event. Both Parties shall in good faith use such effort as is
reasonable under all the circumstances known to that Party affected by the
Force Majeure Event at the time to remove or remedy the cause(s) and mitigate
the inability to perform. However, the obligation to use such reasonable
efforts shall not be interpreted to require resolution of labor disputes by
acceding to demands of the opposition when such course is inadvisable in the
discretion of the Party having such difficulty.
6.2 Remedial Action
Subject to the limitation on extensions of Milestones set forth in Section
4.3( e), a Party shall not be liable to the other Party if the Party is prevented
from performing its obligations hereunder due to a Force Majeure Event. The
Party rendered unable to fulfill an obligation by reason of a Force Majeure
Event shall take all action necessary to remove such inability with all due
speed and diligence. The nonperforming Party shall be prompt and diligent in
attempting to remove the cause of its failure to perform, and nothing herein
shall be construed as permitting that Party to continue to fail to perform after
said cause has been removed. Notwithstanding the foregoing, the existence of
a Force Majeure Event shall not excuse any Party from its obligations to make
payment of amounts due hereunder.
6.3 Notice
29 SANFRAN 90103 (2K)
In the event of any delay or nonperformance resulting from a Force Majeure
Event, the Party suffering the Force Majeure Event shall, as soon as
practicable under the circumstances, notify the other Party in writing of the
nature, cause, date of commencement thereof and the anticipated extent of any
delay or interruption in performance.
6.4 Termination Due To Force Majeure Event
Subject to Section 4.3( e), if a Party is prevented from performing its material
obligations under this Agreement for a period of twelve (12) consecutive
months or longer, the unaffected Party may terminate this Agreement, without
liability of either Party to the other, upon thirty (30) days written notice at any
time during the Force Majeure Event.
ARTICLE VII
DEFAULTIREMEDIES/TERMINATION
7.1 Events of Default by Buyer
The following shall each constitute an "Event of Default" by Buyer:
(a) Buyer breaches any material obligation (other than one covered by
Section 7.1 (b) or (c) of this Agreement) and fails to cure such breach within
thirty (30) days after written notification of breach by Seller or such longer
period as may be necessary to cure such breach as long as Buyer is exercising
diligent efforts to cure such default.
(b) Buyer fails to make any payment due under this Agreement within thirty
(30) days after written notice that such payment is due.
(c) The initiation of an involuntary proceeding against Buyer under the
bankruptcy or insolvency laws, which involuntary proceeding remains
undismissed for sixty (60) consecutive days, or in the event of the initiation by
Buyer of a voluntary proceeding under the bankruptcy or insolvency laws.
7.2 Events of Default by Seller
30
SANFRAN 90103 (2K)
(1) The following shall each constitute an "Event of Default" by the Seller
if Seller does not cure within the time set forth in clause (2), below:
(a) Seller breaches any material obligation (other than ones covered by
Sections 7.2(b), (c), (d), (e) or (f) of this Agreement or for which a remedy is
specified).
(b) Seller fails to make any payment due under this Agreement within thirty
(30) days after written notice that such payment is due.
( c) The initiation of an involuntary proceeding against Seller under the
bankruptcy or insolvency laws, which involuntary proceeding remains
undismissed for sixty (60) consecutive days, or in the event of the initiation by
Seller of a voluntary proceeding under the bankruptcy or insolvency laws.
(d) Seller sells or transfers Buyer's share of the Output (or any individual
component thereof) or Expansion Plant Output (or any individual component
thereof) or the right to Buyer's share of the Output (or any individual
component thereof) or Expansion Plant Output (or any individual component
thereof), to the extent that such Expansion Plant Output is purchased by Buyer,
to any Person other than Buyer.
(e) Seller fails to comply with the terms of Buyer's right of first refusal as
described in Section 2.5 of this Agreement.
(f) Subject to Section 7.4( c), Seller fails, for any reason other than an
unauthorized act or omission by Buyer, to achieve the Commercial Operation
Date by the applicable Milestone deadline as set forth in Section 4.3(b)(v), as
such deadline may be extended as a result of a Force Majeure Event in
accordance with Section 4.3(e).
(2) Time for Cure. Nothing described in Section 7.2(1)(a) above shall
constitute an Event of Default if Seller cures the event, failure or circumstance
within (30) days after written notification by Buyer or such longer period as
may be necessary to cure as long as Seller is exercising diligent efforts to cure.
7.3 Termination for Default
31 SA'IFRAA 90103 (2K)
(a) In the event the defaulting Party fails to cure the Event of Default within
the period for curative action under Sections 7.1 or 7.2, as applicable, the non-
defaulting Party may terminate the Agreement by notifying the defaulting
Party in writing of (i) the decision to terminate and (ii) the effective date of the
termination.
(b) Upon termination of the Agreement by Buyer pursuant to Section 7.3(a)
due to an Event of Default by Seller, (i) Buyer shall have no future or further
obligation to purchase the Output of the Plant or to make any payment
whatsoever under this Agreement, except for payments for obligations arising
or accruing prior to the effective date of termination, and (ii) Seller shall, if
Buyer has paid in full for emission offsets pursuant to Section 4.3U), either (A)
reimburse Buyer pro rata for any unused such offsets paid for by Buyer or (B)
transfer to Buyer title to any unused such offsets paid for by Buyer. Upon
termination of the Agreement by Seller pursuant to Section 7.3(a) due to an
Event of Default by Buyer, Seller shall have no future or further obligation to
deliver the Output of the Plant to Buyer or to satisfy any other obligation of
this Agreement, except for payments or other obligations arising or accruing
prior to the effective date of termination. After the effective date of
termination, the Agreement shall not be construed to provide any residual
value to either Party or any successor or any other Person, for rights to, use of
or benefits from the Plant to any Person.
( c) Intentionally Omitted.
7.4 Damages
(a) For all claims, causes of action and damages the Parties shall be entitled
to the recovery of actual damages allowed by law unless otherwise limited by
the Agreement. Neither the enumeration of Events of Default in Sections 7.1
and 7.2, nor the termination of this Agreement by a non-defaulting Party
pursuant to Section 7.3(a), shall limit the right of a non-defaulting Party to
rights and remedies available at law, including, but not limited to, claims for
breach of contract or failure to perform by the other Party and for direct
damages incurred by the non-defaulting Party as a result of the termination of
this Agreement.
(b) Except as otherwise specifically and expressly provided in the
Agreement, neither Party shall be liable to the other Party under this
32
SANFRAN 90103 (2K)
Agreement for any indirect, special or consequential damages, including but
not limited to loss of use, loss of revenues, loss of profit, interest charges, cost
of capital or claims of its customers or members to which service is made.
Except as set forth in Section 4.1 (k) and except to the extent Seller violates its
undertaking not to provide or sell rights to part or all of the Output to a party
other than Buyer, Seller shall not be liable to Buyer for failure to provide any
specific amount of Output hereunder.
(c) In the event that Seller fails to meet the Commercial Operation Date by
the applicable Milestone deadline as set forth in Section 4.3(b )(v), as such
deadline may be extended as a result of a Force Majeure Event in accordance
with Section 4.3(e), Seller shall be liable for liquidated damages in the amount,
per month, equal to the Monthly LD Amount for each full month (with parts of
a month pro rated) that Seller is late in satisfying the Milestone. So long as
Seller is paying such liquidated damages on a monthly basis, up to twelve (12)
months, Buyer shall not be permitted to terminate this Agreement. If after
twelve (12) months following the relevant Milestone deadline Seller has failed
to achieve Commercial Operation, or if for any reason Seller fails to pay, or
discontinues paying, the monthly liquidated damages provide for above, Buyer
may terminate this Agreement by written notice to Seller. This twelve (12)
month period shall not be extended as a result of a Force Majeure Event.
Upon such termination, Seller shall pay Buyer, within thirty (30) days of the
termination notice, a lump sum equal to the LD Amount. No other damages or
remedy shall be available to Buyer on the basis of such failure to meet the
Milestone set forth in Section 4.3(b )(v) or termination of this Agreement based
on failure to achieve Commercial Operation within twelve (12) months of that
Milestone deadline.
(d) The Parties agree that the liquidated damages set forth in Sections
4.3(h) and 7.4(c) are reasonable and represent a fair and genuine estimate of
the damages Buyer will suffer upon the failure of Seller to achieve
Commercial Operation by the agreed upon date(s). The Parties acknowledge
that it would be impracticable or extremely difficult to fix Buyer's actual
damages, and therefore have deemed the liquidated damages set forth above to
be the amount of damage sustained by Buyer upon such a failure. The Parties
further agree that payment of such amount shall be as liquidated damages and
not as a penalty, and is therefore not subject to avoidance under California
Civil Code section 1671.
33
SANFRAN 90103 (2K)
7.5 Indemnification
Seller and Buyer agree to defend, indemnifY, and hold each other, and their
respective officers, directors, employees and agents, harmless from and against
all claims, demands, losses, liabilities, and expenses (including reasonable
attorneys' fees) (collectively "Damages") for personal injury or death to
persons and damage to each other's physical property or facilities or the
property of any other Person to the extent arising out of, resulting from, or
caused by the negligent or intentional and wrongful acts, errors, or omissions
of the indemnifYing Party. This indemnification obligation shall apply
notwithstanding any negligent or intentional acts, errors or omissions of the
indemnitees but the indemnifYing Party's liability to pay Damages to the
indemnified Party shall be reduced in proportion to the percentage by which
the indemnitees' negligent or intentional acts, errors or omissions caused the
Damages. Neither Party shall be indemnified for its Damages resulting from
its sole negligence or willful misconduct. These indemnity provisions shall
not be construed to relieve any insurer of its obligation to pay claims
consistent with the provisions of a valid insurance policy.
7.6 Buyer's Right to Operate
If Seller (i) fails to maintain the Availability Threshold for a period of nine (9)
months in any twelve (12) month period, or (ii) fails to generate Energy for
sixty (60) consecutive days, then Buyer or its designee may, but shall not be
obligated to, step-in and assume operational control from Seller of the Plant;
provided that Buyer shall not be permitted to step-in and take control so long
as Seller or any of Seller's Lenders are using commercially reasonable efforts
to remedy the failures described in (i) or (ii) above. Buyer, its employees,
contractors and designees shall have the unrestricted right to enter the Plant to
the extent necessary to operate the Plant. Upon the exercise of this right,
Buyer or its designee shall at all times operate the Plant using Prudent Utility
Practice and shall comply, to the extent commercially practicable, with the
terms of this Agreement. Notwithstanding the foregoing, Seller shall not be
excused from any obligation or remedy available to Buyer as a result of
Buyer's operation of, or election not to operate, the Plant. Buyer shall pay
Seller the applicable rate for Output provided hereunder, less any costs
incurred by Buyer to operate the Plant. Buyer shall indemnifY and hold Seller
harmless from any liability to third parties arising out of Buyer's failure to
operate the Plant using Prudent Utility Practice. Upon Buyer's satisfaction
34
SANFRJI,,'" 90103 (2K)
that Seller has the ability to operate the Plant III accordance with this
Agreement, Seller shall resume operational control.
Should Seller's Lender(s) refuse to finance the Plant, or materially condition
such financing, solely as a result of this Section' 7.6, and Seller gives Buyer
written notice of such refusal to finance, Buyer shall have the following
options: (1) terminate this Agreement without liability of one Party to the
other; (2) renegotiate this Section 7.6 with Seller and Lender(s) in a manner
mutually acceptable; (3) delete this Section 7.6 in its entirety (which deletion
will not require Seller's additional consent); or (4) arrange for financing for
the Plant under materially equivalent terms and conditions as the Lender(s)
were prepared to provide but for this Section 7.6. If Buyer fails to elect and
complete one of these options within sixty (60) days of written notice from
Seller, Seller shall have the right to terminate this Agreement without liability
of one party to the other.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
8.1 Seller's Representations and Warranties
Seller represents and warrants to Buyer that as of the date of execution of this
Agreement:
(i) Seller IS duly organized and validly existing as a limited liability
company under the laws of Delaware, and has the lawful power to
engage in the business it presently conducts and contemplates
conducting in this Agreement and Seller is duly qualified in each
jurisdiction wherein the nature of the business transacted by it makes
such qualification necessary;
(ii) Seller has the legal power and authority to make and carry out this
Agreement and to perform its obligations hereunder; all such actions
have been duly authorized by all necessary proceedings on its part. As
of the date of execution hereof, (a) the Plant shall on the Commercial
Operation Date be a "qualifying small power production facility" as that
term is defined in Section 3(17)(C) of the Federal Power Act, and will
35 SANFRAN 90103 (2K)
possess all of the exemptions from regulation provided in 18 CFR
Sections 292.601(c) and 292.602; and (b) this Agreement is not required
to be filed with FERC and no approval (except with respect to
"qualifYing small power production facility" status) with respect to this
Agreement is required from FERC. In the event that the Plant is not a
IIqualifYing small power production facility" on the Commercial
Operation Date or any date thereafter, Seller shall make appropriate
filings under the Federal Power Act within sixty (60) days so as to
comply with applicable law, subject at all times to the provisions of
Article IX of this Agreement;
(iii) The execution, delivery and performance of this Agreement by Seller
will not conflict with its governing documents, any applicable laws, or
any covenant, agreement, understanding, decree or order to which Seller
is a party or by which it is bound or affected;
(iv) This Agreement has been duly and validly executed and delivered by
Seller and, as of the date first set forth herein, constitutes a legal, valid
and binding obligation of Seller, enforceable in accordance with its
terms against Seller, except to the extent that its enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the rights of creditors generally or by general
principles of equity; and
(v) There are no actions, suits, proceedings or investigations pending or, to
the knowledge of Seller, threatened in writing against Seller, at law or in
equity before any Governmental Authority, which individually or in the
aggregate are reasonably likely to have a materially adverse effect on
the business, properties or assets or the condition, financial or otherwise,
of Seller, or to result in any impairment of Seller's ability to perform its
obligations under this Agreement.
8.2 Buyer Representations and Warranties
Buyer represents and warrants to Seller that as of the date of execution of this
Agreement:
(i) Buyer is The City of Palo Alto, a chartered city and municipal
corporation, duly organized and validly existing, and has the lawful
36 SANJ1RA,'1 90103 (2K)
power to engage in the business it presently conducts and contemplates
conducting in this Agreement and Buyer is duly qualified in each
jurisdiction wherein the nature of the business transacted by it makes
such qualification necessary;
(ii) Buyer has the legal power and authority to make and carry out this
Agreement and to perform its obligations hereunder and all such actions
have been duly authorized by all necessary proceedings on its part;
(iii) The execution, delivery and performance of this Agreement by Buyer
will not conflict with its governing documents, any applicable laws or
any covenant, agreement, understanding, decree or order to which Buyer
is a party or by which it is bound or affected;
(iv) This Agreement has been duly and validly executed and delivered by
Buyer and, as of the first date set forth herein, constitutes a legal, valid
and binding obligation of Buyer, enforceable in accordance with its
terms against Buyer, except to the extent that its enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the rights of creditors generally or by general
principles of equity; and
(v) There are no actions, suits, proceedings or investigations pending or, to
the knowledge of Buyer, threatened in writing against Buyer, at law or
in equity before any Governmental Authority, which individually or in
the aggregate are reasonably likely to have a materially adverse effect
on the business, properties or assets or the condition, financial or
otherwise, of Buyer, or to result in any impairment of Buyer's ability to
perform its obligations under this Agreement.
ARTICLE IX
NO CHANGE TO RATES, TERMS OR CONDITIONS
37 SANFRAN 90103 (2K)
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 that the standard is the "Mobile-Sierra public interest" standard of
review, as stated by the United States Supreme Court in Morgan Stanley Capital
Group Inc. v. Public Utility District No.1 o/Snohomish County, 554 U.S.
(2008). As to all other persons it is intended that the same standard, as may be made
applicable to other than the Parties, apply, as stated by FERC in Modesto Irrigation
District, Docket No. EL03-159-004, 125 FERC,-r 61,174, para. 15 (Order Denying
Rehearing, November 14, 2008).
ARTICLE X
MISCELLANEOUS
10.1 Assignment
The rights and obligations of this Agreement may not be assigned by either
Party without the prior written consent of the other Party, which consent shall
not be unreasonably withheld or delayed. Notwithstanding the foregoing,
Seller may use subcontractors without Buyer's consent to comply with the
terms of this Agreement provided that notwithstanding the use of said
subcontractors, Seller shall remain responsible for all its obligations under this
Agreement. Buyer may furthermore use any agent it so designates for
scheduling and billing purposes, so long as Buyer remains responsible for all
of its obligations under this Agreement. Any purported assignment of this
Agreement in the absence of the required consent, except as provided in 10.2,
shall be void.
10.2 Financing
Notwithstanding Section 10.1, Seller may, without the consent of Buyer,
collaterally assign its rights under this Agreement to Lenders as collateral
security in connection with any financing of the purchase or operation of the
Plant, provided that such Lender( s) or its designee agree( s) in writing that
upon assuming any of Seller's prospective rights under this Agreement, such
Lender also shall be bound by all of Seller's prospective obligations under this
Agreement. Notwithstanding any such assignment, Seller's obligations under
this Agreement shall continue in their entirety in full force and effect and
38 SANFRAN 90!O3 (2K)
Seller shall remain fully liable for all of its obligations under or relating to this
Agreement. Each such collateral assignment and any purchaser or transferee
shall be subject to Buyer's rights and defenses hereunder and under applicable
law. Seller shall provide prior written notice to Buyer at least seven (7) days
prior to any such collateral assignment.
In order to facilitate the obtaining of financing of the Plant, Buyer shall
execute, upon request, a commercially reasonable consent to assignment, with
respect to a collateral assignment hereof to Lenders in connection with the
documentation of the financing or refinancing for the Plant. Any assignment
in violation of this Agreement shall be void, ab initio. Buyer shall consider in
good faith any amendments to this Agreement proposed by Seller which relate
to financing of the Plant or other amendments requested by Seller in order to
receive or maintain financing from Lenders.
10.3 Notices
Any notice, demand, request, or communication required or authorized by this
Agreement shall be delivered either by hand, facsimile, overnight courier or
mailed by certified mail, return receipt requested with postage prepaid, to:
The City of Palo Alto
250 Hamilton Avenue, Seventh Floor
Palo Alto, CA 94301
Attention: City Clerk
Telecopier: (650) 329-2646
on behalf of Buyer;
with a copy to:
SANFRAN 90103 (2K)
The City of Palo Alto
250 Hamilton Avenue, Eighth Floor
Palo Alto, CA 94301
Attention: Senior Assistant City Attorney / Utilities
Telecopier: (650) 329-2646
39
and to:
The City of Palo Alto
250 Hamilton Avenue, Third Floor
Palo Alto, CA 94301
Attention: Director of Utilities
Telecopier: (650) 321-0651
and to:
Northern California Power Agency
651 Commerce Drive
Roseville, CA 95678
Attention: Power Contracts Administrator
Telecopier: (916) 781-4255
and to:
SANFRAN 90103 (2K)
Ameresco Johnson Canyon LLC
c/o Ameresco, Inc.
111 Speen Street, Suite 410
Framingham, MA 01701
Attention: General Counsel
Telecopier: (508) 661-2201
Telephone: (508) 661-2200
40
with a copy to:
Ameresco Johnson Canyon LLC
c/o Ameresco, Inc.
111 Speen Street, Suite 410
Framingham, MA 01701
Attention: Vice President, Renewable Energy
Telecopier: (508) 661-2201
Telephone: (508) 661-2200
on behalf of Seller.
The designation and titles of the person to be notified or the address of
such person may be changed at any time by written notice delivered in the
manner set forth in this Section 10.3. Any such notice, demand, request, or
communication shall be deemed received (i) if delivered by hand by a Party or
sent by facsimile or (ii) upon receipt by the receiving Party if sent by courier
or U.S. mail.
10.4 Captions
All titles, subject headings, section titles and similar items are provided for the
purpose of reference and convenience and are not intended to be inclusive,
definitive or to affect the meaning of the contents or scope of the Agreement.
10.5 No Third Party Beneficiary
No provision of the Agreement is intended to, nor shall it in any way, inure to
the benefit of any customer, property owner or any other third party, so as to
constitute any such Person a third-party beneficiary under the Agreement, or of
anyone or more of the terms hereof, or otherwise give rise to any cause of
action in any Person not a Party hereto.
10.6 No Dedication
No undertaking by one Party to the other under any prOVISIon of the
Agreement shall constitute the dedication of that Party's system or any portion
41 SANFRAN 90103 (2K)
thereof to the other Party or to the public or affect Seller as an independent
entity and not a public utility.
10.7 Entire Agreement; Integration
This Agreement, together with all Appendices attached hereto, constitutes the
entire agreement between the Parties and supersedes any and all prior oral or
written understandings. No amendment, addition to or modification of any
provision hereof shall be binding upon the Parties, and neither Party shall be
deemed to have waived any provision or any remedy available to it, unless
such amendment, addition, modification or waiver is in writing and signed by
a duly authorized officer or representative of the Parties.
10.8 Applicable Law
The Agreement is made in the State of California and shall be interpreted and
governed by the laws of the State of California and/or the laws of the United
States, as applicable.
10.9 Venue
The Parties hereby submit to the exclusive jurisdiction of the federal courts for
the Northern District of the State of California; provided, however, that if such
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 San Francisco, State of California.
10.10 Nature of Relationship
The duties, obligations and liabilities of the Parties are intended to be several
and not joint or collective. The Agreement shall not be interpreted or
construed to create an association, joint venture, fiduciary relationship or
partnership between Seller and Buyer or to impose any partnership obligation
or liability or any trust or agency obligation or relationship upon either Party.
Seller and Buyer shall not have any right, power or authority to enter into any
agreement or undertaking for, or act on behalf of, or act as or be an agent or
representative of or otherwise bind the other Party.
42
SANFRAN 90103 (2K)
10.11 Good Faith and Fair Dealing; Reasonableness
The Parties agree to act reasonably and in accordance with the principles of
good faith and fair dealing in the perfonnance of this Agreement. Unless
expressly provided otherwise in this Agreement, (i) wherever the Agreement
requires the consent, approval or similar action by a Party, such consent,
approval or similar action shall not be unreasonably withheld or delayed, and
(ii) wherever the Agreement gives a Party a right to detennine, require, specify
or take similar action with respect to matters, such detennination, requirement,
specification or similar action shall be reasonable.
10.12 Severability
Should any provision of the Agreement be or become void, illegal or
unenforceable, the validity or enforceability of the other provisions of the
Agreement shall not be affected and shall continue in full force and effect. The
Parties will, however, use their best endeavors to agree on the replacement of
the void, illegal, or unenforceable provision(s) with legally acceptable clauses
which correspond as closely as possible to the sense and purpose of the
affected provision.
10.13 Confidentiality
All infonnation disclosed by Seller, including without limitation all
engineering documents, designs, specifications and financial infonnation, shall
be kept confidential and shall not be disclosed to any third party except as
provided in this Section 10.13. Buyer acknowledges Seller's request to hold
all infonnation regarding this Agreement confidential. Buyer shall disclose
such infonnation to third parties only to the extent required by California law
(including, without limitation, the California Constitution, the California
Public Records Act and the Brown Act). Notwithstanding the foregoing,
either Party may disclose this Agreement to SVSW A or its representatives, the
Northern California Power Agency or its representatives, or to Lenders or
potential Lenders or their representatives; provided that prior to such
disclosure, the recipient shall agree in writing to keep the material confidential
under tenns no less stringent than as set forth in this Section 10.13. Buyer also
shall be pennitted to disclose this Agreement and related infonnation to the
City Council of Palo Alto and/or the City Council for the express purpose of
obtaining approval to execute this Agreement; provided that in connection
43
SANFRAN 90103 (2K)
with such disclosure Buyer shall only disclose such information to the extent
required by California law (including, without limitation, the California
Constitution, the California Public Records Act and the Brown Act). Each
Party shall be bound by its obligations of confidentiality hereunder for a period
of two (2) years from expiration or any earlier termination of this Agreement.
Notwithstanding anything to the contrary in this Section 10.13, nothing shall
restrict any Party from using or disclosing confidential information in any
manner it chooses which (i) is or becomes generally available to the public
other than as a result of a disclosure directly or indirectly by the disclosing
Party or its representative; (ii) was within the using or disclosing Party's
possession prior to it being furnished hereunder, provided that such
information is not subject to another confidentiality agreement with, or other
contractual, legal or fiduciary obligation of confidentiality to, any other party
with respect to such information; (iii) is rightfully obtained by a Party from
third parties authorized to make such disclosure without restriction; or (iv) is
legally required to be disclosed by judicial or other governmental action as
determined by such Party's attorney acting in good faith (including, but not
limited to, the California Constitution, the California Public Records Act and
the Brown Act), provided that prompt notice of said judicial or other
governmental action shall have been given to the non-disclosing Party and that
the non-disclosing Party shall, at its sole cost and expense, be afforded the
opportunity (consistent with the legal obligations of the disclosing Party) to
exhaust all reasonable legal remedies to maintain the confidential information
in confidence.
10.14 Cooperation
The Parties agree to reasonably cooperate with each other in the
implementation and performance of the Agreement. Such duty to cooperate
shall not require either Party to act in a manner inconsistent with its rights
under the Agreement.
10.15 Counterparts
This Agreement may be executed in two or more counterparts and by different
Parties on separate counterparts, all of which shall be considered one and the
same agreement and each of, which shall be deemed an original.
{signature page follows}
44
SANFRAN 9O!O3 (2K)
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
duly executed as of the day and year first above written.
AMERESCO JOHNSON CANYON LLC THE CITY OF PALO ALTO
By Ameresco, Inc., its sole member APPROVAL AS TO FORM:
By: By:
Name: Michael T. Bakas Name: Grant Kolling
Title: Vice President Title: Senior Assistant City Attorney
Date: Date:
CITY OF PALO ALTO CITY OF PALO ALTO
APPROVAL BY ADMINISTRATIVE SERVICES APPROVAL BY UTILITIES DIRECTOR
DIRECTOR
By: By:
Name: Lalo Perez Name: Valerie o. Fong
Title: Administrative Services Director Title: Utilities Director
Date: Date:
CITY OF PALO ALTO CITY OF PALO ALTO
APPROVAL BY CITY MANAGER APPROVAL BY MAYOR:
By: By:
Name: James Keene Name: Peter Drekmeier
Title: City Manager Title: Mayor
Date: Date:
45
SANFRAN 90103 (2K)
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF MIDDLESEX
)
)
)
SS
On this day of , 2008, before me, the undersigned notary
public, personally appeared , as the of
Ameresco, Inc., a Delaware corporation, the sole member of Ameresco Johnson
Canyon LLC, a Delaware limited liability company, proved to me through
satisfactory evidence of identification, which was , to be the
person whose name is signed on the preceding document, and acknowledged to me
that he signed the preceding document voluntarily for its stated purpose as
_________ of Ameresco, Inc., a Delaware corporation, the sole member
of Ameresco Johnson Canyon LLC, a Delaware limited liability company.
My Commission expires _______ ---'-
Notary Public
46
SANFRAN 90 I 03 (2K)
APPENDIX A
SITE DRAWINGS
Seller shall provide to Buyer final Site Drawings prior to the Commercial
Operation Date.
47
SANFRAN 90103 (2K)
APPENDIXB
FORM OF ATTESTATION
Ameresco Johnson Canyon LLC
Environmental Attribute Attestation and Bill of Sale
Ameresco Johnson Canyon LLC ("Ameresco") hereby sells, transfers and delivers to
("Customer")
-------~---~~---~-~-~-~~~---the Environmental Attributes and Environmental Attribute Reporting Rights associated with the generation of
the indicated energy for delivery to the grid (as such term( s) are defmed in the
_____________ (identifY contract) (the "Contract') dated 20
between Ameresco and Customer) arising from the generation for delivery to the grid of the energy by the
Facility described below:
Facility name and location: Fuel Type:
Capacity (MW):_ Operational Date: ____ _
(for facility that has added renewable capacity, show operational date and amount of new capacity)
As applicable: CEC Reg. no. _ Energy Admin. m no. Q.F. m no. _
MWhrs generated
20 -------______ 20
20 -------
in the amount of one Environmental Attribute or its equivalent for each megawatt hour generated; and Ameresco
further attests, warrants and represents as follows:
i) to the best of its knowledge, the information provided herein is true and correct;
ii) its sale to Customer is its one and only sale of the Environmental Attributes and associated
Environmental Attribute Reporting Rights referenced herein;
iii) the Facility generated and delivered to the grid the energy in the amount indicated as undifferentiated
energy; and
[check one:]
iv) Ameresco owns the Facility.
iv) to the best of Ameresco's knowledge, each of the Environmental Attributes and Environmental
Attribute Reporting Rights associated with the generation of the indicated energy for delivery to the
grid have been generated and sold by the Facility.
This serves as a bill of sale, transferring from Ameresco to Customer all of Ameresco's right, title and interest in
and to the Environmental Attributes and Environmental Attribute Reporting Rights associated with the generation
of the energy for delivery to the grid.
Contact Person: _______ tel: 1-508-661-2200; fax: 1-508-661-2201
WITNESS MY HAND,
SANFRAN 90103 (2K)
AMERESCO JOHNSON CANYON LLC
By: Ameresco, Inc., its sale member
By
Its
Date:
8-1
48
APPENDIXC
INSURANCE COVERAGES
At its own expense, Seller shall secure and maintain during the Term the
following insurance with the coverage amounts indicated for occurrences
during and arising out of Seller's performance of this Agreement. Such
insurance shall be placed with responsible and reputable insurance companies
in compliance with Requirements of Law applicable to Seller.
1. Workers' CompensationlEmployer's Liability. Seller shall
maintain Workers' Compensation Insurance and Employer's
Liability Insurance which comply with Requirements of Law
applicable to Seller.
2. Automobile Liability. Seller shall maintain Automobile Liability
Insurance in compliance with Requirements of Law applicable to
Seller, including coverage for owned, non-owned and hired
automobiles for both bodily injury (including death) and property
damage, including automobile liability contractual endorsement
and uninsured/underinsured motorist protection endorsements.
3. Third Party Liability. Seller shall maintain third party liability
insurance in compliance with Requirements of Law applicable to
Seller on a project-specific basis covering against legal
responsibility to others as a result of bodily injury, property
damage and personal injury arising from the operation and
maintenance of the Plant. Such policy shall be written with a
limit of liability not less than $10,000,000 and a deductible not to
exceed $10,000. Such liability may be in any combination of
primary and excess/umbrella. Coverage shall include, but not be
limited to, premises/operations, explosion, collapse, underground
hazards, broad form property damage and personal injury
liability. Such coverage shall not contain exclusions for punitive
or exemplary damages.
49 SANFRAN 90103 (2K)
APPENDIXD
SCHEDULING PROTOCOLS
1. Prior to three (3) workdays before the end of a month, Seller is to
provide to NCPA and Buyer a monthly forecast of loads and/or
generation for the following month. At a minimum, monthly forecasts
will be hourly kilowatt (kW) values by weekday, Saturday, and
SundaylHoliday.
2. No later than 14:00 each Thursday, Seller is to provide a forecast of
loads and/or generation for the following week to the extent different
from the monthly forecast in Paragraph 1. Weekly forecasts will be
hourly kW values for each hour of the week.
3. Daily modifications to forecasts. Unless otherwise mutually agreed,
Seller may make changes to the Weekly forecast by providing such
changes to NCP A prior to 08:00 two (2) workdays before the active
scheduling day.
a. Example: For power that is scheduled for generation or delivery on
Thursday, March 29, changes must be submitted to NCPA no later
than 08:00 on Tuesday, March 27.
4. Hourly modifications to active schedules. Unless otherwise mutually
agreed, Seller may make changes to active schedules by providing such
changes to NCP A with a minimum of 4 hours notice before the active
hour to be changed. Changes to active schedules are limited to two (2)
changes per day, excluding forced outages, unless otherwise agreed to
between the parties. One request for a schedule change, of one hour or
multiple hours duration, constitutes one schedule change.
a. Example: For power that is scheduled for generation or delivery in
hour ending 15:00 (for the period from 14:01 to 15:00), changes
must be submitted to NCPA no later than 11 :00.
5. NCPA is to be notified of all planned or forced generation outages.
6. At Seller's request, NCPA will modify generation and load schedules for
unforeseen circumstances in accordance with the above scheduling
timeline constraints and NCP A Schedule Coordination Agreement.
50
SANFRAN 90103 (2K)
7. All notices and schedules are to be submitted to NCP A by phone, fax or
email to the following persons: ChiefDispatcherlScheduler.
8. In the absence of forecasts and schedules as noted above, NCPA will
utilize the most current information provided by Seller in the development
and submission of schedules.
51 SANFRAN 90103 (2K)
EXAMPLE FORM OF DAY-AHEAD SCHEDULE
For: June __ ,2008
Hour Ended: Expected Capability
............. -
1
2
1
4
5
ti
7 g
9
10
] ]
12
11
14
15
16 !
17
L.........-......... If(
19
')0
71 n i
71
24
Expected Daily Temperatures, F
Low
High
Contact
Information:
Scheduling
Coordinator:
Facility:
CITY:
SANFRAN 90103 (2K)
APPENDIXE
PERFORMANCE TEST
The Seller shall coordinate and schedule, with Buyer, a Performance Test after
completion of all equipment startup and commissioning activities. This
performance test may be performed before completing punch list items. Buyer
shall be permitted to witness the Performance Test, including access to and copies
of control room logs, control system display screens, and instrumentation data for
a reasonable period of time before, during and after the Performance Test, and may
also concurrently conduct a site inspection of the Landfill and Plant and associated
facilities, systems and equipment. Seller shall supply a written copy of the
Performance Test results to both Buyer within five (5) business days following the
conclusion of the test.
The Performance Test shall continue for one hundred twenty (120) consecutive
hours (the "Test Period") to demonstrate the following:
1) Net Generator Output: The power output for each generator shall be recorded
for the Test Period to verify the net initial capacities. This Performance Test shall
be performed for all engine/generators simultaneously and will be considered
successful if the average net output for the Test Period is equal to eighty percent
(80%) of the net Initial Capacity designated in this Agreement. All power
measurements shall be based on a power factor of 0.90.
2) Compliance: The Performance Test shall also demonstrate the ability of the
Plant to comply with all material safety, system reliability, environmental, and
other requirements of its permits, this Agreement, any interconnection agreements,
and the LFG Agreement.
SANFRAN 90!O3 (2K) 53
APPENDIXF
SELLER'S SAMPLE QUARTERLY FINANCIAL STATEMENT
Balance Sheets
December 31,2006 and 2007
ASSETS
Current assets:
Cash and cash equivalents
Restricted cash
Accounts receivable
Prepaid and other current assets
Total current assets
Other assets:
Project assets, net
Due from member
Debit issuance costs, net
Total other assets
LIABILITY AND MEMBER'S EQUITY
Current liabilities:
Current portion of long-term debt
Accounts payable
Accrued expenses
Total current liabilities
Long-term liabilities:
Long-term debt, less current portion
Deferred tax liabilities
Total long-term liabilities
Member's equity
SANFRAN 90103 (2KJ 54
Statements of Operations
Years Ended December 31, 2006 and 2007
Revenues:
Electricity Sales
Costs of revenue:
Operation and maintenance
Depreciation of project assets
Gross profit (loss)
Operating expenses:
Seiling, general and administrative
Operating income (loss)
Interest and other financing costs
Income (loss) before tax benefit (provision)
Income tax benefit (provision)
Net income (loss)
SANFRAN 90103 (2K)
Statements of Cash Flows
Years Ended December 31,2006 and 2007
Cash flows from operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization
Amortization of deferred issuance costs
Deferred taxes
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable
Prepaid expenses
Accounts payable
Due to (from) member
Net cash provided by operating activities
Cash flows from investing activities:
Accounts payable relating to construction activity
Accrued expenses relating to construction activity
Purchase of project assets
Net cash used in investing activities
Cash flows from financing activities:
Increase in restricted cash
Capital contributions
Distributions to member
Proceeds from debt issuance
Debt issuance costs
Net cash provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest
Income taxes
Supplemental disclosure of noncash transactions:
Accrued purchases of project assets
SANFRAN 90103 (2K)
ATTACHMENT D
DRAFT -Excerpted Minutes from July 21, 2009 Finance Committee Meeting
3: Adoption of a Resolution Approving the Ameresco Johnson Canyon Landfill Gas
Renewable Energy Power Purchase Agreement for the Acquisition of Up to Two Average
Megawatts of Energy Over Twenty Years at an Estimated Cost Not to Exceed $30 Million
Utilities Senior Resource Originator Torn Kabat provided a presentation about Palo Alto's
locally adopted Renewable Portfolios Standard (RPS) and the Arneresco Johnson Canyon Power
Purchase Agreement (PP A) under consideration. The presentation included:
• Background on the locally adopted RPS target of 33% renewables by 2015 within a Y2
cent per kWh retail rate impact limit
• Calculation of an allowable $5,000,000/year green resource cost premium (112 cent times
annual sales of I billion kWh).
• Progress to date on acquiring resources to ultimately meet the 33% renewable resource
target by 2015.
• Recently rising cost premiums paid for renewable resources implicit in both historic and
current proposals.
• State regulatory and legislative developments driving up the cost of renewables and the
State calculation of a benchmark Market Price Referent that forms a renewable proposal
price clustering point.
• Details of the proposed Johnson Canyon landfill gas power plant and the associated PPA
to sell power to Palo Alto.
• Details of future project expansion opportunities and obligations if Ameresco is able to
price expansion output at 85% of the Market Price Referent with the price capped at 15
cents per kWh.
• Beyond the Johnson Canyon proposal, Palo Alto is still pursing renewables to meet about
12% of its load by 2015. (About 10 times as much as the Johnson Canyon initial output.)
Kabat pointed out that the proposal carne through the City'S 2009 Request for Proposal process
and is among 6 currently being negotiated by a team of staff from Utilities, ASD, and the City
Attorneys office. Kabat noted that the proposed PP A was with Ameresco, with which Palo Alto
has 4 other contracts for renewable energy from landfill energy projects.
Staff also provided a table showing each committed renewable resource and how much of the $5
million per year allowed green premium is consumed for each. The table showed the Johnson
Canyon project will cost about $636,000 per year more than an equivalent amount and shape of
regular "brown" market power, consuming $636,000 of the $5,000,000 per year allowed green
premlUm.
Council Member Schmid pointed out that the Johnson Canyon proposal and others currently
available to us are priced at about two times the current brown energy price, and that it might be
a good time to look at the divergence of the two markets and the use of the Y2 cent premium.
Chair Burt suggested that staff produce more metrics for Council to consider when developing
policies. Metrics may include:
• QualifYing Renewable Portfolio Percentage (like our 18% current amount)
• Qualifying renewables plus our large hydroelectric resources, which provide 50% of the
energy used in an average hydro year. (18% + 50% =68%)
• Add in customers' voluntary PaloAltoGreen percent ofload (68% + 6% 74%)
He suggested we may need a tool to help people understand how one neighbor getting the regular
Palo Alto power may be getting 68% non carbon power while another neighbor subscribing to
PaloAltoGreen product may be getting 68% non carbon electricity plus renewable attributes
covering all 100% of their electric consumption.
Burt remarked that reducing energy usage also helps meet the RPS goals by reducing load. He
suggested looking at how much a 10% load reduction would help to meet the 33% goal. He
pointed out that a more aggressive energy efficiency strategy could reduce customer bills if
efficiency cost less than renewables on a per kWh basis.
Utilities Director Valerie Fong said staff will bring this type of policy comparison to the UAC
for discussion.
Council Member Morton complimented staff on laddering in a good mix of renewable resources
over the years with a mix of prices that are influenced by the markets surrounding us.
MOTION: Council Member Morton moved seconded by Council Member Burt to recommend
that Council adopt a resolution approving the Power Purchase Agreement (PP A) with Ameresco
10hnson Canyon LLC, a Delaware limited liability company. Additionally, for this agreement,
to recommend the Council waive the application of the investment-grade credit rating
requirement of Section 2.30.340( d) of the Palo Alto Municipal Code to this transaction.
MOTION PASSED 3-0
MOTION: Council Member Schmid moved, seconded by Chair Burt, to direct Staff to work
with the UAC and then report back to the Finance Committee with a re-examination of the goals
and the matrix that are being used in the alternate energy program as a second agendized item
when the UAC discusses the Power Purchase Agreement with Ameresco 10hnson Canyon, LLC
with the CounciL
MOTION PASSED: 3-0
TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: CITY MANAGER'S OFFICE
DATE: AUGUST 3, 2009 CMR: 341:09
REPORT TYPE: Consent
SUBJECT: Appointment of Lalo Perez as City Manager Pro Tem For the September 14,
2009 City Council Meeting
RECOMMENDATION
The City Manager recommends that the City Council appoint Lalo Perez as City Manager Pro
Tern for the September 14, 2009 City Council meeting.
BACKGROUNDIDISCUSSION
Article IV, Section 9 of the City Charter provides in relevant part that "[i]n the absence ... of the
city manager and the assistant city manager ... the council shall appoint a city manager pro tern
who shall possess the powers and discharge the duties of the city manager during such absence
"
The City Manager will be attending the International City/County Management Association
annual national conference, and will not be available for the September 14 City Council meeting.
The City Manager is recommending that the Council appoint Administrative Services Director
Lalo Perez to serve as City Manager Pro Tern in his absence. Mr. Perez has the knowledge and
skills to serve in this capacity for this meeting.
RESOURCE IMPACT
The appointment of a City Manager Pro Tern will have no resource impact to the City.
CITY MANAGER:
CMR:341:09 Page 1 of 1
TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: COMMUNITY SERVICES
DATE: AUGUST 3, 2009 CMR: 306:09
REPORT TYPE: CONSENT
SUBJECT: Adoption of a Park Improvement Ordinance for the Renovation of Lytton
Plaza -Capital Improvement Program Project PE-08004j Approve an
Agreement with the Friends Of Lytton Plaza, L.L.C., for the Design,
Construction and Installation of Park Facilities and Other Improvements at
Lytton Plaza j and Adoption of an Ordinance Amending the Budget for Fiscal
Year 2010 to Accept Donations and to Provide an Additional Appropriation in
the Amount of $348,800 and Accept a Donation in the Same Amount From the
Friends of Lytton Plaza, L.L.c., and to Allocate an Additional $50,000 From the
Infrastructure Reserve for the City's Contribution (Not to Exceed $400,000) to
Capital Improvement Program Project PE-08004
RECOMMENDATION
Staff recommends that the Council:
1) Approve and adopt the attached Park Improvement Ordinance for improvements to
Lytton Plaza, 202 University Avenue at Emerson Street (Attachment A).
2) Authorize the City Manager or designee to execute the attached agreement with the
Friends of Lytton Plaza, L.L.C., for improvements located within Lytton Plaza, including
the installation of new paving, water fountain, site amenities, landscaping and other
improvements consistent with the Park Improvement Ordinance (Attachment B).
3) Approve the attached Budget Amendment Ordinance to accept and expend a $348,800
matching donation from the Friends of Lytton Plaza, LLC, and to augment the City's
financial share of the partnership by $50,000 from the Infrastructure Reserve (to a new
total City commitment of $400,000) for the benefit of equipment, amenities, landscaping,
sidewalk replacement and other improvements at Lytton Plaza -CIP Project PE-08004
(Attachment C).
BACKGROUND
Lytton Plaza was conceived and built by local banker Bart Lytton in the early 1960's across
Emerson Street from his bank for the purpose of holding art displays and promotional events for
the bank. In the early 1970's, Lytton Savings and Loan was acquired by Great Western Saving
and Loan Association. Shortly after purchasing Lytton Savings, Great Western expressed its
CMR:306:09 Page 10f5
interest in selling the plaza property. In 1975, the City Council voted to purchase the property
for $154,000, and the City took possession of the plaza in October 1975.
Very little has been done to change the appearance of the plaza since it was purchased by the
City. The donut-shaped planters and circular resting benches are original to the plaza and the
flowering pear trees in the planters are severely root bound and in declining health. The plaza is
frequently used as a staging area for displays during art and wine festivals, the annual May Fete
Parade, and it recently served as a stage for bands during the World Music Day festival. The
plaza has a proud history serving as a freedom of speech area since Vietnam War protests in the
early 1970's.
Situated at the head of University A venue, the plaza is considered an important gateway to the
downtown business district. Rather than serving as a prime meeting and mingling place,
however, the round planters and dilapidated amenities discourage visitors from sitting to enjoy
lunch or to enjoy entertainers on the plaza.
On June 16, 2008, the Council approved a letter of intent between the City and the Friends of
Lytton Plaza to begin design of a renovated plaza (CMR: 281 :08). The Friends hired landscape
architect Gary Laymon, of the Guzzardo Architectural Partnership in San Francisco, to create a
design for the renovated plaza that will be appealing and welcoming.
The renovation of the Plaza will include:
demolition of the existing plaza and sidewalk surfaces
demolition of existing stone wing walls along University A venue and Emerson Street
removal of existing trees
removal of existing lighting
re-pavement of the plaza and adjoining sidewalks
repositioning of the art piece Digital DNA
installation of new lights, tables and benches
installation a new fountain
The intent of the new design is to make the plaza inviting to downtown visitors, merchants and
neighbors, to provide a staging area for small concerts, storytelling and poetry events, and to
provide a gathering place that is conducive to conversations and relaxing.
This project was first introduced to the Park and Recreation Commission on September 23, 2007,
during Oral Communications by Le Levy and Sunny Dykwel. Mr. Levy returned to the
Commission at the October 23, 2007, regular meeting to make a full presentation. Mr. Levy
presented conceptual plans for the renovation of the plaza and gathered input from the
Commission on impacts to parking, social use of the park and ideas about re-Iandscaping and
lighting the plaza. The final plaza design (Exhibit A of Attachment B) incorporates the
comments and suggestions offered by the Commission and the public at that meeting. In
addition to these presentations at Commission meetings, the Friends also gathered public
comments at a public presentation on Lytton Plaza on Wednesday, May 28, 2008, at City Hall.
CMR:306:09 Page 2 of 5
The proposed project has also undergone a full "Site and Design" review by the City's
Architectural Review Board (ARB). The ARB reviewed the project for conformance with City
design standards and aesthetical appropriateness for the area. The plans and design concepts for
this project were reviewed by the Architectural Review Board at three separate meetings. The
plans presented to the Council incorporate all of the suggestions presented by the ARB.
The Park and Recreation Commission reviewed the project again on March 24, 2009, and voted
unanimously to recommend to the City Council adoption of a park improvement ordinance for
the project (Attachment E). Approved minutes from the Commission's meeting are also attached
for reference (Attachment F).
DISCUSSION
Staff has worked cooperatively with the Friends to develop an agreement and right-of-entry to
provide the Friends of Lytton Plaza, LLC exclusive access to the entire plaza and adjacent
sidewalks during construction. The agreement specifies policy and procedural guidelines for the
Friends of Lytton Plaza, LLC to follow regarding design, construction, safety, liability, and
payment details. The agreement follows similar public/private partnership agreements that
provide for authorized non-profit organizations to manage the improvement of City facilities.
Other examples of such partnerships include the Friends of Heritage Park for the construction of
a children's playground, Friends of the Children's Theatre for the construction of the Magic
Castle, and an agreement with Perry-Arrillaga for the construction of a refreshment stand at the
Baylands Athletic Center.
Under the terms of the agreement, the Friends will deposit accumulated donations for the project
($348,800) into a City-designated account. The Friends' funds will be matched with the
$350,000 in Capital Improvement Project funds that the Council approved for the project (CIP
PE-08004). The Friends have solicited bids from qualified and State-licensed contractors. The
selected contractor will be responsible for providing insurance and will indemnify the City and
the Friends against certain risks. The insurance required is similar to the levels of protection
normally required for City public works construction projects.
The initial scope of work envisioned by the Capital Improvement Project was for the renovation
of the plaza up to the edge of the existing sidewalk. When the project was reviewed by the
Architectural Review Board, the Board recommended that the new paver material for the plaza
be extended to the edge of the street curbs on University and Emerson Streets. Staff agreed that
by using the same pavers over the sidewalk up to the edge of the curb, it would not only make
the plaza appear larger, but the pavers would create a more welcoming appearance to the plaza.
The cost for resurfacing the sidewalks along the two edges of the plaza will cost $50,000. There
is an economy of scale in accomplishing this work while the rest of the plaza is being renovated.
Staff has recommended that the City be responsible for the added cost of resurfacing the
sidewalks. Staff therefore recommends that $50,000 from the Infrastructure Reserve be used to
pay for this expense that was not part of the original CIP funding.
The Friends have provided a time line for the project (Exhibit B of the Agreement) that show all
phases and timing of the construction of the project, including staging, demolition, site
preparation, construction, fencing and site clean-up. The Friends have also provided a detailed
CMR:306:09 Page 3 of 5
budget that corresponds to the phased construction plan that demonstrates that all expenses for
the project have been anticipated and adequately provided for (Exhibit C of the Agreement). The
budget also includes a contingency amount (10%) to cover unforeseen construction or design
expenses. The timeline and associated budget have been reviewed by staff to ensure that the
project is viable and that the project can be successfully completed with minimal disruption to
the downtown shopping area or merchants and plaza neighbors.
Once the document is signed and approved, and all requirements met, the Friends will obtain all
necessary building permits from the City. Upon obtaining any necessary building permits, the
Friends will then commence construction activities. The City's Building Inspection Division
will inspect the progress of the construction in order to ensure that the project is constructed
safely and competently according to all codes and specifications. All construction work will be
coordinated with the Utility Department to ensure that there is no adverse impact on utility
infrastructure.
If, for any reason, the Friends are unable to satisfactorily complete the project within the ten-
month time period established by the agreement, the retained dedicated funds for the project will
be used to allow the City to complete the project according to plans.
RESOURCE IMPACT
Partial funding for the City's share of the project is included in Capital Improvement Program
Project -PE-08004 (Lytton Plaza Renovations): $50,000 for design services; $300,000 for
construction services. Additional funding of $50,000 for sidewalk resurfacing, not originally a
part of the CIP's scope of work, is requested from the Infrastructure Reserve. The $350,000 in
Capital Improvement Project funds that were approved by the Council for this project, together
with the $50,000 in funds from the Infrastructure Reserve, have been met by $348,800 in private
contributions from the Friends of Heritage Plaza, LLC.
Funds for this project are included in Capital Improvement Program Project -PE-08004 (Lytton
Plaza Renovation) approved in FY 2006-08 for $350,000 (Attachment D).
Construction costs for the entire project will total $637,272. An additional $63,728 (10%) has
been added for contingency costs. An amount not to exceed $50,000 has been allocated for
design, engineering and surveying expenses. The total cost of the project, therefore, is $748,800.
In addition to the $350,000 previously approved by Council, and the $$348,800 contributed by
the Friends, a Budget Amendment Ordinance in the amount of $50,000 is needed to increase the
appropriation to this project. This additional appropriation will be funded by the Infrastructure
Reserve.
The annual cost for maintaining and operating the plaza is estimated at $6,000. This cost is
approximately the same as the maintenance of the existing plaza and irrigation system. New
lighting fixtures will be much more energy efficient than the existing lights. Landscaping has
been designed to minimize the use of water for irrigation. The cost of operating a water fountain
is estimated at $2,000 per year.
CMR:306:09 Page 4 of5
POLICY IMPLICATIONS
This project is consistent with the City's approved public/private partnership policy as a "joint
partnership project."
This report does not represent any change to existing City policies. The proposed project is
consistent with existing City policy, including Policy C-26: Maintain and enhance existing park
facilities.
ENVIRONMENT AL REVIEW
This project has been determined to have no significant effect on the environment and to be
categorically exempt from review under the California Environmental Quality Act (CEQA) as
repair and maintenance of existing streets and similar facilities pursuant to CEQA Guidelines,
Section 15301 (c).
ATTACHMENTS
Attachment A:
Attachment B:
Exhibit A:
Exhibit B:
Exhibit C:
Exhibit D:
Attachment C:
Attachment D:
Attachment E:
Attachment F:
PREPARED BY:
Park Improvement Ordinance
Agreement (including exhibits)
Descriptions of the Site
Construction and Installation Schedule
Itemized Budget for the Project
Insurance Requirements for the Project
Budget Amendment Ordinance
Capital Improvement Project PE-08004 Description
Staff report to the Park and Recreation Commission, March 24, 2009
Minutes from the Park and Recreation Commission, March 31, 2009
Interim Director Community Services
CITY MANAGER APPROV AL: ____ j)---ib...::::....---()~~-':::::( (::::~~-~ .. ~~'=== ...... ==---__ JAME~E
City Manager
CMR:306:09 Page 5 of 5
ORDINANCE NO. __
ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO
APPROVING AND ADOPTING A PLAN FOR IMPROVEMENTS TO
LYTTON PLAZA
The Council of the City of Palo Alto does ORDAIN as follows:
SECTION 1. Findings. The City Council finds and declares that:
(a) Article VIII of the Charter of the City of Palo Alto and Section 22.08.005 of
the Palo Alto Municipal Code require that, before any substantial building, construction,
reconstruction or development is commenced or approved, upon or with respect to any land held
by the City for park purposes, the Council shall first cause to be prepared and by ordinance
approve and adopt a plan therefor.
(b) Lytton Plaza is dedicated to park, playground, recreation or conservation
purposes.
(c) The City intends to authorize the construction of certain plaza improvements
within Lytton Plaza, as shown on the Lytton Plaza Plan (the "Plan"), attached as Exhibit "A":
(l) Removal of existing concrete, stone walls, benches, paving materials,
and lighting systems, and prepare the site for the construction and
installation of new surface materials, benches, water fountain,
landscaping and lighting.
(2) Clearing of vegetation and trimming of existing shrubs and trees in
accordance with City policies, as necessary.
(3) Adjustment and restoration of existing planting and irrigation to
accommodate the proposed improvement.
(4) Construction and installation of sidewalks and retaining structures in
accordance with the Plan.
(5) Installation of site amenities, including, without limitation, benches,
tables and planters, in accordance with the Plan.
(d) The improvements at Lytton Plaza will be limited to the approximately 8,500
square feet of land that is bounded by the street curbing fronting on University Avenue and
Emerson Street, the City Parking Lot P, and the private property located at 220 University
Avenue, all of which constitutes the entirety of the Plaza.
(e) The project improvements will avoid protected trees and other sensItIve
resources, if any. In addition, existing park uses will be restored following the completion of
project construction.
1
090728 Jb 0073114
(f) The project described above and as more specifically described in the Plan,
attached hereto as Exhibit "A," is consistent with park and conservation purposes.
(g) The Council desires to approve the project described above and as more
specifically described in the Plan, attached hereto as Exhibit "A."
SECTION 2. The Council hereby approves the Plan for the construction of the
improvements at Lytton Plaza, and it hereby adopts the Plan, attached hereto as Exhibit "A," as
part of the official plan for the construction of the park improvements at Lytton Plaza.
SECTION 3. The Council finds that the project to construct the facilities at
Lytton Plaza is subject to review under the California Environmental Quality Act.
SECTION 4.
date of its adoption.
INTRODUCED:
PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk
APPROVED AS TO FORM:
Senior Asst. City Attorney
090728 Jb 0073114
This ordinance shall be effective on the thirty-first day after the
Mayor
APPROVED:
City Manager
Director of Community Services
Director of Administrative Services
2
Contract No. --------
AGREEMENT FOR THE DESIGN, CONSTRUCTION AND
INSTALLATION OF FACILITIES AND OTHER CAPITAL
IMPROVEMENTS AT LYTTON PLAZA
Dated as of 2009 ____ 7
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TABLE OF CONTENTS
Purposes 4
2 Term 5
3 Use; Access to the Site 6
4 Consideration 6
5 Plan for Design, Construction and fnstallation 8
6 Construction and fnstallation of Faci lities 9
7 Maintenance and Repairs 10
8 As-Built Drawings II
9 Ownership of Fac ilities J I
10 Utility Service II
II Insurance I I
12 Indemnity 13
13 Waiver 14
14 Assignment 14
15 Default; Remedies for Default 14
16 Notices 14
17 Miscellaneous Provisions 15
Exhibit "A" Description of the Site
Exhibit "8" Construction and Installation Schedule for the Facilities
Exhibit "c" Itemized Budget for the Facilities
Exhibit "D" Insurance Requirements
Contract No. _________ _
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AGREEMENT FOR THE DESIGN, CONSTRUCTION AND
INSTALLATION OF FACILITIES AND OTHER CAPITAL
IMPROVEMENTS AT LYTTON PLAZA
This Agreement for the Design, Construction and Installation of Facilities
and Other Capital Improvements at Lytton Plaza (the "Agreement"), dated, for
convenience, , 2009 (the "Effective Date"), is made and
entered into by and between the CITY OF PALO ALTO, a chartered California
municipal corporation (the "CITY") and the FRIENDS OF LYTTON PLAZA PARK,
LLC, a California limited liability company (the "FRIENDS") (individually, a "Party"
and, collectively, the "Parties"), in reference to the following facts and circumstances:
RECITALS:
A. The CITY has designated as a city park under Palo Alto Municipal Code
section 22.08.360 a 0.195 acre site commonly known as Lytton Plaza, bounded by
University Avenue, Emerson Street, and the CITY's parking lot P in Palo Alto, California
(the "Plaza").
B. The FRIENDS intends to benefit the CITY and the general public by
designing, constructing and installing on the approximately 8,500 square feet of the Plaza
(the "Site") a certain water fountain, benches, tables, planter containers and associated
capital improvements and structures (the "Facilities"). The schematic description and
site map of the Site is described in and attached hereto as "Exhibit A." A design,
construction and installation schedule for the Facilities is included in "Exhibit B."
C. The FRIENDS will design, construct and install the Facilities at
substantially its own cost and expense. The CITY will grant to the FRIENDS an amount
of funds not to exceed $400,000, which the FRIENDS will apply towards the acquisition
and construction and installation costs of the Facilities.
D. Upon the completion of the construction and installation of the Facilities,
the FRIENDS will deliver possession of the Site to the CITY and it also will transfer all
rights, title and interests in and to the Facilities to the CITY.
E. Pursuant to the CITY's policy and procedures, the CITY is required to
budget one percent of the construction costs of a CITY capital improvement project for
public art in, among other places, parks and plazas. The CITY intends to allocate I % of
the budget for the Facilities to the "Digital DNA" sculpture's (the "Sculpture") removal
from and subsequent installation in the Plaza.
IN CONSIDERA nON OF the foregoing recitals and the following
covenants, terms and conditions, the Parties agree:
AGREEMENT:
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I. PURPOSES
1.1 The Parties acknowledge that the foregoing Recitals A through E
are hereby ratified and approved, and are incorporated in this Agreement. The purposes
of this Agreement are to:
(a) grant the FRIENDS and its contractors, agents and representatives
temporary access to the Site during the Term in order that the FRIENDS may construct
and install, or cause the construction and installation of, the Facilities;
(b) provide for the preparation by the FRIENDS, and the review and
approval by the CITY, of the FRIENDS' plans, specifications and working drawings for
the Facilities;
(c) provide for the completion of construction and installation of the
Facilities by the FRIENDS and its contractors, agents and representatives and the
granting of the CITY's approval and acceptance of the Facilities; and
(d) provide for the transfer of possession of the Site and all rights, title and
interests in and to the Facilities to the CITY upon the completion of construction and
installation of the Facilities.
1.2 Notwithstanding any provisions of this Agreement to the contrary,
the FRIENDS shall not be responsible for any work of construction necessary to correct,
remove, or repair any undiscovered pre-existing conditions under the Plaza, under the
sidewalks adjacent to the Plaza, or under Parking Lot P.
1.3 In regard to the off-site improvements relating to the Facilities at
the Plaza, the following will apply:
(a) Notwithstanding any provisions of this Agreement to the contrary, the
FRIENDS shall be responsible for the construction, installation, repair, or maintenance of
any underground improvements or facilities that may be required to bring the necessary
utility services to the Plaza, such as water lines, electrical service, storm drain lines
connecting to existing underground lines, or any other above ground or underground off-
site improvements or facilities (collectively "Off-Site Improvements") that may be
required for the use of the Plaza and any of the Facilities, as described in Recital B above,
that are constructed or installed, or caused to be constructed or installed, by the
FRIENDS at the Site. The foregoing provision regarding the obligation of the Friends
with respect to the Off-Site Improvements takes into account that, as of the Effective
Date, there exist a water line, an electrical line, and a stonn drain connection to and at the
Plaza.
(b) The FRIENDS' general contractor will collaborate and otherwise
coordinate with the CITY's contractor in the removal of the Sculpture, currently located
in the Plaza, prior to the commencement of construction of the Facilities by the
FRIENDS' general contractor. In that regard, the FRIENDS' general contractor will
disassemble the Plaza's ground level flooring and then the CITY's contractor will remove
and store the Sculpture during the period of construction, and make arrangements with
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the CITY for the appropriate repair and restoration of the Sculpture prior to its
subsequent installation at a new location in the Plaza. The footing of the Sculpture will
be constructed to the completed footing, as may be required under the contract between
the FRIENDS and its general contractor, subject to the cooperation and assistance with
the CITY's contractor, by a date mutually agreed to by the Parties.
1.4 The CITY, at its sole cost and expense, will be responsible to
perform any work of construction necessary to correct, remove, or repair any such
undiscovered pre-existing conditions referred to in Section 1.2 above.
1.5 The FRIENDS, at its sole cost and expense, will be responsible for
constructing the Off-Site Improvements referred to in Section 1.3(a) above.
1.6 For the purposes of this Agreement, the term "Facilities" will not
include the work required to correct, repair, or remove any undiscovered pre-existing
conditions or to perform any of the tasks relating to the Sculpture.
1.7 In the event the Site is destroyed by any cause that renders the Site
unfit for the purposes described in Section 1.1 hereof, and its physical condition cannot
be repaired within one hundred eighty (180) days from the date of destruction, then either
Party may give written notice of termination of this Agreement, which will become
effective thirty (30) days after the other Party's receipt of such notice.
1.8 Nothing in this Agreement will be construed to limit the CITY's
right to temporarily revoke the authority of the FRIENDS or its contractors, agents and
representatives to gain access to the Site for the purposes hereof in the event of an
uncured default and breach of this Agreement by the FRIENDS or irrespective of any
breach by the FRIENDS, in the interest of the public health, safety and welfare.
2. TERM
2.1 This Agreement shall be for a term of ten (10) months (the
"Term"), commencing upon the Effective Date, when the Parties have duly executed and
delivered this Agreement. If the completion of construction and installation of the
Facilities is delayed for any reason beyond the reasonable control of the FRIENDS, then
the Parties may agree, in writing, to extend the Term on a month-to-month basis, in order
to permit the completion of construction and installation of the Facilities by the
FRIENDS or its contractors, agents and representatives. Upon (a) the FRIENDS'
completion of any punch-list items within the time specified in Section 6.7.5, (b) the
CITY's determination that the FRIENDS have achieved full completion of the
construction and installation work, and (c) the CITY's acceptance of the Facilities by
written notice to the FRIENDS, this Agreement will expire or otherwise terminate
without notice to either Party. The Term will not extend on or after July 1, 20 10.
3. USE; ACCESS TO THE SITE
3. I Subject to all covenants, terms and conditions hereof, the CITY
hereby grants to the FRIENDS, its members, directors, officers, employees, consultants,
contractors, agents and representatives the revocable, nonexclusive right to enter the Site
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for the purposes hereof. No other rights, title or interests, including, without limitation,
any estate, ownership, leasehold, easement or other property interest, in the Site is
granted or intended to be granted by the CITY to the FRIENDS by this Agreement.
4. CONSIDERATION
4.1 The FRIENDS will obtain contributions from the community to
defray substantially all of the costs and expenses of the design, construction and
installation of the Facilities, excepting only those funds which the CITY will contribute
pursuant to Recital C and Section 4.4, and excepting the cost to correct, repair, or remove
any undiscovered pre-existing conditions, which are required for the operation and use of
the Plaza. The contributions received by the FRIENDS will be used exclusively to pay
for the services of a duly licensed landscape architect, a project manager, and any other
individual whose services are reasonably required to complete the design and
construction and installation of the Facilities, plus reasonably related project costs and
expenses. The services of the foregoing individuals will be obtained by means of an
informal competitive selection process conducted by the FRIENDS. The FRIENDS will
deliver all funds and other financial contributions that it receives to the CITY, which will
deposit such funds and other contributions in a CITY fund or account and will disburse
accordingly, as described in Section 4.4. The FRIENDS will be obligated to pay any fee
or charge for utility services rendered to the FRIENDS at the Site in connection with the
Facilities' construction and installation.
4.2 The FRIENDS also will undertake a community outreach program
to provide information to the businesses and residents in the neighborhood of the Plaza
concerning the Facilities for the purpose of soliciting the input and support for the
Facilities and construction work and to seek ways to mitigate, to the maximum extent
possible, the loss of use of park facilities during the period of construction. As
practicable, the FRIENDS will coordinate its construction and installation efforts at the
Site with the surrounding neighboring businesses at the Plaza in connection with the
construction and installation of the Facilities.
4.3 Prior to the commencement of construction and installation of the
Facilities, the FRIENDS will furnish to the CITY's Director of Administrative Services
evidence that assures the CITY there will be sufficient funds available from funds to be
provided by the FRIENDS, funds raised by the FRIENDS in the community outreach
program referred to in Section 4.2, and the funds contributed by the CITY pursuant to
Recital B and Section 4.4 to complete the construction and installation ofthe Facilities by
the FRIENDS and its contractors, agents and representatives. The term "sufficient funds"
referred to in this Agreement means the total amount of all actual costs of construction
and installation of the improvements, equ ipment, and structures that constitute the
Facilities, as set forth in the FRIENDS' itemized budget, attached hereto and
incorporated herein by reference as Exhibit "c." The budget wi II include an additional
ten percent (10%) of the estimated total amount of all actual costs of the Facilities as a
contingency to meet any unforeseen costs that may arise during the construction and
installation of the F aci lities.
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4.3.1 Evidence of assurance will take the following form: Evidence of
the deposit by the FRIENDS of the total amount of sufficient funds for the Facilities, as
defined herein, into the separate account maintained by the CITY with disbursements
from that account requiring the signatures of authorized representatives of the Parties will
be furnished. At such times as the FRIENDS has currently payable invoices for the
Facilities, the CITY will take the steps necessary to expedite its approval process so that
funds can be disbursed from the account maintained by the CITY, which will be
sufficient to satisty the FRIENDS's accounts payable. The CITY will use reasonable
efforts to process the requests for payment in a manner which permits the FRIENDS to
remain current on its obligations. The Director of Administrative Services, or designee,
will be the CITY's representative for all purposes hereof. If this Agreement is terminated
for any reason, before the expenditure of all the funds in the CITY's fund or account can
occur, the CITY will be entitled to all rights, titles and interests in the funds; provided,
however, the CITY will thereafter expend the funds only for the purpose of constructing
and installing the Facilities, or part thereof, that is not completed at the effective date of
termination. If any portion of the amount remains and is not disbursed following the
completion of the Facilities, the remainder will be retained by the CITY and used to
defray the costs of maintenance of the Facilities at the Site.
4.3.2 The account will be maintained in the name of the CITY in a form
reasonably acceptable to the Director of Administrative Services.
4.4 As of the Effective Date, the CITY will establish (or has
established) a Lytton Plaza Capital Improvement Project Fund account within the Capital
Improvement Project budget for FY 2009-10 ("CPI PE-08004"), relating to the
Facilities. Because the CITY is required by its policy and procedures to reduce its
contribution to the Facilities' costs by the one percent for arts program expenditure,
which will be used to pay for the CITY's contractor's services, the CITY will reduce its
contribution to the FRIENDS in an amount not to exceed four hundred thousand dollars
($400,000.00) (drawn from CPI PE-08004) by a sum equal to the lesser of (a) three
thousand five hundred dollars ($3,500.00) or (b) a sum equal to one percent of the
difference between the FRIENDS' direct construction costs and the FRIENDS' design
costs. For the purposes of illustrating the manner of calculating the amount referred to in
Section 4.4(b), the following formula will be used: A -(.01 x [(B -A) -C), where A is
the CITY's not-to-exceed contribution amount of $400,000, B is the positive difference
between the FRIENDS' direct construction costs amount of $800,000 and the CITY's
not-to-exceed contribution amount of $400,000, and C is the FRIENDS' design costs
amount of$50,000. The amount of$396,500 is the maximum amount that the CITY will
contribute to the FRIENDS for the costs of designing, constructing and installing the
Facilities, which amount is calculated, as follows: $400,000 -(.01 x [$800,000 -
$400,000] -$50,000) or $3,500. If the costs of the CITY's contractor services exceed
$3,500, the CITY will not apply any amount in excess of $3,500 to further reduce the
CITY's maximum contribution.
4.4.1 The CITY will administer and coordinate the receipt and
disbursement of these funds, which will be expended for all costs and expenses related to
the design and the construction and installation of the Facilities at the Site. No interest on
the accumulated funds will be paid by the CITY. If, for any reason, the Parties determine
090728 Jb 0072987 7
not to commence the construction and installation of the Facilities at the Site, then the
Parties will agree to share the cost of the design services relating to the Facilities. The
CITY will be obligated to pay the FRIENDS the Jesser of one-half of the design costs or
fifty thousand dollars ($50,000.00).
4.5 The CITY will issue permits, as required, and waive the obligation
of the FRIENDS to pay any and all penn it-and permit-related fees and charges that are
due and payable to the CITY's general fund with respect to the design and the
construction and installation of the Facilities at the Site and any other related work to be
performed by the FRIENDS in connection therewith; provided, however, the CITY will
not waive the obligation of the FRIENDS to pay any rate, fee or charge that is due and
payable to any of the CITY's enterprise funds for utility services that are rendered to the
FRIENDS at the Site or the Plaza (other than the utility costs to be paid by the CITY
pursuant to Section 1.2 with respect to any undiscovered pre-existing conditions or any
Off-Site Improvements).
4.6 The CITY will provide staff support, inspection services and other
assistance to the FRIENDS, UpO!1 reasonable request, in connection with the initiation
and completion ofthe Facilities.
5. PLAN FOR DESIGN, CONSTRUCTION AND INSTALLATION
5.1 The FRIENDS will prepare or cause to be prepared final plans and
specifications and working drawings (the "Plans") for the design and the construction
and installation of the structures and improvements constituting the Facilities to be
located at the Site, as described in Exhibit "A." The FRIENDS will concurrently submit
the Plans to the CITY's Community Services Department, Planning and Community
Environment Department and the Public Works Department as well as to the appropriate
board and commissions, including, without limitation, the Parks and Recreation
Commission, the Planning Commission, and the Council for review and approval.
5.2 The FRIENDS will obtain and maintain all CITY-issued permits
and other authorizations required for the completion of the Facilities and will furnish to
the CITY upon request during the construction and installation phases any and all
financial and non-financial security deemed necessary and appropriate by the CITY,
including, without limitation, evidence of insurance coverage, indemnity agreement, and
lien waivers; the CITY will not require the FRIENDS to provide performance and
payment bonds, provided that the CITY has first determined pursuant to Section 4.3 that
there are sufficient funds available to complete the construction and installation of the
Facilities by the FRIENDS and its contractors, agents and representatives.
6. CONSTRUCTION AND INSTALLATION OF FACILITIES
6.1 The FRIENDS will commence the design and the construction and
installation within thirty (30) days after the Effective Date in accordance with the
construction and installation schedule, as set forth in Exhibit "B." All construction and
installation work will be conducted in an efficient and workmanlike manner in substantial
compliance with the approved time schedule. The FRIENDS, at its cost and expense,
090728 jb 0072987 8
will arrange for the placement of a portable restroom at the Site during the Term and at
any time that the FRIENDS and its contractors, agents and representatives will be
performing work in regard to the Facilities.
6.2 The FRIENDS will comply with the CITY's regulations governing
construction noise controls and regulations governing dust control, all as set forth in the
Palo Alto Municipal Code.
6.3 The FRIENDS will be responsible to accomplish all associated
work required to complete and install the Facilities and it will be required to comply with
all conditions that are imposed on the Facilities during the CITY's approval process.
6.4 The FRIENDS will include standard CITY requirements in all
equipment purchases and construction contracts with third parties in regard to warranties
and workmanship guarantees for the Facilities.
6.5 All contractors, subcontractors, and other personnel who will
perform the construction and installation work at the Site under contract with the
FRIENDS will obtain and maintain all current licenses required by the State of California
during the Term.
6.6 The Facilities will be constructed and installed at the Site in
compliance with the approved Plans. Any conditions relating to the manner, method,
design and construction of the Facilities establ ished under the CITY's approval process
will be conditions of this Section 6.6 as if they were stated and otherwise fully
incorporated in this Agreement. Upon the completion of construction and installation, the
FRIENDS's project manager for the Facilities will submit to the CITY's Manager, Open
Space and Parks, a certificate of inspection, verifying that the construction and
installation were completed in conformance with Title 24 of the California Code of
Regulations.
6.7 For the purposes of this Agreement, the Facilities will be deemed
completed at the time all of the following have occurred:
6.7.1 The FRIENDS' landscape architect has delivered a statement, in
writing, to the CITY, stating that the Facilities have been substantially completed in
accordance with the Plans;
6.7.2 The FRIENDS has obtained all necessary CITY inspections of and
approvals for the Facilities;
6.7.3 The Parties' representatives have inspected the Facilities, and all
major defects and incomplete items that materially impair the use of the Plaza have been
remedied and a "punch-list" of minor defects has been prepared for prompt repair and
completion by the FRIENDS.
6.7.4 All trash and garbage has been removed from the Site.
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\ '
6.7.5 The CITY has confirmed, in writing, that the FRIENDS has
complied with the provisions of this Section 6.7, including subsections 6.7.1 through
6.7.6, and final acceptance by the CITY has been issued. As a condition precedent to the
CITY's acceptance of the Facilities, the FRIENDS will complete the "punch-list" items
within a reasonable time but by no later than thirty (30) days after the CITY has made a
preliminary determination that the Facilities is deemed completed.
6.7.6 Concurrently with the confirmation, in writing, by the CITY to the
FRIENDS that the CITY has accepted the Facilities and the FRIENDS has made the
Plaza available to the CITY for use by the public after substantial completion of
construction. The construction contract entered into between the FRIENDS and the
FRIENDS' general contractor shall provide that the general contractor's guarantee shall
be for the direct and immediate benefit of the FRIENDS and the CITY jointly, and shall
guarantee, in writing, that the work, materials, apparatus, equipment and workmanship
that have been performed, used, installed or otherwise incorporated in the Facilities are
free of defects, and the FRIENDS' general contractor, at its sole cost and expense, shall
agree to repair or replace any defective work, materials, apparatus, or equipment or
workmanship which is discovered by the FRIENDS or the CITY within one (1) year from
the date of substantial completion of the Facilities.
7. MAINTENANCE AND REPAIRS
7.1 The FRIENDS, at its sole cost, will maintain the Site and the
Facilities during the Term in a commercially reasonable, clean and safe manner to the
complete satisfaction of the CITY and in compliance with all applicable laws. The
FRIENDS will provide approved containers for trash and garbage generated at the Site
and arrange for their disposal. The CITY reserves the right to enter and inspect the Site
for compliance with this maintenance requirement and applicable safety requirements.
The FRIENDS will be responsible for any damage to the Site or the Facilities that arises
in connection with the construction and installation activities at the Site. The CITY will
be responsible for the pre-existing condition of any utilities at the Site at the
commencement of construction and installation in addition to the responsibilities of the
CITY, as described in Section 1.2.
7.2 If the FRIENDS fails to properly maintain the Site, then the CITY
may notify the FRIENDS, in writing, of such failure. The FRIENDS will be afforded a
reasonable period of time in order to bring the Site to a clean and safe condition. The
CITY, at its option, may elect to enforce its rights and remedies, including, without
limitation, entering the Site to ensure the safety of all persons and property thereon.
7.3 The obligation of the FRIENDS to maintain and repair the Site and
the Facilities will terminate upon the CITY's acceptance of the Facilities pursuant to
Section 6.7.6. Thereafter, the CITY will maintain and repair the Site in accordance with
the standards, customs and practices of the CITY pertaining to its maintenance and repair
of property owned or controlled by the CITY.
8. AS-BUIlL T ORA WINGS
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8.1 Upon the completion of construction and installation of the
Facilities, the FRIENDS will provide the CITY's Director of Public Works with a
complete set of 24" by 36" 3 mil Mylar® reproducible "as built" Plans, reflecting the
actual construction and installation of the Facilities performed or caused to be performed
by the FRIENDS at the Site pursuant to this Agreement.
9. OWNERSHIP OF F ACJLITIES
9.1 The FRIENDS covenants that the Facilities will be free and clear
of all liens, claims or liability for labor or materials at the time of completion of the
construction and installation thereof. The FRIENDS will execute a quitclaim deed or
other document acceptable to the CITY to reflect the transfer to the CITY of the
ownership of the Facilities and all rights, title and interests therein.
10. UTILITY SERVICE
10.1 The FRIENDS will be responsible for paying for all utility
services, including electric, water, and waste water services, provided at the Site, as more
fully described in Exhibit "8" hereof, which the FRIENDS requires in order to construct
and install the Facilities and the other improvements at the Site. In the construction and
installation of the Facilities and other improvements, the FRIENDS will not cause
damage to the CITY's utilities at the Site or the Park. The FRIENDS will be liable for the
repair or replacement costs of the CITY's utilities at the Site or the Park that are damaged
by the FRIENDS (including any person hired or used by the FRIENDS) in connection
with the construction and installation of the Facilities and other improvements. The
repair or replacement costs will be payable on demand of the CITY. The obligations of
the FRIENDS under this Section 10.1 will terminate upon the CITY's final acceptance of
the Facilities pursuant to Section 6.7.
II. INSURANCE
ILl The FRIENDS, its consultants and/or general contractors, ifany, at
their sole cost and expense, will obtain and maintain during the Term the insurance
coverage described in Exhibit "0," insuring not only the FRIENDS and its consultants
and contractors, respectively, but also with the exception of workers compensation,
employer's liability and professional liability insurance, naming the CITY as an
additional insured concerning the FRIENDS' performance under this Agreement.
11.2 Any deductibles or self-insured retentions must be declared to and
approved by the CITY. At the option of the CJTY either: the insurer shall reduce or
eliminate such deductibles or self-insured retentions as respects the CITY, its elected or
appointed officials, officers, employees, and volunteers; or the FRIENDS shall procure a
bond guaranteeing payment of losses and related investigations, claim administration and
defense expenses. The insurance shall remain in full force and effect during the Term,
commencing on the Effective Date and ending on the termination of this Agreement.
Each insurance policy required by this Agreement shall contain the following clauses:
090728 jb 0072987 11
(a) "Each insurance policy required by this clause shall be endorsed to
state that coverage shall not be suspended, voided, canceled by
either party, reduced in coverage or in limits except after thirty
(30) days' prior written notice by certified mail, return receipt
requested, has been given to the CITY."
(b) "All rights of subrogation are hereby waived against the CITY OF
PALO ALTO and its elected and appointed officials, officers or
employees, when acting within the scope of their employment or
appointment. "
(c) "The CITY OF PALO ALTO is named as a loss payee on the
Facilities and builders' risk insurance policies described above."
(d) "The CITY OF PALO ALTO, its elected and appointed officials,
officers, employees, agents and volunteers are to be covered as
insureds as respects: liability arising out of activities performed by
or on behalf of the FRIENDS; products and completed operations
of the FRIENDS; premises owned, occupied or used by the
FRIENDS; or automobiles owned, subleased, hired or borrowed by
the FRIENDS. Except for the waiver of subrogation contained in
Section 11.4, the coverage shall contain no special limitations on
the scope of protection afforded to the CITY, its elected and
appointed officials, officers, employees, agents or volunteers."
(e) "For any claims related to this Agreement, the FRIENDS'
insurance coverage shall be primary insurance as respects the
CITY OF PALO ALTO, its elected and appointed officials,
officers, employees, agents and volunteers. Any insurance or self-
insurance maintained by the CITY, its elected and appointed
officials, officers, employees, agents or volunteers shall be excess
of the FRIENDS' insurance and shaii not contribute with it."
(f) "Any failure to comply with reporting or other provisions of the
policies including breaches of warranties shall not affect coverage
provided to the CITY OF PALO ALTO, its elected and appointed
officials, officers, employees, agents or volunteers."
(g) "The FRIENDS' insurance shall apply separately to each insured
against whom a claim is made or suit is brought, except with
respect to the limits of the insurer's liability."
11.3 All insurance required of the FRIENDS, its consultants and/or
general contractors by this Agreement will be provided by insurer carriers with a current
A.M. Best's rating of not less than A:VII. The FRIENDS will deposit or will cause to be
deposited with the CITY, on or before the Effective Date, certificates of insurance
necessary to satisfy the CITY that these insurance provisions have been complied with,
and to keep such insurance in effect and the certificates therefor on deposit with the
CITY during the Term. If the FRIENDS does not provide evidence of coverage at least
090728 jb 0072987 12
thirty (30) days prior to the expiration of any existing insurance coverage, the CITY may
purchase such insurance coverage for not more than a six-month period, on behalf of and
at the sole cost and expense of the FRIENDS. The CITY retains the right to review the
coverage, form, and amount of the insurance coverage required by this Agreement and
require the FRIENDS to alter the coverage, as appropriate. The CITY's requirements
shall be reasonable and shall be designed to assure protection from and against the kind
and extent of risk which exists at the time a change in insurance is required. A failure by
the FRIENDS or the FRIENDS' general contractor to provide acceptable insurance
policies or certificates with the CITY incorporating such changes within thirty (30) days
of receipt of such notice will constitute a default under this Agreement. Such default will
constitute a material breach and shall be grounds for termination of this Agreement by the
CITY. The procuring of such required insurance will not be construed to limit the
FRIENDS' liability hereunder or to fulfill the indemnification provision and requirements
of this Agreement. Notwithstanding the policy or policies of insurance, the FRIENDS
shall be obligated for the full and total amount of any damage, injury, or loss occurring
during the Term that is caused by the FRIENDS or its landscape architect, general
contractor, or design professionals, or connected with this Agreement or with use or
occupancy of the Site by the FRIENDS or its landscape architect, contractors, or design
profess ionals.
11.4 All rights of subrogation are hereby waived by the CITY against
the FRIENDS and its managers, members, employees, and agents when any of them is
acting on behalf of the FRIENDS in the performance of this Agreement.
12. INDENfNITY
12.1 The FRIENDS will protect, defend, indemnify and hold harmless
the CITY, its elected and appointed officials, officers, employees and representatives,
from any and all demands, claims, damage, loss or liability of any nature, including death
of or injury to persons, property damage or any other loss, caused by or arising out of the
FRIENDS' or any of its landscape architect's or contractor's negligent acts, errors, or
omissions, or willful misconduct, in the performance of or failure to perform its
obligations under this Agreement. The foregoing indemnity obligation of the Friends
shall expire and be of no further force or effect upon the confirmation, in writing, by the
CITY that the CITY has accepted the Facilities, except for any pending claims made, in
writing, that are received by the FRIENDS, the FRIENDS' general contractor, or the
CITY prior to such acceptance.
13. WAIVER
13.1 The waiver by either Party of any breach or violation of any
covenant, term, or condition of this Agreement or of the provisions of any park
improvement ordinance or other CITY law will not be deemed to be a waiver of any such
covenant, term, condition, or ordinance or of any subsequent breach or violation of the
same or any other covenant, term, condition, or ordinance. The subsequent acceptance
by either Party of any consideration which may become due or payable hereunder will
not be deemed to be a waiver of any preceding breach or violation by the other Party of
any other covenant, term, or condition of this Agreement or any ordinance.
090728 jb 0072987 13
14. ASSIGNMENT
14.1 The FRIENDS will not assign, transfer, or convey this Agreement
without the express written approval of the CITY, and any such assignment, transfer or
conveyance without the approval of the CITY will be void and in such event, at the
CITY's option, this Agreement may be terminated upon notice to the FRIENDS.
15. DEFAULT; REMEDIES FOR DEFAULT
15.1 Except as otherwise provided under this Agreement, should the
FR I ENDS default in the performance of any covenant, term or condition contained in this
Agreement and such default is not corrected within thirty (30) days of receipt of a notice
of default from the CITY, the CITY may elect to enforce any of the following rights and
remedies: (a) terminate this Agreement and alJ rights of the FRIENDS and its consultants
and contractors, if any; (b) cure any default of the FRIENDS by performance of any act,
including payment of money, and the cost and expense thereof, plus all reasonable
administrative costs, will become immediately due and payable by the FRIENDS to the
CITY; (c) initiate an action or suit in law or equity to enjoin any acts which may be
unlawful or in violation of the rights of the CITY hereunder; or (d) pursue any other right
or remedy as may be provided in this Agreement.
15.2 In the event of a default which cannot reasonably be cured within
thirty (30) days, the FRIENDS shall have a reasonable period of time to cure the default.
The remedies given to the CITY hereunder, or by any law now or hereafter enacted, are
cumulative and the exercise of one right or remedy shall not impair the right of the CITY
to exercise any or all other remedies. In case any suit, action or proceeding to enforce
any right or exercise any remedy shall be brought or taken and then discontinued or
abandoned, then, and in every such case, the Parties will be restored to their former
positions, rights and remedies as if no such suit, action or proceedings had been brought
or taken.
16. NOTICES
16.1 All notices, requests and approvals by a Party will be given, in
writing, and del ivered by personal service, the United States Postal Serv ice, express
delivery service, or facsimile transmission, as follows:
TO CITY:
090728 jb 0072987
City of Palo Alto
1305 Middlefield Road
Palo Alto, CA 94301
Phone: (650) 463-4951
Fax: (650) 321-5612
E-Mail :Greg.Betts@CityofPaloAlto.org
ATTN: Greg Betts, Interim Director
14
TO FRIENDS: Friends of Lytton Plaza Park, LLC
721 Emerson Street
Palo Alto, CA 94301
Phone: (650) 543-2211
Fax: (650) 543-2211
E-Mail: Barbara@GardenCourt.com
Attention: Barbara Gross
17. MISCELLANEOUS PROVISIONS
17.1 This Agreement will be governed by and construed in accordance
with the laws of the State of California and the Charter of the City of Palo Alto and the
Palo Alto Municipal Code. The Parties will comply with all applicable federal, state and
local laws in the exercise of their rights and the performance of their obligations under
this Agreement.
17.2 All provisions of this Agreement, whether covenants or conditions,
will be deemed to be both covenants and conditions.
17.3 This Agreement represents the entire agreement between the
Parties and supersedes all prior negotiations, representations and contracts, written or
oral. This Agreement may be amended by an instrument, in writing, signed by the
Parties. This Agreement may be executed in any number of counterparts, each of which
will be an original, but all of which together will constitute one and the same instrument.
17.4 All exhibits referred to in this Agreement are by such references
incorporated in this Agreement and made a part hereof. The following exhibits are made
a part of this Agreement:
Exhibit "A" -Description of the Site
Exhibit "B" -Construction and Installation Schedule for the Facilities
Exhibit "C" -Itemized Budget for the Facilities
Exhibit "D" -Insurance Requirements
17.5 Upon request of the CITY, the FRIENDS will furnish to the CITY
for its review and approval copies of its articles of organization, operating agreement, and
other information relating to its organization status.
17.6 This Agreement is subject to the fiscal provisions of the Charter of
the City of Palo Alto and the Palo Alto Municipal Code. This provision will take
precedence in the event of a conflict with any other covenant, term or condition of this
Agreement.
17.7 The Parties agree that the normal rule of construction to the effect
that any ambiguity is to be resolved against the drafting party will not be employed in the
interpretation of this Agreement or any amendment or Exhibit hereto.
090728 jb 0072987 15
IN WITNESS WHEREOF, the Parties by their duly authorized
representatives have executed this Agreement on the Effective Date.
APPROVED AS TO FORM:
Senior Asst. City Attorney
APPROVED:
Director of Administrative Services
Director of Community Services
090728 jb 0072987
CITY OF PALO ALTO
City Manager
FRIENDS OF LYTTON PLAZA PARK,
LLC Me~~
;~ 7<----, r;;-
Member
16
, ,
Lytton Plaza
""'v Aho, C"M¢fhi,'l
090728 jb 0072987
"
-/
EXHIBIT "A"
DESCRIPTION OF THE SITE
..,...
17
Layout Plan
L·7
EXHIBIT "B"
CONSTRUCTION AND INSTALLATION SCHEDULE FOR THE FACILITIES
090728 jb 0072987 18
EXHIBIT "C"
ITEMIZED BUDGET FOR THE FACILITIES
090728.ib 0072987 19
REQU[RED
YES
YES
YES
YES
YES
YES
EXHIBIT "D"
INSURANCE REQUIREMENTS
THE FRIENDS AND/OR ITS GENERAL CONTRACTOR. AT ITS SOLE EXPENSE. SHALL DURING THE
TERM OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED
BELOW, AFFORDED BY COMPANIES WITH A BEST'S KEY RATING OF A-:VII, OR HIGHER,
LICENSED OR AUTHORIZED TO TRANSACT INSCRANCE BUSINESS IN THE STATE OF
CALIFORJ'IIA.
M[NIMUM LIMITS
TYPE OF COVERAGE REQU[REMENT EACH
OCCURRENCE AGGREGATE
WORKER'S COMPENSATION STATUTORY
AUTOMOB[LE LIABILITY STATUTORY
BODIL Y [NJURY $1,000,000 $1,000,000
COMPREHENS[VE GENERAL
LIAB[LITY, [NCLUD[NG PERSONAL PROPERTY DAMAGE $1,000,000 $1,000,000
[NJURY, BROAD FORM PROPERTY
DAMAGE BLANKET CONTRACTUAL, BOD[L Y INJURY & PROPERTY DAMAGE $1,000.000 $ [,000,000
AND FIRE LEGAL LIAB[LITY COMBINED.
BOD[LY [NJURY $1,000.000 $1.000.000
-EACH PERSON $1,000,000 $ [.000,000
COMPREHENSIVE AUTOMOB[LE -EACH OCCURRENCE $1,000,000 $[,000,000
LIABILITY, [NCLUDlNG, OWNED,
HIRED, NON-OWNED PROPERTY DAMAGE $1,000,000 $1,000,000
BODIL Y [NJURY AND PROPERTY DAMAGE, $1,000,000 $1,000,000
COMB[NED
PROFESSIONAL LIABILITY,
[NCLUDlNG, ERRORS AND
OM[SSIONS, MALPRACTICE (WHEN
APPLICABLE), AND NEGLIGENT
PERFORMANCE ALL DAMAGES $1,000.000
THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSlJRED PROPOSER, AT [TS SOLE COST AND EXPENSE,
SHALL OBTA[N AND MA[NTA[N, IN FULL FORCE AND EFFECT THROUGHOUT THE ENTIRE TERM OF ANY RESULTANT
AGREEMENT, THE INSURANCE COVERAGE HERE[N DESCRIBED, INSUR[NG NOT ONLY PROPOSER AND ITS SUBCONSUL TANS,
[F ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS' COMPENSATION, EMPLOYER'S LIABILITY AND PROFESSIONAL
[NSURANCE, NAMING AS ADDITIONAL INSURES CITY, ITS COVNClL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES.
. COMPLIANCE WI rH CITY'S INSURANCE REQUIREMENTS, AS SPECIFIED, BELOW:
I. INSURANCE COVERAGE MUST INCLUDE:
A. A PROVISION FOR A WRITTEN THIRTY-DAY ADVANCE NOTICE TO THE CITY OF A
CHANGE IN COVERAGE OR OF COVERAGE CANCELLATION; AND
B. A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE
FOR CONTRACTOR'S AGREEMENT TO INDEMNIFY CITY -SEE SECTION, SAMPLE
AGREEMENT FOR SERVICES.
II. SUBMIT CERTIFICATE(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE. OR
COMPLETE THIS SECTION AND IV THROUGH V, BELOW.
A. NAME AND ADDRESS OF COMPANY AFFORDING COVERAGE (NOT AGENT OR
BROKER):
B. NAME. ADDRESS. AND PHONE NUMBER OF YOUR INSURANCE AGENT/BROKER:
090728.1b 0072987 20
C. POLICY NUMBER(S):
D. DEDUCTIBLE AMOUNT(S) (DEDUCTIBLE AMOUNTS IN EXCESS OF $5,000 REQUIRE
CITY'S PRIOR APPROVAL):
III. ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO
"ADDITIONAL INSURES"
A. PRIMARY COVERAGE
WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED
INSURED. INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT
ADDITIONAL TO OR CONTRIBUTING WITH ANY OTHER INSURANCE CARRIED BY OR
FOR THE BENEFIT OF THE ADDITIONAL INSURES.
B. CROSS LIABILITY
THE NAMING OF MORE THAN ONE PERSON, FIRM. OR CORPORATION AS INSURES
UNDER THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY
RIGHTS OF THE INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE
NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF
THE COMPANY UNDER THIS POLICY.
C. NOTICE OF CANCELLATION
I. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY
REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, THE ISSUING
COMPANY SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN
NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION.
2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON-
PAYMENT OF PREMIUM. THE ISSUING COMPANY SHALL PROVIDE CITY AT
LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF
CANCELLATION.
IV. UNDERSIGNED CERTIFIES THAT THE FRIENDS' INSURANCE COVERAGE MEETS THE ABOVE
REQU I REMENTS:
THE INFORMATION HEREIN IS CERTIFIED CORRECT BY SIGNA TlJRE(S) BELOW.
Fiml:
Signature:
Name:
(Print or type name)
Signature:
Name:
(Print or type name)
NOTICES SHALL BE MAILED TO:
090728 jb 0072987
PURCHASING AND
CONTRACT ADMINISTRATION
CJTY OF PALO ALTO
P.O. BOX 10250
PALO ALTO. CA 94303.
21
tXI~II~{" Z LONDON
f'1~:"NL TR<:£:.S TO REMAiN,
LXb I It.;(, NIJl\lSI'r~r'cH
:tACKS.
COSRLE MUtCH, S C.F.S. TYP.
NEW rOUNT AtN
WI1H 3 WAH.R }(15
Af~n 1 UP LIGHT, S C r 5 . TYP
I XI)T1NG (ON(AEH.
PLANTER TO REMAIN, TYP
vERTICAL GLIi$:;, AJH PANELS. S.C.U.
WOOD BENCH, rvp
("(11Krl~n: Pi.. ~NTER wi lYTTON
fo'lA1A P1AQUt'. TYPDr)
:;, ( f .~ .. se~ d~taliS
NE1.IV PA'vfR UGlii, 'lef.S, TYP()f 1.
TASLf. AND (HJ\If\S (2) S.C.F S~ TYPOr 2.
I-u.J
u.J OC l-V'!
Z o VI OC
u.J
2
l.!.J
EXISTING STREET UGHT .
TO REMAIN, TYP.
RElOCATED
'DiGITAL DNA'
S(UtPTURE, TYP.
rXI;1'NG TUt!? TR£F TO RFMAIN
NeW (OBiH.:: ;"lUL(H, S (fS. TYP.
U!STlNG O~K TREE TO RHt.AIN
lytton Plaza
Palo Alto, California
UNIVERSITY AVE.
:i;XIST1N(1, wALL TO RE1"lJ\lN.
Z:XI-5TlNG D£NCH TO R£MAIN
:;'X1ST1NG 2' LCNOON PLANt: TREE) to REMAIN
PAR.'<Jr'llG lOi
EXI5Tlt~(, N2\\iSPt\PER Rc..CKS, TYP
_NI:WWALI UGHT S(f'S.
Nf:.W:;·'/ittD£ PEF.lvlE':UlLE.
F'~V£R !:lAND, Type 1, S.C.f~ .. lYP.
fOUNI"AltJ ;'>U!.lP VI"\uLT
I,V1\!ICOiJrJ11 yr
EXISTING P·....ANT[R, TYP
P(RFOFlATED DRAIN PIPE SY~T~M
CONN:CTION TO STORM DRAtN
SEE SECTION
----NEW rLAZA rOLe LIGHT, s,cr.s, ~YI' ut4
NEW (~USHED ST(J·'.jf· ;:;URFAC'Z, TYP
NEW TABLES AND CHAins {'i. S.C r s, TYf' 01 to
HEwCHnlES~ ?1'51AC'H:. TRErS. TV" of£.
EXjSITliKi P/wrr~G TO REMAIN
ME'';'" CONCP';'TE BAND, TYPE 2, !i.Cr . .':.. TYP.
NEW FREtsTAND!NG DOt.ORS' \'\j.o,L:'
S.CF,$" $l)Cdcti:llls.
Nf.W TRA'iI-j R.fCfPTACLf, <;. cr So, TYP of 4:
\2 fiECYCASLE C."'llotJS)
TASLE AND CHA1R'S OJ. S.C.F.S. TYP at 3
NEW COL!JMNAR MAGNOU~ TREES. TYIl of 3
COSBLE MUL(H WI SHoUn f1LANHNG
EXISTING WALL TO !:IE REMOVED
NEW 31Kf ARCS,S C F.5.
Exhibit A
~""',cl,e .... ,t') I,ch"
UGH'Tl!<lr;
® ~E"~~:~,=,'::~';';:L~'::.
!"it!>i!" r,ns:!"!.
12.05.08
':()'"'c1~ )
b,
1(.;(,,«' ;)pp."rH"'l~
len:l"'''' Orey In';3',
Layout Plan
L:mds.capc Archilc(\S • Land Planoers
L-7 6~E M<:f1!gr:ml:'ry \1"'('"(
S.lrfr,lnCl1(Q.CA'l<l:lH
'1lIS<1n·15n
t <':lS>1.:U ~l)<Jj
10 Task Name
CONSTRUCTION
2
3
4
5
'6
7
8
9
10
11
12
13
14
15'
16
17
18
19
20
21
22
23 ... 24
i5
26
"27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
page 1 of 1
Mobilization / temp barricades
Safe-off power and water; salvage egg and newsrack:
Demolition
Rough grade
Underground utilities
Fountain
excavation for vault, footings, basins
vault installation
rough piping
drainage basin
seat wall and wedge base
wedge finish slab
fountain eqpt installation
drainage grate and cobbles
Site hardscape
seat wall bases
base rock
structural soil placement
flatwork pours and sandblast
sealer
pervious base at pavers
pavers
sealer
Electrical
underground rough-in --onsite
underground rough-in --offsite service trench
service connection -offsite CPA vault
paving patch
service pedestal and lighting
fountain eqpt connections
electrical trim
twinkle lights
Glass fins at fountain
Wood bench slats
Landscaping
irrigation
planting
DG
Donor signage
SS frame installation
stone panels installed
Furnishings -tables, bike lockers, trash containers
Fountain trim and start-up
Final inspections / clean up / de-mobilize
weather delays not included
Duration
72 days
3 days
3 days
8 days
2 days
5 days
40 days
2 days
2 days
4 days
6 days
6 days
4 days
7 days
3 days
32 days
4 days
2 days
3 days
14 days
1 day
2 days
6 days
1 day
52 days
5 days
4 days
3 days
2 days
6 days
2 days
3 days
3 days
2 days
4 days
10 days
5 days
3 days
2 days
7 days
3 days
2 days
5 days
4 days
6 days
Start
Wed 8/5
Wed 8/5
Thu 8/6
Tue 8/11
Fri 8/21
Thu 8/27
Tue 8/25
Tue 8/25
Thu 8/27
Fri 8/28
Mon 8/31
Wed 9/2
Mon 9/14
Thu 10/8
Mon 10/19
Tue 9/8
Tue 9/8
Mon 9/14
Tue 9/15
Fri9/18
Thu 10/8
Fri 10/9
Tue 10/13
Wed 10/21
Fri 8/28
Fri 8/28
Tue 9/8
Mon 9/14
Thu 9/17
Thu 10/22
Fri 10/30
Tue 11/3
Mon 11/9
Wed 11/4
Fri 11/6
Wed 10/21
Wed 10/21
Wed 10/28
Mon 11/2
Fri 10/30
Fri 10/30
Fri 11/6
Wed 11/4
Tue 11/3
Mon 11/9
ExV\\l1\"-\-~
Finish Resource Aug '09 Sep '09 Oct '09 Nov '09
2 9 16 23 30 6 13 20 27 4 11 18 25. 1 8 15 Names
Mon 11/16 • Fri 8/7 Devcon r-D
Mon 8/10 RCE / Devcor 4C-h :y---_._--Thu 8/20 JJA L_~..l.
Mon 8/24 JJA D'I
Wed 9/2 Sanco ~-
~~~~----_~--~-I ----------... Wed 10/21
Wed 8/26 JJA
Fri 8/28 JJA
Wed 9/2 PWA
Wed 9/9 JJA
Fri 9/11 JJA
Thu 9/17 JJA
Fri 10/16 PWA
Wed 10/21 PWA
Wed 10/21
Fri 9/11 JJA
Tue 9/15 JJA
Thu 9/17 JJA
Wed 10/7 JJA
Thu 10/8 JJA
Mon 10/12 JJA
Tue 10/20 EPD
Wed 10/21 EPD
:~
il,----lpb
I .J i.
L"_-U-1 I rlJ I ~,d
lh ;£
Wed 11/11 ~ I! •
Thu 9/3 RCE
Fri 9/11 RCE
Wed 9/16 RCE
Fri 9/18 JJA
Thu 10/29 RCE
Mon 11/2 RCE
Thu 11/5 RCE
Wed 11/11 RCE
Thu 11/5 GPG
Wed 11/11 DCI
Tue 11/3
Tue 10/27 Maniglia
Fri 10/30 Maniglia
Tue 11/3 Maniglia
Mon 11/9
Tue 11/3 ASS
Mon 11/9 Devcon
Tue11/10 Devcon
Fri 11/6 PWA
Mon 11/16 Devcon
b o
0-Ul_
•
Lytton Plaza Schedule #3
Devcon
7/23/09 Emerson and University, Palo Alto
LYTTON PLAZA PRELIMINA
23-Mar-09
ITEM
SUPERVISIONI GENERAL CONDITIONS
TEMP. FACILITIES I PROTECTION
GENERAL LABOR I CLEANUP
DEMOLITION
UNDERGROUND UTILITIES
GRADING
LANDSCAPE AND IRRIGATION
CONCRETE CONSTRUCTION
INTERLOCKING PAVERS
WATERPROOFING
FOUNTAIN SURFACING
FOUNTAIN EQUIPMENT
ART GLASS
DONOR WALL FRAME
DONOR STONE MATER!AL
DONOR ENGRAVING' -.'
WOOD SEATING
BIKE RACKS
SITE FURNITURE
TRASH CONTAINERS
ART RELOCATION
TWINKLE LIGHTS
ELECTRICAL
OFFSITE PATCH ALLOWANCE
LAYOUT AND STAKING
MISCELLANEOUS
LUMP SUM ADD FOR STREETSCAPE
LUMP SUM FOR BALANCE OF WORK
SUBTOTAL
GC OVERHEAD AND PROFIT
PRINTING
CONTINGENCY
PROJECT TOTAL
DEDUCT PRINTING ALLOWANCE
ADD TRASH RECYCLE OPTION
Exhibit C
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$().OO
$0.00
$0,00
$0.00
$98;609.50
$OWO
$0.00
$0.00
'$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$116,642.27
$0.00
$0.00
$0.00
$49;186:00
$333i396;66
$0.00
$0:00
. $0.00
$597,834.43
. ··$0.00
. $5;059.60
DEDUCT CONTINGENCY
;Ri~t>NCil.Ep:tq:tA\:";"· ,
DEVCON NOTES
INCLUDES PRINTING ALLOWANCE
INCLUDES PATCHING ALLOWANCE FO
VB NOTES
VB SIGNAGE ALLOWANCE LOW
UPDATED PROPOSAL OF 3-23 INCLUD
TECHCON NOTES
EXCLUDES STREET BENCHES -COULD
EXCLUDES STORM DRAIN CONNECTIO
EXCLUDES TWINKLE LIGHTS -COULD
$0.00
Attachment C
ORDINANCE NO.
ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO
AMENDING THE BUDGET FOR FISCAL YEAR 2010 TO ACCEPT A
DONATION IN THE AMOUNT OF $348,800 FROM THE FRIENDS OF
LYTTON PLAZA, LLC AND PROVIDE ADDITIONAL APPROPRIATION OF
$398,800 TO THE CAPITAL IMPROVEMENT PROGRAM (CIP) PROJECT
PE-08004, LYTTON PLAZA RENOVATION
The Council of the City of Palo Al to does ORDAIN as
follows:
SECTION 1. The Ci ty Council of the Ci ty of Palo Al to
finds and determines as follows:
A. Pursuant to the provisions of Section 12 of Article III of
the Charter of the City of Palo Alto, the Council on June 15, 2009
did adopt a budget for Fiscal Year 2010; and
B. On June 16, 2008, Counci 1 approved a letter of intent
between the Ci ty and the Friends of Lytton Plaza, LLC to begin
design of Lytton Plaza (CMR:281:08). In Fiscal Year 2008, the City
Counci 1 adopted a budget for CI P Proj ect PE-0 8 004 , Lytton Plaza
Renovation (Project), with an initial appropriation of $50,000 for
the design cost of the Project; and
C. In Fi scal Year 2009, the City Counci 1 increased the
appropriation by $300,000 to cover City's share in the construction
cost of the Project, bringing total appropriation to $350,000; and
D. On August 3, 2009, the City Council approved a limited-term
agreement with the Friends of Lytton Plaza, LLC (Friends) for
improvements located within Lytton Plaza, including the
installation of new paving, water fountain, site amenities,
landscaping and other improvements consistent with the Park
Improvement Ordinance. Under the terms of the agreement, the
Friends will deposi t accumulated donations for the Proj ect of
$348,800 into a City-designated account. The Friends funds are
matched with the $350,000 in Capital Improvement Project funds that
Council approved for the CIP Project PE-08004 in Fiscal Year 2009;
and
E. The total estimated cost of the Project is $748,800 which
includes additional funding of $50,000 for sidewalk resurfacing,
not originally part of the Project's scope of work. The
Infrastructure Reserve will provide the fund for the additional
scope of work; and
F. The appropriation of funds for CIP Project PE-08004, Lytton
Plaza Renovation is a one-time event, and in future years
maintenance and replacement costs will be included in the Community
Services Department's budget; and
G. City Council authorization is needed to amend the Fiscal
Year 2010 budget as hereinafter set forth.
SECTION 2. Donation revenue from the Friends of Lytton Plaza,
LLC of Three Hundred Forty Eight Thousand Eight Hundred Dollars
($348,800) is hereby received and, is appropriated to CIP Project
PE-08004.
SECTION 3. The sum of Fifty Thousand Dollars ($50,000) is
hereby appropriated to CIP Project PE-08004 bringing total
appropriation (including action taken in Section 2) to $398,800.
SECTION 4. The Capital Project Fund Infrastructure Reserve is
hereby decreased by Fifty Thousand Dollars ($50,000) with a
remaining balance of Five Million One Hundred Sixty Thousand
Dollars ($5,160,000) as shown in Exhibit A.
SECTION 5. The transactions above will have no impact on the
General Fund Budget Stabilization Reserve.
SECTION 6. As speci f ied in Section 2.28.080 (a) of the Palo
Alto Municipal Code, a two-thirds vote of the City Council is
required to adopt this ordinance.
SECTION 7. The Council of the City of Palo Alto hereby finds
that this is not a proj ect under the California Environmental
Quality Act and, therefore, no environmental impact assessment is
necessary.
SECTION 8.
Municipal Code,
adoption.
As provided in Section 2.04.330 of the Palo Alto
this ordinance shall become effective upon
INTRODOCED AND PASSED:
AYES:
NOES:
ABSTENTIONS:
ABSENT:
ATTEST:
City Clerk
APPROVED AS TO FORM:
City Attorney
APPROVED:
Mayor
City Manager
Director, Communi ty Services
Department
Director
Services
of Administrative
NE\V
CIP LYTTON PLAZA RENOVATION (PE .. 08004)
--
Attachment D
__ ,.rII"IT1on: This project will reonovate/reconstruct Lytton Plitia on i'h~'
comer of Uni versity Ave. and Emerson St. The Friends of Palo
Parks with the support of the downtown business district have
"~."n",~f'{l a Public/Private partnership to fund these renovations. The
nrcmoseu improvements will include demolition of the existing plaza and
construct new improvements including paving treatment, landscaping and
potential tables and water feature.
on: The plaza located in the heart of downtown Palo Alto is in
need of renovation. It currently is attracting loiterers, is in disrepair and
lacks aesthetics that would make the plaza an appealing and family friendly
space.
supplemental Information: A letter of intent between the City and the
private entity will spell out funding commitments of the private/public
partnership along with specific design and construction responsibilities.
Pre-Design Costs
Design Costs $50,000
Construction Costs
Other
$50
Revenues:
Source of Funds: Infrastructure Reserve
CIP FACTS:
• New
• Project Status: Design
• Timeline: FY 2008-2009
• Overall Project Completion: 0%
• Managing Department: Public Works
• Comprehensive Plan: Programs L-33 and L-
34
• Board/Commission Review: ARB, PRC, PTC
IMPACT ANALYSIS:
• Environmental: Categorically exempt from
CEQA.
• Design Elements: ARB/PRC review may be
required.
• Operating: May result in increased mainte-
nance costs.
$50,000
$50,000
Council Policy Direction: This project requires significant diversion of staffing and/or City funds due to outside funding
opportunity.
2007-09 Budget City (?!,Palo AI/o 109
Attachment E
Community Services Department
MEMORANDUM
To: Parks & Recreation Commission
From: Greg Betts, Interim Director, Community Services
Date: March 24. 2009
Subject: Park Improvement Ordinance -Lytton Plaza Improvements
The purpose of this merllorandulll is to provide information on a
plan LO inlprove Lytton Plaza (P<1rk) facilities by a renovation
project rnanagecl by the Friends of Lytton Plaza, LLC, in
cooperation wUh the City of Palo Alto. This project would replace
plaza pavement. landscaping, lights and amenities with a new
design intended to provide better public access and a more inviting
place LO gather, socialize and produce public events (concerts or
slory t clling).
ACTION REQUESTED: A recommendation to the City Council
is requested for the Council to adopt a Park Improvement
Ordinance pertaining to these project plans.
l{eco rlll11cncial ion:
Staff reculllllll~ncls the COillmission approve site plans Cor the improvemcnt to Lytton Plaza as
propu»cd by sl~ill ~lIld the i'ricillis uf Lytton PI(lz~\' LLC. lor the renov~ltion of the plaz;1 to includc
new 11~lvcl11enL, 111anters ~l rounLain, lighting, L~lbles, benches and ~lll1enllics, The COlllmission's
recullllllcncbllon will be alTered to the City Council in their review llf a P,lrk Improvement
Orclin(lncc for this projecL (AlL,lchment A),
Bad:,ground:
Palo Alto lVIullicipal Code 22,08,005 (Ordinallce reC]Llired [or sLlbst~lnti,li building, construcLion)
reCjuil"cs lhat "'Before Clny subsLtnti,lI bLlilding, construction, reconstructiun or development is
commenced UI' (I1)proved, Llpon or with respect to any l~l11d helel by the city for park I)urposes,
cilhel by the cily or hy d lessee, licensee or permiLLec thereof, the council shall first cause to he
I)repal'cd ~\I1d by ordinance approve ancl adopt a plan therct'or, All leases, licenses ,mci permils
with respect LO land held ["or park purposes sh,111 contain provisions requiring compliance \Vith
this secLion, Tile plan shall be prepared in such a manner and with sul'fIcient detail and
IXlnicLilariLy to shuw, LIS ,Ipplicable, the Ildtul'e, funcLion, size, extent and general appearance of
Pari< Improvement Ordinance -Lytton Plaza Improvements
Page 1 of 2
tile Ixoposeci I'IOJCCI. /\ny Ull III the lJlan silall he prel),lreclln lhe same manner and adopteel
hy mliin'll1ce."
Such ,\ "Park lillpmvellleill Ordinance" is required whenever ally project lllLly affect the Llse,
IlrolecLlon 01' cn l Dr or open space luncls.
This \\,\$ firsl in to the Park and Recreation COJllmission on September ,2008.
elwin'..' Oral IllLlnicaliuns Y SUIlIlY Dykwel. Mr, Levy returned to
COJ1l111ISsiull ;i[ lhe October ng to make a full presenration, Mr. Le Levy
prcsenled LIn I renovalion uf plaza and gathered input from lhe
Commissioll on i al LIse of park and ideas aboul re-Ianclscaping anel
I: lillg lile plClzii
C\)l111l1ISsinn and tile
lhe cOlllments and suggeslions olTered by the
In acldi lion to presen ration at COlllm issioll
Illcellngs, oners by Betts to allend a public presentation on
Lynol1 PI,lZa hosled by PlaL:\ on Wednesday. May 28, :2008. at City Hall,
In addilion In a Park Jill t Ordinance from the City Council lor lhese
improvement pro must also have D te and Design" review by the City's
!\!chileC!.ural ReView B(wrci (A ARB revic,vs the project for conformance with City
design aild alelless rOJ LIlt: area, The plans ~lllcl design concepts for
lhl;") I))"olcct has been revieweci the Archi Review Board at three separate meetings.
The pl~lllS prcscnted to lhe COlllmission incorporate all the suggeslions presented by lhe AR B
The 1"t:1l0valioll of' Plaza would include:
... demolitiull 01' the exisli t)I<.lZ:l anci Sll
... ciemolilion or'existing stone wing walls along University AvenLie and Emerson Street
... l-eJllO,,;t! of cxisting trees
It lClllOV~l! ul cxisti lighling
.. re-pavement of the plaza and adjoining siclew:t1ks
<t reposilit)ning of' the art piece Digital DNA
" illsl2lll~tliun \)Inew lights, lables ~mcl benches
• installation a new l'oLlnlain
The inle1lt ollhe new design is to make the plaza inviti to downlown visitors, merchanlS and
11l'lghhms, 10 provide a sl;'lgi 11g area fm sillall concens, IIi and poetry evcn and to
1)lcl\'icic " g,llhcrillg place Lhal is conducive to COil ons anci relaxi
Next SleDS:
St,tff wi II Plc:sC':l1 lhe Pal'" r I
with lhe Friends of Lylwil Plaza th~ll will
1'01 the conslruction or the plaza Illl
Altacillllenls\: Park IIll r Ordinance
A-l:Plans for the renovalion Lytton Plaza
13: Minutes or the October miSSIOn rVleetlllg
Pelll< improvement Ordinance -
lent
and timelint'
Attachment F
MINUTES
PARKS & RECREATION COMMISSION
March 31, 2009
City Hall
250 Hamilton Ave
APPROVED
Commissioners Present: Deirdre Crommie, Joel Davidson, Sunny Dykwel, Carl King, Paul
Losch, Pat Markevitch, Daria Walsh,
Commissioners Absent:
Others Present:
Staff Present: Greg Betts, Catherine Bourquin, Rob de Geus, Donald Piana
I. ROLL CALL CONDUCTED BY: Catherine Bourquin
II. AGENDA CHANGES, REQUESTS, and DELETIONS: None
II. ORAL COMMUNICATIONS: None
IV. BUSINESS:
1. Approval of Draft Minutes of February 24, 2009 regular meeting -The Draft
Minutes of the February 24, 2009 regular meeting were approved as with three
correction. Approved 7:0
2. Informational presentation from Palo Alto Bicycle Advisory Committee -Richard
Swent of the Palo Alto Bicycle Advisory Committee (PABAC) provided the
Commissioners with an overview of what P ABAC is involved with. After a brief
question and answer session with the Commissioners it was agreed that Commissioners
Crommie and Davidson who work with Mr Swent to draft a memo to Council on the
importance of finding funds to support a feasibility study for a pedestrian/bicycle grade
separated crossing of Highway 101 in south Palo Altoto ip1prove access to the
Baylands.
3. Lytton Plaza Project review and recommendation to Council to adopt a Park
Improvement Ordinance for the Project Plan -Commissioner Dykwel excused herself
from this item due to a conflict of interest. Staff Betts provided the Commission with
February 24, 2009 Draft Minutes
APPROVED
some background information behind the recommendation to adopt a park improvement
ordinance for Lytton Plaza. Mr. Levy, a member of the Friends of Lytton Plaza, was
introduced and went over the project plan for Lytton Plaza. There was a question and
answer period immediately following Mr. Levy's presentation. A motion was made by
Commissioner Losch and seconded by Commissioner King.
Motion: The Parks and Recreation Commission recommend to Council to accept a
request to adopt a Park Improvement Ordinance for the Lytton Plaza Project as
presel1ted.
Approved 7:0
4. Seale Park Restroom project review and recommendation to Council to adopt a
Park Improvement Ordinance for the Project Plan -Kate Rooney from Public
Works was introduced and presented to the Commission a brief synopsis of the history
behind restrooms in Palo Alto parks. The funding to install the restroom at Seale Park
will be through the use of Impact Fees and budget adjustments will be made to retlect
ongoing maintenance costs. A park improvement ordinance is being requested for this
project. Commissioner Losch was asked to give some history into the use of impact fees
from his past experience with the Commission. The Commission was given some time to
ask questions. A motion was made by Commissioner Dykwel and seconded by
Commissioner Walsh.
Motion: The Parks and Recreation Commission recommend Council to accept a
request to adopt a Park Improvement Ordinance for the Seale Park Restroom project as
presented.
Approved: 7:0
V. COMMENTS AND ANNOUNCEMENTS
1. Commissioner Markevitch announced that she had been working her way through
the PTA enlisting volunteers for the Senior Games.
2. Commissioner Losch announced that the Council approved an allocation of cash
resources for the Senior Games it passed 7: 1.
3. Commissioner Losch announced that he had been asked by the Weekly to
participate in a blog. He will be writing an article on the Senior Games.
4. Staff de Geus wanted to thank Commissioners Crommie and Davidson for their
participation in the California Parks and Recreation Conference and asked them to
share some of their experiences. It was suggested that it might be helpful in the
future to go over the itinerary of the conference before hand, so they could
understand which subject matter they would be most interested in. Staff Piana had
attended and recommended if the Commissioners get a chance to attend the park
tour.
February 24, 2009 Draft Minutes 2
(" , II
APPROVED
5. The Adopt-a-Park guidelines were discussed and Commissioners were asked to look
over the existing survey card and add their suggestions on what they wanted
included on the card. The park operations number was included as well as an
afterhours number. The Commissioners were to use their assigned parks as a basis
of attending meetings, etc. related to those parks and to be a representative of that
park. Staff will ensure that the Commissioners are aware of any items that come up
pertaining to their individual parks.
6. Staff Bourquin announced a new procedure that will be taking place in the next
month for the posting of information on the web related to the P ARC meetings. The
Agenda's will have links to any back up information related to the business topic.
This procedure is similar to the Council agenda's that are posted.
7. Staff de Geus announced an Earth Day event that is coming up on April 18th, lOam
-2pm at Lucie Stern Community Center.
8. A PARC representative was requested for the budget CIP study session.
Commissioner Crommie volunteered to attend.
9. Commissioner Walsh requested to discuss the gym space issue. Staff de Geus
provided information on what they are working on related to allocating limited gym
space. Commissioners King and Walsh volunteered to help draft up a Gym
allocation policy.
VI. TENTATIVE AGENDA FOR APRIL 28, 2009 REGULAR MEETING:
1. Friends of the Palo Alto Parks representative Olenka Villarreal will present the universally
acceptable playground proposal.
2. Memo to Council for the underpass feasibility study.
3. Discussion on the selection of a P AUSD liaison
4. Dogs off leash at Foothills park discussion
5. Agenda setting/PRC priorities
VII. ADJOURNMENT
Adjourned at 9:05pm
February 24, 2009 Draft Minutes 3
("." \!
TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: UTILITIES
DATE: AUGUST 3, 2009 CMR: 342:09
REPORT TYPE: CONSENT
SUBJECT: Finance Committee Recommendation to Direct Staff to Re-examine the
Electric Power Acquisition and Energy Efficiency Policies and Plans
RECOMMENDATION
The Finance Committee recommends that Council direct staff to work with the Utilities
Advisory Commission (UAC) and then report back to the Finance Committee with a re-
examination of the policies and goals that are being used in the alternate energy program,
including the energy efficiency plans and the electric acquisition policies and plans.
BACKGROUND
At its July 21 meeting, the Finance Committee received a presentation on the status of staffs
efforts to acquire renewable power to meet the City'S Renewable Portfolio Standard (RPS). The
presentation was intended to provide background information for the decision the Committee
faced regarding whether to recommend Council approve a contract for renewable power with
Ameresco Johnson Canyon LLC (CMR: 305:09). The City's RPS goal is part of the Council-
adopted Long-term Electric Acquisition Plan (LEAP) guidelines, which sets a target to meet 33
percent of the City'S electrical load with new renewable resources by 2015, while ensuring the
retail rate impact does not exceed 0.5 cents per kilowatt-hour (¢/kWh) on average (CMR:
158:07).
DISCUSSION
The City currently receives renewable power from five long-term contracts for about 19% of the
City'S annual energy usage. These contracts were executed in 2004 and 2005 and the cost of the
renewable power was approximately equal to the cost for traditional "brown" power. Two
additional long-term renewable power contracts were executed in 2008 and are slated to deliver
power in 2010. These contracts have about a 2 ¢/kWh premium over brown power. Overall,
however, the total impact on rates for the seven executed contracts is less than 0.03 ¢/kWh,
significantly below the 0.5 ¢/kWh rate impact limitation.
However, current prices for renewable power are significantly higher than current prices for
brown power. Proposals received in response to Palo Alto's latest Request for Proposals (RFP)
include premiums for renewable power of 6 to 10 ¢/kWh over brown power. With these
premiums being commanded in the marketplace for renewable power, Palo Alto may have
CMR: 342:09 Page 1 of2
difficulties meeting the 33% RPS goal with an average retail rate impact of 0.5 ¢/kWh. In
addition, the contract that was executed in February 2010 for geothermal power may not go
forward due to project financing issues. The project developer has indicated that thc project will
not go forward unless the price is renegotiated upward. Since this contract must be amended
with this price adjustment before September 3, staff is also bringing this contract to Council on
August 3 (CMR: 347:09) for consideration.
COMMITTEE REVIEW AND RECOMMENDATIONS
The Finance Committee considered a 20-year contract for renewable power with Ameresco
Johnson Canyon LLC on July 21, 2009. While it voted unanimously to recommend Council
approval of the contract, the Committee noted that the cost for renewable power has increased
significantly from prices for renewable power contracts entered into in 2005 and 2006. Given
the dramatic price increases, the Committee expressed a desire for staff and the UAC to review
the overarching policies, guidelines, and plans related to the acquisition of energy. The Finance
Committee, noting that reducing energy usage will help to achieve RPS goals, also asked that the
efficiency plans and goals be reviewed as well to ensure that the value of energy usage
reductions is considered.
The Finance Committee voted unanimously (3-0) to recommend that the City Council direct staff
to work with the UAC and then report back to the Finance Committee with a re-examination of
the goals and the matrix that are being used in the alternate energy program. The notes from the
Finance Committee meeting are attached.
RESOURCE IMPACT
No additional staff time is expected to be required to conduct this review as many aspects of the
proposed review were already planned.
POLICY IMPLICATIONS
Any new policies that may be proposed after the review of the existing policies will need to be
approved by the Council.
ENVIRONMENTAL REVIEW
Review of energy acquisition and efficiency programs and policies does not meet the definition
of a project, pursuant to section 21065 of the California Environmental Quality Act (CEQA).
ATTACHMENT
A. Draft excerpted minutes from the July 21,2009 Finance Committee meeting
PREPARED BY:
DEPARTMENT APPROVAL:
CITY MANAGER APPROVAL:
CMR: 342:09
\::bANE RATCHYE U Assistant Director, Resource Management
VAL~NG
Director of Utilities
\'-'~C' ~-.~.~
.,.z:,. ____ .,. __ ._ .. _ __ ~ ==----
JAMES KEENE
City Manager
-
Page 2 of2
ATTACHMENT A
FINANCE COMMITTEE
DRAFT EXCERPTED MINUTES -Regular Meeting
July 21, 2009
3. Adoption of a Resolution Approving the Ameresco Johnson Canyon
Landfill Gas Renewable Energy Power Purchase Agreement for the
Acquisition of Up to Two Average Megawatts of Energy Over Twenty Years at
an Estimated Cost Not to Exceed $30 Million.
MOTION: Vice Mayor l\1orton moved, seconded by Council Member Burt I that the Finance Committee recommend that the City Council adopt a
resolution approving the Power Purchase agreement with Ameresco Johnson
Canyon, LLC and that Council waives the application of the investment-grade
credit rating requirement of Section 2.30.340(d) of the Palo Alto Municipal
Code to this transaction.
Chair Burt said that he supports the Motion but he is concerned that CO-2
generation goals have been achieved at a minimal cost difference to the rate
payers. Now that there is a divergence from the past trends, the past trends
may no longer be accurate predictors of the future. We have to decide
where we go from here. There is a danger in looking at these successes and
having them indicate that everything is rosy going forward. It's getting
harder to find these sources, not because of leveling of renewables, but it's
in an increase in demand. We've had a great demand for them. He expects
both those trends to continue. He asked if we have enough to keep up with
legislative demand. He stated that Palo Alto is on a course that is similar to
statewide demands.
Council Member Schmid recalled the last time the State went through energy
reform the City ended up with the stranded cost of Calaveras. He thought it
would be appropriate to add an Amendment to the Motion. The goals and
the matrix that are used in the alternate energy program should be
examined.
Chair Burt said he would second that.
Vice Mayor Morton said that it would not be an Amendment since one issue
is a contract agreement and the other is a separate policy.
07/21/08 FIN:090721
FINANCE COMMITTEE
Ms. Fong said it would be better for Staff if the two issues were separate.
MOTION PASSED: 3-0, Klein absent
MOTION: Council Member Schmid moved, seconded by Chair Burt, to
direct Staff to work with the UAC and on re-examining the goals and the
matrix used in the alternate energy program.
Vice Mayor Morton said that for the new members of the UAC this will be a
useful review. This is an issue close to the hearts of Council, and wondered
if it could be part of the Study Session.
Ms. Fong said that the study session was canceled due to vacations and the
pending vacancies on the UAC. They are planning on rescheduling it in a
month or two.
Chair Burt asked if it would be appropriate to modify the Motion to have as a
discussion during the study session between the Council and the UAC in
September or October.
Council Member Schmid said the intent was to have a study with
recommendations, not an open ended discussion such as happens in a study
session.
Chair Burt said that maybe they should have UAC discuss, and then the
Council discuss the issues. He asked who would initiate the discussion. He
also asked if it should it be the Council, as a whole, making a
recommendation to the UAC, without delving into details or making a policy
recommendation or for the UAC to evaluate the issue and then the UAC
would come back to the Council with a recommendation and then the
Council would act. If it is the UAC acting first, the study session might be
useful.
Council Member Schmid said that in study session the Council can't make a
decision.
Vice Mayor Morton said that is correct, but since it is Council policy, and the
issue is going back to an advisory board, without input from CounCil, it may
be useful to have this discussion and to layout the changes. There is so
much policy tied up in this it may be useful for Council to give input to the
UAC.
07/21/08 FIN:090721
FINANCE COMMITTEE
Chair Burt stated the other point is that either way the Council wouldn't
make any decision at the first discussion, they are only making a request to
the UAC for a recommendation. Perhaps the way to launch this to the UAC
would be a discussion at our study session with the UAC, an informal
direction, or discussion with the UAC and then agendize for next Council
meeting whether to put it as a formal request to the UAC.
Ms. Fong agreed that that could be a way to launch the discussion. She said
that the UAC works with a 12 month rolling calendar. It is scheduled in the
next 3-4 months to have a discussion regarding a long term energy
acquisition plan, which this is part of. This study session would be for the
UAC to hear where Council is and then move into this long term. She didn't
think Council would need to take extra action as it is already on the 12
month rolling calendar.
Chair Burt said that the Council would not need to initiate that, other than
the UAC may get a sense of the areas of interest to the Council. He
suggested the Motion reflect that the Council will give input to the UAC at
the study session.
Vice Mayor Morton said that the Motion should also clearly request a UAC
response and after that Council would come back with recommendation.
Chair Burt said if they were asking the UAC to come back to Council with
recommendations that are different than they would have done under their
standard rolling calendar, then his sense was that should not come out of
the study session but rather an agendized Council action.
Council Member Schmid said the Motion that was already approved was to
recommend to the Council that they act on tonight's Staff recommendation.
Perhaps at that point since they will already have it agendized they can
discuss this issue. Since it is an inherent part of the presentation and from
that they can have directive to the Staff and UAC
Chair Burt said that he has apprehensions about that. The Committee
evolved into this discussion, whether it was an inherent part or not, he
wasn't sure. They would look at a specific contract with the Council and
whether or not anyone wishes to see a more clear Council request of the
UAC for evaluation of this broader policy as energy acquisition, not just goals
but conservation and efficiency goals. There could be two items agendized
07/21/08 FIN:090721
FINANCE COMMITTEE
on the same evening. One agendized item to the UAC reporting back in
some time frame under whatever parameters the Council would agree on. It
sounds not very different than what the UAC would be doing under the
rolling 12 month plan but it might differ somewhat from where they are
heading giving it a more specific time frame and focus.
Ms. Fong said that it really is in the UAC work plan. She reiterated that
there are four new members coming on board so she can not gauge where
they are on these issues. The UAC will bring this to the Finance Committee
after it's discussed at the UAC and then bring it to the Council. A study
session that does include the UAC and Council would be a healthy discussion
and would guide and inform the UAC where this should be taken without
specific Council action.
Chair Burt said he believed the sense of the Finance Committee was that
they would like to have the Council look at a more clear direction on what
they are seeking in the upcoming months. It mayor may not be different
than what they are already receiving from the UAC. He didn't know if the
more thorough evaluation of a greater emphasis on conservation of energy
use reduction would have been as high on the priority list as it might be
coming from the Council. He said there are two options, 1) Deferring to the
study session with the UAC to figure out what the Council wants and to
make a more specific request at an agendized meeting, or 2) At this point in
time request that this subject be a second agendized item at the time that
we discuss item three as tonight.
MOTION RESTATED: Council Member Schmid moved, seconded by Chair
Burt, to direct Staff to work with the UAC and then report back to the
Finance Committee with a re-examination of the goals and the matrix that
are being used in the alternate energy program as a second agendized item
when the UAC discusses the Power Purchase Agreement with Ameresco
Johnson Canyon, LLC with the Council.
MOTION PASSED: 3-0 Klein absent
07/21/08 FIN:090721
TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: CITY MANAGER'S OFFICE
DATE: AUGUST 3, 2009 CMR: 344:09
REPORT TYPE: CONSENT CALENDAR
SUBJECT: Approval of transfer of $70,000 from Council Contingency to fund High Speed
Rail Informational Symposium, Design Workshop, and Technical Consulting Services related to
City review of the San Francisco to San Jose High Speed Train (RST) Project EIR.
RECOMMENDATION
Staff recommends that the City Council approve a transfer from Council Contingency in the
amount of $70,000 to fund activities related to the staff and Council High Speed Rail Ad Hoc
Committee review of the San Francisco to San Jose High Speed Train Project EIR, including the
following:
1. A budget of $20,000 for the City's share of two important out reach events Palo Alto is
taking the lead on in coordination with the Peninsula Cities Consortium:
a) the High Speed Rail Informational Symposium (or "Teach In") on September
12th, a one-day session intended to bring High Speed Rail experts to a series of
panel discussions followed by facilitated community discussions. Estimated Cost:
$5,000; and
b) The Design Workshop, a two-day event on October 3rd and 4th bringing urban
design professionals to develop design plans for best integrating high speed rail
into the Palo Alto community. Estimated Costs: $15,000.
2. A budget of $50,000 to fund the retention of outside expertise to provide peer review and
analysis of technical documents including the project alternatives analysis as they are
released by HSR staff.
BACKGROUND
On May 18th the Council adopted Guiding Principles to provide direction to the High Sped Rail
Ad Hoc Committee. Mayor Drekmeier appointed Council members Kishimoto, Barton, Burt,
and Klein to this committee. The Ad Hoc Committee has been working closely with the
Peninsula Cities Consortium (PCC) to develop public outreach and education efforts and to
explore urban design solutions that consider community values for the high speed train project.
CMR:344:09 Page 1 of3
DISCUSSION
In order to proceed with the next steps in the PCC process and Ad Hoc Committee and Council
review of the San Francisco to San Jose High Speed Train Project EIR, staff has identified the
need for funding of approximately $70,000 for the following three activities:
1. High Speed Rail Informational Symposium
As a member of the PCC and working in cooperation with its partner agencies, Palo Alto will
sponsor an all-day "teach-in" on September 12, 2009 in the Palo Alto City Council Chambers as
a prelude to the October workshop. The purpose of the "teach-in" is to provide the public with
training in urban design and planning concepts and to bring all attending up to the same baseline
level of knowledge in preparation for the urban design workshop. Caltrain experts will make a
presentation on the basics of best practices of railroad planning and design. The expert
presentation will be followed by series of panel discussions followed by facilitated community
discussions and answer any technical questions from the public.
The total cost of this project is $5,000. Caltrain, acting in its capacity as the project manager of
the HSR project, has offered to participate to offset the event costs.
2. Urban Design and Planning Workshop
A more complete two-day design workshop is scheduled for October 3rd and 4th. The workshop
will focus on the Palo Alto segment of the HST/Caltrain corridor including segments north and
south of the city limits in adjacent cities. The workshop will be open to the public and staffed
with design professionals and organizers from the broader design community who have agreed to
volunteer their time to participate in this event in order to minimize costs.
This two-day event will be similar to a design charrette. On the first day of the workshop, there
will be a briefing by design professionals, brainstorming and interviewing sessions for all
participants and an opportunity to form teams to work on design concepts. On the second day, a
team of national experts will present conceptual urban design plans. The workshop is largely
organized by volunteers supported by Palo Alto staff. The workshop participants will also be
volunteers. Input and consultation has all been accomplished through volunteers and community
leaders.
The total cost of the event is estimated to be $15,000 which will be funded by the City, but staff
will be contacting Caltrain regarding co-sponsorship of this event. The Council requested that
the HSR subcommittee (Kishimoto, Barton, Burt, and Klein) return with a budget prior to
expending $15,000. Incidental expenses involve room rentals, document preparation, base maps,
printing and video documentation.
3. Technical Expertise Consultant
As reported in the last HSR staff report on July 20th, the California High Speed Rail Authority
(HSRA) team released the draft scoping report for the San Francisco to San Jose High Speed
Train project in June. The next steps for the HSRA team include initiation of the alternatives
analysis, technical evaluations, and preparation of the draft Project EIRiEIS, scheduled for
release in the first quarter of 20 11.
CMR:344:09 Page 2 of3
Staff has recognized the need for the City to retain outside expertise as technical documents are
released by HSRA staff. This fall, HSR staff anticipates releasing drafts of the alternatives
analysis. Staff anticipates that the Ad Hoc Committee and Council will need independent peer
review of technical conclusions such as tunneling feasibility and other below grade options,
costs, and railroad operations. Staff is requesting $50,000 to retain expert engineering consulting
servIces.
POLICY IMPLICATIONS
This action is consistent with existing Council policy direction.
RESOURCE INIP ACT
Funding for the HSR Ad Hoc committee was not included in the City's FY 2010 Adopted
Budget. Staff is requesting that the City Council's Contingency Account provide the funding in
the amount of $70,000 for the activities described above. The City Council's annual
appropriation for the contingency account is $250,000. This transaction will reduce the City
Council's contingency account from $250,000 to $180,000.
ENVIRONMENTAL REVIEW
This request for funding is not considered a project under the California Environmental Quality
Act.
PREPARED BY:
/'" 7 STEVE EMSLIE
CITY MANAGER APPROVAL: ----
CMR:344:09
Deputy City Manager
JAMES KEENE
City Manager
Page 3 of3
TO:
FROM:
DATE:
REPORT TYPE:
SUBJECT:
HONORABLE CITY COUNCIL
CITY MANAGER DEPARTMENT: UTILITIES
AUGUST 3, 2009 CMR: 336:09
CONSENT
Approval of Recommendation to Direct Staff to Design a Third-Party
City of Palo Alto Utilities Department Zero-Interest Energy Efficiency
Loan Program for Small Commercial Customers
RECOMMENDATION
Staff recommends that Council directs staff to design a pilot Utilities zero-interest energy
efficiency loan program, to be administered by a third party contractor, and targeting small
commercial customers. The program design and time line for implementation will be submitted to
Council for approval by September 30, 2009. A Request for Proposals to find a third party
contractor to implement and administer this program for the City will also be released by
September 30, 2009. Responses are expected by November 2009 and a program contract is
expected to go to Council by the first quarter of 201 O.
BACKGROUND
On May 18, staff brought a report to Council identifying the costs associated with in-house
programming and implementation of on-bill and off-bill loan financing options in the new
Utilities SAP-Customer Care and Service (CCS) billing system (CMR:234:09). At that time,
staff recommended a multi-pronged approach to energy efficiency loan financing including:
short-term contracting with a commercial lending institution to provide traditional secured loans;
longer-term staff review and implementation of Utilities on-or off-bill energy efficiency loan
financing; and investigation of a lien-based loan repayment through property taxes.
These loans will assist small businesses in implementing energy efficiency measures. One of the
major barriers to implementation is the upfront cost, which the loans will pay for.
On May 18, 2009, Council directed staff to return by September 30 with a plan to quickly
implement an on-bill or off-bill Utilities-financed loan program for businesses wishing to
improve their energy efficiency to install equipment such as new lighting or heating, air
conditioning ventilation (HV AC). Staff was also directed to solicit input and assistance from
community volunteers. This community input has resulted in the current third-party-based
proposal.
CMR: Page lof5
-
DISCUSSION
Community Input
Since May 18, staff has investigated the implementation requirements for both on-bill and off-
bill Utilities financing programs and obtained input from a number of individuals including
Asher Waldfogal, Utilities Advisory Commissioner, Walter Hays of the Community
Environmental Action Partnership (CEAP), Jim Baer of Premier Properties, and Debbie Mytels
of Acterra. The interests of the various stakeholders are aligned as follows. Environmental
advocates want to reduce energy consumption by a significant percentage in the shortest
timeframe possible. Property owners and managers want to identify new ways to partner with
tenants to reduce energy consumption. The City of Palo Alto (City) wants to design and
implement a loan program which meets the needs of the participants, protects rate payers from
the risk of loan defaults, and minimizes program administrative costs.
Utilities Bi1ling System
Staff initiated discussions with the contractor that implemented the City's new SAP utility billing
system, HCL-Axon (Axon). Staff asked Axon to develop cost estimates and timelines for on-bill
and off-bill loan management options. The cost for three scenarios were developed. The
"Minimalist CCS" scenario allows for a very simple on-bill financing approach with no changes
to the customer program, no early payment option, no loan payment transfers from one customer
to the other, and no changes in loan rates. The cost for the "Full-Functionality CCS"
accommodates a more robust on-bill financing scenario at significantly greater cost than the
"Minimalist CCS." The "SAP Loan Management" scenario is an "off-the-shelf' SAP product
that can be used to implement off-bill financing. The table below highlights the key attributes
and costs for the three options.
Loan Financing and Management Alternatives (Billing S stem)
Attribute Minimalist CCS Full-functionality CCS SAP Loan
Mana2ement
Integrated Yes Yes No
w/utility bills
Integrated Yes Yes No
w/utility bill
payment
Code enhancement Medium Complex Mimmal
required
Impact on bill Requires changes to bill print Requires changes to bill No changes to bill print
printing print separate document
Technical support Limited support from SAP Limited support from Supported by SAP
SAP
Functionality Limited: No adjustable rates, Full functionality of Full functionality of
no early payment, no loan advanced payment advanced payment
transfers processing processing r---$89,000 $530,000 $531,000 Cost
Development time 2 months 6 months 6 months
Third-Party Programs
As an alternative to using the Utilities billing system, the City can contract with a third-party
Non Governmental Organization (NGO) to provide loan management services related to facility
energy efficiency improvements. This model would be similar to the management of several
CMR: 336:09 Page 2 of5
I
existing Council-approved energy efficiency programs. Examples of these programs include
Right Lights+ with Ecology Action and Green@Home energy audits through Acterra. This
approach can result in a lower program implementation cost with greater flexibility. A qualified
NGO could efficiently operate an energy efficiency loan program, resulting in greater economies
of scale.
This is the program design alternative preferred by the majority of the stakeholders due to greater
speed to market, lower impact on City staffing requirements, and the ability for staff to utilize
existing contractual resources to support loan program auditing, inspection, and Measurement
and Verification (M& V) functions. One or more NGO contractors would be selected via the
City's Request for Proposals process.
Other Utility Loan Programs
In addition, staff engaged in discussions with other utilities in California and Connecticut that
have implemented programs for energy efficiency financing to gain insight from those
organizations. While several municipalities contract with lending agencies to provide energy
efficiency loans and several utilize property lien systems, no municipalities engage in unsecured
financing of energy efficiency projects. There are some investor-owned utilities with on-bill
financing programs including San Diego Gas and Electric and Southern California Gas Company
(both subsidiaries of Sempra) and the United Illuminating Company in Connecticut. Staff
reported on some of the findings regarding these programs in CMR: 234:09 on May 18, 2009.
Also in that report, staff referenced Sacramento Municipal Utility District's (SMUD's) off-bill
financing program, which is limited to property owners. While some information can be gleaned
regarding program development cost, loan parameters, default rates and ongoing staffing
requirements, none of these programs translate directly to the program under consideration for
Palo Alto.
Staffhas focused the investigation into two different loan financing and management options:
• Traditional and non-traditional third-party programs delivered through non-governmental
organizations (NGO), and,
• Billing and repayment through the City's current SAP billing system.
Staff solicited input from the community volunteers to help determine which option best meets
stakeholder needs.
Preliminary Legal Review and Administrative Review
The City Attorney's office investigated state requirements for loan programs and the program
elements needed to mitigate the risk to the City and rate payers. The City Attorney's office
determined the City is exempt from the State of California Finance Lender's Law, and, since this
program is conceived for business efficiency loans only, the Truth in Lending Act. Exemption
from both of these laws will greatly reduce the amount of documentation, implementation time
and oversight required to develop either of the program options described above. Staff is still
reviewing other potential legal requirements, such as the Equal Credit Opportunity Act, to
determine how this might impact the program. In addition to legal review, staff is evaluating
requirements for serving in the role of lender and loan administrator.
CMR: Page 3 of5
Proposed Utilities Program Attributes and Outstanding Issues
Anyon-bill program approach would require sufficient time for the SAP-CCS billing system to
address all of the post-implementation bugs and for the system to achieve full stability,
irrespective of the high programming costs for implementation.
Staffs conclusion is that the third-party program design is the best solution to meet both the
Council's goals and customers' requests for a program that can be quickly implemented. An on-
bill program appears too complex, time consuming, and costly for the implementation timeline
under consideration. An off-bill program would require significant increases in staff resources
and significant delays in speed to market while these resources were identified and assembled.
For these reasons, attention is now being focused on deVeloping a Request for Proposal (RFP)
scope of work for third-party loan services.
Preliminary program attributes include:
1. Loans will be restricted to commercial customers in good standing, and a loan agreement
will be required.
2. The borrower will be the tenant (except in the case of master meters). Landlord
permission will be required.
3. The maximum loan amount is equal to total equipment cost plus total installation cost
less rebate.
4. Loan repayment by owner when the tenant is in default or the building space is
unoccupied. These will be unsecured loans and measures to establish credit worthiness
will be required.
5. The program will apply to electric and gas energy efficiency projects, but not water.
Issues to be Addressed
The following issues are being analyzed and will be addressed in the September 2009 staff
memo to Council:
1. Legal constraints to offering loan programs through a third-party program provider
2. Co-sign requirement for the loan
3. Borrower qualifications and credit status
4. Qualifying measures
5. Potential of combining rebates and loans
6. Loan minimum and maximum amounts
7. Program funding and budget
8. Repayment terms
9. Transaction documentation and loan agreements
10. Risk management approvals
11. Verification of purchases/installations
12. Loan payments to tenant and/or vendor
13. Loan adjustments to accommodate project cost changes
14. Contractor Lists or multiple bid requirement
15. Loan commitment period for project completion
16. Source of loan funds (which could include funds from the Electric Reserve Account
known as the Calaveras Reserves and which would require Council review and approval)
17. What customers qualify for loans
336:09 Page 4 of5
18. The City can place a lien on property if the loan is unpaid, provided that Council adopts
an ordinance codifying the lien procedure prior to implementing the program.
Staff is still working on understanding these issues. Most will be addressed before going out
with an RFP for a contractor. Some issues may be impacted by the third-party contractor
preference.
RESOURCE IMPACT
At this point, no significant resource impacts have occurred. Staff time to develop the program
has been allocated and some costs for outside legal review have been incurred. While funding
for this proposed pilot project could come from the Calaveras Reserve, staff will evaluate all
funding options and return with a complete program implementation proposal to Council upon
receipt of proposals from third party vendors. This timeline is expected to be in the first quarter
of2010.
POLICY IMPLICATIONS
Implementing this financing mechanism will reinforce to the City of Palo Alto's policies and
goals to encourage energy efficiency installations and to assist customers in their attempts to use
electricity and natural gas more effectively. Goals being supported include the City Council
Priority Number Three, "Environmental Protection," the Ten Year Energy Efficiency Program,
and the Climate Protection Plan.
ENVIRONMENTAL REVIEW
The study of the City's provisions of these services does not constitute a project pursuant to
Section 21065 of the California Public Resources Code, thus no environmental review under
CEQA is required.
ATTACHMENT
A. CMR 234:09 -Approval of Plan to Develop Three Options for a City of Palo alto
Utilities Customer Energy Efficiency Financing Program
PREPARED BY: JOYCE KINNEAR, Utility Marketing Services Manager
KARLA DAILEY, Senior Resource Planner
TOM AUZENNE, Assistant Director, Utilities
JANE RATCHYE, Assistant Director, Utilities
DEPARTMENT APPROVAL: .~ VAL~RI~NG
Director of Utilities
CITY MANAGER APPROVAL: ~ ~~
JAMES KEEN
Q./ City Manager
>'
CMR: 336:09 Page 5 of 5
ATTACHMENT A
TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: UTILITIES
DATE: MAY 18, 2009 CMR: 234:09
REPORT TYPE: CONSENT
SUBJECT: Approval of Plan to Develop Three Options for a City of Palo Alto
Utilities Customer Energy Efficiency Financing Program
RECOMMENDATION
After researching four options that could provide a City of Palo Alto Utilities (CPAU) customer
energy efficiency financing program, staff recommends that City Council direct staff to develop
a multi-prong approach to meet customer needs by offering different solutions over a timeline
that would allow programs to phase in as soon as they are possible.
• The first, early option would be to contract with a lending agency to provide
energy efficiency loans. This program is likely able to start within six months.
• In parallel, City Council would direct staff to undertake a thorough legal and
administrative review of one or both of the following programs: (i) an on-bill or
off-bill financing program; (ii) a municipal financing program that would allow
property owners to repay energy efficiency loans through superior liens on
property tax bills.
Pursuing different program options provide the greatest flexibility to customers in financing
efficiency upgrades, allowing both residential and business customers to receive loans for a
variety of upgrades at a low or no cost interest rate (depending on the City's cost to buy down
the interest rate).
If Council does direct staff to implement a financing option, staff will return to Council with the
details of the programs and a more complete timeline after detailed legal and project reviews are
completed. This will be delivered to Council by the end of the third quarter in 2009.
BACKGROUND
City Council members have requested that staff review financing options for CP AU customer
energy efficiency installation projects. A financing program helps to overcome the first cost
barrier that inhibit customers from investing in energy efficient equipment. Depending on the
repayment terms of the financing program, the loan payments would be offset by the energy cost
CMR: 234:09 Page 1 of8
savings, resulting in significantly lower upfront cost to the customer. Staff has reviewed four
program types available in the industry:
1. Superior liens payable on property tax bills,
2. Notes secured by a Deed of Trust,
3. On-Bill or Off-Bill Financing, and
4. Contracting with a lending agency to provide efficiency loans.
To date, staff has spoken with several utility, industry and City representatives, and completed a
preliminary analysis of the costs and risks associated with each type of financing program. Each
type of financing program for customer energy efficiency and renewable projects has different
legal, financial, and customer costs, benefits, and risks. Each methodology would require some
lead time to implement and most would require additional staffing for program development and
administration. The types of energy efficiency financing are summarized below. A full
discussion of the costs, benefits, and risks is presented below in the Discussion section.
Superior Liens Payable on Property Tax Bills:
Charter cities may use one of two methods to create superior liens on property which secure the
repayment of energy retrofit loans. The first is to create contractual assessments; the second is to
create a Mello-Roos community facilities district. Each of these debts is paid on the property
owner's property tax bill, through a contractual assessment that is not a tax.
Note Secured By Deed of Trustfrom the Property Owner
A note secured by deed of trust is a lien on the property and is paid on a monthly or other time
period basis. Repayment may also be required within a short period of time or upon sale.
However, such a lien is last in priority after other liens. In other words, in the event of
foreclosure, this lien will be last to be paid back from the equity left in the property (if any
exists) after other pre-existing mortgages and liens. This makes the property appraisal prior to
the retrofit much more important. If the City does not do an extensive appraisal, it is possible to
lose money when homes are foreclosed. On the other hand, formal appraisals increase the cost
of making the loans in the first place. According to the Santa Clara County Assessor's Office,
eight properties were foreclosed in Palo Alto in calendar year 2008.
Loan Paid on Utility Bill (HOn-Bill Financing") or with the Utility Bill (HOff-Bill Financing")
Another option is a loan taken by the customer from the utility for an energy efficiency upgrade.
The loan is repaid on the utility bill and is called "on-bill financing." This kind of loan is
unsecured and thus dischargeable upon bankruptcy. This option is likely only available to
businesses under California law. Loans to customers would come with significant cost, reporting,
and auditing requirements for the City. A variation of this option is to provide "Off-Bill
Financing." In this option, the utility provides funding for a project, and the bill is manually
computed separately from a utility bill. The bill for an energy efficiency project can be included
with the utility bill.
Contracting with a Lending Agency (Bank or Credit Union) to Provide Low/No-Cost Efficiency
Loans
A program widely undertaken by many utilities including Alameda Municipal Power and City of
Palo Alto several years ago is for the utility to work with a lending institution or credit agency to
provide loans for customers' efficiency projects. Staff is currently discussing the interest of the
local credit union in revitalizing this program. -------CMR: 234:09 Page 2 of 8
DISCUSSION
Superior Liens paid on property tax bills.
Using superior liens to assure loan repayment is desirable for several reasons. First, these liens
are superior to all other liens and mortgages on the property with the exception of property tax.
In the case of bankruptcy or foreclosure, the City will be repaid second, after only the county.
The lender would be third. In addition, repayment may be scheduled for a short period of time.
This will prevent legal challenges on issues including successor liability and gifts of public
funds.
There are two ways to set up a system in which the loan would be treated as a lien on property.
The first is to create a contractual assessment pursuant to the Improvement Act of 1911, which
was amended last year by AB 811 specifically to allow the creation of contractual assessments
for energy retrofits. To create contractual assessments, which take the form of liens on affected
property, Council must adopt a resolution initiating study of an AB 811 program and
determining that the program would be in the public interest. Next, the City will create a report
that ensures that the assessment is based on a specific benefit to the property and defines
program specifics. The contents of the report are specifically enumerated in the amended
Improvement Act. After the report is complete, Council must hold a hearing and adopt a second
resolution establishing and approving the program.
AB 811 contractual assessments take place only upon consent of the property owner or owners.
Additionally, AB 811 affirms that the lien created by this assessment would be superior to all
other liens and mortgages on the property. The City, as assessment administrator, could require
property appraisals and a credit review prior to lending. Cities are permitted to issue bonds to
support an AB 811 program, and program administration costs can be built into the loan
amounts.
A second way to create a loan repaid on the property tax bill is to create a Mello-Roos
community facilities district. AB 811 Programs and Mello-Roos districts have four main
commonalities: 1) both allow a lien to be placed against the property, 2) both are done with
property owner consent, 3) both allow the lien to be secured with bonds or other financing, and
4) both ensure that the lien is positioned ahead of the mortgage in the event of foreclosure.
Creating a Mello-Roos district, or special tax assessment district, is an option available only to
charter cities such as Palo Alto. In 2007, Berkeley used a Mello-Roos-like formulation to create
a solar loan program called BerkeleyFIRST. Because a Mello Roos district creates a tax, it does
not have to be apportioned based on the exact benefit to the property. This means that less
background justification will be required, though it is, of course, optional.
To use this procedure, Palo Alto would first enact legislation allowing it to create a special tax
assessment district and to fund the program from its electric utility funds. At creation, this
district will be city-wide, but "empty" -property owners will choose to opt into it, thus avoiding
Proposition 218 requirements for a city-wide vote. Once a property owner opts into the district,
the energy retrofit will be installed and the City will assess a special tax on the affected property.
This tax would be paid back to the electric utility via the yearly property tax bill.
There are benefits to this option. While it may take more background research to form and staff
time to administer, it is by far the most secure option, may be designed to suit the City'S specific
needs, and is suitable for residential customers, commercial customers, and even property
CMR: 234:09 Page 3 8
owners with tenants. The staff time to coordinate between the County assessor, property owners,
and contractors is not insignificant, however. The City of Berkeley has a full-time staff person
assigned to its $1,500,000 pilot SolarFIRST program (in addition to working with bond counsel
and consultants to administer the program). There are contractors who have assisted cities and
counties in the development of this type of program, e.g. the City of Palm Desert and Sonoma
County used the same consultant in setting up their AB 811 program. To lower the
implementation costs of an AB 811 program the City could participate in a county-wide or even
a statewide program. One such program that is currently being developed by Renewable
Funding, a private investment firm, is the CaliforniaFIRST Statewide Program.
Note Secured by Deed o/Trust from the Property Owner:
A note secured by deed of trust is a lien on the property and is paid on a billed basis. Repayment
may also be required within a shorter period of time or upon sale. However, such a lien is last in
priority after other liens. In other words, at foreclosure, this lien will be last to be paid back from
any equity left in the property after other pre-existing mortgages and liens. This makes the
property appraisal prior to the retrofit much more important. If the City does not do an extensive
appraisal, it is more likely to lose money when homes are foreclosed. On the other hand, a
formal appraisal increases the cost of making the loans in the first place. More research on this
option could be completed; however, due to the fact that this lien would require similar up-front
costs as with the superior liens and would be much riskier to the City, this option has not been
researched extensively.
On or Off-Bill Financing:
On-bill financing incorporates 0% interest loans and short payment terms for customers,
allowing easier payment of upfront costs to install efficiency measures. A drawback to this
option is that the utility is exposed to default risks. The risk of default increases over time
particularly for efficiency projects with long payback periods. Consumer lending laws and
license requirements make lending funds for non-business customers for less than $5,000 a very
arduous and expensive process. As in a lease, collection problems could also arise upon sale or
foreclosure, making it important that adequate screening is done before approving a loan. Non-
payment of the loan portion of the bill likely cannot justify turning utilities off. One of the
largest concerns about this method is that it is insecure for the City and entails risk of
nonpayment and of implementation, which results from an inexperienced entity trying to become
a lender and high upftont program implementation costs over a relatively small base of
participants.
Program implementation costs consist of utility billing system conversion cost and ongoing
program administration cost. At Southern Gas Company (SGC) and San Diego Gas & Electric
(SDG&E), both subsidiaries of Sempra Energy, the conversion costs were relatively high and the
process time consuming. At SDG&E, the billing IT conversion took one year and cost around
$400,000. The program has been in place since 2006, and there are 3 full time employees
currently administering the program. To date, there have been 120 projects funded, and an
average of one application is filed per week. At SCG, the IT utility bill conversion project cost
about $120,000. The program has also been in place since 2006, and one and one-half full-time
employees are required to administer the program. This program has only nine customer
projects funded. These utilities were not comfortable giving out information about the exact
number of defaults, but CPAU staff members were led to believe that default rates are relatively
low, and the utilities expect a one to five percent default rate.
CMR: 234:09 Page 4 of8
To implement an on-bill financing program for the City, staff working on the SAP utility billing
system conversion estimated the cost will be $500,000. Billing system upgrades typically
involve a fixed number of programming hours regardless of the number of customer accounts.
Therefore, the cost for system upgrade on a per customer basis is much higher in smaller utilities.
Staff estimates that an implementation of an on-bill financing program would take at least 24
months.
Off bill financing is used by the Sacramento Municipal Utility District (SMUD). It helps to
provide funding for efficiency projects without changing the utility's billing program. To avoid
the issues related to utility billing systems and much of the risk with lending to tenants, SMUD
lends only to property owners and sends the bills through a separate system in the same envelope
as the utility bilL To further reduce utility risk, SMUD has a limit of $10,000 per loan, charges
the customers interest and an application fee to cover the costs of the program, and has credit
requirements for any customer who wishes to enroll in the program. Information is not yet
available on exact numbers of customers involved or in the numbers of defaults, but SMUD staff
have told CP AU staff that loan applications are not high.
Within the state of California, there are stringent legal, licensing and reporting requirements to
consumer loan providers. Some of these requirements come from the Truth in Lending Act, the
Equal Credit Opportunity Act, the California Code of Regulations and the California Finance
Lender's Law. Consumer loans are any loans for residential use or any commercial loan of less
than $5,000. These requirements are so onerous that the two utilities in California providing on-
bill financing, SGC and SDG&E, have chosen not to include this type of loan for residential
customers or for commercial customers seeking less than $5,000 in their program. Even for
commercial loans, there are lengthy and costly licensing requirements. This begins with
completing the license application with the State Department of Corporations
(http://www.corp.ca.gov/forms/pdfI1422CFLLF.pdf). To avoid some ofthe restrictions and cost
of the license (which is based on total business sales, not a percentage of the lending operation),
SGC and SDG&E obtained an official exemption from the Department of Corporations for these
areas. This exemption process took six months. CPAU staff was advised by Sempra staff that it
is unknown whether this exemption would be available for publicly owned utilities, as part of the
justification from the Department of Corporations for the exemption was that a state body (the
California Public Utilities Commission) would be over-seeing the program. Once this exemption
was in effect, the utilities still had to follow general guidelines with extensive reporting and
compliance requirements as listed below:
o Licensees are subject to periodic regulatory examinations that the licensee must
pay for.
o Licensees must pay an annual assessment each year.
o Licensees must file an Annual Report by March 15th each year.
o Licensees are subject to statutory books and record requirements.
o Licensees are responsible for compliance with all applicable laws and regulations.
o Licensees must maintain a $25,000 surety bond at all times.
Typically, applicants must receive a loan approval from the utility prior to installation of any
equipment. The installation property must have an active, connected electric account with the
utility and, preferably, no record of missed or late payments. The equipment to be installed must
meet all the efficiency requirements as a rebated item. To determine the amount of the loan, the
utility will evaluate the simple payback period of the equipment installation. loan
CMR: 234:09 Page 5 of 8
periods are limited to three to five years. Equipment for which a loan is received must have a
payback that is shorter than the loan period. If this method is ultimately selected, it should be
coupled with an unsecured promissory note and the loan capped at a pre-determined amount to
minimize the risk of non-payment.
Staff has not completed a thorough legal review of this option due to its complexity and will
need to conduct a more thorough review should the Council direct staff to pursue this option.
Contracting with a Lending Agency:
Since the purpose of a lending agency is to provide loans, several utilities with whom CP AU
staff spoke have developed this option. The City of Palo Alto itself, in late 1999 (CMR 447:99),
contracted with the Palo Alto Community Federal Credit Union to provide home energy
efficiency improvement loans with City subsidized loan rates. This contract was completed after
a Request for Proposals response from the Credit Union to provide loans during a two year
program life to customers who wished to install efficiency measures. This program was mostly
used by residential customers. In particular, residents who owned "Eichler" homes found this a
low-cost way to fund efficiency measures. Over $2.2 million was loaned to residents during the
program's life. Staff is currently confirming the credit union's interest in reinitiating such a
program.
Because banks and credit unions are set up to fill customer loans, many of the utility'S
administrative issues, such as licensure, restrictions on consumer lending, changes to the utility
billing system, or credit requirements, are removed in this option. The utility's cost will be
limited to a part-time staff person to assist customers in completing the loan application and any
amount the utility wishes to "pay down" the interest rate for customers' loans. This option does
have a higher transaction cost for customers, however, as customers must work with both utility
and lending agency staff to complete the transaction. Alameda's collaborative program with a
local bank offers business customers low-interest loans for approved electric technologies,
including energy-efficient lighting and charging equipment for electric vehicles.
Several outside agencies, most particularly the Electric and Gas Industries Association (EGIA)
also provide a service of utility sponsored financing for residential efficiency and renewable
(solar electric and hot water heating) projects. Whether working with a bank, credit union, or
agency such as EGIA, the utility assists the customer in developing the project and loan
applications and "buys-down" the interest rate. The bank will have pre-developed guidelines for
appropriate lending limits and credit requirements and may work with the utility to expand its
typical credit requirements.
Given the risks and costs involved with the different financing program options, staff
recommends that City Council direct staff to contract with a lending agency to provide energy
efficiency loans as a short term solution. In parallel, City Council would direct staff to undertake
a thorough legal and administrative review of one or both of the following programs: (i) an on-
bill or off-bill financing program; (ii) a municipal financing program that would allow property
owners to repay energy efficiency loans through superior liens on property tax bills. An off-bill
financing program could begin within a year, while an on-bill program is expected to take at
least 24 months. The timing of a municipal financing program would depend on whether or not
the City participates in a regional or statewide program; such a program will likely take at least
12 months before an official launch.
CMR: 234:09 Page 60f8
RESOURCE IMPACT
Any of the options discussed in this staff report would have resource impacts on the City. A
table summarizing the most important impacts is shown below:
Program Upfront Staffing Operations Legal Financing Total Cost Risk (1
Name Capital Estimate for Estimate for Review Estimate to 5, with
for 3 Year 3 Year 5 being
L~nding Program Program highest)
One full-time
Superior professional Consultant-
Lien on $1,500,000 -salary and Estimated at Outside $1,925,000 1 Property benefits--$50,000 per counsel:
Tax $75,000 per year $50,000
year
One full-time Outside
Note professional Consultant-counsel:
$25,000 Secured $1,500,000 -salary and Estimated at plus In-$1,900,000 4* by Deed benefits--$50,000 per house of Trust $75,000 per year counsel: year $10,000
Billing
One full-time System--Costs to
professional $500,000 In-house Buy-
On-Bill $1,500,000 -salary and one time counsel: Down $2,435,000 5* Financing benefits--Marketing, $10,000 Interest-
$75,000 per Processing, Estimated
year etc.--$50,000 at $50,000
per year
One full-time Costs to
professional Billing In-house Buy-
Off-Bm -salary and processing--Down $1,500,000 counsel: $1,960,000 5* i Financing benefits--$75,000 per $10,000 Interest-
$75,000 per year Estimated
year at $50,000
One-half full-Costs to
• Contract time Buy-professional In-house I
with $0 -salary and Minimal counsel: Down $165,000 1 Financing Interest-benefits--$10,000 Agency $35,000 per Estimated
at $50,000 year
* Some risk can be reduced by program design.
Note: all costs are annual for the three year duration of a pilot program except for upfront capital
infusion of the program and modifications to the billing system, which are presumed to be one-
time.
CMR: 234:09 Page 7 of8
Staff will look at ways to keep risks at a reasonable level for other rate payers. Risk reduction
methods, including starting with a shorter-term, such as three years, limiting/capping the
numbers of customers or dollars invested, and limiting loans to a time period less than the
lifetime of the equipment being installed will help to reduce credit risk. In addition, limiting the
program to customers who have not had a late payment and who have been utility customers for
at least two years can be used as terms to pre-qualifY applicants. Final risk reduction steps will
be included when the programs have completed legal and management review and are ready to
launch.
Funding for this proposed pilot project could come from the Calaveras Reserve and/or Public
Benefits funding (if sufficient funds are available in that area without eliminating other
efficiency programs). Staff will further review these funding options and return with a complete
proposal to implement a program as directed by Council.
POLICY IMPLICATIONS
Implementing any of these options would demonstrate the City of Palo Alto's policy to
encourage energy efficiency installations and to assist customers in their attempts to use
electricity and natural gas more effectively. Approval of staffs recommendations to implement
a Customer Energy Efficiency Financing Program would support the City Council Priority
Number Three, "Environmental Protection."
ENVIRONMENTAL REVIEW
The provision of these services do not constitute a project pursuant to Section 21065 of the
California Public Resources Code, thus no environmental review under CEQA is required.
ATTACHMENT
None.
PREPARED BY:
DEPARTMENT APPROVAL:
CITY MANAGER APPROVAL:
CMR: 234:09
JOYCE KINNEAR, Utility Marketing Services Manager
CHRISTINE TAM, Resource Planner
AMY BARTELL, Deputy City Attorney
KARL VAN ORSDOL, Manager, Energy Risk
TOM AUZENNE, Assistant Director, Utilities
JANE RA TCHYE, Assistant Director, Utilities
JOE SACCIO, Deputy Director, Administrative Services
VALERIE O. FONG
Director of Utilities
LALOPEREZ
Director of Administrative Services
JAMES KEENE
City Manager
Page 8 of8
TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: UTILITIES
DATE: MAY 18, 2009 CMR: 234:09
REPORT TYPE: CONSENT
SUBJECT: Approval or Plan to Develop Three Options for a City of Palo Alto
Utilities Customer Energy Efficiency Financing Program
RECOMMENDATION
After researching four options that could provide a City of Palo Alto Utilities (CPAU) customer
energy efficiency financing program, staff recommends that City Council direct staff to develop
a mUlti-prong approach to meet customer needs by offering different solutions over a timeline
that would allow programs to phase in as soon as they are possible.
• The first, early option would be to contract with a lending agency to provide
energy efficiency loans. This program is likely able to start within six months.
• In paraHel, City Council would direct staff to undertake a thorough legal and
administrative review of one or both of the following programs: (i) an on-bilI or
off-bill financing program; (ii) a municipal financing program that would al10w
property owners to repay energy efficiency loans through superior liens on
property tax bills.
Pursuing different program options provide the greatest flexibility to customers in financing
efficiency upgrades, allowing both residential and business customers to receive loans for a
variety of upgrades at a low or no cost interest rate (depending on the City's cost to buy down
the interest rate).
If Council does direct staff to implement a financing option, staff will return to Council with the
details of the programs and a more complete timeline after detailed legal and project reviews are
completed. This will be delivered to Council by the end of the third quarter in 2009.
BACKGROUND
City Council members have requested that staff review financing options for CPAU customer
energy efficiency installation projects. A financing program helps to overcome the first cost
barrier that inhibit customers from investing in energy efficient eqUipment. Depending on the
repayment terms of the financing program, the loan payments would be offset by the energy cost
CMR: 234:09 Page 1 8
savings, resulting in significantly lower upfront cost to the customer. Staff has reviewed four
program types available in the industry:
1. Superior liens payable on property tax bills,
2. Notes secured by a Deed of Trust,
3. On-Bill or Off-Bill Financing, and
4. Contracting with a lending agency to provide efficiency loans.
To date, staff has spoken with several utility, industry and City representatives, and completed a
preliminary analysis of the costs and risks associated with each type of financing program. Each
type of financing program for customer energy efficiency and renewable projects has different
legal, financial, and customer costs, benefits, and risks. Each methodology would require some
lead time to implement and most would require additional staffing for program development and
administration. The types of energy efficiency financing are summarized below. A full
discussion of the costs, benefits, and risks is presented below in the Discussion section.
Superior Liens Payable on Property Tax Bills:
Charter cities may use one of two methods to create superior liens on property which secure the
repayment of energy retrofit loans. The first is to create contractual assessments; the second is to
create a Mello-Roos community facilities district. Each of these debts is paid on the property
owner's property tax bill, through a contractual assessment that is not a tax.
Note Secured By Deed o/Trust/rom the Property Owner
A note secured by deed of trust is a lien on the property and is paid on a monthly or other time
period basis. Repayment may also be required within a short period of time or upon sale.
However, such a lien is last in priority after other liens. In other words, in the event of
foreclosure, this lien wiH be last to be paid back from the equity left in the property (if any
exists) after other pre-existing mortgages and liens. This makes the property appraisal prior to
the retrofit much more important. If the City does not do an extensive appraisal, it is possible to
lose money when homes are foreclosed. On the other hand, formal appraisals increase the cost
of making the loans in the first place. According to the Santa Clara County Assessor's Office,
eight properties were foreclosed in Palo Alto in calendar year 2008.
Loan Paid on Utility Bill ("On-Bill Financing") or with the Utility Bill ("Off-Bill Financing")
Another option is a loan taken by the customer from the utility for an energy efficiency upgrade.
The loan is repaid on the utility bilJ and is called "on-bill financing." This kind of loan is
unsecured and thus dischargeable upon bankruptcy. This option is likely only available to
businesses under California law. Loans to customers would come with significant cost, reporting,
and auditing requirements for the City. A variation of this option is to provide "Off-Bill
Financing." In this option, the utility provides funding for a project, and the bill is manually
computed separately from a utility bill. The bill for an energy efficiency project can be included
with the utility bill.
Contracting with a Lending Agency (Bank or Credit Union) to Provide LowlNo-Cost Efficiency
Loans
A program widely undertaken by many utilities including Alameda Municipal Power and City of
Palo Alto several years ago is for the utility to work with a lending institution or credit agency to
provide loans for customers' efficiency projects. Staff is currently discussing the interest of the
local credit union in revitalizing this program.
CMR: 234:09 Page 2 of 8
DISCUSSION
Superior Liens paid on property tax bills.
Using superior liens to assure loan repayment is desirable for several reasons. First, these liens
are superior to all other liens and mortgages on the property with the exception of property tax.
In the case of bankruptcy or foreclosure, the City will be repaid second, after only the county.
The lender would be third. In addition, repayment may be scheduled for a short period of time.
This will prevent legal challenges on issues including successor liability and gifts of public
funds.
There are two ways to set up a system in which the loan would be treated as a lien on property.
The first is to create a contractual assessment pursuant to the Improvement Act of 1911, which
was amended last year by AB 811 specifically to allow the creation of contractual assessments
for energy retrofits. To create contractual assessments, which take the form of liens on affected
property, Council must adopt a resolution initiating study of an AB 811 program and
determining that the program would be in the public interest. Next, the City will create a report
that ensures that the assessment is based on a specific benefit to the property and defines
program specifics. The contents of the report are specifically enumerated in the amended
Improvement Act. After the report is complete, Council must hold a hearing and adopt a second
resolution establishing and approving the program.
AB 811 contractual assessments take place only upon consent of the property owner or owners.
Additionally, AB 811 affinns that the lien created by this assessment would be superior to all
other liens and mortgages on the property. The City, as assessment administrator, could require
property appraisals and a credit review prior to lending. Cities are permitted to issue bonds to
support an AB 811 program, and program administration costs can be built into the loan
amounts.
A second way to create a loan repaid on the property tax bill is to create a Mello-Roos
community facilities district. AB 811 Programs and Mello-Roos districts have four main
commonalities: 1) both allow a lien to be placed against the property, 2) both are done with
property owner consent, 3) both allow the lien to be secured with bonds or other financing, and
4) both ensure that the lien is positioned ahead of the mortgage in the event of foreclosure.
Creating a Mello-Roos district, or special tax assessment district, is an option available only to
charter cities such as Palo Alto. In 2007, Berkeley used a Mello-Roos-like formulation to create
a solar loan program called BerkeleyFlRST. Because a Mello Roos district creates a tax, it does
not have to be apportioned based on the exact benefit to the property. This means that less
background justification will be required, though it is, of course, optional.
To use this procedure, Palo Alto would first enact legislation allowing it to create a special tax
assessment district and to fund the program from its electric utility funds. At creation, this
district will be city-wide, but "empty" -property owners will choose to opt into it, thus avoiding
Proposition 218 requirements for a city-wide vote. Once a property owner opts into the district,
the energy retrofit will be installed and the City will assess a special tax on the affected property.
This tax would be paid back to the electric utility via the yearly property tax bill.
There are benefits to this option. While it may take more background research to form and staff
time to administer, it is by far the most secure option, may be designed to suit the City's specific
needs, and is suitable for residential customers, commercial customers, and even
CMR: Page 3 of 8
owners with tenants. The staff time to coordinate between the County assessor, property owners,
and contractors is not insignificant, however. The City of Berkeley has a full-time staff person
assigned to its $1,500,000 pilot SolarFIRST program (in addition to working with bond counsel
and consultants to administer the program). There are contractors who have assisted cities and
counties in the development of this type of program, e.g. the City of Palm Desert and Sonoma
County used the same consultant in setting up their AB 811 program. To lower the
implementation costs of an AB 811 program the City could participate in a county-wide or even
a statewide program. One such program that is currently being developed by Renewable
Funding, a private investment firm, is the CaliforniaFIRST Statewide Program.
Note Secured by Deed of Trust from the Property Owner:
A note secured by deed of trust is a lien on the property and is paid on a billed basis. Repayment
may also be required within a shorter period of time or upon sale. However, such a lien is last in
priority after other liens. In other words, at foreclosure, this lien will be last to be paid back from
any equity left in the property after other pre-existing mortgages and liens. This makes the
property appraisal prior to the retrofit much more important. If the City does not do an extensive
appraisal, it is more likely to lose money when homes are foreclosed. On the other hand, a
formal appraisal increases the cost of making the loans in the first place. More research on this
option could be completed; however, due to the fact that this lien would require similar up-front
costs as with the superior liens and would be much riskier to the City, this option has not been
researched extensively.
On or Off-Bill Financing:
On-bill financing incorporates 0% interest loans and short payment terms for customers,
allowing easier payment of upfront costs to install efficiency measures. A drawback to this
option is that the utility is exposed to default risks. The risk of default increases over time
particularly for efficiency projects with long payback periods. Consumer lending laws and
license requirements make lending funds for non-business customers for less than $5,000 a very
arduous and expensive process. As in a lease, collection problems could also arise upon sale or
foreclosure, making it important that adequate screening is done before approving a loan. Non-
payment of the loan portion of the bill likely cannot justify turning utilities off. One of the
largest concerns about this method is that it is insecure for the City and entails risk of
nonpayment and of implementation, which results from an inexperienced entity trying to become
a lender and high upfront program implementation costs over a relatively small base of
participants.
Program implementation costs consist of utility billing system conversion cost and ongoing
program administration cost. At Southern Gas Company (SGC) and San Diego-Gas & Electric
(SDG&E), both subsidiaries of Sempra Energy, the conversion costs were relatively high and the
process time consuming. At SDG&E, the billing IT conversion took one year and cost around
$400,000. The program has been in place since 2006, and there are 3 full time employees
currently administering the program. To date, there have been 120 projects funded, and an
average of one application is filed per week. At SCG, the IT utility bill conversion project cost
about $120,000. The program has also been in place since 2006, and one and one-half full-time
employees are required to administer the program. This program has only nine customer
projects funded. These utilities were not comfortable giving out information about the exact
number of defaults, but CPAU staff members were led to believe that default rates are relatively
low, and the utilities expect a one to five percent default rate.
CMR:234:09 Page 4 of8
To implement an on-bill financing program for the City, staff working on the SAP utility billing
system conversion estimated the cost will be $500.000. Billing system upgrades typically
involve a fixed number of programming hours regardless of the number of customer accounts.
Therefore, the cost for system upgrade on a per customer basis is much higher in smaller utilities.
Staff estimates that an implementation of an on-bill financing program would take at least 24
months.
Off bill financing is used by the Sacramento Municipal Utility District (SMUD). It helps to
provide funding for efficiency projects without changing the utility's billing program. To avoid
the issues related to utility billing systems and much of the risk with lending to tenants, SMUD
lends only to property owners and sends the bills through a separate system in the same envelope
as the utility bilL To further reduce utility risk, SMUD has a limit of $10,000 per loan, charges
the customers interest and an application fee to cover the costs of the program, and has credit
requirements for any customer who wishes to enroll in the program. Information is not yet
available on exact numbers of customers involved or in the numbers of defaults, but SMUD staff
have told CPAU staff that loan applications are not high.
Within the state of California, there are stringent legal, licensing and reporting requirements to
consumer loan providers. Some of these requirements come from the Truth in Lending Act, the
Equal Credit Opportunity Act, the California Code of Regulations and the California Finance
Lender's Law. Consumer loans are any loans for residential use or any commercial loan of less
than $5,000. These requirements are so onerous that the two utilities in California providing on-
bill financing, SOC and SDO&E, have chosen not to include this type of loan for residential
customers or for commercial customers seeking less than $5,000 in their program. Even for
commercial loans, there are lengthy and costly licensing requirements. This begins with
completing the license application with the State Department of Corporations
(http://www.corp.ca.gov/forms/pdf/1422CFLLF.pdt). To avoid some of the restrictions and cost
of the license (which is based on total business sales, not a percentage of the lending operation),
SOC and SDO&E obtained an official exemption from the Department of Corporations for these
areas. This exemption process took six months. CPAU staff was advised by Sempra staff that it
is unknown whether this exemption would be available for publicly owned utilities, as part of the
justification from the Department of Corporations for the exemption was that a state body (the
California Public Utilities Commission) would be over-seeing the program. Once this exemption
was in effect, the utilities still had to follow general guidelines with extensive reporting and
compliance requirements as listed below:
o Licensees are subject to periodic regulatory examinations that the licensee must
pay for.
o Licensees must pay an annual assessment each year.
o Licensees must file an Annual Report by March 15th each year.
o Licensees are subject to statutory books and record requirements.
o Licensees are responsible for compliance with all applicable laws and regulations.
o Licensees must maintain a $25,000 surety bond at all times.
Typically, applicants must receive a loan approval from the utility prior to installation of any
equipment. The installation property must have an active, connected electric account with the
utility and, preferably, no record of missed or late payments. The equipment to be installed must
meet al1 the efficiency requirements as a rebated item. To determine the amount of the loan, the
utility will evaluate the simple payback period of the equipment installation. Typically, loan
CMR: 234;09 Page 5 of 8
periods are limited to three to five years. Equipment for which a loan is received must have a
payback that is shorter than the loan period. If this method is ultimately selected, it should be
coupled with an unsecured promissory note and the loan capped at a pre-determined amount to
minimize the risk of non-payment.
Staff has not completed a thorough legal review of this option due to its complexity and wi]]
need to conduct a more thorough review should the Council direct staff to pursue this option.
Contracting with a Lending Agency:
Since the purpose of a lending agency is to provide loans, several utilities with whom CPAU
staff spoke have developed this option. The City of Palo Alto itself, in late 1999 (CMR 447:99),
contracted with the Palo Alto Community Federal Credit Union to provide home energy
efficiency improvement loans with City subsidized loan rates. This contract was completed after
a Request for Proposals response from the Credit Union to provide loans during a two year
program life to customers who wished to install efficiency measures. This program was mostly
used by residential customers. In particular, residents who owned "Eichler" homes found this a
low-cost way to fund efficiency measures. Over $2.2 million was loaned to residents during the
program's life. Staff is currently confirming the credit union's interest in reinitiating such a
program.
Because banks and credit unions are set up to fill customer loans, many of the utility's
administrative issues, such as licensure, restrictions on consumer lending, changes to the utility
billing system, or credit requirements, are removed in this option. The utility's cost will be
limited to a part-time staff person to assist customers in completing the loan application and any
amount the utility wishes to "pay down" the interest rate for customers' loans. This option does
have a higher transaction cost for customers, however, as customers must work with both utility
and lending agency staff to complete the transaction. Alameda's co]]aborative program with a
local bank offers business customers low-interest loans for approved electric technologies,
including energy-efficient lighting and charging equipment for electric vehicles.
Several outside agencies, most particularly the Electric and Gas Industries Association (EGIA)
also provide a service of utility sponsored financing for residential efficiency and renewable
(solar electric and hot water heating) projects. Whether working with a bank, credit union, or
agency such as EGIA, the utility assists the customer in developing the project and loan
applications and "buys-down" the interest rate. The bank will have pre-developed guidelines for
appropriate lending limits and credit requirements and may work with the utility to expand its
typical credit requirements.
Given the risks and costs involved with the different financing program options, staff
recommends that City Council direct staff to contract with a lending agency to provide energy
efficiency loans as a short term solution. In parallel, City Council would direct staff to undertake
a thorough legal and administrative review of one or both of the following programs: (i) an on-
bill or off-bill financing program; (ii) a municipal financing program that would allow property
owners to repay energy efficiency loans through superior liens on property tax bills. An off-bill
financing program could begin within a year, while an on-bill program is expected to take at
least 24 months. The timing of a municipal financing program would depend on whether or not
the City participates in a regional or statewide program; such a program will likely take at least
12 months before an official launch.
CMR: 234:09 Page60fS
RESOURCE IMPACT
Any of the options discussed in this staff report would have resource impacts on the City. A
table summarizing the most important impacts is shown below:
Program Upfront Staffing Operations Legal Financing Total Cost Risk (1
Name Capital Estimate for Estimate for Review Estimate to 5, with
for 3 Year 3 Year 5 being
Lending Program Program highest)
One fuJI-time
Superior professional Consultant-
Lien on $1,500,000 -salary and Estimated at Outside $1,925,000 1 Property benefits--$50,000 per counsel:
Tax $75,000 per year $50,000
year
One full-time Outside
counsel: Note professional Consultant-$25,000 Secured $1,500,000 -salary and Estimated at plus In-$1,900,000 4* by Deed benefits--. $50,000 per house of Trust $75,000 per year counsel: year $10,000
Billing
One full-time System--Costs to
professional $500,000 In-house Buy-
On-Bill $1,500,000 -salary and one time counsel: Down $2,435,000 5* Financing benefits--Marketing, $10,000 Interest-
$75,000 per Processi ng, Estimated
year etc. --$50,000 at $50,000
per year
One full-time Costs to
professional Billing In-house Buy-
Off-Bill $1,500,000 -salary and processing--counsel: Down $1,960,000 5* Financing benefits--$75,000 per $10,000 Interest-
$75,000 per year Estimated
year at $50,000
One-half full-Costs to
Contract time Buy-professional In-house with Down
Financing $0 -salary and Minimal counsel: Interest-$165,000 1
benefits--$10,000 Agency $35,000 per Estimated
at $50,000 year
* Some risk can be reduced by program design.
Note: all costs are annual for the three year duration of a pilot program except for upfront capital
infusion of the program and modifications to the billing system, which are presumed to be one-
time.
CMR: 234:09 Page 7 of 8
Staff wil1 look at ways to keep risks at a reasonable level for other rate payers. Risk reduction
methods, including starting with a shorter-term, such as three years, limiting/capping the
numbers of customers or dollars invested, and limiting loans to a time period Jess than the
lifetime of the equipment being instal1ed wi1J help to reduce credit risk. In addition, limiting the
program to customers who have not had a late payment and who have been utility customers for
at least two years can be used as terms to pre-qualify applicants. Final risk reduction steps will
be included when the programs have completed legal and management review and are ready to
launch.
Funding for this proposed pilot project could come from the Calaveras Reserve and/or Public
Benefits funding (if sufficient funds are available in that area without eliminating other
efficiency programs). Staff will further review these funding options and return with a complete
proposal to implement a program as directed by CounciL
POLICY IMPLICATIONS
Implementing any of these options would demonstrate the City of Palo Alto's policy to
encourage energy efficiency installations and to assist customers in their attempts to use
electricity and natural gas more effectively. Approval of staff's recommendations to implement
a Customer Energy Efficiency Financing Program would support the City Council Priority
Number Three, "Environmental Protection."
ENVIRONMENTAL REVIEW
The provision of these services do not constitute a project pursuant to Section 21065 of the
California Public Resources Code, thus no environmental review under CEQA is required.
ATTACHMENT
None.
PREPARED BY:
DEPARTMENT APPROVAL:
CITY MANAGER APPROVAL:
CMR: 234:09
JOYCE KINNEAR, Utility Marketing Services Manager
CHRISTINE TAM, Resource Planner
AMY BARTELL, Deputy City Attorney
KARL VAN ORSDOL, Manager, Energy Risk
TOM AUZENNE, Assistant Director, Utilities
JANE RA TCHYE, Assistant Director, Utilities
JOE SACCIO, Deputy Director, Administrative Services
L~~~pL.J
Director of Administrative Services
Page 8 of 8
CITY OF PALO ALTO
MEMORANDUM
DATE: August 3, 2009
TO: City Council
FROM: Donna Grider, City Clerk and Kelly Morariu, Assistant to the City
Manager
SUBJECT: Request for City Council Approval of a New Contract with the
Independent Police Auditor, OIR (Office of Independent Review)
for Up to Three Years in an Amount Not to Exceed $27,500 Per
Year and Approval of $1,500 from the Council Contingency
RECOMMENDATION
Staff is requesting the City Council to approve a new contract with the
independent police auditor, OIR Group, and to approve $1,500.00 be taken
from the Council Contingency account to fully fund this contract for the 2010
fiscal year. The contract would be for three years, however, the City retains
the right to terminate for any reason with ten days notice.
BACKGROUND
On August 7, 2006 the City of Palo Alto entered into a one-year contract with
Michael J. Gennaco and Robert Miller of the OIR (Office of Independent
Review) Group to provide audit services of the Palo Alto Police Department.
In September 2007, the contract was brought back to Council to renew for
an additional two years. The contract with OIR Group is due to expire on
September 9, 2009.
We have spoken with the OIR Group and they are willing to continue
providing their services to the City of Palo Alto. They have advised us that
the new rate for Mr. Gennaco is $215.00 per hour and $190.00 per hour for
Mr. Miller. The total compensation for per year would not exceed $27,500.00.
The current Contract Account budget is based on previous rates, leaving a
shortage of $1,500.00 to fully fund this contract. Staff is asking Council to
approve moving $1,500.00 from the Council Contingency Fund to fully fund
this contract for the 2010 fiscal year. Going forward in the next budget years
we will increase the Council’s contract budget to include the full amount for
this contract.
CITY OF PALO ALTO CONTRACT NO.: CI0133537
AGREEMENT BETWEEN OF PALO ALTO
....., ..... £-.......:.JI,J GENNACO AND ROBERT MILLER
FOR PROFESSIONAL SERVICES
INDEPENDENT POLICE AUDITOR
This AGREEMENT is entered into on this 3rd day of August, 2009,
OF PALO a California municipal
GENNA CO at 4900
·"'Tn' .......... " ... CA ("CONSULTANT").
RECITALS
The following recitals are a substantive portion of this Agreement.
A. intends to contract audit services ("Project") and desires to
~"e"'e~ a consultant to provide services in vULllJ."""H'-'U with the Project
B. CONSULTANT represented that it necessary professional expertise,
qualifications, and capability, and aU 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, of the covenants,
parties
AGREEMENT
=.=..:::.=~~==,-",,-,::...;;;:.=~=.:::;.' CONSULTANT shall perform the
Exhibit in accordance with the terms and conditions contained in this
performance of all Services shan to the reasonable of CITY.
this Agreement shall he from the date of its execution through
.. ~ ...... ~~ earlier pursuant to Section 19 of this Agreement.
u ....... Uj,." this
described in
... gn~emem. The
2,2012
~~~~~~!'!;!;~~~:!.!:...!...!i::~~~~~:9.' Time is of the essence in the ... .,.,.'1'1'\ .. ""0,,,1"'<>
Services this Agreement. CONSULTANT shall complete Services within
Agreement and in accordance with schedule set forth in B A", attached to and
of this Any Services are not
be by in a reasonably n1"n'mnr
timely manner based upon the and direction communicated to the
CITY's to extend the term or the schedule for performance shall not preclude recovery of
damages delay if the extension is required due to the fault CONSULTANT.
Professional SelVices
Rev. 2009
CONSULT ANT shall not receive any compensation
.. ,...."fT,..... authorization of CITY. Additional
necessary for the "'1"1'\"""'",
Scope of Services described "A".
reimbursable eXI)en.ses
Michael Gennaco
Miller shall put "City of
applicable,
receipt.
paid to
performed without
shall mean work is determined by
which is not included within the
task. The
1.I.n .. a,",vu by CITY.
lll"'UQ.J!;"'l at the specified
l11V'U1\ ... '~" within thirty (30) days of
All of the shall be
performed by CONSULTANT CONSULTANT's supervision. CONSULTANT represents
professional technical necessary to perform the ...... rvlr''''' '"""l1n1 ...... 11
by this Agreement that the have sufficient skill experience to perform the
assigned to CONSULTANT that it, its employees and sub consultants, if permitted,
have and shall maintain during the term of this an permits, qualifications,
insurance and approvals of whatever nature that are legally required to perform Services.
All of the services to be furnished by CONSULT ANT under this shall meet the
professional standard and quality that prevail among professionals in the same discipline of
similar knowledge and skill engaged in work throughout California under the same or similar
circumstances.
~~~~:':"":::~~~~~i:!....!.l:..:!!:...!!:.~!::!2.~. CONSULTANT shan keep itselfinformed
compliance with all federal, state and laws, ordinances, regulations, and orders may
affect in manner the or the performance of Services or engaged to perform
Services under this Agreement. CONSULTANT shall procure all and pay all
charges and fees, and give all notices required by the performance of the
~~~!.l..!:~~~;22~~~~.:!2' CONSULTANT shall correct, at no cost to CITY, any and
all errors, or ambiguities in the product submitted to CITY, provided CITY gives
notice to CONSULTANT. If CONSULTANT has prepared plans and specifications or other design
uV\ .. UU.l.VU,,, to construct the Project, CONSULTANT shall be obligated to correct any all errors,
4
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Professional Sel"lliees
Rev. JanUlllY 2009
or ambiguities discovered to and during the course of construction of the Project.
obligation UUlLt ..... V .... of the Agreement.
SECTION 9. COST ESTIMATES. N/A.
SECTION 10. INDEPENDENT CONTRACTOR. It is , ... I"I ..... "'T,I'\I'\I"I agreed perfonning
Agreement CONSULT ANT, and "' .... 1 ........... employed by or contracted with
L1.U.LU"'U labor materials this Agreement, act as an
or employee CITY.
The agree that expertise of
considerations Agreement CONSULTANT not assign or
........ J.., .. ,~~ any interest this Agreement nor the perfonnance of CONSUL T ANT's obligations
...... ,,"' ...... 'u ..... without prior written consent of the Consent to one assignment will not
be deemed to consent to any without the ",nT'T""'"
of the manager win
without
as the Project Manager to have responsibility
eXfiCUllon of the to represent CONSULTANT
circumstances cause the substitution of the project project coordinator, or any other
personnel for reason, the ofasubstituteproject the assignment
key new or be subject to the prior written of the CITY's project
CONSULTANT, at CITY's promptly remove personnel who CITY fmds do
not perfonn the in an manner. are uncooperative, or a threat to the
adequate or timely completion of or a threat to the safety
The City's project manager is Interim Police
Alto, CA 94303, Telephone:
CONSULTANT's contact with
The CITY designate an aJte:rnate
.5
Dennis Bums,
650-329-2103.
Department, 275
project will be
to t)eJrIOIt'mIl.nC,e, progress and of the
lll ..... ,1"'5 .... ~ from time to time.
ProfessiOflai Services
Rev. JIlJIIm'y 2009
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SECTION 14. OWNERSHIP OF MATERIALS. Upon delivery. work product. induding
without limitation, writings. drawings, specifications, calculations, documents,
materials copyright developed under this shall and remain
exclusive of CITY without restriction or limitation use. CONSULTANT
that all which from of the work shall vested
in CITY, CONSULTANT waives relinquishes all claims to or other intellectual
rights in of the CITY. NeitherCONSULTANTnor contractors, shall
of such available to individual or organization without the written approval
ofthe City or CONSULTANT makes no representation of the suitability of the
work product for use or application to circumstances not contemplated by the scope of work.
CONSULTANT will CITY to at any time
..... W.Ull'; the term of this Agreement and for (3) years CONSULTANT's records
pertaining to matters covered this Agreement. CONSULTANT further
such for at three (3) after the expiration or termination
Agreement, regardless of or not it is ......... "'...,..... in part by an Indemnified Party.
16.1. the fullest extent permitted law, CONSULTANT shall protect,
defend and hold harmless its Council members, employees and agents
(each an "Indemnified Party") from and against and all demands, claims, or liability of
nature, including death or injury to any person, property damage or any other loss, including
costs and of whatever nature including attorneys fees, experts court costs and
disbursements ("Claims") resulting from, arising out of or any manner to performance or
nonperformance by CONSULTANT, its officers, employees, agents or contractors under this
Agreement, regardless of whether or not it is caused in part by an Indemnified
16.2. Notwithstanding the above, nothing in this Section 16 shall be construed to
require CONSULTANT to indemnify an Indemnified from Claims arising from active
negligence, sole negligence or willful misconduct of an Indemnified
The of CONSULTANT's and duties CITY shaH not
operate as a of the of indemnification. The provisions of this Section 16 shall survive
the expiration or early termination of this Agreement.
~~::..=~-!::..!..!-::..::...:.~:....=:~. The either party of any breach or violation of any covenant,
condition or provision of this Agreement. or of the provisions of any ordinance or law, win not
deemed to a waiver of any term, condition, provisions, ordinance or law, or of
subsequent breach or violation of the same or ohny other covenant, condition, provision,
ordinance or law.
18.1. CONSULTANT, at its cost and expense, obtain and maintain, in fun
Profi:ssiolllli Services
Rev. January 2009
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force and during the term of this Agreement, the insurance coverage described in Exhibit "D'I.
CONSULTANT and its contractors, if any, shall obtain a policy endorsement as an
additional insured under any general liability or automobile policy or policies.
coverage required hereunder shall be provided through carriers
AM ratings of A-:VII or which are licensed or authorized to
transact insurance business in the ofCaHfornia. and all contractors of CONSULTANT
under this Agreement will obtain in full and
the term of Agreement, identical coverage, naming CITY as an additional
lll., .......... U under policies as above.
18.3. evidencing such shall be
with execution of this Agreement. certificates will be subject to approval
Manager and will stating that is primary and will not
be canceled. or except filing with
Purchasing thirty (30) 1..4.1..1vvJll,;nLVll or modification,
CONSULTANT shall be reSClons the
are to CITY's Purchasing HA ......... "'''.
18.4. The such will not be
l'1'n".,IT".,.11 to limitCONSULTANT's liability nor to
Agreement. Notwithstanding the or policies of insurance, CONSULT ANT will
obligated the full and amount of any damage, as
a result Services under this or loss
arising after the
19.1. city manager may suspend the performance of the Services, in whole orin
part, or terminate this Agreement, with or without by giving ten (10) days prior written notice
tI1eJ~eot to CONSULTANT. Upon receipt of notice, CONSULTANT immediately
discontinue its performance of the Services.
19.2. CONSULTANT may terminate this Agreement or suspend its perfonnance of
the Services by giving thirty (30) days written thereofto but only event of
a substantial failure of performance by CITY.
19.3. Upon such suspension or termination~ CONSULTANT shall deliver the
City Manager immediately and all copies of studies, sketches, drawings, computations, and
other data, whether or not completed, by CONSULTANT or contractors, if any, or given
to CONSULTANT or contractors, ifany, in connection with this Agreement Such materials will
oec()me the property of CITY.
1 suspension or temrination by CITY~ CONSULTANT will be paid
the to CITY in wi th the scope on
of suspension or termination; provided,
ternmmltea on account default by CONSULTANT,
Professional ServiCeII:
R.c:v. Jaal.W}' 2009
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will be obligated to compensate CONSULTANT for that portion of CONSULTANT's
services which are of direct and immediate benefit to as such may by
the City Manager acting in the reasonable exercise ofhislber discretion
No payment, partial payment, acceptance, or partial CITY will
operate as a waiver on part of of any its rights this
All notices hereunder will in writing and prepaid,
certified mail, aaClressea as follows:
To Clerk
project rl1r''''l''t",.
CONSULTANT recited above
21.1. In accepting this Agreement, CONSULT ANT covenants that it has
no and will not acquire any direct or indirect, financial or otherwise, which would
conflict in manner or degree with the performance of the Services.
21.2. CONSULTANT further covenants that, in theperfonnance of this Agreement,
it will not employ subcoDSultants, contractors or persons having such an CONSULT ANT
certifies that no who or will have any financial interest tmder this Agreement is an officer
or employee this provision will be interpreted in accordance with the applicab Ie provisions
the Palo Alto Mtmicipal Code and Government of the State California.
.3. If the 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 the Political Reform Act.
SECTION 22. NONDISCRIMINATION. As set forth in Palo Alto Municipal Code section
2.30.510, CONSULTANT that the performance of this Agreement, it shall not
discriminate in employment of any because of the skin color, gender, age, religion,
disability, origin, ancestry. orientation, housing status, marital status, familial status,
or height of such person. CONSULT ANT acknowledges that it read and understands the
Section 2.30,510 the Palo Municipal Code to Nondiscrimination
Requirements and violation thereof. and agrees to meet all requirements of Section
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2.30.510 pertaining to nondiscrimination in employment.
SECTION 23. ENVIRONMENTALLY PREFERRED PURCHASING. City of Palo
is a green business and works to purchase provide products in an environmentally sustainable
manner. CONSULTANT will use production methods waste environmentally toxic
products, as well as less packaging, CONSULTANT will adhere to standard that printed
materials will be. at a minimum, printed on 30% post consumer paper with vegetable
ink. The will check with the project to the maximum recycled content
paper available for each FSC (Forest Stewardship certified that is .. 1'0 ............... ,""
free" is CONSULTANT will use methods energy use and thus the
footprint for the development. production and delivery of products. CONSULTANT shall ",""",,""""""
the Environmentally Preferred as may be to time.
SECTION 24. MISCELLANEOUS PROVISIONS.
24.1. Agreement will be governed the laws State of ""","U.\J'lU ....
the event that an
win be vested exclusively
California.
is brought, the
California in
of such action
Clara, State
24.3. prevailing in any brought to the provisions afthis
grcCmtmL may recover its reasonable costs and attorneys' fees expended in \.-v., .. " ......
action. The party shall be entitled to recover an amount to the
legal services provided by employed by it as well as
parties.
24.4. document represents the and integrated agreement between the
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 the parties.
24.5.
wiU bind, the
covenants. terms, conditions and provisions of this Agreement will apply
successors, executors, administrators, and consultants of the
24.6. If a court competent jurisdiction finds or rules that any provision of this
Agreement or any amendment thereto is void or unenforceable, the unaffected provisions this
greement and any amendments thereto will remain in full force and
24.7. An exhibits referred to Agreement any addenda. appendices,
attachments, schedules to Agreement which. from time to time, may be to in any
duly executed amendment are by such reference incorporated in this Agreement and will be
deemed be a part Agreement.
Agreement is subject to provisions of the Charter of the City of
Alto and the Palo Alto Municipal Code. AgreementwiU terminate without any penalty (a)
at the end fiscal year event that are not appropriated for the following fiscal
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Professional ServiC<:1l
Rev. January 2009
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 24.8 shall take
precedence in the event of a conflict with any other covenant, tenn, condition, or provision of this
Agreement.
24.9. 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.
24.10 All unchecked boxes do not apply to this 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
Purchasing Manager By: ~
Name: M1cW'61cfo JJtJMJ?
APPROVED AS TO FORM:
Title:, __ -----___ -____ _
Senior Asst. City Attorney By:
Name: A£erT &i .J:>r .,
Title: ~ ----------------------
Attachments:
EXHIBIT "A": SCOPE OF WORK
EXHIBIT "B":
EXHIBIT "C":
COMPENSA nON
INSURANCE REQUIREMENTS
---
Professional Services
Rev. J anllary 2009
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EXffiBIT"A"
SCOPE OF SERVICES
Consultant shall perform the following
L
2.
Intake -The Consultant will arrange to receive an e-mail of each citizen
complaint within three (3) working days the date complaint is originally made.
Consultant will then converse with the intake officer by telephone to clarify the nature of the
Initial investigation -As soon as an investigator is to the citizen complaint,
Consultant will confer with the Personnel & Coordinator by telephone discuss
the investigative plan.
Follow-up -Consultant will with O>V.IJ.l ..... & Training Coordinator
within two of the complaintto evaluate results determine whether
investigation is necessary.
Disposition When the investigation is complete, Consultant will with the
Police Chief to recommend a disposition or to resolve any issues about process not
previously resolved.
Status and tracking -Consultant will track case status and disposition on an updated
chart will include current in all .. "' .... ,n.,...,."
Meet to discuss quarterly with the
Chief to present current tracking and citizen
procedural problems identified and potential policy
Cwnulative and findings as to identified
trends
Decision to initiate investigation -Consultant will confer the police department
and administrative executive who requests investigation
implications, policy violations, and investigative
Investigation -Consultant will discuss the investigation plan the Personnel &
Training Coordinator arrange a mutually convenient way to .... 1..I ... w..'" Consultant on the
progress of the investigation.
Follow up: Additional investigation -Consultant will with the Professional &
Training Coordinator periodically to evaluate results and determine whether
investigation is necessary. When appropriate, Consultant will request further investigation
ProfessiOl'la.l Services
Rev. January 2009
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3.
4.
the and/or investigator'S of conrnnilllo.
Disposition -the investigation is complete, Consultant will the file
then with the Chief to recommend a of disposition, if needed, or to
resolve issues about not previously resolved.
Status tracking -Consultant will case status and disposition on an updated
chart will include current charts reports.
Meet to discuss trends -Consultant will meet quarterly with City Manager and
Chief to present current tracking charts and discuss ............... complaint trends,
procedural problems identified any potential policy issues.
Consultant will be promptly notified of an review each deployment Palo Alto
Police Department to review recommend to Police Chiefwhether deployment was
consistent with the Police Department's Taser policy and training. Should systemic issues
deployment, Consultant will recommend to Police Chief modifications
and/or as appropriate.
Consultant will
detail on
two reports during the year summarizing findings and
disposition. It will meet with the City Council
or raised. to finalizing
to discuss significant problems and
will contain the Police Department City
Manager. Consultant will solicit the Police Department's response and to reach a
consensus as to solutions. Consultant document its reports.
Profcuional Services
Rev. January 2009
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EXHIBIT "B"
SCHEDULE OF PERFORMANCE
The CITY to compensate the CONSULTANT forprc>tes:slOM.l services performed in
accordance with the tenns conditions of this Agreement, as set forth below.
Compensation shall calculated based on Consultant's billing rates up to the not to
VA. .... ..., ........ amount contract. The hourly billing rate Michael is $215.00 hour
the hourly billing rate for Miller is $ 190.00 hour.
The compensation to be to CONSULTANT under this for aU described
in Exhibit (Basic and reimbursable expenses, including travel shall not exceed
$27,500.00 per year a potential extending it two one-year Travel"'VY""ne,,,e
a portion total CONSULTANT to complete all ' ... TU',.,. ... "
including reimbursable and work ........ t'fi'\T"F'I'\"·1'I
expenses for which the
compensation set forth
CONSULT ANT shall perform the and categories of work as outl1nc~ below.
Review, .~_ .. ~~, investigation, and disposition of an estimated 1 citizen complaints per
monitor related action.
Internal Affairs investigation planning, monitoring, evaluation recommendations for an
estimated 5 investigations per monitor any related action.
Taser policy and training, each Taser deployment, .. "'J, ........... at 6 per to
determine with training and policy.
Task 4
Meet with the City Manager and Police quarterly and City Council semiannually.
semi· annual reports.
Total Services and Travel Expenses
Maximum Total Compensation per year
year $27,500
$27,500
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Rcv. JanWU)' 2009
EXHIBIT "C"
INSURANCE REQUIREMENTS
CONTRACTORS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, SHALL FOR THE TERM Of THE COJlfTRACT
OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECifiED BELOW, AFFORDED BY COMPANIES
WITH AM BEST'S KEY RATING OF A-:VIl, OR HIGHER, LICENSED OR AUfHORiZED TO TRANSACT INSURANCE BUSINESS IN
THE STATE OF CALIFORNIA..
AWARD IS CONTINGENT ON COMPLIANCE WITH CITY'S INSURANCE REQUIREMENTS AS SPECfFIED. BELOW:
MINIMUM LIMITS
ReQUIReD Type OP COveRAGE ReQUIReMENT EACH
YES
YES
YES
YES
YES
OCCURRENCE AGGREGATE
WORKER'S COMPENSATION STATUTORY
EMPLOVER'S LIABILITY STATUTORY
BODIL V INJURY $1,000,000 $1,000,000
GENERAL LIABILITY, INCLUDING
PERSONAL INJURV, BROAD fORM PROPERTY DAMAGE $1,000,000 $1,000,000
PROPERTY DAMAGE BLANKET
CONTRACTUAL, AND FIRE LEGAL BODILV INJURY & PROPERTY DAMAGE $1,000,000 $1,000,000
L1ABILITV COMBINED.
BODILY INJURV $1,000,000 $1,000,000 . EACH PERSON $1,000,000 $1.000,000 -EACH OCCURRENCE SI,OOO,OOO $1,000,000
AUTOMOBILE LIABILITY, INCLUDING
ALL OWNED, HIRED, NON-OWNED PROPERTY DAMAGE $1,000,000 SI,OOO,OOO
BODILV INJURY AND PROPERTY 51,000,000 $1,000,000
DAMAGE, COMBINED
PROFESSIONAL LIABILITY, INCLUDING,
ERRORS AND OMISSIONS,
MALPRACTICE (WHEN APPLICABLE),
AND NEGLIGENT PERFORMANCE ALL DAMAGES $1 000000
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 SUBCONSULT ANTS,
IF ANV, 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 DAY ADVANCE NOTICE TO CITY OF CHANGE IN
COVERAGE OR OF COVERAGE CANCELLATION; AND
B. A CONTRACTUAL LIABILITY EtIDORSEMENT PROVlDING INSURANCE COVERAGE FOR
CONTRACTOR'S AGREEMENT TO INDEMNTFY CITY.
C. DEDUCTIBLE AMOUNTS IN EXCESS OF $5,000 REQUIRE CITY'S PRIOR APPROVAL.
II. CONTACTOR MUST SUBMIT CERTIFICATES(S) OF INSURANCE EVlDENCING REQUIRED COVERAGE.
m. ENDORSEMENT PROVlSIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO "ADDITIONAL
INSUREDS"
A. PRIMARY COVERAGE
WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERA nONS 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 ADDmONAL INSUREDS.
B. CROSS LIABILITY
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ProfessiOflal Services
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THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER THE POLICY SHALL
FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER, BUT THIS
AND THE NAMlNG OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF
THE COMPANY UNDER THIS POLICY.
C, NOTICE OF CANCELLATION
I, IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER
THAN THE NON-PA YMENTOF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE ClTY
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·PA YMENT
OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A TEN (I 0) DAY
WRrITEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION.
NOTICES SHALL BE MAILED TO:
PURCHASfNG AND CONTRACT ADMINISTRATION
CITY OF PALO ALTO
P.O. BOX 101~
PALOALTO,CA 94303
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Professional Services
Rev. January 2009
TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: CITY MANAGER
DATE: AUGUST 3, 2009 CMR: 348:09
REPORT TYPE: CONSENT
SUBJECT: Adoption of a Resolution Amending Resolution No. 8904 to Change the City
Council Vacation Schedule for Calendar Year 2009 to End on September 7, 2009
RECOMMENDATION
Staff recommends that the City Council adopt the attached resolution amending the Council's
summer recess to end on September 7, 2009 instead of September 11, 2009.
DISCUSSION
On February 9, 2009, the Council adopted a resolution scheduling the Council summer recess
and winter closure for 2009. The original schedule for the Council summer recess was August 4
-September 11, 2009. Pursuant to Municipal Code Section 2.04.010, during the annual
vacation, there shall be no regular meetings of the Council nor of the Council standing
committees.
Due to scheduling conflicts in September, there is a need to schedule Council standing
committee meetings (Finance and Policy & Services) during the week of September 7, prior to
the current scheduled end of the Council vacation. As such, staff is recommending that the
Council amend the current summer recess schedule so that it ends on September 7. This would
allow the scheduling of the two standing committee meetings during that week.
RESOURCE IMPACT
There is no resource impact associated with the recommendations in this report.
POLICY IMPLICATIONS
This report is consistent with prior Council direction.
ENVIRONMENTAL REVIEW
The actions in this report do not constitute a project under the California Environmental Quality
Act (CEQA) guidelines; therefore, no environmental assessment is required.
ATTACHMENTS
CMR: 348:09 Page 1 of2
ATTACHMENTS
Attachment A: Resolution Amending the Council Recess for August 2009
PREPARED BY:
CITY MANAGER APPROVAL:
CMR: 348:09
KELLY MORARIU
Assistant to the City Manager
JAMES KEENE
CITY MANAGER
Page 2 of2
* * * NOT YET APPROVED * * *
Resolution No.
Resolution of the Council of the City of Palo Alto
Amending Resolution No. 8904 to Change the City
Council Vacation Schedule for Calendar Year 2009 to
End on September 7, 2009
WHEREAS, pursuant to Section 2.04.010(b) of the Municipal Code, the City
Council must schedule its annual vacation for each calendar year no later than the third meeting
in February and may not hold any regular meetings or meetings of Council standing committees
during the scheduled annual vacation; and
WHEREAS, the City Council adopted Resolution No. 8904 on February 9, 2009
setting the Council vacation from Tuesday, August 4 through Friday, September 11,2009; and
WHEREAS, a need has arisen to schedule Council standing committee meetings
during the week of September 7, 2009.
NOW, THEREFORE, the Council of the City of Palo Alto does hereby RESOLVE
as follows:
SECTION 1. Resolution No. 8904 is hereby amended to change the 2009 City
Council vacation schedule from August 4 through September 11, 2009 to August 4 through
September 7, 2009.
SECTION 2. The Council finds that this is not a project under the California
Environmental Quality Act and, therefore, no environmental impact assessment is necessary.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENTIONS:
ABSENT:
ATTEST: APPROVED:
City Clerk
APPROVED AS TO FORM:
City Attorney
090730 mb 8261108 1
TO:
FROM:
DATE:
REPORT TYPE:
SUBJECT:
HONORABLE CITY COUNCIL
CITY MANAGER DEPARTMENT: FIRE
AUGUST 3, 2009 CMR: 310:09
Public Hearing
Public Hearing to Confirm Weed Abatement Report and Adoption of
a Resolution Confirming Weed Abatement Report and Ordering Cost
of Abatement to be a Special Assessment on the Respective Properties
Described Therein
RECOMMENDATION
Staff recolnlnends Council hear and consider objections from affected propeliy owners of
proposed asseSSlnents related to cOlnpleted weed abatement work and adopt the attached
resolution confinning the report and ordering abatement costs to be a special assessnlent on the
propeliies specified in the report.
BACKGROUND
The Weed Abatenlent Division of Santa Clara County Agriculture and Enviromnental
Managenlent adlninisters the contract for weed abatel11ent within the City of Palo Alto, In
accordance with an agreement established on April 18, 1977 between the City and County.
On December 15, 2008, in accordance with Chapter 8.08 of the Palo Alto Municipal Code, the
City Council declared weeds to be a nuisance and ordered that the nuisance be abated. A public
hearing was held on January 12, 2009, to consider objections to the proposed destnlction or
relnoval of the weeds. No objections were noted. Once the above steps had been taken, the
County Weed Abatelnent Division instnlcted its contractor to abate weeds on City and private
properties within Palo Alto. That work has now been cOlnpleted. Property owners were notified
the third week in Decelnber 2008 that weeds were to be abated by March 2, 2009, either by the
owners or by the County. If the property owners chose to have the County abate the weeds, the
abatenlent charges would be levied against the respective properties as an assessment by the
County Assessor. The County has since infonned the property owners of the costs for destroying
and removing the weeds.
The Fire Departlnent has published the required notice of this hearing in the Palo Alto Weekly.
The cost report by the County Weed Abatement Division has been posted on the Downtown
Library bulletin board for ten days prior to this hearing.
CMR 310:09 Page 1 of2
DISCUSSION
Property owners lnay object to the charges for weed abatement being levied against their
properties. The charge consists of the contractor's cost plus 150 percent adlninistrative charges,
in accordance with Palo Alto's contract with Santa Clara County (CMR 357:00, Septenlber 18,
2000).
A representative fronl the County Weed Abatelnent Division will be present at the public hearing
with the records of weed abatelnents that have taken place. Should there be any nlodifications in
the proposed assessnlents as a result of the healing, changes in the asseSSlnent spread will be
lnade as necessary. After any recalculations are conlpleted, and Council adopts the attached
resolution confinning the abatenlents and ordering those costs to be inlposed as liens on the
abated properties, the assessnlents will be subnlitted to the County Assessor for entry on the
October tax roll upon which general City taxes are to be collected.
RESOURCE IMPACT
There is no direct fiscal impact of this action to the City. The asseSSlnents identified on
Attachment B, totaling $5,938.99, will be inlposed as liens on the properties listed and will not
be borne by the City.
POLICY IMPLICATIONS
This procedure is consistent with existing City policies.
ENVIRONMENTAL REVIEW
The Santa Clara County Counsel has determined the Weed Abatelnent Prograln to be
Categorically Exempt fron1 CEQA pursuant to CEQA Guidelines Section 15308.
ATTACHMENTS
Attaclllnent A: Resolution
Attaclllnent B: 2009 Weed Abatement Assessments by the County of Santa Clara
Prepared by:
GORDON SIMPKINSON
Acting Fire Marshal
Department Head Review: ~./~
HOLAS MARl AKO
Fire Chief
~ C __ //
City Manager Approval: __ ~~±=-====~==:~~==-:..~-====---~ .... ~~=======--
\) JAMES KEENE
~ City Manager
CMR 310:09 Page 2 of2
* * * NOT YET APPROVED * * *
Resolution No.
Resolution of the Council of the City of Palo Alto Confin11ing
Weed Abatelnent Report and Ordering Cost of Abatelnent to
be a Special Assess111ent on the Respective Propeliies
Described Therein
Attaclll11ent A
WHEREAS, the Council of the City of Palo Alto has heretofore declared weeds
growing on celiain properties within the City to be a public nuisance by Resolution No. 8888,
dated December 15,2008; and
WHEREAS, the Council on January 12, 2009, did adopt Resolution No. 8898
thereby ordering the weed nuisance abated; and
WHEREAS, subsequent to the giving of said notice, the Fire Chief, through his
Adn1inistrator, the Weed Abaten1ent Division of Santa Clara County Department of Agriculture
and Environmental ivlanagement, has caused to be abated the weeds on the herein described
properties; and
WHEREAS, the Fire Chief, through' his Administrator, the Weed Abaten1ent
Division of Santa Clara County Depalin1ent of Agriculture and EnviromnentalManagen1ent, has
filed his report and asseSSlnent list for weed abatement as provided by law and a hearing has
been duly set and noticed, for objections to said report and assessment list and for confim1ation;
and
WHEREAS, the Council has duly considered the report and assessment list and any
objections thereto,
NOW, THEREFORE, the City Council of the City of Palo Alto does hereby
RESOLVE as follows:
SECTION 1. The repOli and assessment list is in all respects complete and correct
and is hereby confin11ed. The . amounts of the cost for abating the nuisance are confirmed and
those remaining unpaid, as shown on Exhibit "A" attached hereto and incorporated herein, shall
constitute special assessments against the respective parcels of land and are a lien on the property
for the amount of the respective assessment.
SECTION 2. All written or oral protests or objections to said repOli and assessment
list are overruled or denied.
SECTION 3. The unpaid assessments shown on Exhibit "A" shall be entered upon
the 2009-2010 tax roll against the parcels of land and shall be collected at the same time and in
the same manner as general City taxes, be subject to the same int re st and penalties, and be
subject to the same procedure and sale in case of delinquency. All laws and ordinances
applicable to the levy, collection, and enforcement of City taxes are hereby made applicable to
this special assessment.
090707 Illb 8261079
* * * NOT YET APPROVED * * *
SECTION 4. Santa Clara County has detelll1ined the weed abatement progran1 to be
categorically exempt froll1 CEQA pursuant to CEQA Guidelines Section 15308.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Senior Deputy City Attorney City Manager
Director of Administrative Services
Fire Chief
090707 mb 8261079 2
2009 Weed Abatement Program Attaclunent B
Assessment Report
City of Palo Alto
TAX ROLL
Situs APN OWNER ADDRESS AMT IBA
128 Kingsley 124-15-038 Khan Anwar And Nayyar 2341 Falling Water Ct SANTA CLARA 95054-1316 $298.00 6001
2030 Park 124-27-002 Kofi Tetteh A 464 Spruce St BERKELEY 94708-1223 $513.15 6001
420 Cambridge 124-32-008 Lueeo Ine 599 College A v PALO ALTO 94306 $684.20 6052
3101 Middlefield 127-53-007 Fisher Lie 178 Ely PI PALO ALTO 94306-4552 $684.20 6001
3085 Middlefield 127-53-008 Borcich Group Lie 644 Menlo Av Unit 202 . MENLO PARK 94025 $684.20 6001
405 Curtner 132-41-072 Ellis Bess Trustee & Et Al 6223 Franciscan Wy SAN JOSE 95120-4420 $513.15 6001
3700 El Camino Real 137-11-078 Kss Investment Lie 13 80 Miravalle A v LOS ALTOS 94024-5744 $684.20 6022
4243 Manuela 175-02-053 Weakland Anna Wu Trustee 4243 Manuela Ct PALO ALTO 94306-3731 $298.00 6001
4103 Old Trace 175-20-078 SmithwiekAlton D And Ursula L Po Box 60065 PALO ALTO 94306 $553.59 6020
3111 Alexis 182-43-018 Raduehel William J Trustee 3111 Alexis Dr PALO ALTO 94304-1306 $1,026.30 6039
TOTAL $5,938.99
Report Date: 7/8/2009 (List Sorted by APN) Page 1
TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER
DATE: AUGUST 3, 2009
DEPARTMENT: ADMINISTRATIVE
SERVICES
CMR: 331:09
REPORT TYPE: REPORTS OF OFFICIALS
SUBJECT: Adoption of a Budget Amendment Ordinance to Increase the Budget for
Retiree Medical Costs Related to the Updated Retiree Medical Actuarial
Study -Valuation Date January 1,2009
EXECUTIVE SUMMARY
This report provides the City Council with the actuarial study results required by the Government
Accounting Standards Board's (GASB) Statement No. 45, Accounting and Financial Reporting
by Employers for Post Employment Benefits Other Than Pensions. The results of the study as
compared to the 2007 study show an increasc in costs across all City funds. Staff recommends
that the attached budget amendment ordinance be approved to allocate these costs in the Fiscal
Year 2010 budgct for all funds except the General Fund. The General Fund increase will come
from a draw on trust assets from prior years pre-funding.
RECOMMENDATION
Staff recommends that the Council adopt the attached budget amendment ordinance (BAO) to
allocate the increase in retiree medical costs to all City funds except the General Fund.
(Attachment C).
BACKGROUND
Per GASB Statement No. 45, beginning in Fiscal Year 2008, the City of Palo Alto was required
to recognize in its financial statements any unfunded, earned retiree medical costs including
those for current active employees. GASB 45 also requires the City to completc an actuarial
study on a bicnnial basis, to determine the retiree medical liability and how much the City should
be setting aside each year to fund that liability, the armual required contribution (ARC). There
are several ways of treating unfunded liabilities, including (1) establishing and funding an
irrevocable trust with CalPERS or other financial institution; (2) pay as you go and booking the
unfunded ARC on the financial statements; (3) setting aside dedicated reserve and (4) issuing
debt to fund the liability. These options were discussed with the Finance committee and full
Council in May 2007 (see Attachement D) and the Council directed staff to establish a trust with
CalPERS. In Fiscal Year 2008, the City established an irrevocable trust with California
Employers Retirees Benefit Trust (CERBT) for retiree medical benefits. In Fiscal Year 2008, the
CMR; 331;09 Page I of6
City transferred $33.8 million to the trust. The trust is administered by Califoruia Public
Employees Retirement System (CaIPERS). The City established an irrevocable trust for many
reasons, including the following
• For long-term planning the CERBT sets the expected rate of return at 7.75 percent
compared to the City's rate of return on investments of 4.21 percent for FY 2009
(CMR:319:09, July 27, 2009). The CERBT rate was set in FY 2008 and it is possible that
the CERBT will adjust the rate at some point in the future.
• A higher expected rate of return results in a lower liability and ARC for the City. The
2007 actuarial study compared 7.75 percent to 4.5 percent for the liability and the ARC.
The total liability as of 2007 was $102.2 million at 7.75 percent compared to $159.2
million at the 4.5 percent rate of return, a difference of $57 million. The 2007 ARC was
$7.7 million at 7.75 percent compared to $11.9 million at the 4.5 percent rate of return, a
difference of $4.2 million (Attachment 6, page 12).
• The trust funds are protected in an irrevocable trust and cannot be used for any other
purpose and cannot be taken by the State.
• The trust funds are considered an asset and decrease the liability. If the funds were not in
an irrevoeable trust the liability and the ARC would increase. Funds in a reserve or
internal service funds would not be considered as plan assets and would not reduce the
liability or the ARC.
• Over the past 20 years, CalPERS averaged rate of return was 7.75 percent on their
investments for pensions, this includes the decline of 23.4 percent for year ending June
30,2009.
• Administrative costs are expected to be significantly lower with CalPERS than with a
private financial institution.
• Using intemal staff or a provider other than CaiPERS would require significantly more
work, would require a trust or financial planner; legal services, establishmcnt of an
investment policy and risk program, and the creation of a review tcam possibly including
members of bargaining units.
• Establishing a trust administered by CalPERS allows the City to fund the ARC in a
variety of ways, including direct payment to CalPERS for current retirees and utilization
ofttust pre-funding.
DISCUSSION
The actuarial study completed by Milliman, Inc. in June 2009, using a valuation date of January
I, 2009, valued the City's retiree medical liability at $129.7 million, assuming a 7.75 percent
investment rate of return on the funds. The $129.7 million is an increase of $27.5 million from
the previous actuarial study using a valuation date of January 1, 2007, which valued the City'S
retiree medical liability at $102.2 million, assuming a 7.75 percent investment rate of return on
the funds. The $129.7 million is reduced by the value of the trust assets, $24.6 million, for an
unfunded retiree medical liability of $105.1 million. The ARC or amount the City must
recognize in the finaneial statements is $9.8 million for Fiscal Years 2010 and 2011.
CMR: 331:09 Page 2 of6
The following table shows the allocations of both the liability and the ARC across the City's
funds assuming 7.75 percent rate of return, based upon actual staff demographics within each
fund.
Fund Actuarial Liability ARC ,
General Fund $91,218,476 $6,797,923 •
Capital Improvement Fund 1,563,882 141,351
Electric Fund 13,128,983 943,097 •
Fiber Optics 84,585 10,251 i
Gas Fund 4,588,835 343,577
Printing -Internal Service Fund 270,363 27,980
Refuse Fund 3,063,013 244,889
Storm Drain Fund 493,835 36,173
Technology Fund -Internal 2,226,335 214,454
Service Fund
Vehicle -Internal Service Fund 1,224,905 94,688
Wastewater Colleetion Fund 2,012,681 168,995
Wastewater Treatment Fund 5,112,442 377,095
Water Fund 4,672,615 385,754
Citywide Total $129,660,950 $9,786,227
As per the above table, the General Fund share of the citywide ARC totals approximately $6.8
million annually. For Fiscal Year 2010, this is an increase of $1.2 million from the January 1,
2007 valuation of $5.6 million. A variance analysis for each Fund and each General Fund
department is attached in Exhibit A. The variance analysis reflects the change in actuarial
liability and ARC from the January I, 2007 valuation.
The actuarial report also provides the actuarial liability for each bargaining group including
Management and Professionals. The Service Employee's International Union (SEIU) had the
greatest increase of $13.3 million and is 48.3 percent of the total City liability. The Management
and Professionals group had an increase of $6.6 million and is 24.0 percent of the total City
liability. A variance analysis for each group is attached in Exhibit B.
Increases to the accrued actuarial liability are primarily due to:
• The cost of benefit accruals since the last valuation as. of January I, 2007; benefits earned
for two years ($6 million), plus interest on the priO!: liability ($102 million • 7.75 % =
$16 million), less benefit payments ($8 million) -for a total of approximately $14
million
• Changes in medical premiums and expected growth rate of future premiums -an increase
ofapproximately $2 million.
• Changes in the City's employee demographic composition increasing the number of new
retirees since the last valuation -an increase of approximately $12 million. The current
valuation included an increase of 115 retirees. This was more than expected in the last
actuarial valuation which was 55 based on assumed retirement rates. When an employee
CMR: 331:09 Page 3 of6
retires sooner than expected, the City must pay more benefits than if they retired at a later
date. This cost might be offset by actual medical costs for current employees if a position
is left vaeant.
California Employers Retirees Benefit Trust (CERBT):
Once the CERBT is established there are three ways to fund the ARC: (I) continued direct
payments to CalPERS for current retirees: (2) contributions to the trust; (3) use of the initial
prefunding to the trust asset. In Fiscal Year 2008, the City transferred $33.8 million to the trust.
The $33.8 million included $4.7 million toward the 2008 ARC. In addition, the City made direct
contributions to CalPERS for current retirees in the amount of $4.6 million, for a total ARC of
$9.3 million. The $9.3 million ARC is the computed ARC without recognition ofthc trust as an
asset; this is required by GASB in the first year of the trust. The trust asset value as of June 30,
2008 is recognized,in the Comprehensive Annual Financial Report (CAFR) at $29.2 million.
In Fiscal Year 2009, the City transferred $0.7 million (from all funds except the General Fund) to
the trust. The $0.7 million is to be used toward funding the ARC. 'Inc decision to transfer from
all funds except the General Fund is part of the FY 2009 budget strategy to balance the General
Fund. In addition, the City made direct contributions to CalPERS for current retirees in the
amount of $5.2 million (from all funds) and used $1.8 million (from the General Fund's portion
of the trust) of the asset value toward the ARC, for a total ARC 0[$7.7 million (the ARC for FY
2009 is less than FY 2008 because the computed ARC recognizes the trust as an asset). The
estimated trust asset value as of June 30, 2009 to be recognized in the CAFR will be $27.0
million. The ARC and the trust asset are reported in the CAFR, however any gains or losses on
the investment of the trust assets are not including in the CAFR.
In Fiscal Year 2010, the City will fund the revised ARC of $9.8 million. The General Fund will
contribute through direct contributions (current retirees), transfer of $1.0 million to the trust
(based on anticipated savings from capital projects of $1.0 million) and use of the asset value.
All other funds will fully contribute to the ARC through direct contributions and transfers to the
trust.
The actuarial valuation uses the trust assct value as it is reported on CERBT statements; thesc
include investment gains and losscs which are not included in the City'S CAFR. Due to
economic conditions, the asset value as of January I, 2009 as reported on the CERBT statement
was $24.6 million. The asset value as of March 31, 2009 is $2 L 7 million. This asset value
includes total investment losses sincc inception of the trust in FY 2008 of $12.1 million and
administrative costs of $16,092. The markets have improved since Mflrch 31, the DOW Jones
index has risen from 7,609 to 8,447 (11% increase) as of June 30, 2009. The asset value of the
trust fund is expected to reflect improved performance and the statement is expected in the next
month.
To recognize the updated ARC in the City'S financial statements for FY 2010 and 2011, an
increase in budget is needed. Due to continued expected challenges of reduced revenues and
budget deficits, the actual funding of the ARC will continue to come from multiple sources:
continucd direct payments to CalPERS for current retirees; contributions to the trust; and use of
the initial prefunding to the trust asset. The City can continue to use the trust to fund the ARC as
CMR: 331:09 Page 4of6
long as annual contributions are made or there is a balance in the net OPEB asset (over funding
of the ARC).
RESOURCE IMPACT
The FY 2010 budget allocated $8,362,902 towards the ARC, but this amount was an estimate
before the actuarial study was completed. The ARC contained in the actuarial study was
$9,786,226 representing an increase of $1,423,324 across all City funds. The General Fund
portion of the increment of the increase is $735,286. The General Fund portion will come from a
portion of the pre-funded trust asset. The attached budget amendment ordinance adjusts the FY
2010 budget to allocate the remaining cost of $688,038 aeross all remaining funds. (Attachment
C).
ENVIRONMENTAL REVIEW
The action recommended is not a project for the purposes of the California Environmental
Quality Act.
CMR: 331:09 Page50f6
PREPARED BY:
Accounting Manager, Administrative Services
DEPARTMENT HEAD APPROVAL:
CITY MANAGER APPROVAL:
ATTACHMENTS
LALO
Director, Administrative Services
. Q'"' ( I)~
JAMES KEENE
City Manager
Attachment A: City of Palo Alto, GASB 45 Actuarial Valuation of Post Employment Benefits
Other than Pensions, As of January 1,2009. Prepared June 25, 2009
Exhibit A Actuarial Liability and Annual Required Contribution Variance
analysis by Fund and General Fund Departments
Exhibit B -Actualial Liability Variance analysis by Bargaining Group
Attachment B: City of Palo Alto, GASB 45 Actuarial Valuation of Post Employment Benefits
Other than Pensions, As of January 1, 2007, prepared January 16,2008
Attachment C: Budget Amendment Ordinance
AttachmentD: CMR:195:07, May 1,2007, Autholization to Proceed with Establishing an
Irrevocable Trust with California Public Employees Retirement System
(CaIPERS) for Retiree Benefits
CMR: 331:09 Page 6 of6
ATTACHMENT A
City of Palo Alto
GASB 45 Actuarial Valuation of
Post Employment Benefits Other than Pensions
As of January 1, 2009
Prepared by:
John R. Botsford, FSA, MAAA
June 25, 2009
Milliman
June 25, 2009
City of Palo Alto
250 Hamilton Avenue
Palo Alto, California 9430 1
City of Palo A Ito -
GASB 45 Actuarial Va/u/llion of po .• t Employment Benefits as of January 1,2009
650 California Slree1, Floor 17
Sen Francisco, CA 94100·2702
USA
Tel +14154031333
Fa/( +14154031334
milliman.com
At the request of the City of Palo Alto, we have completed an actuarial valuation of post employment
benefits as of January 1,2009.
The purpose of this report is to determine the Annual Required Contribution and required financial
disclosures under the Governmental Accounting Standards Board Statement No. 45 -Accounting and
Financial Reporting by Employers for Postemp/oyment Benefits Other Than Pensions (GASB 45). Our
determinations reflect the procedures and methods prescribed in GASB 45.
In preparing our report, we relied on financial information and employee data furnished to us by the City of
Palo Alto. While Milliman has not audited the financial and census data, they have been reviewed for
reasonableness and are, in our opinion, sufficient and reliable for the purposes of our calculations. If any
of this information as summarizl){] in this repOli is inaccurate or incomplete, the results shown could be
materially affected and this repmi may need to be revised.
The assumptions and cost method were selected by the City to satisfY CaIPERS' required assumptions and
methods for funding agency OPEB liabilities through CalPERS OPEB trust. In our opinion, all assumptions
and methods used in this valuation are reasonable for this purpose. The values provided in this report are
estimates only. They represent results if actual experience exactly matches the'assumptions used. Actual
experience will likely differ and continued monitoring of experience should be performed and
adjustments made to the assumptions as nocessa.y.
The actuarial computations under GASB 45 are for purposes of fulfilling employer accounting
requirements. The calculations reported herein have been made on a basis consistent with our
understanding of GASB 45. Determinations for purposes other than meeting employer financial
accounting requirements may be significantly different fi'om the results reported herein. Reliance on
information contained in this repmi by anyone for anything other than the intended purpose puts the
relying entity at risk of being misled. .
This report has been prepared for use by City of Palo Alto for the purposes described herein.
Accordingly, this repmi may not be distributed to any third party outside the City without Milliman's
written consent unless public disclosure is required by law. Milliman hereby consents to the distribution
of this report to the City's auditor for the purpose of preparing the audit of the City's financial statements.
Offices in PrinCipal Cl!le& WQlidw!de-
City of Palo Alto
June 25, 2009
Page 2
If distribution of the report is made outside the City, the report must be provided in its entirety. This
report is a complex, technical analysis that assumes a high level of knowledge concerning the City of Palo
Alto's operations, and uscs the City of Palo Alto's data, which Milliman has not audited. Any third party
recipient of Milliman's work product who desires professional guidance should not rely upon Mi11iman's
work product, but should engage qualified professionals for advice appropriate to its own specific needs.
On the basis of the foregoing, we hereby certiJy that, to the best of our knowledge and belief, the report is
complete and accurate and has been prepared in accordance with generally recognized and accepted actuarial
principles and practices which are consistent with the applicable Actuarial Standards of Practice of the
American Academy of Actuaries. The undersigned is a member of the American Academy of Actuaries
and meets the Qualification Standards of the American Academy of Actuaries to render the actuarial
opinion contained herein.
Sincerely, ~
2fo!~, !'SA, MAAA
Pl'incipal and Consulting Actuary
JRB:tah
II :'&po\(;orn2Q09\cpa09gn1b.dw
Milliman
TABLE OF CONTENTS
Section Page
I Management Summary
Introduction ............................................................................................................................... J
Background ................................................................................................................................ I
Assumptions .............................................................................................................................. I
Resu Its 0 f Study ......................................................................................................................... 2
Impact of Changes from Last Valuation ................................................................................... 3
Variability of Results ................................................................................................................. 4
II Exhibits
Exhibit 1. Projected Benefit Payments ............................................................................. 5
Exhibit 2. Projected Number ofRetirees .......................................................................... 6
Exhibit 3. Liabilities and Nonnal Cost ............................................................................. 7
Exhibit 4. Breakdown of Liabilities Beforo and Afl.er Age 65 ........................................ 8
Exhibit 5. Unfunded Actuarial Accrued Liability ............................................................ 9
Exhibit 6. Required Financial Statement Disclosures .................................................... 10
Exhibit 7. Required Supplementary Information ........................................................... II
Exhibit 8. Valuation Summary by Bargaining Group .................................................... 12
Exhibit 9. Valuation Breakdown by Fund ...................................................................... 13
Exhibit 10. Valuation Breakdown by General Fund Departments ................................... 14
m Appendices
Appendix A. Summary of Benefits ..................................................................................... 15
Appendix B. Actuarial Cost Method and Assumptions ...................................................... 17
Appendix C. Summary of Participant Data ........................................................................ 21
City of Palo Alto <lASB 45 Actuarial Vall/atlon lIS of January I, 101J')
This wOfk product was prepured solely for City of Palo Aim for the purposes described herein find may no! be appropriate to lise
for other PilrpoSes, Milliman does oot ioteoo to be~efit and assumes no duty or liability to other putties who reeeive this work,
Milliman
SECTION I. MANAGEMENT SUMMARY
Introduction
Milliman, Inc. ("Milliman") has been retained by the City of Palo Alto ("City") to provide a GASB 45
actual"ial valuation of its post employment benefit (OPEB) plans. In our valuation we:
• Project expected payouts and number of retirees for future years
• Calculate the present value of lola I benefits
• Calculate the actuarial liability (present value of benefits attributable to past service)
• Determine the Annual Required Contribution (ARC) and annual OPEB expense under GAgB
Statement No. 45
• Provide a breakdown of the City's OPEB costs by Ilepar\ment and bargaining group
Background
Employees who retire directly from the City are eligible for retiree health benefits ifthey retire on or after
age 50 with 5 years of service and are receiving a monthly pension from CalPERS.
For employees hired before January 1,2004, and all PAPOA employees, the City pays for the entire cost
of retiree health benefits for retirees for their lifetimes. The City also pays a portion of medical costs for
dependents of retirees equal to 80% of the premiums for 2009 and incl'easing 5% per year until the City's
share reaches 100% of dependent premiums for 2013 and beyond.
For management employees, IAFF and FCA members hired on or aftcr January I, 2004, and SEIU
employees hired on or after January I, 2005, the City pays for the 50% of the above described benefits
after 10 years of service, and the city's portion increases by 5% for each additional year of service up to
20 years. For FCA, IAFF, and managemen1iconfidential employees who retire on or after January I,
2006, and for SEIU employees who retire on or after January 1,2007, the maximum premium amount the
City will pay toward health insurance will be equal to the second highest CalPERS Bay Area Basic plan
premium (currently the Blue Shield HMO premium).
The City contracts with CalPERS to prov ide medical benefits for its retirees.
Appendix A provides a more detailed summary of benefits.
Assumptions
With any valuation of future benefits, assumptions of anticipated future events are required. If actual
events differ from the assumptions made, the actual cost of the plan will vary as well. The following
assumptions should be reviewed for appropriateness.
City of Palo Alto GASH 45 ActuarIal Valuation as of January 1. 2009
This work product wns prepared solely for City orpulo Alto for the purposes described herein and may not be appropriate to use
for other purposes, Milliman dOoes MI intend to benefit and ll5Sumes no duty or liability tOo Oother parties whoo receive lhis work
Milliman
SECTION I. MANAGEMENT SUMMARY
Discollnt Rate. GASB 45 requires that the interest rate used to discount fut\lfe benefit payments back to
the present be based on the expeeted rate of return on any investments set aside to pay for these benefits.
The City has funded its GASB OPEB liabilities by contributing to California Employers' Retiree Benefit
Trust ("CERBT") Fund. We have, therefore, used a discount rate of 7.75% for this valuation based on
CaIPERS' expected return on assets held in their OPEB trust.
Health Cost Trend. We have assumed health costs will inerease according to the health cost inflation
trend derived by using the "Getzen" model developed by the Society of Actuaries. Please see Appendix
B for an explanation of this trend model.
Demographic Assumptions. We are using the same rates used by the California Public Employees
Retirement System (CaIPERS) in their actuarial valuations of retirement benefits under a 2.7% at age 55
benefit formula for miscellaneous employees, and a 3% at age 50 formula for Poliee and Fire employees.
A complete summary of the actuarial assumptions is presented in Appendix B.
Results a/Study
The valuation results are summarized in the following exhibit and use the following terms:
The Present Value of Benefits is the present value of projected benefits discounted at the valuation
interest rate (7.75%).
the Aetllarlal Accrued Liability (AAL) is the present value of benefits that are auributed to past service
only. The portion attributed to future employee service is excluded. For retirees, this is equal to the
present value of benefits. For active employees, the actuarial present value of the ,proJected benefits of
each individual is allocated as a level percentage of expected salary for each year of employment between
entry age (defined as age at hh'e) and assumed exit (until maximum retirement age). The portion
attributed to service between entry age and the valuation date is the actuarial accrued liability.
The Normal Coot is that pOltion of the City'S provided benefit attributable to employee service in the
current year.
City of Palo A 110 GASB 45 AClllariol VOlllOlloll as of Jalluary I, 2009
This work product was prepared solely for City ofPaiQ Alto forthe purposes described herein and may not bo appropriate t(j use
for other purposes, Mlllirnon 'llOCS not intend to benefit lind assumes no dUlY or liability to other parties who receive this work.
Milliman
2
SECTION I. MANAGEMENT SUMMARY
The Annual Required Contribution (ARC) is equal to the Normal Cost plus an amount to amortize the
unfunded AAL over a period of 30 years. This is the amount the City would be required to report as an
expense each year under GASB 45 assuming the amount is fully funded.
Active Employees
Retirees
Total Partic ipants
Covered Retired Spouses
Present Value of Benefits
Actuarial Accrued Liability
Assets
Unfunded Actuarial Accrued Liability
Normal Cost (as of July I)
Annual Required Contribution (ARC)
Budgeted City Payroll
ARC as a Percent of Budgeted Payroll
Expected first year benefit payments
Impact o/Changes/rom Last Valuation
January 1, 2009
955
--1!Q
1,665
345
$157,214,589
$ 129,660,950
24,616,071'.
$ 105,044,879·
$ 3,478,193
~,
$ 9,786,227
$ 98,940,490
9.9%
$ 5,869,495
January 1, 2007
1,018
---21l
1,630
257
$ 126,935,275
$ 102,237,022
0
$ 102,237,022
$ 3,173,722
$ 9,313,142
$ 97,600,000
9.5%
$ 4,175,915
The Actuarial Accrued Liability increased by approximately $28 million since the last valuation. The
following is a summary of changes to the valuation assumptions that contributed to the changes in AAL:
• The cost of benefit accruals since the last valuation (i.e. the cost attributed employee service since
the last valuation), plus interest on the pl'ior year's AAL due to the passage of time, less benefit
payments since the last valuation date contl'ibuted to the change in Actuarial Accrued Liability.
The combined impact of these factors was an increase in AAL of approximately $14 million.
• Actuarial valuations of retiree medical benefits include assumptions for future increases in
medical premiums. The AAL will change from one valuation to the next to the extent actual
premiums are different than expected and expectations of future premium increases change.
Changes in premiums and the expected growth rate of future premiums resulted in an increase in
AAL of appl'Oximately $2 million.
City of Palo Alto GASB 45 Actuarial Valuation as of January I, 2009
This work prodUCf was prepilTed solely for City OfPillo Alto for the purposes described herein lind may not be appropriate to use
for other purposes. Milliman does not intend to benefit and assumes no dUly or liability 10 other parties who receive Ihis work.
Milliman
3
SECTION I. MANAGEMENT SUMMARY
• OlhcJ' factors such as changes in the city's demographic composition also contl'ibuted to the
change in Actuarial Accrued Liability. The impact of these factors was an increase in liability of
approximately $12 million. A large p0l1ion of this increase was due to significantly more new
retirees than expected since the last valuation, There were 115 new retirees since the last
valuation compared with apPl'Oximately S5 expected new retirees based on assumed retirement
rates,
Variability of Results
The results contained in this report represent our best estimates. However, variation from these or any
other estimates of future retiree medical costs is not only possible but probable, Actual future costs may
vary significantly from estimates in this report,
City 0/ Palo Alto GASB 45 Actuarial Valuation as of January 1,2009
Ihls work product was prepared solely tbr City of Palo Alto jor the purposes described herein end may not be appropriate to use
for other purposes, Milliman does not intend to benefit and assumes no duty or liability II) I)thcr pnrties who rooelve this work,
Milliman
4
SECTION II. EXHIBITS
Exhihit 1. Projected Benefit Payments
The table below illustrates the projected pay-as-you-go City costs of providing retiree health benefits. The
projections only consider the closed group of existing employees and retirees and is based on the current
labor agreements.
Year
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
Current
Retirees
$ 5,712,539
5,786,856
6,050,624
6,249,934
6,479,804
6,548,819
6,589,057
6,612,967
6,647,574
6,641,232
6,643,157
6,597,783
6,500,339
6,519,904
6,538,876
6,522,034
6,510,135
6,440,529
6,348,334
6,258,289
6,185,440
6,099,083
5,986,017
5,869,043
5,691,608
5,506,567
5,306,553
5,076,830
4,859,746
4,628,631
Future
Retirees
$ 156,956
494,138
864,287
1,306,009
1,797,455
2,292,822
2,799,332
3,338,173
3,920,154
4,517,109
5,113,827
5,760,613
6,388,871
7,062,298
7,706,370
8,334,626
9,002,806
9,627,431
10,154,850
10,732,264
11,289,240
11,779,669
12,275,080
12,909,334
13,491,708
13,965,762
14,505,116
15,027,264
15,412,719
15,748,991
Clly of Pulo Alto CiASB 45 Actuarial Vuluulion as of January 1, 2009
$ 5,869,495
6,280,994
6,914,911
7,555,943
8,277,259
8,841,641
9,388,389
9,951,140
10,567,728
11,158,341
11,756,984
12,358,396
12,889,210
13,582,202
14,245,246
14,856,660
15,512,941
16,067,960
16,503,184
16,990,553
17,474,680
17,878,752
18,261,097
18,778,377
19,183,316
19,472,329
19,811,669
20,104,094
20,272,465
20,377,622
This work prQducl ","'llS prepared s{llely for City of Palo Alto for thc purpos~ described herein and may not be appropriate to usc
for other purposes. MlIIimlln d{lcS not intend to benefit and assumes no duty or liability to olher parties who receive this work.
Milliman
5
SECTION II. EXHIBITS
Exhibit 2. Projected Number of Retirees
The table below illustrates the projected number of retirees and spouses. The projections only consider
the closed group ofexisting employees and retirees.
Current Future
Year ketirees ketlrees Total
2009 7\0 17 727
2010 683 51 734
2011 664 83 747
2012 645 119 764
2013 625 154 779
2014 604 190 794
2015 584 222 806
2016 563 257 820
2017 541 289 830
2018 519 320 839
2019 498 349 847
2020 476 375 851
2021 453 400 853
2022 431 422 853
2023 409 443 852
2024 387 460 847
2025 364 476 840
2026 342 489 831
2027 321 499 820
2028 299 506 805
2029 278 511 789
2030 257 513 770
2031 237 514 751
2032 218 513 731
2033 199 509 708
2034 181 503 684
2035 163 495 658
2036 147 485 632
2037 132 473 605
2038 117 459 576
City oj Palo Allo GASH 45 Actuarial Valuation as oj Ja/luary I, 2009
This work product was prepared solely for City ofPaio Alto for the purposes described herein and may not be appropriate to usc
for other purposes. Milliman does not intend to benclilllnd Ilssumes no duty or liability to other parties who receive this work.
Milliman
6
SECTION II. EXHIBITS
Exhibit 3. Liahilities and Normal Cost
The Present Value of Benefits is the present value of projected benefits (premium costs less retiree
contributions) discounted at the valuation interest rate (7.75%).
The Actuaria I Accrued Liability (AAL) is the present value of benefits that are attributed to past service
only. The portion attributed to future employee service is excluded. For retirees, this is equal to the
present value of benefits. For active employees, the actuarial present value of the projected benefits of
each Individual is allocated as a level percentage of expected salary for each year of employment between
entry age (defined as age at hire) and assumed exit (until maximum retirement age). The pOltlon
attributed to service between entry age and the valuation date Is the actuarial accrued liability.
The Normal Cost is that portion of the City's provided benefit attributable to employee service in the
current year.
January f, 2009 January f,2007
Present Vlllue of Benefits
Actives $ 78,830,905 $ 72,105,749
Retirees 78,383,684 54,829,~26
Total $ 157,214,589 $ 126,935,275
Actuarial Accrued Liability
Actives $ 51,277,266 $ 47,407,496
Retirees 78,383,684 54,829,526
Total $ 129,660,950 $ 102,237,022
Normal Cost (as of July 1) $ 3,478,193 $ 3,173,722
Clly 0/ Palo Alto GASB 45 Actuarial Valualion as 0/ January I, 1009
This work product WflS prepared solel,Y for City ofPIll0 Alto for the purposes d<0~crjbed Ilerein and may not be appropriate to use
for other purposes. Milliman does not intend to benefit and assumeS' no duty or liabitity fO Glner parties who rece~ye this ' .... ork.
Milliman
7
SECTION II. EXHIBITS
Exhibit 4. Breakdown of Liabilities Before and After Age 65
The following table shows a breakdown of liabilities and costs attributes to benefits paid prior to age 65
and after age 65.
JonuarJ!. 1,3009
Benefits < Age 65 Benefits> Age 65 Total
Present Value of Benefits
Actives $ 33,740,944 $ 45,089,961 $ 78,830,905
Retirees 25,891,863 52,491,821 Z8,~8J,684
Total $ 59,632,807 $ 97,581,782 $ 157,214,589
Actuarial Accrued Liability
Actives $ 20,942,071 $ 30,335,195 $ 51,277,266
Retirees 25,891,863 78,383,684
Total $ 46,833,934 $ 82,827,016 $ 129,660,950
Normal Cost (CIS of July J) $ 1,556,310 $ 1,921,883 $ 3,478,J 93
CIty of Palo A/lo GASH 4.~ Acluar/al Valuallon as of JanunryJ, 1009
This work pIQdtlct was prepared soleI)' for City 'Of P{llo Alto for the purposes described herein and may not be nppropriate [() lise
for other ptlfPOSes, MilHman does I10t intend to benefit and assumes no duty or liability to otber parties who roooive this work.
Milliman
8
SECTION II. EXHIBITS
Exhibit 5. Unfunded Actuarial Accrued Liability
The Unfunded Actuarial Accrued Liability (UAAL) is the actuarial accrued liability offset by any assets
set aside to provide retiree health benefits. This is equal to the value of the retiree health benefits accrued
to date that has not been funded. The UAAL must be amortized over a period not exceeding 30 years and
included in the ARC amount (shown in Exhibit 5) each year. We have calculated the amortization of
UAAL as a level percentage of payroll over 30 years. This means the amortization amount would be
expected 10 increase at the same rate as payroll increases each year. We have assumed the City's payroll
will increase 3.25% per year for this purpose.
Janaary 1, 2009 January 1, 2007
Unfunded A ctuar/al Liabilily (UAAL)
Actuarial Accrued Liabil!ty $ 129,660,950 $ 102,237,022
Assets Held in nuS! 24,616,071
Unfunded Actuarial Accrued Liability $ 105,044,879 $ 102,237,022
Funded percentage 19.0% 0.0%
Amortizalion ofUAALfor ARC
UAAL $ 105,044,879 $ 102,237,022
Amortization Period 30 years 30 years
Level % of Payroll Amortization Factor 17.2858 17.2858
Amortization Amount -January 1" $ 6,076,946 $ 5,914,509
Interest to beginning of fiscal year -July I" $ 231,088 $ 224,911
Amortization Amount --beginning of fiscal year $ 6,308,034 $ 6,139,420
CI(y of Palo Allo GASB 4S AclUarlal Valuallon a. of January 1,20119
This work product was prepared solely fot City of Palo Alto for the purposes described herein and may not be appropriate LQ use
for other purposes. Milliman docs not intend to benefit and assumes no duty or liability to other parties who receive this work,
Milliman
9
SECTION II. EXHIBITS
Exhibit 6. Required Financial Statement Disclosures
The following table shows the calculation of the Annual Required Contribution and Net OPEB
Obligation.
For the Fiscal Year Emling
Determination a/Annual Required Contribution
Normal Cost at beginning of fiscal year
Amortization of UAAL
Anl)ual Required Contribution (ARC)
Determination 0/ Net OPES Obligation I (Asset)
Annual Required Contribution
Interest on prior year Net OPEB Obligation 1 (Asset)
Adjustment to ARC
Annual OPEB Cost
City Contributions made'
Increase in Net OPEB Oblig alion 1 (Asset)
Net OPEB Obligation 1 (Asset) -beginning of year
Net OPEB Obligation 1 (Asset) -end of year
June 30, 2010
$ 3,478,193
6,308.034
$ 9,786,227
$ 9,786,227
TBD
TBD
TBD
TBD
TBD
TBD
TBD
June 30, 2008
$ 9,313,000
$ 9,313,000 o
$ 9,313,0000
38,490,000
$ (29,177,000)
$ 0
$ (29,177,000)
• Amounts shownJal'fiscal year ending June 30. 2008. were reported by Ihe City on ils CAFR as oj June 30. 2008. GASH
45 define, contribution, Jar Ihis purpose to be actual benefil payments made dlreclly by Ihe City during the year and
contributions made to a seporate, in'evocable Irusl. This exhibit will need 10 be completed at Ihe end of the fiscal
year once actual contributions are known.
The following table shows the annual OPEB co st and net OPEB obi igation for the prior yeal's.
Fiscal
Year Ended
06/30/2008
06/30/2009
06/3012010
" See above jootnote,
Annual
OPEn Cost
$ 9,313.000
8,740,000
TBD'
Percentage 0/
OPES Cost
Contributed
413%
TBD'
TBD'
NetOPEB
Obligation I
(Asset)
$ (29,177,000)
TBD'
TBD'
Funded Slalas and Funding Progress. As of January 1,2009, the most recent actuarial valuation date,
the plan was 19.0% funded. The actuarial accrued liability for benefits was $129.7 million, and the
actuarial value of assets was $24.6 million, resulting in an unfunded actuarial accrued liability of
$105.0 million.
Clly oj Palo Alto GASB 45 Acruarlal Valuallon as oj January J, 2009
This work product was prepared solely for City of Palo Alto for the purpos~ described herein and may not be. appropriate to use
, for other purposes Milliman dQes not intend to benefit and assumes no duty or liability to other parties who receive this work.
Ml1Iiman
10
SECTION II. EXHIBITS
Exhibit 7. Required Supplemeutary Information
The following table shows a schedule of Funding Progress required unde;' GASB 45.
Acluarial AClaarlal VAAL asa
Valuallon Vallie of AAL Funded Covered % of Covered
Dale Assets EAN VAAL Ralio Payroll Payroll
0110112005 nla nia nia nia ni. ni.
01i0112007 $ 0 $102,237,022 $102,237,022 0.0% $97,600,000 105%
OliO 112009 $ 24,616,071 $129,660,950 $105,044,879 19.0% $98,940,490 106%
City oj Palo Alto GASB 45 Actuarial Valuation as oj January J, 2009 11
This work product was prepared solely for City QfPalo Alto for the purposes described herein and may not be appropriate to use
for other purposes. Milliman does not intend 10 benefit and assumes no duty or liability to other parties who receive this work.
Milliman
SECTION II. EXHIBITS
Exhibit 8. Valuation Summary by Bargaining Group
Valuation results shown below are based on a 7,75% discount rate. At the request of the City, we did not
provide a breakdown of the ARC by bargaining group since a breakdown of assets by bargaining group
was not available,
FCA IAFF Mgml/ColI( PAPOA SEIU Tot(tl
COllnts
Actives 3 102 207 79 564 955
Retirees and Dependents --1Q±. ~ ~ .....ill..
Total 3 206 402 159 895 1,665
Presellt VlIllle of Benefits
Actives $ 339,438 $ 12,118,133 $ 17,660,537 $ 7,173,119 $ 41,539,678 $ 78,830,905
Retirees 11,460,562 21,756,345 10,802,428 34,364,309 78,383,684
Total $ 339,438 $ 23,578,695 $ 39,416,882 $ 17,975,587 $ 75,903,987 $157,214,589
A cllmrllli AccfIled L/llbtllly
Actives $ 268,508 $ 8,105,421 $ 12,423,191 $ 4,120,760 $ 26,359,386 $ 51,277,266
Retirees 11,460,522 21,756,345 10,802,468 34,364,309 78,383,684
Total $ 268,508 $ 19,565,983 $ 34,179,536 $ 14,923,228 $ 60,723,695 $129,660,950
City 0/ Pillo Allo GASB 45 ACluI"lal Valuotlon lIS 0/ Jallua,., I, 2009 12
This work producL was prepared solely for City ofPillo Alto for the purposes described herein and may not be appmprlate to use
for other purposes. Milliman does not Intend to benefit and assumes no duty or liability to other parties WllO receive this work.
Milliman
SECTION II. EXHIBITS
Exhibit 9. Valuation Breakdown by Fund
Valuation results shown below are based on a 7,75% discount rate. The counts, Actuarial Liability, and
ARCs include actives and retirees. In determining the ARC for each fund, we used the breakdown of
assets by Fund provided to us by the City.
Fund Description CERBTFund# Count Actuur;fI/ Liability ARC
GF 102 1,097.30 $ 91,218,476 $ 6,797,923
GFCIP 471 21.95 1,563,882 141,351
Elce-Supply 513 0.80 44,373 (14,752)
Gas-Supply 514 OA5 33,012 (4,990)
Water-Opor •• 522 58.77 4,672,615 385,754
Elce-Operating •• 523 164.30 13,084,610 957,849
Gas-Operating •• 524 59.24 4,555,823 348,567
Refuse-Oper 525 41.95 3,063,013 244,889
WWT-Oper. 526 71.92 5,112,442 377,095
WWC-Oper. .-527 30.93 2,012,681 168,995
Storm Drai n-Oper 528 7.65 493,835 36,173
External Svc. 529 0.00 0 0
Fiber Optics 533 1.39 84,585 10,251
Vehicle Main 681 20.00 1,224,905 94,688
Technology 682 34.35 2,226,335 214,454
Printing & Mailing 683 4.00 270,363 27,980
Unknown Fund (Rets) • 50.00 nla nla
Total 1,665.00 $129,660,950 $ 9,786,227
• Actuarial Liability and ARC for 50 retirees with no Fund code were allocated to each Fund in
proportion to the Actuarial LIability and ARC fund allocation for current employees, as requested by
the City .
•• Actuarial Liability for active and refired un Admin employees were allocaled 10 the FUND 522
(WATER), FUND 523 (ELEC), FUND 524 (GAS), and FUND 527 (WWC) In proportion to each of
those Fund's Actuar/al Liability.
City Of Palo Alto GASH 45 Actuarial Valullllon lIS of January I, 2009
This work product was prepared solely for City ofPalQ Alto for the purposes described herein and may nol be appropriate ro use
for other purposcs. Milliman does not inlend to benefit and as~uJTIes no duty or liability to other parties who receive this work.
Milliman
13
SECTION II. EXHIBITS
Exhibit 10. Valuation Breakdown by General Fu~d Departments
Valuation "esults shown below are based on a 7.75% discount rate. The counts, Actuarial Liability, and
ARCs include actives and reti,·ees. A breakdown of assets by General Fund Department was not
available; therefore, assets attributed to the General Fund were allocated to 'each Department based on the
pl"Oportion of each Department's AAL to the total AAL for the General Fund.
General Fund
Department Count Actuarial Llabill(v ARC
ASD 84.30 $ 5,932,007 $ 489,570
ATT 15.10 1,303,589 104,024
AUD 2.00 115,611 15,08 I
CLK 13.10 1,035,745 70,366
COU 10.00 885,029 44,592
CSD 153.60 10,182,568 820,473
FIR 245.00 24,576, 151 1,729,712
HRD 25.10 2,087,623 142,962
LIB 49.20 3,026,209 307,718
MGR 17.10 1,329,760 86,010
PLA 73.30 4,652,780 401,621
POL 275.00 24,242,749 1,761,351
PWD 134.50 11,848,655 824,443
ULT 0.00 0
Total 1,097.30 $ 91,218,476 $ 6,797,923
Actuarial Liability and ARC for 50 retirees with no Fund code were allocated to each Fund in proportion
to the Actuarial Liability and ARC fund allocation for current employees, as requested by the City,
Cit, of Palo Alto GASB 45 Actuarial Valuation as of Janullr, /, 1009
1 tus work product \\'IJS preIWred solely for City ufPulo Alto for the purposes described herein and msy not be appropriate to usc
for oUler JlUrpC>ses, Milliman does not intend to benefit and assumes 110 duty or liability to other parties who reecive this work.
Milliman
14
SECTION III. ApPENDICES
Appendix A. Snmmary of Benefits
The following description of retiree health benefits is intended to be only a brief summary. For details,
reference should be made to Summary Plan Descriptions, Plan Documents, labor agreements, and
employee booklets.
Eligibility
Employees hired before January 1,2004 and PAPOA members (Tie,' I employees) are eligible for retiree
health benefits if they retire from the City after age 50 with at least 5 years of service, and are eligible for
a CalPERS pension. Management, IAFF, and FCA employees (Tier 2 employees) hired on or after
January 1,2004, and SElU employees hired on 01' after January 1,2005 (Tier 2 employees), are eligible
for retiree health benefits if they retire from the City with at least 10 years ofCalPERS service, including
5 years of service with the City, and are eligible for a CalPERS pension.
Health Benefits
The City contracts with the CalPERS health plan to provide retiree health benefits to its retirees and
spouses. For Tier I reti"ees, the City pays for the entire cost of health benefits for retirees and a portion
of their dependents' premiums. The portion of dependent premiums paid by the City is 80% for 2009,
and will increase by 5% per year until the City pays the entire dependent premium in 2013 and beyond.
Tier 2 employees are entitled to a portion of the Tier I benefits depending on their years of service. After
10 years of service, Tiel' 2 employees are entitled to 50% of Tier 1 benefits, and this portion increases by
5% with eaeh additional year of service beyond 10 years up to a maximum of 100%. The portion of
dependent premiums paid by the City is 90%, subject to the above vesting schedule.
For FCA, IAFF, and management/confidential employees who retire on or after January I, 2006, and for
SElU employees who retire on or after January I, 2007, the maximum premium amount the City will pay
toward health insurance will be equal to the second highest CalPERS Bay Area Basic plan premium
(eurrently the Blue Shield HMO premium).
Surviving Spouse Benefits
Upon the death of a retiree, benefits continue to surviving spouses of retirees for their lifetimes. The City's
portion of premiums is the same as the portion paid on behalf of the retiree.
Dental and Vision
The City does not pay Dental or Vision Benefits for retirees.
City oj Palo Alto GASH 45 Actuarial Valuation as oj January I, 2009
This work product W(lS prep<lred solely for City of Palo Alto for the purposes described herein and may not be appropriate to use
for other purposes, Milliman does not intend to benefit lind assumes no duty Of liability to other parties who receive this work.
Milliman
15
SECTION III. ApPENDICES
Appendix A. Snmmary of Benefits (contlnned)
Health Insurance Premium Rates
The following table shows monlhly relil'ee health insurance premiums for Ihe 2009 and 2010 pl'emium
years for coverage under the CalPERS Health Plan for the Bay Area Region:
Moo/kly Premium Rales -2009
2-ParfJ!. Family
Under 65 Over 65 Under 65 Over 65 Under 65 Over 65
Plans
Blue Shield HMO $560.57 $341.44 $1,121.14 $682.88 $1,457.48 $1,024.32
Blue Shield NetValue 495.50 304.66 991.00 609.32 1,288.30 913.98
Kaiser Permanente 508.30 280.17 1,016.60 560.34 1,321.58 840.51
PERSCure 749.83 404.60 1,499.66 809.20 1,949.56 1,213.80
PERSChoiee 482.48 349.11 964.96 698.22 1,254.45 1,047.33
PERSSeiect 453.16 349.11 906.32 698.22 1,178.22 1,047.33
PORAC 484.00 330.00 906.00 657.00 1,151.00 1,052.00
Monthly Premium Rates -2010
Single 2-Par~ Family
Under 65 Ovor65 Under 65 OVer 65 Under 65 Over 65
Plans
Blue Shield HMO $577.33 $299.53 $1,154.66 $599.06 $1,501.06 $898.59
Blue Shield NetValue 500.35 299.53 1,000.70 599.06 1,300.91 898.59
Kaiser Pennanente 532.56 298.36 1,065.12 596.72 1,384.66 895.08
PERSCare 868.[7 410.60 1,736.34 821.20 2,257.24 [ ,231.80
PERS Choice 508.74 356.09 1,017.48 712.18 1,322.72 1,068.27
PERS Select 474.93 356.09 949.86 712.18 1,234.82 1,068.27
PORAC 484.00 363.00 906.00 723.00 1,151.00 1,157.00
City of Palo Alto GASB 45 Actuarial Valuation as Of January 1, 2009 16
This work product was prepared s()lely for City of Palo Alto for the purposes described herein and rnay not be appropriate to use
for ()Iher purposes. Milliman does nol inlend to benefit and assumes no duty or liability 10 other parties who receive this work.
MIlliman
SECTION III. ApPENDICES
Appendix B. Actuarial Cost Method and Assumptions
Actuarial Cost Method
The actuarial cost method used for determining the benefit obligations is the Entry Age Normal Cost
Method. Under the principles of this method, the actuarial present value of the projected benefits of each
individual included in the valuation is allocated as a level percentage of expected salary for each year of
employment between entry age (defined as age at hire) and assumed exit.
The portion of this actuarial present value allocated .to a valuation year is called the normal cost. The
pOition of this actuarial present value not provided for at a valuation date by the sum of (a) the actuarial
value of the assets, and (b) the actuarial present value of future normal costs is called the Unfunded
Actuarial Accl'Ued Liability (UAAL). In determining the Annual Required Contribution, the UAAL is
amortized as a level percentage of expected payroll over 30 years.
Economic Assumptions
Discount Rate Oiabilities): 7.75% effective annual rate
Salary Increases: 3.25% pel' year growth in overall payroll for purposes of amortizing unfunded liability.
For purposes of calculating entry age normal costs, merit salary increases are applied for individual members
according to assumptions rates used by CalPERS in its actuarial valuation of retirement benefits. For all
employees, assumed merit salary increases are based on an entry age of30.
Demographic Assumptions
Demographic assumptions regarding retirement, disability, and turnover are based on statistics taken from
pension valuations for California PERS under a 2.7% @ 55 formula for Miscellaneous employees, and a
3% @ 50 formula for Police and Fire employees. Below is a summary of the assumed rates for retirement,
disability, and turnover.
Disability:
Misc. 2.7% @ 55 3%@50
Age Males Females Police Fire
30 0.02% 0.04% 0.58% 0.22%
35 0.08% 0.10% 0.87% 0.32%
40 0.15% 0.16% 1.16% 0.42%
45 0.24% 0.23% 1.45% 0.53%
50 0.37% 0.35% 1.75% 0.67%
City oj'PaloAlto GASB 45Actuarlal Valuation as oj'January 1,2009
This work product was prepared solely rOT City orPalo Alto ror fhe purposes deseribed herein and may not be appropriate to use
rOT other purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work.
Milliman
17
SECTION III. ApPENDICES
Appendix B. Actuarial Cost Method and Assumptions (continued)
Demographic Assamptions (continued)
Retirement:
Mise. 2.7% @55 3%@50
Ac.e Males Females
50 5.00% 7.00% 12.08% 6.79%
51 2.00% 5.00% 10.71% 9.22%
52 3.00% 5.00% 17.05% 13.77%
53 3.00% 6.00% 19.16% 16.61%
54 4.00% 6.00% 19.74% 20.38%
55 9.00% 10.00% 24.97% 25.16%
56 7.00% 8.00% 19.10"1. 24.07%
57 8.00% 7.00% 22.32% 20.10%
58 8.00% 10.00% 21.98% 23.54%
59 10.00% 9.00% 22.79% 19.93%
60 17.00% 13.00"10 100.00% 100.00%
61 16.00% 11.00% 100.00% 100.00%
62 28.00"10 23.00"10 100.00% 100.00%
63 23.00% 20.00% 100.00% 100.00"10
64 16.00% 14.00% 100.00% 100.00"10
65 27.00% 27.00% 100.00"1. 1 00.00"10
70 100.00% 100.00"/. 100.00% 100.00"10
I Sample probabilities/or a Police or Fire emp/oyee with 25 years 0/ service.
Withdrawal: Sample probabilities ofmiscetlaneous employees terminating within one year for an employee
with five years a/service with selected ages and sample llrobabilities of Safety employees terminating within
one year for an employee with a given number of years ofservice are shown below:
Misc. 2.7% @ 55 3%@50
Age Males Females Service Police Fire
30 5.5% 7.5% I 8.2% 7.4%
35 3.9% 5.5% 3 3.3% 3.2%
40 2.9% 4.1% 5 3.0% 2.6%
45 2.2% 3.1% 10 2.1% 0.9%
50 0.6% 0.9% 15 1.3% 0.8%
55 0.4% 0.6% 20 1.0% 0.7%
60 0.0% 0.0% 25 0.8% 0.6%
City of Palo Alto GASB 4J Actoarilll VIII.alion liS of Jllnullry I, 2009
This work product was prepared solely for City QfPalo Alto for the purposes destribed herein and may not be appropriate 10 use
ror other purposcs. Milliman does 110t intend to benefit and assumes no duty or liability to oloor parties who receive Ibis work.
Milliman
18
SECTION III. ApPENDICES
Appendix B. Actuarial Cost Method and Assumptions (continued)
Demographic Assumptions (continued)
Mortality: Rates used by CalPERS in its actuarial valuati'on of retirement benefits.
Spouse Coverage: 60% of employees are assumed to elect spouse coverage upon retirement (among
them, 70% will elect 2-pal1y coverage and 30% will elect Family coverage before age 65, no dependent
children are assumed after age 65).
For Current retirees, actual data was used to value spouse and dependent coverage. We have assumed
that retirees who are married will have spouse coverage only after age 65.
Spouse Age: Female spouses are assumed to be three years younger than male spouses, on average.
Medical Inflation Assumption
Milliman reviews all valuation assumptions on a regular basis in order to provide our clients with current
and reliable information. As part of a recent review, we evaluated the Society of Aetuaries (SOA)
recently published report on long-term medical trend. That report includes detailed research performed
by a committee of economists and actuaries (including a Milliman representative) and proposes the use of
the "Getzen Model" named after the professor that developed the model. We believe that the research
and the model are fundamentally and technically sound and will advance the body of knowledge available
to aetuaries to more accurately project long-term medical trends. At this time, we believe this model is
the industry standard for projecting long term medical trends. Milliman has decided to use that model as
the foundation for the trend that it I'e commends to our clients for OPEB valuations.
The health cost inflation trend we derived based on the "Getzen Model" is shown in the following table:
Year
2009
2010-2014
2015 -2032
2033 -2047
2048 -2076
2077 and beyond
% Inflation
Actual Increase
6.50%
6.00%
5.50%
5.00%
4.50%
The CalPERS OPEB assumption model currently states that the select period of the medical cost inflation
trend cannot be more than \0 years. We therefore derived a constant medical cost inflation trend of 5.85%
for the 10" year and beyond that produces approximately the same valuation results as the above trend
model. This trend assumption used in our valuation is shown on the following page.
City of Palo Alto GASB 45 Actuarial Valuatioll (IS of January 1, 2009
This work product was prepared solely rOT City orPalo Alto rOT the purposes described herein and may not be appropriate to usc
rOT other pmposes. Millimun does not intend to benefit and assumes no duty or liubility to other parties who receive fhis work.
Milliman
19
SECTION III. ApPENDICES
Appendix B. Actuarial Cost Metbod and Assumptions (continued)
Medica/Inflation As.vumplion (continued)
The following table shows the medical cost inflation trend used in our valuation.
Year
2009
2010-2014
2015 2017
2018 and beyond
City oJ Palo Alto GASH 45 Actuarial Valuation as oJ January I. 2009
% Inflation
Actual Increase
6.50%
6.00%
5.85%
This work prodoot was prepared soleI)' for City ofFal;) Alto f(lr the purposes described herein and may not be appropriate to use
for other purposes. Milliman does nOI intend to benefit and assumes no duty or liability to ulner parties who rceeive this work.
Milliman
20
SECTION III. ApPENDICES
Appendix C. Summary of Participant Dnta
The following census of participants as of January 1 ",2009 was used in the actuarial valuation and provided
by the City of Palo Alto.
Covered Active Employees
A[{.e FCA M /imflCon[ PAPOA SEW Total
Under 25 0 2 0 1 II 14
25 -29 0 6 3 17 45 71
30-34 0 6 7 16 60 89
35 39 0 17 19 13 52 101
40-44 0 26 26 13 71 136
45 -49 3 23 41 12 112 191
50-54 0 17 54 6 87 164
55-59 0 5 36 1 71 113
60-64 0 0 18 0 42 60
65 & Over .....Q _3 ~ ..J.2
Total 3 102 207 79 564 955
Average Attained Age at Valuation Date: 45.3
Average Years of Service at Valuation Date: 11.2
Current Kef trees
A[{.e IAFF MgmtiCon[ PAPOA SEW Tolal
Under 55 13 14 17 23 67
55-59 7 31 16 39 93
60 -·64 14 '38 14 64 130
65 -69 26 37 II 70 144
70 74 20 34 7 49 110
75 79 14 17 8 36 75
80-84 4 15 5 26 50
85 & Over -2. ---1 24 ..3:l
Total 104 195 80 331 710
Average Attained Age at Valuation Date: 67.2
City Of Palo Alto GASH 45 ActuarIal Valuatlo1l as of Jal/uary I, 2009
'(his y,.t'lrk proouet was prepared solely for City of Palo Alto for the purposes described herein !'Iltd may not be appropriate to. tlSC
for other purposes. MiIIlman does not intend to. benefit and assumes no duty o.r liability to olhcr parties Who. receive this work,
Milliman
21
EXHIBIT A
Actuarial Liability and Annual Required Contribution Variance Analysis by Fund and
General Fund Departments
Actuarial Valuation Aetuarlal Valuation
Jan. 1, 2007 (~g 14) . Jan. 1, 2009 (~a 13) Change
Actuarial Actuarial Actuarial % %
Fund Llablltlr ARC Llablltlr ARC Llablltll Change ARC Chanaa
GF 73,008.348 5,598,512 91,218,476 6,797,923 17,610,128 23.92% 1,199,411 21.42%
GFCIP 1,110,244 97,878 1,563,882 141,351 453,038 40.86% 43,673 44.110/"
E!ectric 11,341,482 758,679 13,128,983 943,007 1,787.501 15.76!)/~ 184,416 24.31%
Ga. 2,938,389 187,420 4,588,835 343,577 . 1,652,446 56.27% 156,157 83.32%
Water 2,838,751 236,847 4,672,615 385,754 1,833,004 64.60% 146,907 61.51%
Refuse 1,907,563 148.571 3,063,013 244,889 1,155,450 60.57% 96,318 (34.8:,3010
WNT 3,782,400 261,384 5,112,442 377,095 1,330,042 35.16% 115.711 44.27%
WlVC 1,290,119 99,772 2.012,681 168,995 722,562 56.01% 69,223 69.3tlO/l)
Storm Drain . 502,517 35,038 493,835 30,173 ·8,682 ·1.73% 1,137 3.25%
Fiber optlcs ...... 84,585 10,251 84,585 10,251
Vehicle main 1,028,273 73,900 1,224,905 94,688 100,632 19,12% 20,788 26.13%
Technology 1,587,856 144,325 2,226,335 214,454 638,479 4Q.21% 70,129 46.59%
Printing and Mailing 142.203 13.669 270,368 27,980 126,160 90.120/1) 14,291 104.40%
External Service u" 160,877 28,350 .160,677 .28,350
$102,237,022 $7,600,163 $129.660,950 $9,766,227 $27,42'3,928 $2.100,064
Ulnc!uded in Electric Fund in FY 2007 . ..-"
"uFund WM cloeed in FY 2009
Actuarial ValuatIon Act\1arial Valuation
Jan. 11 2007 ~~g 15~ Jan. I, 2009 (~g 14) Chaneo
Actuarial Aetu!'IiTlal Actuarial % %
General Fund Ooet. Llablltl~ ARC Llablltll ARC Llablltl~ Chansa ARC Chango
ASD 5,707,361 469,503 5,932,007 489,570 224,646 3.94% 20,067 4.27%
ATT 960,869 80,918 1,303,589 104.024 342,720 35.67% 23,108 28.55%
AUD 252,422 32,164 115,611 15Ml ·136,811 ~54,20% ·17,083 ·53.11%
ClK 824,736 79,466 1.035,745 70,366 211,009 25.59% ·9.102 ·11.45%
COU 993,450 92,931 '. 005,029 44,592 ·108,421 -10.91% ·48,339 ·52.02%
CSD 8,692,640 692,954 10,132,586 62ll,473 1,589,926 Ht5Qo/e 127,519 18.40%
FIR 19,350,296 1,346.396 24,576,151 1,729,712 5.217,855 28.95% 383,316 23.47%
HRD 1,529,498 122.500 2,087,623 142,962 556,127 36.490/{I 20,372 16,62%
LIB 2,172,224 257.458 3,026,200 307.718 853,965 39.31% 50,260 19.52%
MGR 1,256,030 93,122 1,329,780 66,010 73.730 5.87% ·7,112 ~7,a4%
PlN 3,946,689 326,581 4,652,780 401,621 706,111 17.89% 75.040 22.98%
POL 18,559,469 1.346.565 24,242,749 1,761.351 5,663,280 30.62% 414.786 30.80%
PWO 9,454,690 651,862 11,848,655 624.443 2,393,965 25.32% 166,581 25,32(1/(1
$73,608,352 $5,598,512 $91,218,476 $8,797,923 $17,610,124 $1,199,411
EXHIBIT B
Actuarial Liability Variance Analysis by Bargaining Group
Actuarial Valuation Jan. 1. 2007 fDg 131
Actives
Retiress
FCA IAFF MgmtiProf PAPOA SEIU
279,694 6,516,045 13,934,504 3,432,414 23,244,839 o 8,746,250 13,678,104 8,179,029 24,226,143
$279,694 $15,262,295 $27,612,608 $11,611,443 $47,470,982
Actuarial Valuation Jan. 1. 2009 fDg 12)
Actives
Retiress
Change
Actives
Retiress
% Change
%ofTolal
FCA IAFF MgmtiProf PAPOA SEIU
268,508 8,105,421 12,423,191 4,120,760· 26,359,386
o 11,460,562 21,756,345 10,802,468 34,364,309
$268,508 $19,565,983 $34,179,536 $14,923,228 $60,723,695
FCA IAFF MBmtlProf PAPOA SEIU
-11,186 1,589,376 -1,511,313 688,346 3,114,547
0 2,714,312 8,078,241 2,623,439 10,138,166
-$11,186 $4,303,688 $6,566,928 $3,311,785 $13,252,713
-4.00% 28.20% 23.78% 28.52% 27.92%
-0.04% 15.611% 23.95% 12,08% 48.33%
TOTAL
47,407,496
54,829,526
$102,237,022
TOTAL
51,277,266
78,383,684
$129,660,950
TOTAL
3,869,770
23,554,158
$27,423,928
26.82%
100.00%
ATTACHMENT B
City of Palo Alto
GASB 45 Actuarial Valuation of
Post Employment Benefits Other tban Pensions
As of January 1,2007
Prepared by:
Jonn R. Botsford, FSA, MAAA
January 16,2008
Milliman
January 16, 2008
City of Palo Alto
250 Hamilton Avenue
Palo Alto, California 94301
City of Palo Alto-
GASB 45 Actuarial Valuatiou of Post Employment Benefits as of January 1,2007
650 California Sireet, Floor 17
San FranciS:CO, CA 94108·2102
USA
Tel +1415400 1333
Fax +1 4154031334
mllilmaftcom
At the request of the City of Palo Alto, we have completed an actuarial valuation of post employment
. benefits as ofJamiary 1,2007,
The purpose of this report is to detennine the Annual Required Contribution and required financial
disclosures under the Governmental Accounting Standards Board Statement No. 45 -Accounting and
Financial Reporting by Emplayers for Postemployment Benefits Other Than Pensions (GASB 45), Our
determinations reflect the procedures and methods prescribed in GASB 45. Our calculations assume
that the City will adopt the GASB 45 accounting standard effective with the 2007-2008 fiscal year. The
results shown from the prior valuation are for comparison purposes only,
In preparing our report, we relied on financial infornlation and employee data furnished to us by the City of
Palo Alto. While Milliman has not audited the financial and census data, they have been reviewed for
reasonableness and are, in our opinion, sufficient and reliable for the purposes of our calculations, If any
of this information as summarized in this report is inaccurate or incomplete, the results shown could be
materially affected and this report may need to be revised.
The assumptions and cost method were selected by the City to satisfy CalPERS' required assumptions and
methods for funding agency OPEB liabilities through CalPERS newly established OPEB trust. In our
opinion, all assumptions and methods used in this valuation are reasonable for this purpose, The values
provided in this report are estimates only, They represent results if actual experience exactly matches the
assumptions used. Actual experience will likely differ and continued monitoring of experience should be
performed and adjustments made to the assumptions as necessary. The actuarial computations under
OASB 45 are for purposes of fulfilling employer accounting requirements. The calculations reported
herein have been made on a basis consistent with our understanding of OASB 45, Determinations for
purposes other than meeting employer financial accounting requirements may be significantly different
from the results reported herein, Reliance on information contained in this report by anyone for anything
other than the intended purpose puts the relying entity at risk of being misled,
This report has been prepared for use by City of Palo Alto for the purposes described herein,
Accordingly, this report may not be distributed to any third party outside the City without Milliman's
written consent unless public disclosure is required by law, Milliman hereby consents to the distribution
Offices in PrinCipal Cities Worldwide
City of Palo Alto -
January 16,2008
Page 2
of this report to the City's auditor for the purpose of preparing the audit oftbe City's fmandal statements.
If distribution of the report is made outside the City, the report must be provided in its entirety. This
report is a complex, technical analysis that assumes a high level of knowledge concerning the City of Palo
Alto's operations, and uses the City of Palo Alto's data, which Milliman has not audited. Any third party
recipient of Milliman's work product who desires professional guidance should not rely upon Milliman's
work product, but should engage qualified professionals for advice appropriate to its own specific needs.
On the basis of the foregoing, we hereby certify that, to the best of our knowledge and belief, the report is
complete and accurate and has been prepared in accordance with generally recognized and accepted actuarial
principles and pr~ctices which are consistent with the applicable Actuarial Standards of Practice of the
American Academy of Actuaries. The undersigned is a member of the American Academy of Actuaries
and meets the Qualification Standards of the American Academy of Actuaries to render the actuarial
opinion contained herein.
JRB:tah
":\cplI\va!UOO7\w.'lcpn07rerv.dOG
sincU7 R. ~ 2: R. Botsford, FSA, MAAA
Principal and Consulting Actoary
Milliman
T ABLE OF CONTENTS
Section Page
I Management Summary
Introduction ............................................................................................................................... I
Background ................................................................................................................................. 1
Assumptions .............................................................................................................................. 2
Selection i Approval of Actuarial Assumptions ....................................................................... 2
Results of Study .......................................................................... , ................................. , ............ 2
Impact of Changes from Last Valuation ........ , .................................... , .................................... , 3
Variability of Results .... , ............................ , ............ , .................................................................. 4
II Exhibits
Exhibit 1. Projected Benefit Payments ............................................................................. 5
Exhibit 2. Projected Number of Retirees .......................................................................... 6
Exhibit 3. Liabilities and Nonnal Cost.. ........................................................... : ............... 7
Exhibit 4. Unfunded Actuarial Accrued Liability ............................................................ 8
Exhibit 5. Required Financial Statement Disclosures ...................................................... 9
Exhibit 6. ReqUired Supplementary Information ........................................................... 10
Exhibit 7. Valuation Results -Alternative Diseount Rates ............................................ 11
Exhibit 8. Valuation Summary by Bargaining Group .................................................... 12
Exhibit 9. Valuation Breakdown by Fund ..... : ................................................................ 13
.Exhibit 10. Valuation Breakdown by General Fund Departments ................................... 14
III Appendices
" Appendix A. Summary of Benefits ..................................................................................... 15
Appendix B. Actuarial Cost Method and Assumptions ..................................................... , 17
Appendix C. Summary of Participant Data ........................................................................ 20
CUy of Palo Allo GASB 45 Actuarial Valuation as of January 1, 2007
This work product was prepared solely for City of Palo Alto for the purposes deseribed herein and may not be appropriate!O us:e
for other purposes Milliman does not intend to benefit and assumes no duty or liability to .other panies who receiyc this WOrk
Milliman
SECTION I. MANAGEMENT SUMMARY
Introduction
Milliman, Inc. ("Milliman") has been retaincd by the City of Palo Alto ("City") to provide a GASB 45
actoarial valuation of its post employment benefit (OPEB) plans. In our valuation we:
• Project expected payouts and number of retirees for future years
• Calculate the present value of total benefits
• Calculate the aetuarialliability (present value of benefits attributable to past service)
• Determine the Annual Required Contribution (ARC) and annual OPEB expense under GASB
Statement No, 45
• Prepare the financial statement disclosures relating to the funded status of the plan
• Provide a breakdown of the City's OPEB costs by department and bargaining group
Background
Employees who retire directly from the City are eligible for retirce health benefits ifthey retire on or after
age 50 with 5 years of service and are receiving a monthly pension from CaIPERS.
For employees hired before January 1,2004, and all PAPOA employees, the City pays for the entire cost
of retiree health benefits for retirees for their lifetimes. The City also pays a portion of medical costs for
spouses of retirees equal to 70% of the premiums for 2007 and increasing 5% per year until the City's
share reaches 100% of spouse premiums for 20 13 and beyond.
For management employees, IAFF and FCA members hired on or after January I, 2004, and SEIU
employees hired on or after January 1, 2005, the City pays for the 50% of the above described benefits
after 10 years of service, and the city's portion increases by 5% for each additional year of service up to
20 years. For FCA, IAFF, and management/confidential employees who retire on or after January I,
2006, and for SEIU employees who retire on or after January I, 2007, the maximum premium amount the
City will pay toward health insurance will be equal to the second highest CalPERS Bay Area Basic plan
premium (currently the Blue Shield HMO premium).
The City contracts with CalPERS to provide medical benefits for its retirees,
Appendix A provides a more detailed summary of benefits,
Assumptions
With any valuation of future benefits, assumptions of anticipated future events are required, If actual
events differ from the assumptions made, the actual cost of the plan will vary as well. The following
assumptions should be reviewed for appropriateness.
Discount Rate. GASB 45 requires that the interest rate used to discount future benefit payments back to
the present be based on the expected rate of return on any investments set aside to pay for these benefits.
The City has indicated that it intends fund its GASB OPEB liabilities by contributing to a trust
City Of Palo Alto GASH 45 Actuarial Valuallon as of January ], 2007
This work product was prepared solely for City of Palo AII;Q for Ine purposes described herein and may not be appropriate 10 use
for other purpose. .. Milliman does not intend to benefit and fl3sumes no duty or liability to othet parties who reecive this work
Milliman
SECTION I. MANAGEMENT SUMMARY
established by ColPERS for this purpose. We have, therefore, used a discount rate of 7.75% for this
valuation based on CaIPERS' expected return on assets held in their OPEB trust.
Health Cost Trend .. We have reflected the actual medical premium increases from 2007 to 2008. After
2008, we have assumed premium increases of8.0% from 2008 to 2009, graded down 1% per year to 5.0%
per year.
Demoflrovhic Assumptions. We are using the same rates used by the California Public Employees
Retirement System (CaIPERS) in their actuarial valuations of retirement benefits under a 2.7% at age 55
benefit formula for miscellaneous employees, and a 3% at age 50 formula for Police and Fire employees.
A complete summary of the actuarial assumptions is presented in Appendix B.
Selection/Approval of Actuarial AssumptiollS
An actuarial valuation of post-employment benefits includes estimates of uncertain future events. The
economie and demographie actuarial assumptions to anticipate future plan experience were selected to
comply with CalPERS required assumptions for participation in their OPES trust. The demographic
assumptions were developed by CalPERS based on the actual experience of the pool of public agencies,
including the City of Palo Alto, that participate in CalPERS for pension benefits. Although the City's
actual experience may differ for the overall experience of the pool, we believe it is reasonable for
purposes ofthis valuation to assume that the City of Palo Alto's future experience will be similar to the
experience of the pool of other California public agency employers covered under the same pension
formulas as the City, Ultimately, the City and its auditor must select/approve the set of actuarial
assumptions used in reporting liabilities on its financial statements.
Results of Study
The valuation results are summarized in the following exhibit and use the following terms:
The Present Value of Benefits is the present yalue of projected benefits discounted at the valuation
interest rate (7.75%).
The Actuarial Accrued Liability (AAL) is the present value of benefits that are attributed to past service
only. The portion attributed 10 future employee service is excluded. For retirees, this is equal to the
present value of benefits. For active employees, the actuarial present value of the projected benefits of
each individual is allocated as a level percentage of expected salary for each year of employment between
entry age (defined as age at hire) and assumed exit (until maximum retirement age). The portion
attributed to service between entry age and the valuation date is the actuarial accrued liability.
The Normal Cost is that portion of the City's provided benefit attributable to employee serviCe in the
current year.
The An~'lUal Required Contribution (ARC) is equal to the Normal Cost plus an amount to amortize the
unfunded AAL over a period of 10 to 30 years. This is the amount the City would be required to report as
an expense each year under GASB 45 assuming the amount is fully funded. Note, the ARC represents an
City vj'Palo AlfO GASH 45 ACluatial Valuation as oj' January 1. 2007
This \'I.'Ork product was prepared solely for City orPah) Alto for the purposes described herem lind may not be appropriate to use
for other purposes Milliman does not intend to benefit and assumes no duty Of liflbillty to other parties who receive this work,
Milliman
2
SECTION I. MANAGEMENT SUMMARY
accounting expense, but the City is not required to contribute the ARC to a separate trust. If the City does
not set aside funds equal to the ARC each year, then the Annual OPEB Expense (less actual benefit
payments) will accumulate as a liability (Net OPEB Obligation) on the City's balance sheet.
January 1, 2007 July 1, 2005
Active Employees 1,018 1,038
Retirees ---.ill _.J92
Total Participants 1,630 1,630
Covered Retired Spouses 257 217
Present Value of Benefits $ 126,935,275 $ 129,305,421
Actuarial Accrued Liability $ 102,237,022 $ 91,486,759
Assets I 27,093.351 $~OO,OOO
Unfunded Actuarial Accrued Liability $ 75,]43,671 $ 73,286,759
Normal Cost ' $ 3,173,722 $ 4,011,490
Annual Required Contribution (ARC) , $ 7,686,163 $ 8,937,739
Budgeted City Payroll $ 97,600,000 $ 81,600,000
ARCilS a Percent of Budgeted Payroll 7.9% $ 11.0%
Expected first year benefit payments $ 4,175,915 $ 3,286,972
I These assets are currently held in Ihe City's Internal Service Fund. At the City's request, we have
included these assets in our actuarial valuation since the city intends 1o transfer these assets 10 a
qualifYing separate Irust prior to Ihe end oj the fiscal year ending June 30, 201J8,
1 The Normal Cost and ARC were determined as oj the end oj the fiscal year Jor the last valuation. For
this valuation, the Normal Cost and ARC were determined as oj the beginning oj the fiscal year to
accountJor the City's intention to Jund its ARC at the beginning oj eachfiscal year.
Impact of Changes from Last Valuation
The Actuarial Accrued Liability increased by approximately $11 million since the last valuation. The
following is a summary of changes to the valuation assumptions that contributed to the changes in AAL:
• The discount rate was increased from 7% [0 7.75% to reflect the City's intention to fund its
liabilities through the CalPERS trust. This resulted in a decrease in actuarial accrued liability of
approximately $10 million.
• The actuarial cost method changed from Projected Unit Credit to Entry Age Normal to conform
with CaIPERS' OPEB assumption model for funding GASB 45 liabilities in its trust. This
City of Palo Allo GASB 45 Actnariat flalnation as of January I, 1007
This W{)(k product was preparM s{)lely for City of Palo AIt{) fm the purposes described herein and may not be appropriate to use
for other purposes. Milliman does IlQl intend to benefit and assumes 00 duty or liability tQ other parties who receive this work
Milliman
3
SECTION I. MANAGEMENT SUMMARY
resulted in an increase in AAL of approximately :b4 million. Note that a change in cost method
does not affect the present value of future benefits. It only impacts the accrual pattern of costs.
This change resulted in a higher AAL, but current and future "normal c!'sts" will be slightly
lower under the new cost method.
• The plan's demographic assumptions were also updated to reflect the latest CalPERS
demographic assumptions used for California public agency pension valuations. This resulted in
an increase in AAL of approximately $3 million.
• The cost of benefit accruals since the last valuation (Le. the cost attributed employee service since
the last valuation), plus interest on the prior year's AAL due to the passage of time, less benefit
payments since the last valuation date also contributed to the change in Actuarial Accrued
Liability. The combined impact of these factors was an increase in AAL of approximately $10
million.
• Other factors such as changes in the city's demographic composition and changes in health
premiums also contributed to the change in Actuarial Accrued Liability. The combined impact of
all other factors was. an increase in liability of approximately $3 million.
Variability of Results
The results contained in this report represent our best estimates. However, variation from these or any
other estimates of future retiree medical costs is not only possible but probable. Actual future costs may
vary significantly from estimates in this report.
City of Palo A 110 GAsn 45 ACluarial Valuation as oj January 1, 2007
This wurk product was prepared SOlely fOT City of Palo Alto fur the purposes described herein and may not be appropriate ttl use
for (lther purposes, Milliman does not inle·lld to benefit and assumes no duty or liability 10 other parties who receive ih~s work.
Milliman
4
SECTION II. EXHIBITS
Exhibit 1. Projected Benefit Payments
The lable below illustrates the projected pay-as-you-go City costs of providing retiree health benefits. The
projections only consider the closed group of existing employees and retirees and is based on the current
labor agreements.
Current Future
Year Retirees Retirees Total
2007 5; 3,979,387 5; 196,528 $'4,175,915
2008 4,054,178 478,129 4,532,307
2009 4,264,172 844,434 5,108,606
2010 4,440,151 1,277,685 5,717,836
2011 4,601,923 1,746,207 6,348,130
2012 4,676,922 2,259,792 6,936,714
2013 4,760,639 2,800,638 7,561,277
2014 4,762,598 3,326,619 8,089,217
2015 4,736,343 3,853,155 8,589,498
2016 4,754,499 4,393,906 9,148,405
2017 4,755,070 4,976,335 9,731,405
2018 4,744,882 5,540,062 10,284,944
2019 4,729,190 6,123,412 10,852,602
2020 4,683,342 6,738,145 11,421,487
2021 4,612,778 7,305,951 11,918,729
2022 4,572,562 7,917,554 12,490,116
2023 4,544,547 8,511 ,041 13,055,588
2024 4,479,050 9,086,551 13,565,601
2025 4,408,123 9,656,825 14,064,948
2026 4,319,047 10,203,794 14,522,841
2027 4,203,837 10,653,211 14,857,048
2028 4,092,084 11,134,144 15,226,228
2029 3,982,172 11,583,894 15,566,066
2030 3,872,845 11,956,337 15,829,182
2031 3,747,734 12,323,553 16,071,287
2032 3,611,257 12,730,802 16,342,059
2033 3,448,905 13,084,733 16,533,638
2034 3,299,285 13,338,127 16,637,412
2035 3,137,019 13,610,513 16,747,532
2036 2,957,793 13,859,643 16,817,436
City of Palo Alto GASB 45 Acluar;al Valulltion as of January 1, 2007
This WQrk product was prepared solely forC!!:), of Palo Alto fur the purposes described herein and mlly no! be appropIfate tQ use
for olher purposes. Millimah does not intend to benefit and assumes no dUty or liability to other parties who receive this work.
Milllrnan
5
SECTION II. EXIDBITS
Exhibit 2. Projected Number of Retirees
The table below illustrates the projected number of retirees and spouses. The projections only consider
the closed group of existing employees and retirees.
Current Future
Year Retirees Retirees Total
2007 605 25 630
2008 589 59 648
2009 572 95 667
2010 556 132 688
2011 538 170 708
2012 521 208 729
2013 503 245 748
2014 485 282 767
2015 466 316 782
2016 447 350 797
2017 428 380 808
2018 409 411 820
2019 389 438 827
2020 370 463 833
2021 350 485 835
2022 331 505 836
2023 312 522 834
2024 292 536 828
2025 274 547 821
2026 255 557 812
2027 237 562 799
2028 219 565 784
2029 202 565 767
2030 185 561 746
2031 169 556 725
2032 154 549 703
20;l3 139 540 679
2034 125 527 652
2035 112 513 625
2036 100 497 597
City 0/ Palo Allo GASB 45 Actuarial Valuation as 0/ January 1, 2007
This work product was prepared solely fo! City of Palo Alto for the purposes desCttbed herein and may hot be Ilppropriate [(I use
for tither pUrp05es. Millitnatl does not intend to 'benefit and assumes no duty or liability to other parties who receive this work.
Milliman
6
SECTION II. EXHIBITS
J;:xhibit 3. Liabilities and Normal Cost
The Present Value of Benefits is the present value of projected benefits (premium costs less retiree
contributions) discounted at the valuation interest rate (7.75%).
The Actuarial Accrued Liability (AAL) is the present value of benefits that are attributed to past service
only. The portion attributed to future employee service is excluded. For retirees, this is equal to the
present value of benefits. For active employees. the actuarial present value of the projected benefits of
each individual is allocated as a level percentage of expected salary for each year of employment between
entry age (defined as age at hire) and assumed exit (until maximum retirement age). 'The portion
attributed to service between entry age and the valuation date is the actuarial accrued liability.
The Normal Cost is that portion of the City's provided benefit atlributeble to employee service in the
current y eur.
January 1, 2007 _~lyl,2005
Present Value of Benefits
Actives $ 72,105,749 $ 77,597,402
Retirees 54,829,526 51,708,019
Total $ 126,935,275 $ 129,305,421
Actuarial Accrued Liability
Actives $ 47,407,496 $ 39,778,740
Retirees 54,829,526 51,708,019
Total $ 102,237,022 $ 91,486,759
Normal Cost $ 3,057,456 $ 3,749,056
City of Palo Alto GASB 4$ AClnoriol Volaolion os of Jonuory 1, 2007
This work product W8.s prepated solely fOf City QfPalo Alia ror Ihe purposes described herein and may not be appropriate to usc
fOf other purposes, Milliman does not intend to benefit and assumes no duty or liability to other parties who receIVe this work
Milliman
7
SECTION IL EXHIBITS
The following table shows a breakdown of liabilities and costs attributes to benefits paid prior to age 65
and after age 65.
JanuarvI, 2007
Benefits <Age 65 I}ell~(its > Age 65 Total
Present Value of Benefits
Actives $ 29,202,226 $ 42,903,523 $ 72,105,749
Retirees 16,156,219 38,673,307 ...... 54,829.526
Total $ 45,358,445 $ 81,576.830 $ 126,935,275
Actuarial A ccrued Liability
Actives $ 18,161,889 $ 29,245,607 $ 47,407,496
Retirees 16,156,219 38,673,307 54,829,526
Total $ 34,318,108 $ 67,918,914 $ 102,237,022
Norma/Cost $ 1,304,115 $ 1,753,341 $ 3,057,456
City of Pato Alto GASH 45 Actuarial ValuQtion as of January 1, 2007
This work product was prepared roleJy for City of Palo Alto for t~e purposes descri~ herein and mlly not be appropriate to use
for other purposcs, Milliman does not intend to benefit ilod assumes no duty or liilbility 10 olher panies who reccive this work.
Milliman
SECTION II. EXHIBITS
Exhibit 4. Unfunded Actuarial Accrued Liability
The Unfunded Actuarial Accrued Liability (UAAL) is the actuarial accrued liability offset by any assets
set aside to provide retiree health benefits. This is equal to the value cfthe retiree health benefits accrued
to date that has not been funded. The UAAL must be amortized over a period not exceeding 30 years and
included in the ARC amount (shown in Exhibit 5) each year. For illustrative PUlpOSes, we have
calculated the amortization of UAAL as a level percentage of payroll over 30 years. This means the
amortization amount would be expected to increase at the same rate as payroll increases each year. We
have assumed the City's payroll will increase 3.25% per year for this purpose.
Unfunded Actuarial Uahilit)' (UAAL)
Actuarial Accrued Liability
Assets Held in Trust
Unfunded Actuarial Accrued Liability
Funded percentage
Amortization of UAALfor ARC
UAAL
Amortization Period
Level % ofPayro]] Amorti?.ation Factor
Amortization Amount -January 1,2007
Interest to July 1,2007
Amortization Amount July 1,2007
City of Palo Alto GASB 45 Actuarial Yaluotion as of January J, 2007
January /, 2007
$ 102,237,022
27,093,351
$ 75,143,671
26.5%
$ 75,143,671
30 years
17.2858
$ 4,347,133
$ 165,308
$ 4,512,441
ThJs work product was prepared sOleJy for City afPalo Alto for the purposes described herejn and may not be appropriate to use
for other purposes Milliman does 1Iot intend to benefit tl1id assumes no duty or liability to other parties who receive Ihis work.
Milliman
9
SECTION II. EXHIBITS
Exhibit 5. Required Financial Statement Disclosures
The following table shows the calculation of the Annual Required Contribution and Net OPEB
Obligation.
For the Fiscal Year Ending
June !l0, 2008 JUlie 30, 2007
Determination 0/ Annual Required Contrlbul/on
Normal Cost at beginning of fiscal year $ 3,173,722 $ nla
Amortization ofUAAL 4,512,441
Annual Required Contribution (ARC) $ 7,686,163 $ nla
Determination 0/ Net OPEB Obligation
Annual Requited Contribution $ 7,686.163 $ nla
Interest on prior year Net OPEB Obligation 0 nla
Adjustment to ARC nla
Annual OPEB Cost $ 7.686.163 nla
City Contributions made • 7,686,163
Increase in Net OPES Obligation $ 0 nla
Net OPEB Obligation beginning of year $ 0 $ nla
Net OPEB Obligation 1 (Asset) ~ end of year $ 0 $ nla
'" GASB 45 defines contributions for lhis purpose to be actual benefit payments made directly by the City during Ihe year
and contributions made to a separatel irrevocable trust. This exhibit will need to be completed at the end of the
fiscal year once actual contributions are known.
The following table shows the annual OPEB cost and net OPEB obligation for the prior 3 years.
Percelltage 0/
Fiscal Annual OPEB Cost NetOPEB
YeatEnded OPEB Cost Contributed Obligation
06/3012006 nla nla nla
06130/2007 nla nla nla
06/30/2008 $7,686,163 $7,686.163 100%
Funded Status and Funding Progress. As of January 1,2007, the most recent actuarial valuation date,
. the plan WaS 26.5% funded.' The actuarial accrued liability for benefits was $102.2 million, and the
actuarial value of assets was $27.1 million, resulting in an unfunded actuarial accrued liability of
$75.1 million.
--_ .. -------------------------------------------------
City of Palo Alto GASB 45 ACinarial Valuation as of January i, 2007
This work product was prepared 801ely for City of Palo AlIQ fur the purposes described herein and may no! be appropriate to use
for other purposes. Milliman does nol intend to benefit and ;,ssumes no duty or liability to other parties who reeeive this work.
Milliman
10
SECTION II. EXHIBITS
Exhibit 6. Required Supplementary Information
The following table shows a schedule of Funding Progress required under GASB 45.
Actuarial Actuarial UAAL as a
Valuation Value 0/ AAL Funded Covered % o/Covered
Date Assets EAN UAAL Ratio Payroll Payroll
01/0112003 nla nla nla nla nla nla
01/0112005 nla nla nla nla nla nla
01/0112007 $27,093,351 $102,237,022 $75,143,671 26.5% $97,600,000 77%
City of Palo Alto GASB 45 Actuarial Valuation as of January I. 2007 11
This work product. was prepared solely for City of Palo Alto for the purposes described herein and may not be appropriate to use
for other purposes Milliman docs not intend to benefit and assumes no duty or liability to other parties who receive this work.
Milliman
SECTION II. EXHIBITS
Exhibit 7. Valuation Results -Alternative Discount Rates
The following exhibit shows the results of the valuation based on alternative discount rates of 7.75%
(funded basis) and 4.5% (unfunded basis). The discount rate is uscd to calculate the present value of
expected future benefit payments. The lower the discount rated used, the higher the present valued will
be. GASB 45 requires that the discount rate be reflective of the assets used to pay benefits. For unfunded
OPEB liabilities, the rate would be the expected return on the City's general funds. For funded OPEB
liabilities (ARC set aside in a separate trust each year), the discount rate would be the expected return on
assets invested in such a trust. A higher expected return and discount rate would result a much lower
OPEB liability and ARC for the City.
Present Value of Benefits
Actuarial Accrued Liability
Assets
Unfunded Actuarial Accrued Liability (UAAL)
Normal Cost (beginning fiscal year)
Amortization ofUAAL
Annual Required Contribution (ARC)
Annual benefit payments
City oj Palo Alto GASB 45 Actuarial Valuation as oj January 1, 2007
7.75% Discount
Rale
$126,935,275
$102,237,022
27,093,351
$ 75,143,671
$ 3,173,722
4,512.441
$ 7,686,163
$ 4,175,915
4.5% Discount
Rale
$225,257,556
$159,157,754
27,093,351
$132,104,403
$ 6,547,102
5,330,672
$ 11,878,074
$ 4,175,915
Thiswork product was prepared solely for City OfP810 Alto for th~ purposes described herein and m<ly not be appropriate to use
for other purposes. Milliman does not intend 10 benefit and assumes no duty or liability to other p<lrties who receive this work
Milliman
12
SECTION II. EXHIBITS
Exhibit 8. Valuation Summary by Bargaining Group
Valuation results shown below are based on a 7,75% discount rate, At the r4quest oftha City, we did not
provide a breakdown of the ARC by bargaining group since a breakdown of assets by bargaining group
was not available.
FCA IAFF MgmilConf PAPOA SEIU Total
Counts
Actives 4 105 270 75 564 1,018
Retirees and Dependents ..Q 2Q 154 -1l .2.ll.2 --<ill
Total 4 201 424 148 853 1,630
Present Value Of Benefits
Actives $349,253 $ 9,850,205 $20,340,146 $ 5,500,912 $36,065,233 $ 72,105,749
Retirees 8,746,2:JQ 13,678,104 8,179,029 24,22~,143 54,829,526
Total $349,253 $18,596,455 $34,018,250 $13,679,941 $60,291,376 $126,935,275
ACluarialAccrued Liability
Actives $279,694 $ 6,516,045 $13,934,504 $ 3,432,414 $23,244,839 $ 47,407,496
Retirees 8,746,250 13,678,104 8,179,022 24,22~,14J 54,829,526
Total $279,694 $15,262,295 $27,612,608 $J 1,611,443 $47,470,982 $102,237,022
City oj Palo Alto GASB 45 Actuarial Valuallon as oj January I, 2007 13
This Work product was prepared solely for City of Palo AUo fur the purposes described herein and may not be appropriate Co me
for other purposes" Milliman does nOI mien<.! to beneflt and assumes no duty Of liability to otlier parties who receive this w('lfk"
Mmiman
SECTION II. EXHIBITS
Exhibit 9. Valuation Breakdown by Fund
Valuation results shown below are based on a 7.75% discount rate. The counts, Actuarial Liability, and
ARCs include actives and retirees. In determining the ARC for each fund, we used the breakdown of
assets by Fund provided to us by the City.
Fund Coullt Actuarial Liability ARC
CIP 22.45 $ 1,110,244 $ 97,678
ELEC 126.84 11,341,482 758,679
External SVC 5.00 160,877 28,350
GAS 44.72. 2,936,389 187,420
General Fund 1,084.10 73,608,348 5,598,512
ISP -Printing 3.00 142,203 13,689
lSI" -Technology 29.00 1,587,856 144,325
ISP -Vehicle 17.00 1,028,273 73,900
Refuse 38.45 1,907,563 148,571-
STORM Dr. 8.20 502,517 35,036
UTL -Admin 63.00 0 0
WATER 45.02 2,838,751 238,847
WWC 23.42 1,290,119 99,772
WWT 74.80 3,782,400 261,384
Unknown Pund (Rets) • 45.00 nla
Total 1,630.00 $ 102,237,022 $ 7,686,163
• Actuarial Liability and ARC for 45 relirees wilh no Fund code were allocated 10 each Fund in
proportion to Ihe Actuarial Liabilily and ARC fond alldeation for current employees. as requested by
the City,
•• Actuarial Liability for active and retired UTL Admin employees were allocaled to the GAS, ELEC,
WATER, and WWC Funds in proporlion 10 each of those Fund's Actuarial Liability.
City of Palo Alio GASB 45 Actuarial Valuation as of January I, 2007
This. work product was prepared solely for City of Palo Alto for the purpl,)$es described herein and may not be appropriate 10 use
for ()Ilier purposes" Milliman does not intend 10 benefit and assumes 00 duty or liability to other parties who re~jve this work.
Milliman
14
SECTION II. EXHIBITS
Exhibit 10. Valuation Breakdown by General Fund Departments
Valuation results shown below are based on a 7,75% discount rate. The counts, Actuarial Liability, and
ARCs include actives and retirees, A breakdown of assets by General Fund Department was not
available; therefore, assets attributed to the General Fund were allocated to each Department based on the
proportion of each Department's AAL to the total AAL for the General Fund,
Gelleral FUlld
Department Count Actuarial Liability ARC
ASD 89 $ 5,289,514 $ 449,360
ATT IS 960,869 80,918
AUD 5 252,422 32,164
CLK 12 824,736 79,468
COU 17 993,450 92,931
CSD 154 8,592,640 692,954
FIR 241 J9,358,296 1,346,396
HRD 26 J,529,496 122,590
LIB 45 2,]72,224 257,458
MGR 17 1,256,030 93,122
PLA 68 3,946,669 326,581
POL 260 18,559,469 1,346,565
PWD 133 9,454,690 657,862
UTL 2 417 ,847 20,143
Total 1,084 $ 73,608,352 $ 5.598.512
Actuarial Liability and ARC for 45 retirees with no Fund code were allocated to each Fund in proportion
to the Actuarial Liability and ARC fund allocation for current employees, as requested by the City.
,
City of Palo Alto GASB 45 Actllarial Valualion as of January 1, 2007
This work product was prepared solely for City of Palo Alto fur the purposes described herein and may not be apprnpriale to use
for other purposes, Mill1man does not intend to benefit and assumes no duty or liability to Qlber parties who receive this wotk
Milliman
15
SECTION III. ApPENDICES
Appendix A. Summary of Benefits
The following description of retiree health benefits is intended to be only a brief summary. For details,
reference should be made to Summary Plan Descriptions, Plan Documents, labor agreements, and
employee booklets.
Eligibility
Employees hired betore January 1,2004 and PAPOA members (Tiel' 1 employees) are eligible for retiree
health benefits if they retire from the City after age 50 with at least 5 years of service, and are eligible for
a CalPERS pension. Management, IAFF, and ]lCA employees (Tier 2 employees) hired on or after
January 1,2004, and SEIU employees hired on or after January 1,2005 (Tier 2 employees), are eligible
for retiree health benefits if they retire from the City with at least 10 years of CalPERS service, including
5 years of service with the City, and are eligible for a CalPERS pension,
Health Benefits
The City contracts with the CalPERS health ,plan to provide retiree health benefits to its retirees and
spouses, For Tier I retirees, the City pays for the entire cost of health benefits for retirees and a portion
of their spouses' premiums for their lifetimes, The portion of spouse premiums paid by the City is 60%
for 2005, and will increase by 5% per year until the City pays the entire spouse's premium in 2013 and
beyond,
Tier 2 employees are entitled to a portion of the Tier 1 benefits depending on their years of service, After
!O years of service, Tier 2 employees are entitled to 50% of Tier 1 benefits, and this portion increases by
5% with each additional year of service beyond 10 years up 10 a maximum of 100%,
For FCA, IAFF, and management/confidential employees who retire on or after January I 2006, and for
SEITJ employees who retire on or after January I, 2007, th~ maximum premium amount the City will pay
toward health insurance will be equal to the second highest CalPERS Bay Area Basic plan premium
(currently the Blue Shield HMO premium).
Surviving Spouse Benejils
Upon the death ofa retiree, benefits continue to surviving spouses of retirees for their lifetimes, The City's
portion of premiums is the same as the portion paid on behalf of the retiree,
Dental and Visioll
The City does not pay Dental or Vision Benefits for retirees.
City af Pala Alta GAS» 45 Actuarial Valuation as of Janua,y }, 2007
This work product was prepared solely fOf City of Palo Alto for the purposes described herein and may not be appropriate to use
rQr olher purposes. Milliman does not intend to benefit and assumes no duty or liability to other parties who receive this work
Milliman
16
SECTION III. ApPENDICES
Appendix A. Summary of Benefits (continued)
Health Insurance Premium Rales
The following table shows monthly retiree health insurance premiums for the 2007 and 2008 premium
years for coverage under the CalPERS Health Plan:
Monthly Premium Rates -2007
Single 2·Party
Under 65 Over 65 Under 65 Over 65
Bay Area
Blue Shield HMO $ 484.21 $ 318.95 $ 968.42 $ 637.90
Kaiser Permanente 431.17 289.68 862.34 579.36
PERSCare 769.50 371.68 1,539.00 743.36
PERSCholce 455.18 341.75 910.36 683.50
PORAC 439.00 351.00 822.00, 701.00
Monthly Premium Rates -2008
Single 2.Party
Under 65 Over 65 Under 65 Over 65
Bay Area
Blue Shield HMO $ 532.93 $ 341.44 $ 1,065.86 $ 682.88
Kaiser Permanente 470.67 273.36 941.34 546.72
PERSCare 749.83 404.60 1,499.66 809.20
PERSChoice 482.48 349,11 964.96 698.22
PORAC 452.00 308.00 847.00 614,00
City of Polo jllto GASB 45 ACluarial Valuation as Of January I. 2007
ihis wor;': product was p.repared solely for City of Palo Alto for the purposes described herem and may not be appropriate to U;g;
for ()Iller purposes. Milliman does not intend to beneflt and assumes no duty or liability to ather parties who receive this work
Milliman
17
SECTION III. ApPENDICES
Appendix B. Aetua rial Cost Method and Assu rnptions
Actuarial Cost Method
The actuarial cost method used for determining the benefit obligations is the Entry Age Normal Cost
Method. Under the principles of this method, the actuarial present value ofthe projected benefits of each
individual included in the valuation is allocated as a level percentage of expected salary for each year of
employment between entry age (defined as age at hire) and assumed exit.
The portion of this actuarial present value allocated to a valuation year is called the normal cost. The
portion of this actuarial present value not provided for at a valuation date by the sum of (a) the actuarial
value of the assets, and (b) the actuarial present value of future normal costs is called the Unfunded
Actuarial Accrued Liability (UAAL). In determining the Annual Required Contribution, the UAAL is
amortized as a level percentage of expected payroll over 30 years.
Economic Assumptions
Di~Q()-''!!'LRale (liabilities): 7.75% effective annual rate
Salarvlncreases: 3.25% per year growth in overall payroll for purposes of amortizing unfunded liability.
For purposes of calculating entry age normal costs, merit salary increases are applied for individual members
according to assumptions rates used by CalPERS in its actuarial valuation of retirement benefits. For all
employees, assumed merit salary increases are based on an entry age of 30.
Health Cost Trend: Actual increase from 2007 to 2008, 8% increase in health premiums from 2008 to 2009,
and graded down I % per year to 5% per year.
City of Palo Atto GASB 45Acluarial Valuatwn as of January i, 2007
This work product was prepared solely fnr City ofPal(l Alto f\lf the purposes described herein and may not be appropriate to use
for .other purpo.ses Milliman does nOI intend t{l benefit alld assumes no dUly or liabIlity to other parties who receive this work.
Milliman
18
SECTION Ill. ApPENDICES
Appendix B. Actuarial Cost Method and Assumptions (continued)
Demographic Assumptions.
Demographic assumptions regarding retirement, disability, and turnover are based on statistics taken from
pension valuations for California PERS under a 2.7% @ 55 fonnula for Miscellaneous employees, and a
3% @ 50 formula for Police and Fire employees. Below is a summary oflhe assumed rates for retirement,
disability, and turnover.
Disability.'
Misc. 2.7% @55 3%@50
Age Males Females Police Fire
30 0.02% 0.Q4% 0.58% 0.22%
35 0.08% 0.10% 0.87% 0.32%
40 0.15% 0.16% 1.16% 0.42%
45 0.24% 0.23% 1.45% 0.53%
50 0.37% 0.35% 1.75% 0.67%
Retirement:
Misc. 2.7% @55 3%@50
__ A~ Males Females Police I Fire I
50 5.00% 7.00% 12.08% 6.79%
51 2.00% 5.00% 10.71% 9.22%
52 3.00% 5.00% 17.05% 13.77%
53 3.00% 6.00% 19.16% 16.61%
54 4.00% 6.00% 19.74% 20.38%
55 9.00% 10.00% 24.97% 25.16%
56 7.00% 8.00% 19.10% 24.07%
57 8.00% 7.00% 22.32% 20.10%
58 8.00% 10.00% 21.98% 23.54%
59 10.00% 9.00% 22.79% 19.93%
60 17.00% 13.00% 100.00% 100.00%
61 16.00% 11.00% 100,00% 100.00%
62 28.00% 23,00% 100.00% 100.00%
63 23.00% 20.00% 100.00% 100.00%
64 16.00% 14.00% 100.00% 100.00%
65 27.00% 27.00% 100.00% 100,00%
70 100.00% 100.00% 100.00% 100.00%
I Sample probabilities for a Police or Fire employee wifh 25 yea/'s of service.
Appendix B. Actuarial Cost Method and Assumptions (continued)
City of Palo Alto c,'ASB 45 Actuarial Valuation as of January 1, 2007
This work product was prepllted solely for City orPalo Alto for the purposes described herein Ilnd may not be appropriate to use
for other purposes. Mil1Jman does not intend to benefit and assumes 00 duty or liability to other parties who receive thIS work.
Milliman
19
SECTION III. ApPENDICES
Demographic Assumptions (continued)
Withdrawal: Sample probabilities of miscellaneous employees terminating within one year for an employee
with five years of service are shown below for selected ages:
Misc. 2.7% @ 55
Age Males Females
30 5.5% 7.5%
35 3.9% 5,5%
40 2.9% 4.1%
45 2.2% 3.1%
50 0.6% 0.9%
55 0.4% 0,6%
Sample probabilities of Safety employees tenninaling within one year for an employee with a given number
of years ofscrvice are shown below:
3%@50
Service Police Fire
I 8.2% 7.4%
3 3.3% ],2%
5 3,0% 2,6%
10 2.1% ,0.9%
15 1.3% 0.8%
20 1,0% 0.7%
25 0,8% 0.6%
Mortality: Rates used by CalPERS in its actuarial valuation of retirement benefits,
~se Coverage: 60% of employees are assumed to elect spouse coverage upon retirement (no
dependent children are assumed).
For Current retirees, actual data was used to value spouse coverage,
Spouse Age: Female spouses are assumed to be three years younger than male spouses, on average.
City of Palo Alto GASB 45 Actuarial Valuation as Of January J, 2007
This work product was prepared solely fOf City of Palo Alto for the pmposes described heretli atld may not be appropriate to use
for other purposes, Milliman does 1'101 intend to bene-fit and assumes no duty or liability to other parties who receive this work.
Milliman
20
SECTION III. ApPENDICES
Appendix C. Summary of Participant Data
The following census of participants as of January 2007 was used in the actuarial valuation and provided by
the City of Palo Alto.
Covered Active Employees
FCA IAFF jlfgmVCoIIL PAPOA SEW
Under 25 0 0 0 2 4 6
25 -29 0 4 3 15 46 68
30 -34 0 9 13 18 42 82
35 -39 0 22 20 7 63 112
40 -44 I 2~ 32 12 83 154
45 -49 2 29 57 14 98 200
50 54 0 II 67 5 98 181
55·-59 0 2 50 2 75 129
60 -64 I 2 20 0 45 68
65 & Over ......Q ......Q ......Q -1Q
Total 4 105 270 75 564 l,018
Average Attained Age at Valuation Date: 46
Average Years of Service at Valuation Date: 11.4
Currelll Retirees
Age IAFF MgmtlCo!J[ PAPOA SEW Total -----
Under 55 1 1 9 20 23 63
55 -59 12 22 12 28 74
60-64 12 29 14 59 114
65 69 26 33 8 58 125
70 74 15 25 8 43 91
75-79 13 18 6 30 67
80-84 3 10 4 26 43
85 & Over ..,], _I 22 35
Total 96 154 73 289 612
Average Attained Age at Valuation Date: 67
City Of PaloAllo GASB 45 ACIuarlal Valualion as of January 1.2007
This \vork"proqucl was prepared solely for City of Palo Alto for the 'purposes desenbed herein and may no! be approptiate to use
for other purposes. Millilll"n does not intend to benefit and assumes no duty or liability to other parties who receive this work.
Milliman
21
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ATTACHMENT C
ORDINANCE NO.
ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO
AMENDING THE BUDGET FOR FISCAL YEAR 2010 TO PROVIDE
ADDITIONAL APPROPRIATIONS OF $688,038 FOR RETIREE MEDICAL
EXPENDITURES AS UPDATED WITH THE RETIREE MEDICAL
ACTUALRIAL STUDY COMPLETED JUNE 2009
WHEREAS, pursuant to the provisions of Section 12 of Article
III of the Charter of the City of Palo Alto, the Council on June 15,
2009 did adopt a budget for fiscal year 2010; and
WHEREAS, per Governmental Accounting .Standards Boards (GASB)
Statement No. 45, Financial Reporting for Retiree Medical Benefits,
beginning in fiscal year 2008, the City of Palo Alto was required to
recognize in its financial statements any unfunded, earned retiree
medical costs, including those for current active employees; and
WHEREAS, per GASB 45, the City is required to complete an
actuarial study on a biennial basis to determine the retiree medical
liability and how much the City should be setting aside each year to
fund that liability
WHEREAS, an actuarial study completed by Milliman, Inc. in June
2009, using a valuation date of January 1, 2009 valued the City's
unfunded retiree medical liability at $105 million
WHEREAS, the required annual contribution that the City must
recognize in it's financial statements is $9.8 million for fiscal
year 2010
WHEREAS, additional appropriations are requested to fund the
retiree medical contribution for fiscal year 2010
WHEREAS, City Council authorization is needed to amend the
fiscal year 2010
NOW, THEREFORE, the Council of the City of Palo Alto does
ORDAIN as follows:
SECTION 1. The Capital Fund Infrastructure Reserve is hereby
decreased by the sum of Thirty Three Thousand Nine Hundred and Five
dollars ($33,905). As a result of this change the Infrastructure
Reserve will be reduced from $5,160,000 to $5,126,094
SECTION 2.
Electric Fund is
Hundred dollars
The Supply Rate Stabilization Reserve in the
hereby decreased by the sum of Fifteen Thousand One
($15,180)
SECTION 3. The Distribution Rate Stabilization Reserve in the
Electric Fund-is hereby decreased by the sum of One Hundred Thirty
Three Thousand Two Hundred and Seventy-Seven dollars ($133,277)
SECTION 4. The Rate Stabilization Reserve in the Water Fund is
hereby decreased by the sum of One Hundred Twenty Three Thousand and
Twenty-Two dollars ($123,022)
SECTION 5. The Supply Rate Stabilization Reserve in the Gas
Fund is hereby decreased by the sum of Eleven Thousand Nine Hundred
and Eleven dollars ($11,911)
SECTION 6. The Distribution Rate Stabilization Reserve in the
Gas Fund is hereby decreased by the sum of One Hundred Twenty Five
Thousand Five Hundred and Four dollars ($125,504)
SECTION 7. The Rate Stabilization Reserve in the Refuse Fund
is hereby decreased by the sum of Eighty One Thousand Four Hundred
and Sixty-One Dollars ($81,461)
==~~~~8. The Rate Stabilization Reserve in the Wastewater
Treatment is hereby decreased by the sum of Eighty Nine
Thousand Five Hundred and Seventy-Three Dollars ($89,573)
SECTION 9. The Rate Stabilization Reserve in the Wastewater
Collection Fund is hereby decreased by the sum of Fifty Nine
Thousand Two Hundred and Forty-Six Dollars ($59,246)
SECTION 10. The Rate Stabilization Reserve in the Storm
Drainage hereby increased by the sum of Two Thousand Three
Hundred and Sixty-Seven Dollars $2,367
SECTION 11. The Rate Stabilization Reserve in the Fiber Optics
Fund is hereby increased by the sum of Thirty Three Thousand Two
Hundred and Fifty-Six Dollars $33,256
SECTION 12. The Retained Earnings in the Vehicle Replacement
Fund is hereby decreased by the sum of Thirteen Thousand One Hundred
and Forty-Nine Dollars ($13,149)
SECTION 13. The Retained Earnings in the Information Technology
Fund is --hereby decreased by the sum of Twenty Four Thousand Five
Hundred and Eleven Dollars ($24,511)
SECTION 14. The Retained Earnings in the Printing and Mailing
Fund is hereby decreased by the sum of Twelve Thousand Nine Hundred
and Twenty-Two Dollars ($12,922)
As specified in Section 2.28.080(a) of the Palo Alto Municipal
Code, a two-thirds vote of the City Council is required to adopt
this ordinance
SECTION 16. The Council of the City of Palo Alto hereby finds
that this is not a project under the California Environmental
Quality Act and, therefore, no environmental impact assessment is
necessary.
SECTION 17. As provided in Section 2.04.350 of the Palo Alto
Municipal Code, this ordinance shall become effective upon adoption.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSTENTIONS:
ABSENT:
ATTEST:
City Clerk
APPROVED AS TO FORM:
Senior Asst. City Attorney
APPROVED:
Mayor
·City Manager
Director
Services
of Administrative
TO:
ATTENTION:
FROM:
DATE:
SUBJECT:
ATTACHMENT D
City of Palo Alto
City Managelf.,'s Report
HONORABLE CITY COUNCIL
}<'INANCE COMMITTEE
CITY MANAGER DEPARTMENT: ADMINISTRATIVE
SERVICES
MAY 1,2007 CMR: 195:07
AUTHORIZATION TO PROCEED WITH ESTABLISHING AN
IRREVOCABLE TRUST WITH CALIFORNIA PUBLIC
EMPLOYEES RETIREMENT SYSTEM (CALPERS) FOR
RETIREE BENEFITS
RECOMMENDATION
The purpose of this report is to seek Council's approval to: (a) entering into a contract with
California Public Employees Retirement System (CalPERS) to begin process of establishing an
irrevocable trust fund for retiree medical benefits; and (b) transfering funds in the amount of
$26.5 million currently set aside in the Retiree Health Benefits Internal Service Fund to
CalPERS to establish the trust.
BACKGROUND
Per GASB 45, the City of.Palo Alto will be required to recognize in its fmancial statemcnts any
unfunded, earned retiree medical costs including those for cnrrent active employees bcgilllling in
fiscal year 2007-08. In December 2006, staff presented an update on funding options for retiree
medical (Attachment A). The Finance Committee was supportive of the idea of establishing a
trust with CaIPERS.
DISCUSSION:
The actuarial study completed by Milliman, Inc. in April 2006 valued the City's unfunded retiree
medical liability at $148.7 million, assuming a 4 percent rate of return on the funds, the then-
current rate of return on the City'S investments.
Once the City takes steps to establish a trust for these funds, the assumed rate of return rises to
7.75 percent, reducing the present-value of the liability to $82.6 million. Furthermore, if the City
deposits the $26.5 million balance from its Retiree Health Benefrts Internal Service Fund into the
trust, the unfunded liability is reduced to $56.1 million. Without establishing a tmst, the Annual
Required Contribution (ARC ~ or amount the City must set aside to fully fund the liability)
would be $13.1 million per year. Wjth the establishment of a trust, the ARC goes down to $6.9
million. The budget for fi.scal year 2007-08 and all subsequent years would then include this
reduced ARC and the proposed funding plan for the entire liability.
CMR: 19507 Page) of4
The following table shows the allocations of both the liability and the ARC across the City's
funds a:ssuming 7.75 percent rate of return, based upon actual staff demographics within each
fund.
Fund Actuarial Ua bility ARC
General Fund $61,613,148 $5,141,349
Capital Improvement Fund 542,174. 67,606
Electric Fund 8,990,109 660,327 -
External Service Fund 101,350 24,741
Gas Fund 2,397,695 203,057
Printing -Internal Service Fund 166,772 15,822
Refuse Fund 1,474,589 138,046
Storm Drain Fund 344,492 25,163
Technology Fund -Internal 961,295 1J 0,135
Service Fund
Vehicle -Internal Service Fund 746,362 70,939
Wastewater Collection Fund . 670,244 152,104
Wastewater Treatment Flmd 2,685,693 65,379
Water Fund 1,884,974 220,165
Citywide Total $82,578,897 $6,894,833
As per the above table, the General Fund staffs share of the citywide ARC \otals $5.1
million. Since the General Fund budgets $2.2 million per year for current retiree medical
expenditures, an additional $2.9 million would be required to fund the increased expenditure.
General Fund staff provide services to the other funds, with the associated salary, beneflt and
other costs allocated to the other funds via thc Cost Plan. However, the Cost Plan allocations
have only included current retiree medical expenses and have not included the appropriate share
of General Fund staffs annualJy accrued retiree medical liability. Once that liability is added to
the Cost Plan, the allocated expense to other funds increases by $0.4 million per year resulting in
a net ARC of $2.5 million. Using the fmal actuarial information, the net ARC for the General
Fund is $2.5 million; an increase of $0. I million from the Long Range Financial Plan estimated
net ARC of $2.4 million.
In addition, none of the historically accrued liability has.been allocated to other funds. Staffhas
calculated that other funds' unpaid share of already-accrued retiree medical liability totals $3
million. That rather large unpaid "bill" will be charged over a period of three years to mitigate
the impact to the other funds. Therefore, for three years, the General Fund's ARC will effectively
be reduced by an additional $1.0 million, leaving $1.5 million in required set-aside funds.
Starting in fIscal year 2010-11, when the other funds have caught up in their payments, the
General Fund net ARC would bump back up to $2.5 million. A new actuarial study, which is
required every two years, will change those numbers once again.
CMR: 195:07 Page 2 of 4
The following table summarizes the calculation described above:
Total Citywide ARC $6,894,833
Less all other funds ARC <1,753,484> .. ~ ... .. ~ ..
Equal GF ARC 5,141,349
Less current amount budgeted for retiree medical benefits <2,200,000>
GF increase due to GAS.B 45 implementation .. 2,941,349
Less current year cost-plan allocations , <400,000> .
Equals net ARC!i1crease for GF 2,541,349
Less prior years' catch up of cost plan <1,012,072>
Equals net ARC increase for GF less prior year catch-up $1,529,277
Alternatives to establishing a trust with CalPERS have been discussed with the Finance
Committee (Attachment A). These include: continuing the pay-as-you-go approach and booking
the unfunded ARC on the financial statements; issuing debt to fund the liability; participating in
a pre-funding plan by CaIPERS; establishing a trlfst with a financial institution other than
CaIPERS; and others.
Staff recommended proceeding with the CalPERS trust option for many reasons, including the
following:
• Administrative costs are expected to be significantly lower with CalPERS than with a
private financial institution.
• CalPERS has an outstanding record of investment performance and a seasoned team of
investment professionals. Over the past 20 years, CalPERS has averaged a 1 ° percent
rate of return on their investments.
• Using internal staff or a provider other than CalPERS would require significantly more
work, would require a trust or financial planner; legal services, establishment of an
investment policy and risk program, and the creation of a review team possibly including
members of bargaining units.
• Pre-funding would require the City to issue debt at a taxable rate and it would potentially
impact other debt issuance plans.
• If the City decided not to establish a trust fund and left the $26.5 million in the Retiree
Health Benefits Internal Service Fund, the expected interest rate would be 4.35 percent,
as reported for the City's portfolio as of December 31, 2006. In addition, the $26.5
million would not be considered applicable assets -so the ARC would go back to $13.1
million
Should Council direct staff to proceed with establishing the trust with CalPERS, staff would
initially receive annual reporting on the earned rate of return, eventually moving to quarterly
reporting. These results would be included in the quarterly financial report to Council.
ENVIRONMENTAL REVIEW
The action recommended is not a project for the purposes of the California Environmental
QUality Act.
CMR: 195:07 Page 3 of 4
PREPARED BY:
TRUDY EIKENBERRY
Accounting Manager, Administr tive Services
DEPARTMENT HEAD APPROVAL:
LALOPEREZ
CITY MANAGER APPROVAL: V" •• ,-,,4 LJ /"")
~\ \ ' ). uo r."",.,.",:~/-:-:--:-____ _ . t" EMILY HARRISON
Assistant City Manager
ATTACHMENTS
Attachment A: CMR:438:06, June 12, 2006, Informational Update on Financial Reporting
Activity and Funding Options for Retiree Medical -Governmental Accounting
Standards Board Statcments Numbers 43 & 45
CMR: 195:07 Page 4 of 4
TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER
DATE: AUGUST 3,2009
REPORT: REPORT OF OFFICIALS
DEPARTMENT: PLANNING AND
COMMUNITY ENVIRONMENT
CMR: 332:09
SUBJECT: Adoption of a Resolution Amending Green Building Standards for
Compliance, Tables A & B for Non-Residential and Residential Projects, and
Review of Report on Implementation of the City's Green Building
Ordinance.
EXECUTIVE SUMMARY
This report provides a summary of inlplementation of the City's Green Building Ordinance,
(Palo Alto Municipal Code (PAMC) Chapter 18.44). Over the past year, the program covered
264 permits and influenced $8,306,638 in valuation and 98,275 square feet of construction to
incorporate strategies that are environmentally and socially responsible, and improve occupant
health.
Staff recommends that Council adopt, by Resolution, amendments to the tables adopted by
Council in June 2008 in conjunction with its adoption of the Green Building Ordinance. The
revised tables set forth green building compliance thresholds, rating systems, and compliance
verification for private development by project type. The amendments increase requirements for
existing buildings with a particular focus on increasing building owner knowledge of the
building's energy efficiency, and adjust the covered project definitions based on lessons learned
from the first year of program implementation.
RECOMMENDATION
Staff and the Architectural Review Board recommend that the City Council review this report
describing the past year's implementation of the City's Green Building Ordinance, and adopt the
attached Resolution (Attachment A) referencing proposed amendments to Tables A & B
(Resolution Exhibits 1 and 2).
BACKGROUND
In June of 2008, the City of Palo Alto adopted a mandatory Green Building Ordinance (P AMC
Chapter 18.44) requiring specific project types to meet minimum standards for compliance and
verification using the appropriate U.S. Green Building Council (USGBC) Leadership in Energy
and Environmental Design (LEED) or Build It Green (BIG) Green Point Rated (GPR) green
building rating systems.
The goal of the Palo Alto Green Building Program is to design, build and operate a new
generation of efficient, environmentally responsible, and healthy buildings in the City of Palo
Alto. Building green can have a significant impact on reducing energy, water and natural
CMR: 332:09 Page 1 of 11
resource consumption, and can improve Palo Alto citizens' well being through improved indoor
air quality and comfort. Green building is the practice of taking an integrated approach to
building construction, building systems, and building sites to provide more environmentally
responsive, healthy, productive, economical places to work, learn and live. Green building also
goes beyond the physical buildings to consider how the site and buildings interact with the
community and transportation infrastructure.
The associated Resolution, adopted in conjunction with the ordinance, referred to the standards
for green building compliance, and includes:
• Table A; City of Palo Alto Green Building Standards for Compliance for Private
Development, Nonresidential Construction and Renovation, and
• Table B, City of Palo Alto Green Building Standards for Compliance for Private
Development, Residential Construction and Renovation.
P AMC Section 18.44.040 requires that any amendments to the standards for green building
compliance be considered and recommended by the Architectural Review Board. There is also a
need to update the Historic Resources Board and Planning and Transportation Commission on
the progress made implementing the ordinance during the first year of the Palo Alto Green
Building Program.
This report covers the first year of ordinance implementation and performance of the Palo Alto
Green Building Program, and describes proposed amendments to the green building
requirements (Tables A and B).
PROGRAM REPORT
The Green Building Ordinance requires staff to return to Council one year after the effective date
to report on program implementation. Therefore, this report covers program performance from
July 1, 2008 -June 30, 2009. Staff anticipates that future program reports will be provided
during the annual Earth Day report in April of each year, covering the previous year performance
from January 1 -December 31.
Over the past year, the Palo Alto Green Building Program was created both to implement the
Green Building Ordinance, and to address implementation of and interaction with the City's
Energy Efficiency Ordinance and Construction and Demolition Debris Diversion (C&D)
Ordinance. Staff has implemented several key measures establishing staff and community
building activities and program performance over the last year, and has gained insight into areas
where the program could be better optimized, as described in the "Discussion on Amendments"
section of this report.
Green Building Implementation Activities
The following are staff and community building activities that were undertaken and completed
during the past fiscal year to implement the Green Building Ordinance:
• Hiring of Experienced Staff and Training of Existing Staff -In early October 2008, the City
filled the vacant C&D position (funded by Public Works Operations budget) with a qualified
CMR: 332:09 Page 2 of 11
staff member who is a LEED Accredited Professional, with BIG's Green Point Rater (GPR)
Training, and experience in green building policy, standard development, education and
project review. Staff initiated the program, with assistance from a City of San Jose employee
through the Management Talent Exchange Program, and from interns from Stanford and
California State University San Luis Obispo (Cal-Poly), which allowed the C&D program to
continue to run while the green building program was established. Additional staff merrlbers
in the Planning and Community Environment, Public Works, and Utilities Departments have
undergone training and/or have become accredited/certified under the USGBC LEEDIBIG
GPR programs, respectively.
• Developing the Palo Alto Green Building Program Guide (Guide) -The Guide was
developed as a tool to assist the community in understanding the City's program and to
provide infonnation on why green building is important. The Guide describes the City's
project requirements and submittal and review processes, as well as presents financial
incentives and helpful outside resources to assist with compliance.
• Developing a New Green Building Website The Planning and Community Environment
Department website added a new green building section that allows applicants to view
successful green projects in the City, the goals and purpose of the green building program,
links to financial' incentives for building green, and outside resources. From the site, users
can download the Palo Alto Green Building Guide to find specific infonnation regarding the
proj ect type the user is undertaking, at
http://www.cityofpaloalto.orgldepts/plnlgreen building/default.asp.
• Streamlining the C&D and Energy Ordinance Compliance Reviews -C&D and building
energy efficiency are a subset of the broader practice of green building; therefore the
requirements for both were merged into' one program and the application process was
combined for ease of implementation by the City and community. The C&D Debris
Diversion Ordinance requires covered projects to achieve a 75% diversion rate and requires
applicants to bring all debris to an approved facility. The Energy Efficiency Ordinance
requires covered projects to achieve energy savings 15% beyond the California State Energy
Code.
• Integrating Green Building into the Permit and Inspection Process -Staff established new
review and enforcement protocol through the planning and building application processes,
including updating existing forms, proj ect checklists, and the Accela building permit tracking
systen1 to account for green building review and inspection.
• Achieving Greater Cost Recovery -Staff assessed the fiscal and staffing needs to run the
green building program to ensure greater cost recovery. The FY 2010 budget passed in June
2009 includes new fees ranging from approximately $100 -$800 for projects covered under
the Green Building Ordinance to cover staff time to review projects and enforce the
requirements. Project fees were determined by the size of the project, and whether the City
was providing verification in house, or through the Build It Green or the Green Building
Certification Institute.
CMR: 332:09 Page 3 of11
• Adding New Enforcement Options -The Ordinance requires compliance as its primary
enforcement mechanism. Final building inspections are delayed until the proj ect can show an
adequate level of compliance. In order to expand compliance options, in July 2009, the
administrative penalty schedule was updated to allow fines for non-compliant green building
projects at $500 per day of non-compliance. There are currently no incentives for complying
since all projects must comply, however rebates are offered for building green through the
Utilities and Public Works Departments.
• Creating a Performance Database -Staff established performance indicators for determining
the effectiveness of the program including, but not limited to, number of projects by type,
number of occupants in green buildings, square footage, points achieved, water reduction,
energy savings, waste diverted, greenhouse gas emission reductions, and dollars spent on
environmentally preferable materials. In addition, the system tracks review time to ensure
green building review and inspection are not responsible for prolonging the building process.
• Participating in City, Regional and National Events and Efforts -City staff participates in
city, regional and national green building related events and efforts. City staff presented a
session regarding the Green Building Ordinance and program implementation at the AIA
(American Institute for Architects) International Conference and at the Bay Area City
Attorney's Association, participated on the Energy and Climate Taskforce to develop green
building indicators for cities nationally through ICLEI (Local Governments for
Sustainability), participated in the Build It Green Public Agency Council and in the Santa
Clara County Cities Association Green Building Collaborative to develop policy
recommendations for use throughout the county (Attachment E). In addition, the City's
ordinance was recognized as a model ordinance by the International Municipal Lawyers
Association.
Looking Forward
In the coming year and beyond, staff anticipates preparing for when green building is just the
way all building occurs in Palo Alto. The following are some of the activities pialmed for the
comIng years:
• Building Greater Staff Capacity Staff intends to work toward reducing reliance on
certifying bodies such as the Green Building Certification Institute and Build It Green by
increasing capacity for staff reviews and on-site inspections of covered green building
projects. Limited staff are currently providing this service for a small percentage of projects.
Integrating these functions into the department could reduce costs and time for applicants and
can prepare the department for future code requirements for green building at the state level.
In particular, staff proposes to increase training and certification in energy efficiency plan
review and on-site compliance inspections. It will be necessary, however, to assure that City
review, inspection and costs are not duplicative of those done by outside bodies.
• Developing a Recognition Program Staff proposes to establish a recognition program to
acknowledge all covered projects that have achieved compliance with mandatory green
building requirements via certificate, plaque or window decal to honor this achievement. This
is particularly valuable for projects that are verified by the City rather than by an outside
agency (such as the Green Building Certification Institute or Build It Green), since all
CMR: 332:09 Page 4 of 11
projects must undergo a similarly stringent compliance review. This program would be in
addition to the Architectural Review Board awards for exceptional buildings, which happen
every five years. The 2010 awards will likely include awards for Green Buildings.
• Focusing Efforts on Existing Buildings -Staff expects to focus greater efforts on
understanding the current performance of the existing building stock, where the greatest
environmental and performance improvements can be made~ These efforts are further
outlined in the discussion on the proposed Ordinance anlendments.
• Continuing to Track Rating Systems. Code and Policy Development and Their Relationship
and Integration into the Green Building Program -It is important for staff to stay current on
green building rating system changes, technology and strategy innovations, and green
building codes and policies at both regional and national levels. These include, but are not
limited to: LEED, BIG, American Society of Heating, Refrigerating and Air-Conditioning
Engineers (ASHRAE) Standard 189, and the California Green Building Code. Staff is
particularly interested in finding innovative ways to incorporate the LEED for Neighborhood
Development (LEED-ND) program into large projects and broad City planning strategies as
well as on implementation scenarios for new requirements being proposed for the CA Green
Building Code changes.
Program Performance
Over the past year, there have been 264 permits issued for projects covered under the green
building compliance standards. Some findings related to the distribution are as follows:
• Residential vs Nonresidential Permits -100 permits, or 38%, were nonresidential and 164-
permits, or 62%, were residential;
• Mandatory Requirements vs Good Faith Efforts (Voluntary) -72 permits, or 27%, had
mandatory green building requirements and 192, or 63% only had construction and
demolition debris diversion and/or good faith effort requirements such as checklist
submittal only;
• Mandatory Requirement Permits by Project Type -22 permits, or close to 30% of those
with mandatory green building requirements were for nonresidential existing buildings,
and 50 permits or close to 70% were for new construction;
• Good Faith Effort Permits by Project Type -114 permits, or 43%, of the total number of
permits were for residential renovations or small additions.
The mandatory requirements influenced $80,412,694 of construction funding toward green
building and over 666,500 square feet of space. Within Palo Alto, there are at least nine (9)
LEED registered proj ects in process to be certified by the Green Building Certification Institute,
about 30 in process to be certified by Build It Green, and at least 15 proj ects being verified by
the City.
CMR: 332:09 Page 5 of 11
Only five (5) of the 72 pennits with mandatory green building requirements have successfully
completed the green building program. It is important to note that projects with mandatory green
building requirements are also typically those that have a longer construction period; therefore,
many projects that were covered under the requirements when the program started, on July 1,
2008, have not yet completed construction. In addition, while only five proj ects have
successfully completed the green building progranl, there are nlany other projects that predate
the mandatory requirements and are voluntarily meeting the City's requirements. All completed
projects achieved the exact number of points, or slightly exceeded the minimum number of green
building points required for the project; however, more recently, staff is seeing (on average)
applicants striving for point targets 30-40% higher than the City minimum points. The five
projects that successfully completed the green building program:
• totaled project valuations of$8,306,638 and 98,275 square feet of construction;
• include 750 employees in Palo Alto;
• achieved on average 24% energy efficiency savings;
• reduced ind()or water use by 69,500 gallons per year;
• reduced outdoor water use by 50,000 gallons per year;
• expended $635,174 on environmentally preferable building materials;
• diverted 704.98 tons of waste from landfill; and
• reduced CO2 emissions by over 200 tons;
At least half of the completed projects installed low-emitting materials, had access to public
transportation, perfonned commissioning, and increased pervious surfaces on site. In addition,
all of the projects achieved at least a 75% debris diversion rate from the landfill.
PROPOSED GREEN BUILDING AMENDMENTS
Staff took the opportunity of reporting on program implementation outcomes to amend the
compliance standards. Each of the goals is discussed further below. The amendments are
proposed for Table A and Table B (both attachments are annotated to indicate proposed
changes), which were original attachnlents to the Green Building Ordinance passed a year ago
and outline green building requirements by proj ect type. The amendments will go into effect
concurrently with the final adoption of the 2008 California Energy Code and local amendments,
expected in January 2010, to ensure compliance with the newest version of the California State
Energy Code. The changes were driven by a number of goals to increase the effectiveness of the
program, including:
• Adding an energy efficiency and existing building emphasis;
• Incorporating lessons learned on covered proj ect types; and
• Clarifying definitions and language for consistency with referenced Green Building
rating systems, codes and programs.
The changes will require covered existing buildings to understand their current energy
perfonnance and how it can be improved, and will allow the City to more effectively require
green building requirements based on project scope rather than valuation.
CMR: 332:09 Page 6 of11
Adding an Energy Efficiency and Existing Building Emphasis
It is important to note that the City already has a separate Energy Efficiency Ordinance that
functions compatibly with the Green Building Ordinance. Because the point thresholds in the
Green Building Ordinance require achievement of some energy-related points, in 2008, Council
adopted the California Energy Code and an Energy Efficiency Ordinance making local energy
efficiency amendnlents. The Energy Efficiency Ordinance, approved by the California Energy
Commission, provides the legal authority for the energy efficiency requirements that are already
part of the Green Building Ordinance.
The City currently has no mandatory green building requirements for a majority of
nonresidential existing building projects, and no requirements for existing residences. However,
existing buildings dominate the built environment and hold the greatest potential for major
carbon reductions through energy and water savings. The existing building stock is where action
must be taken to achieve energy efficiency measures in support of the City climate action plan,
and state and national goals. In the current economy, new construction is playing a smaller role
than it has in the past. In addition, the California Public Utilities Commission's Energy
Efficiency Strategic Plan, supporting the state carbon reduction mandate of AB32, set a goal of
40 percent energy savings in aU homes within 12 years and 80 percent by 2050. To meet these
necessary environmental targets would require Palo Alto's existing buildings, as well as
buildings in other cities, to be renovated at a rate many times the current level of improvements.
Addressing the existing building stock is both necessary and an opportunity for the City to be a
leader and move in a direction that will prepare the greater community for an uncertain energy
future that will also protect its environment; few cities in the State have set mandatory,
aggressive policies or programs for existing buildings. The revisions follow two priorities for
energy efficiency and existing buildings.
Requiring a Performance Approach
In the nonresidential sector (Table A), all new construction over 500 square feet is currently
required to meet an established level in the LEED rating system. However, in the LEED
rating system, there is a prerequisite (a nlandatory requirement that must be met prior to
points being claimed) that allows two paths for ensuring minimum energy efficiency
measures are met. There is a performance path through demonstrating a 10% improvement
over the California State Energy Code (Title 24, Part 6) or ASHRAE 90.1, a national energy
code, or a prescriptive path under ASHRAE 90.1 that requires specified energy strategies.
The proposed amendments would require proj ects in the City to choose the performance
path.
Increasing the Energy "10" of the Owner
Lack of owner awareness remains one of the biggest challenges to improving efficiency of
existing buildings. Amendments to both the nonresidential and residential sector would
require existing buildings undergoing substantial renovations to understand their energy use,
their performance compared to other sinli1ar buildings, and to identify strategies for
inlprovement using two well recognized systems. Rather than emphasizing individual retrofit
measures, the program would focus on a "whole building" approach to understanding energy,
which can deliver much greater energy savings, health and comfort benefits, and much
higher owner satisfaction.
CMR: 332:09 Page 70fll
The nonresidential sector table (Table A) would require applicants, for projects involving
covered existing buildings, to submit a Building Energy Performance Rating using the
Energy STAR Portfolio Manager software tool. The Energy STAR Portfolio Manager is
managed by the U.S. Environmental Protection Agency. Portfolio Manager is a free,
interactive energy management tool that allows building owners to track and assess energy
and water consumption of a given project. The project would receive an energy performance
rating on a scale of 1-100 relative to similar buildings nationwide.
The residential sector table (Table B) would require applicants, for projects involving
covered existing buildings, to perform a HERS IT Rating starting January 2011. HERS stands
for the California Home Energy Rating System, a statewide program administered by the
California Energy Conlffiission under statutory requirenlents. Phase I of the HERS Progranl
provides field verification and diagnostic testing to show compliance with Title 24, Part 6, of
the Building Energy Efficiency Standards. HERS Phase IT expands the program to include
whole-house home energy efficiency ratings for existing and newly constructed homes.
The definition of a covered project for this level was amended from projects having a
valuation greater than $75,000, to projects having a valuation greater than $100,000 and
more than 250 square feet of floor area to ensure that the owner undertakes a significant
enough improvement to benefit from the rating and to incur the time and cost of undertaking
it. In addition, the requirements for residential applicants will not be effective until 2011 to
ensure there is enough time for the commlmity to familiarize themselves with the new
requirement and pro gram.
Requiring use of the Energy STAR Portfolio Manager and HERS IT program would not
mandate design or require improvements to a proj ect. However:
(l)Applicants using the programs would only be required to learn and begin to understand
their project's energy performance; the City does not require that they make improvements to
their score. The City's goal would be for owners to use the knowledge, particularly if the
project is a low performer, to make informed decisions on home improvements that can save
the owner money and energy;
(2)Requiring applicants applying for projects involving existing buildings to understand the
building'S energy performance will move the City further toward requiring a specified level
of performance in the future; and
(3)Since applicants will be required to submit their energy performance rating to the City,
staff will be able to create a database to better track and understand the performance of the
existing building stock, to learn how the City compar~s to other cities, and to know where to
target efforts to improve efficiency and reach Climate Action Plan targets.
hlco[porating Lessons Learned on Covered Pro; ect Types
Staff has gained a better understanding of how different project types fit into the different green
building requirement levels and the issues facing verification. Staff found that the non-residential
requirements for large projects (over 5,000 square feet of floor area, over $500,000 valuation and
CMR: 332:09 Page 8 of 11
over 50% of building square footage) are capturing projects for which it is impractical to apply
comprehensive green building practices, and are not capturing projects where green building
requirements should be applied. For example, a project may have fallen into the requirements
listed above, but the scope of the project only included major equipment installation throughout
the building which caused high valuation, with the majority of the building and systems being
untouched. Another example is a $3 million renovation over 5,000 square feet with a scope that
touched every system and surface, but did not qualify to comply with the ordinance because it
did not cover over 50% of the entire existing buildings square footage because the building was
so large.
The proposed amendments would change the existing standards for large non-residential projects
so that the standards would be based on square footage and scope of a project, rather than project
valuation and percentage of the whole building being renovated. The revised requirements would
apply to a project over 5,000 square feet and with substantial renovations to at least two systems
(HVAC, lighting, plumbing or interior surfaces/partitions). In general, staff found that valuation
was not as good an indicator (for whether green building was practical) as square footage or
scope would be; therefore an effort was made to delete valuation as an indicator.
Starf also found that projects that were "rebuilds" of existing buildings, essentially new
construction, did not have any mandatory green building requirements. The proposed
amendments require both nonresidential tenant improvements, renovations or alterations as set
forth in Table A, Section "C", and residential "rebuilds" to achieve some green building
requirements, or at minimum, to meet a certain level of energy performance starting in 2011.
The amendments also codify the availability of in-house (City staff) verification as an option at
all compliance levels. The City was already providing this option for some project types, and the
increasing level of green building experience and knowledge of City staff now make this more
practical. This proposed amendment would impact both nonresidential and residential projects. If
the City is chosen for verification, staff reviewers will still rely on the submittals of extensive
work by certified and/or experienced green building professionals such as LEED Accredited
Professionals and Green Point Raters.
Clarifying Definitions and Language for Consistency with Referenced Green Building Rating
Systems, Codes and Programs
Reference in the table to the U.S. Green Building Council is proposed to be replaced with the
Green Building Certification Institute (GBCI). In early 2009, GBCl assumed responsibility for
overseeing all LEED proj ect certification. GBCI proposes to improve processing time, ensure
credibility and integrity in the certification process, and separate the body that develops the
standard from the certifying body.
Reference to a specific derivation of a rating system (LEED for New Construction or LEED for
Commercial Interiors) is proposed to be replaced with the overarching rating systenl to give
greater flexibility to the applicant based on the project type.
BOARD/COMMISSION REVIEW AND RECOMMENDATIONS
On July 16,2009, staff presented the proposed amendments to the standards in a public hearing
to the Architectural Review Board (ARB) for recommendation to City Council. The ARB
CMR: 332:09 Page 9 of 11
recommended, on a 5-0-0-0 vote, that Council approve the Resolution adopting the revised
tables.
The table changes were also informally reviewed by community stakeholders on July 1 7 and
commented on by California Energy Commission Buildings Standards Implementation staff.
Neither recommended any changes to the proposed amendments. In addition, two public study
sessions were conducted with the Historic Review Board (July 15, 2009) and Planning and
Transportation Commission (July 29, 2009) allowing staff to present a summary of the first year
implementation of the Green Building Program and to describe the proposed table changes. The
HRB recommended that to be explicit, a row should be added to the compliance tables showing
that all proj ects that do not fit into any of the proj ect categories do not have any green building
requirements. Staffplans to add this to the implementation guide. Staffwill sumnlarize the
P&TC con1ments during the presentation to Council and verbatim minutes from the July 29
study session will be provided at places for Council's consideration.
POLICY IMPLICATIONS
The recommendations set forth are consistent with and further a number of existing City policies.
For the past three years, the City Council has ranked environmental protection among its top
three annual goals. The amendments to Tables A and B, which outline the green building
compliance requirements, are consistent with the Green Building Ordinance adopted in June of
2008, which added Chapter 18.44 to the Palo Alto Municipal Code. The amendments are also
consistent with the Energy Efficiency Ordinance, which added chapter 16.18 to the Palo Alto
Municipal Code establishing local energy efficiency standards based on the 2005 California
Energy Code.
The Green Building Program also promotes the City's Climate Protection Plan (CPP) and Zero
Waste goals. In 2007, the City Council approved the Climate Protection Plan (CPP) that
provided direction to reduce green house gas emissions associated with buildings as one method
to reduce Palo Alto's impact on climate change. The plan proposed implementing specific
requirements for green building and adopting the 2005 California Energy Code to achieve
emission reduction goals.
Finally, the amendnlents support the City's Comprehensive Plan and Sustainability Plan, which
note several green building strategies as key categories of sustainability focus throughout.
RESOURCE IMPACT
If the proposed amendments are adopted, relevant resource impacts could include staff time and
owner expenses. The amendments are unlikely to cause an increase in the applications submitted
under the green building progranl, but are likely to increase the time necessary to review an
individual application. The review time depends greatly upon whether a project with mandatory
requirements chooses to use the City for verification instead of using GBCI or BIG. Applicants'
motivation to choose one verification method over another may include recognition, time, cost
and convenience. Staff is confident, based on the past year, that a manageable number of non-
residential project applicants will choose City verification and the nlajority of residential projects
will choose BIG verification, without increased permit fees. However, the City will need to
adjust its permit fees to allow the option of an increased fee in the event that residential projects
choose City verification to ensure cost recovery.
CMR: 332:09 Page 10 of 11
The only additional owner expenses that are introduced with these amendments would be costs
associated ·with the energy performance rating requirements for existing buildings for both non-
residential and residential projects. For non-residential projects, the Energy STAR Portfolio
Manager program is free; however, time would be needed to input the necessary building
performance information to obtain a rating. If the owner has easy access to the building's energy
and water bills, as well as building characteristics, the time needed would be minimal, typically
under four hours. For residential projects, the owner would be required to hire a HERS II Rater
to audit the home and provide a rating and recommendations. The cost of a rater is estimated at
$300-$600 for an audit and would only be required for projects with valuations over $100,000.
The audit cost is minimal considering the benefit to the owner of understanding their building's
energy performance, and being able to identify strategies that can significantly save money,
reduce environmental impacts and can also improve resale value.
ENVIRONMENTAL REVIEW
The adoption of the proposed amendments is categorically exempt from the provisions of the
California Environmental Quality Act (CEQA) per Section 15308 of CEQA Guidelines.
PREPARED BY:
KRtSTIN'HEtNEN
Associate Planner
DEP AR'fMENT HEAD:
CURTIS WILLIAMS
Director of Planning and Community Environment
CITY MANAGER APPROVAL:
JAM:EfS'REENE ( /.
City ~;~riager LJ
ATTACHMENTS
A. Resolution
B. Table A. City of Palo Alto Green Building Standards for Compliance for Private
Development Nonresidential Construction and Renovation (Not Redlined / Redlined)
C. Table B. City of Palo Alto Green Building Standards for Compliance for Private
Development Residential Construction and Renovation (Not Redlined / Redlined)
D. Letter from Silicon Valley Leadership Group dated June 16, 2009
E. Responses to Questions from Commissioner Keller for July 29,2009 PTC
CMR: 332:09 Page 11 of 11
ATTACHMENT A
NOT YET APPROVED
RESOLUTION NO. ---RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALO
ALTO ADOPTING REVISED GREEN BlTILDING STANDARDS
(' FOR COMPLIANCE FOR PRIVATE DEVELOPMENT PROJECTS
WHEREAS, on May 12, 2008, the City Council considered regulations for
the incorporation of green building teclmiques and materials in private residential and
nonresidential development projects and adopted Ordinance No. 5006; and
WHEREAS, Ordinance No. 5006 specifies that green building standards for
compliance shall be set forth by resolution of the City Council after recommendation
from the Director of Planning and Community Enviro~nt and the Architectural
Review B~ard. Such st~n?ards f?r compliance shall inc~u~~he t~pes of projects s~bj ect
to regulation, green buildIng rating systems to be appheg'to varIOUS types of proJects,
minimum thresholds for compliance and timing and methods of verification of
compliance with green building regulations; and
WHEREAS, on May 12, 2008 the City Council adopted green building
standards for compliance for private development projects set forth in two tables that
were attached to Resolution No. 8825; and
WHEREAS, Ordinance No. 5006 also specifies that not later than one year
after its effective date, a report shall be prepared for presentation to the Architectural
Review Board, Historic Resources Board, Planning and Transportation Commission, and
City Council regarding the results of implementation of the Ordinance.
WHEREAS, on August 3, 2009, the City Council received the report
regarding the initial year of the Green Building program and considered revisions to the
green building standards for compliance associated with Ordinance No. 5006; and
WHEREAS, the Director of Planning and Community Environment and the
Architectural Review Board do hereby recommend that the City Council approve the
proposed revisions to the green building standards for compliance for private
development projects set forth in Table A and Table B and attached to this resolution.
NOW, THEREFORE, the Council of the City of Palo Alto does hereby
RESOLVE as follows:
SECTION 1. The Council hereby approves the revised green building
standards for compliance for private development projects as set forth in Table A and
Table B attached to this resolution.
1
090727 syn 6050919
NOT YET APPROVED
SECTION 2. This resolution shall take effect on January 1, 2010, or upon
the date that ·the 2008 edition of the California Energy Code becomes effective,
whichever is later; provided that the City's Ordinance establishing local energy efficiency
standards for certain buildings and improvements covered by the 2008 California Energy
Code has been approved by the City Council and the California Energy Commission.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST: APPROVED:
City Clerk Mayor
APPROVED AS TO FORM:
City Manager
Deputy City Attorney
Director of Planning and Community
2
090727 syn 6050919
Attachment B
Note: Applicants are advised to use this table only in conjunction with the entirety of requirements in Chapter 18.44 (Green Building Regulations)
I TRACK CHANGES ACCEPTED --EFFECTIVE JANUARY 2010
Table A. City of Palo Alto Green Building Standards for Compliance for Private Development Nonresidential Construction and Renovation
.' -'... J • -, -• ~ --....
"Fype of Project ; -~,-.~ < ' -_, ' : ~ I Rlltia&System, '-r·~,1. -,'. -; ~ . ~ %, -;. -," ~--V rift ti -.
~ "', c-, ;'. _ •• ..... ' ----0'. -_ . Cod' P -'. -' u o· / .-! ~ .r~.--. ". '?' '0", e caOD ,1
-_ ~ I .. 1 _ f r eor .rocram M ....... mTbnsJaold .. ;'.~ .c-~ _ . -'-~, ~'. ..' ,Il '._::1 0 t,.
..........-; __ " r .... _ ~I _' ... _ -_~-::l'" _ ~
A. New construction ~ 5,000 sf USGBC LEED LEED Silver GBCI or CPA
(including additions to existing buildings) The Project Must Choose the LEED Energy Performance Approach.
B. New construction ~ 500 sf and < 5,000 sf USGBC LEED Prerequisites + 5 points (round up) required for every 500 sf GBCI or CPA
(including additions to existing buildings) The Project Must Choose the LEED Energy Performance Approach.
C. Tenant improvements, renovations, or alteratiop.s ~ 5,000 sf USGBC LEED LEED Certified GBCI or CPA
of floor area that include replacement or alteration of at least
two of the following: HV AC system, building envelope,
plumbing systems, lighting systems, and/or interior
finishes/partitions.
D. Renovations and alterations 2:.500 sf that don't fall under USGBC LEED LEED Checklist CPA
Project Types C. Energy STAR Building Energy Performance Rating
Portfolio Manager I
Sf*iaICoDSjderatiou&Qe6nitio~ -_ -,"<'-,'~.r L,:~~'~~",<I< , _o"-t~:-'" _~ .~~ ~ : --. ~ . '_-::-.~'. 'o-_,: ... ~-~:~~-?:':~".·';'-.~' "-.~\~~ =::C'~~i{"~<·-:~\
M' U D Mixed use projects must comply with the applicable project type requirements based on the scope of the project. To be determined by the Planning Director; generally the provisions of Table A
lXed se evelopments will apply to the commercial portion of the development, and the provisions of Table B will apply to the residential portions of the development.
H' . S Exemptions may be available for historic structures, pursuant to Section 18.44.070 of the ordinance. The Compliance Official may allow the use of alternative checklists for historic buildings or
Istonc tructures for buildings that retain or re-use substantial portions of the existing structure.
Multi Year Cumulative Cumulative new construction or renovations over any 2-year period shall be considered as a single project, subject to the highest level of green building requirements for that project, unless
Construction exempted by the Planning Director as impractical for compliance.
U I P , Projects with an unusual scope of work or with unique circumstances may apply for an exemption to the green building requirements to be determined by the Planning Director, pursuant to Palo
nusua rOJects Alto Municipal Code Section 18.44.070.
USGBC LEED stands for the U.S. Green Building Council Leadership in Energy and Environmental Design. Projects must comply with the applicable, and current, LEED® rating system ,
USGBC LEED including but not limited to LEED-NC (New Construction), LEED-CS (Core & Shell), LEED-CI (Commercial Interiors), or LEED-EB (Existing Buildings). An alternative, equivalent rating
system or program may be substituted as approved by the Planning Director, after recommendation by the applicant or Architectural Review Board (if ARB review is required).
GBCI The Green Building Certification Institute provides 3rd party verification services for the LEED rating system .
. CPA The City of Palo Alto staff with expertise in green building will provide in-house review similar in structure and stringency to that of the GBCI.
E STAR P rtti r The Energy STAR Portfolio Manager is managed by the US. Environmental Protection Agency, Portfolio Manager is an interactive energy management tool that allows you to track and assess
Mnergy 0 010 energy and water consumption of your project. The project will receive an energy performance rating on a scale of 1-100 relative to similar buildings nationwide. The project is not required to
anager change its rating, but this tool will help applicants understand a projects rating and how it compares to others.
Building Envelope The building envelope is the ensemble of exterior and demising partitions of a building that enclose conditioned space. (Defined by California Energy Code Title 24, Part 6)
P , 't Prerequisites are green building strategies required by the LEED rating system before points may be claimed for any project type. They are mandatory measures, not options as determined by rerequisl es LEED.
Note: Applicants are advised to use this table only in conjunction with the entirety of requirements in Chapter 18.44 (Green Building Regulations)
I TRACK CHANGED - -EFFECTIVE JANUARY 2010
Table A. City of Palo Alto Green Building Standards for Compliance for Private Development Nonresidential Construction and Renovation
, Type of Project
Ne&.-.sideatial C9IIRAleti9D And Reu8\'atien'"
~New construction_ 2: 2.5,000 sf
(including additions to existing buildings)
New cORstnlOtiOR2:: 5,999 sfane < 25,9(:)9 sf
~New construction 2: 500 sf and < 5,000 sf
(including additions to existing buildings)
C. Tenant improvements. rR:enovation~ or
alterations> 5,000 sf of floor area that include
replacement or alteration of at least two of the
following: HV AC system, building envelope,
plumbing systems, lighting systems, and/or interior
finishes/partitions. oo§; 2:: 59% ofproject sf aRd ::::
~{> Hal11AtiAR~
D. Renovations and alterations> 500 sf that don't
fall under Project Types C.
Other reRo,.,ati9R:::: $19Q,QQge va-luatioR
New e9RstI1:lGtion < 5QQ sfane reRoYation <
$lgg,QQQe of val Hat ion
CheeWi8t ReqtejFM
Rating System, Code or
PnJ2ram
-;;r
BWliI:fIiB¥-llBprevemellt5
Minimum Threshold
~-::I ...
USGBC LEEDLEED NC I LEED Silver en RAiRt~)
Chesklist
T .f.:FO }JG. G.l:!@Gkli~t
USGBC LEEDLEED }IC
Checklist
The Project l\1ust Choose the LEED Energy Perfonnance
Approach.
LEED Silver (33 poiRts)
LEED Pro ratee POiRts Prerequisites + 5 points (round
up) required for everY 500 sf -Pro rated formula (Rew
cORstructioR sf/5,99Q) x. 33poiRts, bHt Rot less thaR 17
pefflts
The Project IVlust Choose the LEED Energv Perfonnance
Approach.
USGBC LEEDLEED }IC I LEED Certified ("t) RAiRt,,)
Checklist
USGBCLEED
Energy STAR Portfolio
Manager
LEED CI Checklist
No reEfuireFflent
LEED Checklist
Buildim! Enemv Performance Rating
Submit eheeklist; melHae OR bH.ilaiRg plaRs
--;-
VeriJh:ation
LEED/U~GBC GBCI or CPA
Threshold yerification b3' LEED
AP
Threshole veriHcatiOl~ by LEED
APGBCI or CPA
ThreshoIa veriHcatioR by LEED
APGBCI or CPA
CPA
~ P' I f "p'ri fi (.'; ::4tl AI~
---"_.-' ... -:-: -'
I '~~ecial Q!Dslde~ations&. Definitions Mill. Use 8F odteF Del'JelepmeBI.GelBRlttFeial aM ~sieeati&baEih!Ffa as .pIi~a"le~ " ~
Miud Use DeveloRments Mixed use Qrojects must comQly with the aQQlicable Qroject tVQe reguirements based on the scoQe of the Qroject. To be determined by the Planning Director; generally the provisions of Table A
will apply to the commercial portion of the development, and the provisions of Table B will apply to the residential portions of the development.
Historic Structures Exemptions may be available for historic structures, pursuant to Section 18.44.070 of the ordinance, The Compliance Official may allow the use of alternative checklists for historic buildings or
for buildings that retain or re-use substantial portions of the existing structure.
Multi Year CumuJatiye Cumulative new construction or renovations over any 2-year period Fells',iHg aee13tieH sf these reEjl:lirsmsFlts shall be considered as a single project subject to the highest level of green
Construction building reguirements for that Qroject, unless exempted by the Planning Director as impractical for compliance.
Unusual Proiects Projects with an unusual scoRe of work or with unigue circumstances mav aRQlv for an exemRtion to the green building reguirements to be determined bY the Planning Director. gursuant to Palo
Alto MuniciQal Code Section 18.44.070.
USGBe LEED stands for the U.S. Green Building Council LeadershiQ in Energv and Environmental Design. Projects must comQly with the aQQlicable and current bemj3liaFlee 'id'l etHef
USGBCLEED LEED® rating svstem ~, including but not limited to LEED-NC (New Construction>. LEED-CS (Core & Shell), LEED-CI (Commercial Interiors), or LEED-EB (Existing Buildingst
An alternative eguivalent rating system or program may be substituted far tRs e@sigRatee Fatlflg s~'st@m "'R@FS 9@@m@8 atJ}3Fe}3riat@ as aRProved by the Planning Director, after recommendation
by the aRQlicant or Architectural Review Board (if ARB review is required).
GBCI The Green Building Certification Institute Rrovides 3rJ Qartv verification services for the LEED rating system.
CPA The Citv of Palo Alto statT with ex~ertise in green building will Qrovide in-house review similar in structure and stringencv to that of the GBCI.
Energv STAR Portfolio The Energv STAR Portfolio Manager is managed by the U.S. Environmental Protection Agency. Portfolio Manager is all interactive energv management tool that allows YOU to track and assess
energy and water consumgtion of your groject. The ~roiect wilI receive an energy Qerfornlal1ce rating on a scale of 1-100 relative to similar buildings nationwide, The Qroject is not required to Manage .. change its rating. but this tool will heiR armlicants understand a Qrojects rating alid how it comRares to others.
BnildingEnvelol!e The building envelo~e is the ensemble of exterior and demisinl! Qartitions of a building that enclose conditioned sQace. (Defined by California Energv Code Title 24. Part 6}
Prerequisites Prereguisites are green building strategies reguired bv the LEED rating system before Qoints may be claimed for anv Qroject tvQe. They are malldatorv measures not oQtions as determined bv
LEED.
I
To be aajl%SteEi aflfll:iaU;r te ref1eet €flaHges to the City's vall:latien per sl'Jl:iare 'feet of He'>';" eeflstru€tiefl.
Page 2
Attachment C
Note: Applicants are advised to use this table only in conjunction with the entirety of requirements in Chapter 18.44 (Green Building Regulations)
I TRACK CHANGED -EFFECTIVE JANlJARY 2010
---~ ----- - - ------- ---- - --- -- --------,... ~ -------------- ----.-------- --- --- -. --- ---. - - -.-------- ------ -------- ---------------- -----. ------
~ Type of Project Raug System, Code or Program"" -." _ MiDimum "(bresbold Required Verifitation • c -.' ~.;; r
Multi-Family Residential
A. New construction of3 or more (attached) units BIG GPR Multifamily 70 points GreenPoint
::::..30 units complete the LEED-ND Rated and/or
(Neighborhood Development) checklist. CPA
B. Renovations or alterations covering:::: 50% of the BIG GPR Multifamily 50 points GreenPoint
existing unit sf and that include replacement or alteration Rated and/or
of at least two of the following: HV AC system, building CPA
envelope, plumbing systems, lighting systems, and/or
interior fmishes/partitions.
C. Renovations, additions, and/or rebuilds to individual BIGGPR Checklist CPA
units::::..250 sf and valuation:::: $100,000 in and single HERS II HERS Rating (requirement effective January
unit 2011)
Single-Family and Two-Family Residential
A. New construction of:::: 1,250 sf BIG GPR Single-Family 70 points GreenPoint
+ 1 point per additional 70 sf over 2,550 (150 Rated and/or
points maximum) CPA
B. Existing home additions or rebuilds:::: 1,250 sf Chose one of the following two options: 50 points GreenPoint
Option 1: BIG GPR Single Family or Existing Rated and/or
Home CPA
OR Option 2: CA Energy Code T-24 Part 6 and The whole house must demonstrate that the HERS II Rater
HERS II TDV Energy of the building is at least 15% and CPA
less than the TDV energy of the standard
building and receive a HERS II rating.
(requirement effective January 2011)
C. Existing home renovations, rebuilds and/or additions BIG GPR Existing Home <=hecklist CPA
totaling:::: 250 sf and < 1,250 sf and :::: $100,000 AND one of the following two options:
valuation
Option 1: CA Energy Code T-24 Part 6 The whole house must demonstrate that the CPA
TDV Energy of the building is at least 15%
less than the TDV energy of the standard
building. (requirement effective January 2011)
Option 2: HERS II HERS II Rating (requirement effective HERS II Rater
January 2011) and CPA
-oe-
Speeial eouid ·ODS .-~--. ~
Mixed Use Developments
Historic Structures
Multi Year Cumulative Construction
Unusual Projects
DefiDitiODS
.~
BIGGPR
,CPA
HERS II Rating
Rebuilds
TDV
Building Envelope
Renovations
-:u ~ -Jr:~l
Mixed use projects must comply with the applicable project type requirements based on the scope of the project. To be determined by the
Planning Director; generally the provisions of Table A will apply to the commercial portion of the development, and the provisions of Table B
will apply to the residential portions of the development.
Exemptions may be available for historic structures, pursuant to Section 18.44.070 of the ordinance. The Compliance Official may allow the use
of alternative checklists for historic buildings or for buildings that retain or re-use substantial portions of the existing structure, and may reduce
the minimum threshold (points) required as outlined in Section 18.44.050.
Cumulative new construction or renovations over any 2-year period shall be considered as a single project and subject to the highest level of
green building requirements for that project, unless exempted by the Planning Director as impractical for compliance.
Projects with an unusual scope of work or with unique circumstances may apply for an exemption to the green building requirements to be
determined by the Planning Director, pursuant to Palo Alto Municipal Code Section 18.44.070.
~ Lt~' .~Tl",,-, .". ,'~i
BIG GPR stands for the Build It Green, Green Point Rated system Projects must comply with the applicable, and current, GPR rating system ,
including but not limited to Single Family, Multi Family and Existing Home. An alternative, equivalent rating system or program may be
substituted as approved by the Planning Director, after recommendation by the applicant or Architectural Review Board (if ARB review is
required).
The City of Palo Alto staff with expertise in green building will provide in house review similar in structure and at least as stringent to that of
Build It Green.
HERS stands for the California Home Energy Rating System, a statewide program that the California Energy Commission is statutory required
to adopt for residential dwellings in California. Phase I of the HERS Program provides field verification and diagnostic testing to show
compliance with Title 24, Part 6, of the Building Energy Efficiency Standards. HERS Phase II expands the program to include whole-house
home energy efficiency ratings for existing and newly constructed homes. The project is not required to change its HERS rating, only understand
what its rating is, how it compares to others and how improvements can be best prioritized.
Rebuild are structures that do not maintain 75% of the existing roof and exterior walls (PA Zoning Code 18.12.l20).
Time-Dependent Valuation (TDV) accounts for the value of electricity differences depending on time-of-use (hourly, daily, seasonal), and the
value of natural gas differs depending on season. TDV is based on the cost for utilities to provide the energy at different times.
The building envelope is the ensemble of exterior and demising partitions of a building that enclose conditioned space. (Defined by California
Energy Code Title 24, Part 6)
Renovations are any work to an existing building needing a permit as defined by the California Building Code.
Note: Applicants are advised to use this table only in conjunction with the entirety of requirements in Chapter 18.44 (Green Building Regulations)
I TRACK CHA.I'lGED_-EFFECTIVE JANUARY 2010
Table B. City of Palo Alto Green Building Standards for Compliance for Private Development Residential Construction and Renovation
Type cifl'P,rojed~ RIlildiR~ .l1IHH'9¥elReRM
Multi-Family Residential
A. New construction of3 or more (attached) units;!
~eel&jM ReElyjadRating Pro2ram Syst-em, Code or
1. ~ ..
BIG GPR Multifamily }14Hltifamily GreeflPoint
Checklist For any mHlti family residefltial project
with
> 30 or more nevI' units proposed, complete thea
LEED-ND (Neighborhood Development) checklist
shall also Be completed and sHBmitted with tl:i:e
application, fer information. Oi'lly.
MiDim~ .. Tbnsbold Required
70 points4-
B. Renovations or alterations covering> 50% of the BIG GPRMultifamily 50 points
existing unit sf and that include replacement or alteration
of at least two of the following: HV AC system. building
envelope, plumbing systems. lighting systems. and/or
interior finishes/partitions.
C. Renovations, A~dditions, and/or rebuilds to
individual units ana/or renovations v.-ith pem'lit > 250 sf
and valuation 2: $100,000 in and single unit§,
Ada' . 1 .. ItlOflS aflEl/or reno" f m' • $1 QQ J)QQ~ a IOns "ita pemut valHation /"
Single-Family and Two-Family Residential
~New construction of> 1,250 sf2~55Q sf
NevI' COllstrHetion 0 " . f> 1 2§Q sfans < 2,55Q sf
B. Existing home additions or rebuilds> 1.250 sf
BIG GPR :Multifamily GreenPoint Checklist
HERS II
No re€)HiremeHt
BIG GPR Single-Family GreenPoiRt Cheekti!'it
Single family GreenPoint Cheeklist
Chose one of the following two options:
Checklist SUBmit checklist; inch-lae
on BHilding plans
HERS Rating (requirement effective
Januarv 2011)
70 points
+ 1 point per additional 70 sf over
2,550 (150 points maximumt
7Q poiHts4
Option 1: BIG GPR Single Familv or Existing Home 50 points
Verification
GreenPoint Rated
verificationan d/ or
CPA
GreenPoint Rated
and/or CPA
CPA~
"srifiGfftioR
GreenPoint Rated
and/or
CPAGreenPoint
Rated verifieatisl1
GreenPolRt Rated
yeritieation
GreenPoint Rated
and/or CPA
OR Option 2: CA Energy Code T-24 Part 6 and The whole house must demonstrate HERS II Rater and
HERS n that the TOV Energy of the building CP A
is at least 15% less than the TOV
enenry of the standard building and
receive a HERS II rating.
(requirement effective January 20 II )
C. Existing home renovations. rebuilds and/or Home Remodeling Green Building Clleeldist Checklist Sl:1bmit eheeldist; ineltide CP A.s.elf
~dditi?ns totaling> 250 sf and ~ 1 ~250 sf andfef BIG GPR Existing Home on building plans verifioation
renOYatloflS > $1 OO+§.,OOO valuatIOn AND f h .c: II . t . ---. . one 0 . t e 10 owmg wo optIOns:
Option 1: CA Energv Code T-24 Part 6 The whole house must demonstrate CPA
that the TDV Energy of the building
is at least 15% less than the mv
energy of the standard building.
(requirement effective Januarv 2011)
Option 2: HERS II HERS 11 Rating (requirement HERS II Rater and
effective January 2011) CPA
AdditioHS aHdior renovatiofls of <$75,QQQ§. permit valuation No requirement
~ _ ',. _. _-.~ .... ---~ """' --'"-I '''. ~ .. -' ---;;:! r'~··~i, = .. ~~: ........ -........ t:~. ---'~ ~pecial ~oosiderations MB!II \lse OF QtlaeF'9erJel8p .. e~.C6mlBe'6i@I:8R8.MSi8eRfi&l eAiefUlas applisaIJle;J. .., -t, -~ '-' .' ," <' '.,': '. ~~.
Mixed Use Developments Mixed use projects must comply with the applicable project type requirements based on the scope of the project. To be detennined by the
Planning Director; generally the provisions of Table A will apply to the commercial portion of the development, and the provisions of Table B
will apply to the residential portions of the development.
Historic Structures Exemptions may be available for historic structures, pursuant to Section 18.44.070 of the ordinance. The Compliance Official may allow the use
of alternative checklists for historic buildings or for buildings that retain or re-use substantial portions of the existing structure, and may reduce
the minimum threshold (points) required as outlined in Section 18.44.050.
Multi Year Cumulative Construction Cumulative new construction or renovations over any 2-year period fslle'Yiflg aElej3tisFl eftJ:lese r8EJ:l:lirSFll8flts shall be considered as a single
project and subject to the highest level of green building requirements for that project, unless exempted by the Planning Director as impractical
for compliance.
Unusual Projects Projects with an unusual scope of work or with unique circumstances may apply for an exemption to the green building requirements to be
determined bv the Planning DirectoL pursuant to Palo Alto Municipal Code Section 18.44.070.
~finiti0l!~ ;:,~,..~~ _-. '1" <~ .:~ .... ~~~.'~~1~" ~,-. -, ~r_ :-~ _.. ~.. ~ ~ " _" .' ;, ~ • ~ •• ~.~ ~. _ -," r-. ,-.. -:-P ~-""',.-~~" ~r~,~
BIG GPR BIG GPR stands for the Build It Green, Green Point Rated system Projects must complv with the applicable and current (iPR rating system.
including but not limited to Single Familv Multi Familv and Existing Home. An alternative equivalent rating system or program may be
substituted as approved bv the Plmming Director. after recommendation bv the applicant or Architectural Review Board (if ARB review is
required).
CPA The City of Palo Alto staff with expertise in green building will provide in house review similar in structure and at least as stringent to that of
Build It Green.
HERS II Rating HERS stands for the California Home Energy Rating System. a statewide program that the California Energy Commission is statutory required
to adopt for residential dwellings in California. Phase I of the HERS Program provides field verification and diagnostic testing to show
compliance with Title 24. Part 6. of the Building Energv EtTiciencv Standards. HERS Phase 11 expands the program to include whole-house
home energy efficiency ratines for existing and newly constructed homes. The project is not required to change its HERS rating. onlY understand
~~.Ul~ ra1i!lg is howjL~.9mpares to othe~s and how impr~y.§ments cal}JJe 12~st prioritized.
Rebuilds Rebuild are structures that do not maintain 75% of the existing roof and exterior walls (PA Zonine Code 18.12.120).
TDV
Building Envelope
Renovations Renovations are any work to an existing building needing a nennit as detlned bv the California Building Code.
Te be aejustea afliulaJly to reflect el3anges te tlle Cit:"s "aluatiel'l rer s€lHare root ofne",. CO'RstructiaFl.
Attachment E
Responses for Questions from Commissioner Keller
Kristin Heinen, Sustain ability / Associate Planner
July 29, 2009
1. Please explain whether commissioning will be required for commercial buildings. Please
outline staffs understanding the role building commissioning has in obtaining the benefits
of the measures in the LEED checklists.
Commissioning is required for commercial buildings, as it is a prerequisite in the LEED rating
system. However, the Green Building Ordinance under section 18.44.030(w) says
"documentation of construction consistent with building plans calculated to achieve energy
compliance is sufficient verification in lieu of post construction commissioning". Therefore, for
projects the City is verifying, we would consider alternative documentation, but in the end it is
still essentially commissioning as defined in 18.44.030 (w). Note that 18.44.030(w) is a definition
for 'Threshold Verification by LEED AP" that will no longer be relevant if the tables are adopted,
as reference to Threshold Verification is being deleted. So the language in that definition is non-
binding and reduced to irrelevance.
Commissioning has numerous undeniable benefits which are best explained in the recently
released Lawrence Berkeley National Laboratory report "Building Commissioning: A Golden
Opportunity for Reducing Energy Costs and Greenhouse Gas Emissions."
This report provides the world's largest database of commissioning case studies for new and
existing buildings. In sum "Commissioning maximizes the quality and persistence of energy,
cost, and emissions reductions. The process ensures that building owners get what they pay for
when constructing or retrofitting buildings, provides risk-management and "insurance" for
policymakers and program managers enabling their initiatives to actually meet targets, and
detects and corrects problems that would eventually surface as far more costly maintenance or
safety issues. The results demonstrate that commissioning is arguably the single-most cost-
effective strategy for reducing energy, costs, and greenhouse-gas emissions in buildings today."
Key findings of the report referenced include:
Median commissioning costs: $0.30 and $1.16 per square foot for existing buildings and new
construction, respectively (and 0.4% of total construction costs for new buildings)
Median whole-building energy savings: 16% and 13%
Median payback times: 1.1 and 4.2 years
Median benefit-cost ratios: 4.5 and 1.1
Cash-on-cash returns: 91% and 23%
Very considerable reductions in greenhouse-gas emissions were achieved, at a negative cost of -
$110 and -$25/tonne C02-equivalent.
High-tech buildings are particularly cost-effective, and saved large amounts of energy and
emissions due to their energy-intensiveness.
Projects employing a comprehensive approach to commissioning attained nearly twice the overall
median level of savings, and five-times the savings of projects with a constrained approach.
Non-energy benefits are extensive and often offset part or all of the commissioning cost.
Limited multi-year post-commissioning data indicate that savings often persistent for a period of
at least five years.
Uniformly applying our median whole-building energy-savings value to the stock of U.S. non-
residential buildings yields an energy-savings potential of $30 billion by the year 2030, and
annual greenhouse gas emissions reductions of about 340 megatons of C02 each year. An
industry equipped to deliver these benefits would have a sales volume of $4 billion per year and
support approximately 24,000 jobs.
This information was directly provided from staff at LBNL.
The report and summary presentation can be downloaded at:
http://cx.lbl.gov/2009-assessment.html
2. Please explain differences between having in-house building inspectors do verification of
green building measures (e.g., the HV AC system is wired and installed correctly and
appears to operate) and having third party verification according to LEED standards (e.g.,
the HV AC is tuned to provide the intended energy savings).
Staff anticipates that in-house verification will be set up in two phases that will be implemented
over several years. The first phase implemented in 2010 will offer in-house verification, but not at
. the on-site inspection level. If the proposed amendments pass, the City will most likely still
highly rely on the work of a green point rater or LEED AP to submit the necessary documentation
to the City for a covered project. The City will verify their work in a similar fashion to that of the
Green Building Certification Institute (GBCI) or Build It Green (BIG). BIG and GBCI do not
perform on-site inspections City staff, unlike BIG or GBCI, does have the convenience of being
able to go on-site for some inspection, but does not anticipate this to be the primary form of
verification in the first phase. In your example of ensuring that the HV AC system is installed and
operating correctly to ensure energy savings, in the first phase this would be the role of the
commissioning agent employed by the owner. Staff anticipates the second phase of
implementation 2-4 years from now. This phase would include multiple qualified staff inspectors
and plan reviewers (i.e. Green Point Raters) that could adequately handle the volume of reviews
and on-site inspections necessary to verify all "green" aspects of the project.
3. Please explain the intent of developing an in-house Recognition Program and whether.
such recognition would really have the same effect as LEED Certification by GBCI or Build
It Green.
The intent is not for the in-house recognition program to compete with the LEED or Building It
Green recognition programs, or for it to have the same market effect. For the past year the City
has been providing in-house verification for commercial projects, and if the proposed
amendments pass, may provide it for residential projects. Although these applicants do not pay
for review and certification by GBCI or BIG, they still submit the same level of documentation to
the City, and the buildings are essentially performing the same. Staff feels that those projects
deserve recognition for those efforts. The program will not in any way deem that a project is
LEED Certified or Green Point Rated as these are registered trademarks. The City will most
likely provide some form of recognition stating successful compliance with the City Green
Building Program. Staff may use such language as the project achieved the LEED Certified level
through City verification, but not that the building is LEED Certified. Recognition is really a
form of differentiation. Since the City requires all of its new buildings and large renovations to
be green, recognition and differentiation will be less important in future years, unless a proj ect is
really doing something extraordinary.
4. If City building inspectors are to be GreenPoint Raters, should homeowners who use City
inspectors be able to get the Build It Green certification as they could through third party
GreenPoint Raters?
Staff believes Build It Green does allow City building department staff who are Green Point
Raters to provide rating services and certify projects through Build It Green., however there is not
sufficient time to confirm this.
5. Please explain whether in-house inspection tracking duplicates or complements Build It
Green's climate calculator.
They are two different things. As described under question #2, in the first phase of
implementation, the City in-house review will compliment Build It Green's current system,
however the project will not receive recognition by them or necessarily receive use of their
climate calculator. Remember, in-house review is merely and option. Projects still have the
choice to go through Build It Green instead. If they choose the City, the City has a separate
performance indicators form, similar to that of BIG's climate calculator that is used to track key
environmental performance indicators. BIG's climate calculator is more robust, but staff feels the
City's is adequate for assessing program performance. It is currently being used for non-
residential projects that don't have access to BIG's climate calculator. The results of the
environmental performance indicators are then converted to emission reductions for the City.
BIG's climate calculator is very helpful to the City, and to providing projects a better
understanding of their environmental performance. It is required to be submitted for all projects
undergoing BIG certification.
6. Please address the comments from Build It Green regarding the requirements for Home
Remodels and Retrofits, as well as their other comments.
BIG Comment #1 BIG recommends the City only recognize projects that have achieved BIG
certification.
Staff is interested in a recognition program for reasons explained under question #3. The actual
program set up will be open for discussion, however the City is looking at recognizing projects
for their achievements at all levels. Staff believes that all measurable efforts toward
environmental protection deserve recognition whether they are certified by BIG or GBCI, or not.
The City can also serve as a credible third-party. As stated under question #3, the intent of the
recognition program will not be to confuse the market place with another label, but to recognize
measurable achievements by projects that are verified by the City.
BIG Comment #2 BIG recommends higher permit fees for in-house verification.
If the amendments pass, City staff will propose increased fees that are cost-based for projects that
choose in-house verification for cost recovery purposes.
BIG Comment #3 -For rebuilds or additions over 1,250 sqft to an existing home, BIG argues that
,our proposed requirement of 70 points is too high.
This is really a question of how stringent the City would like to be. Staff agrees that it is more
difficult for an existing home to achieve 70 points than a new home. BIG's minimum level for
participation is 50 points, so staff assumed the City would be interested in a higher target as is set
for new homes. However, staff supports requiring 50 points instead of 70 for this category to
reflect the fact that achieving any point threshold is a new requirement compared to the original
ordinance. But staff also believes that moving down to the Elements level is to low of a bar for
projects of this size.
Regarding BIG's cost concerns -the City must document the cost-effectiveness of any energy-
efficiency-related,measures and provide that data to the CEC in order for the CEC to approve the
City's Energy-Efficiency ordinance. Thus, energy-efficiency components of the Green Building
ordinance will be thoroughly vetted by Staff, an energy efficiency consultant, and the CEC before
either the Green Building Ordinance or Energy Efficiency Ordinance becomes effective. Staff
intends to present the Energy Efficiency Ordinance to Council in the Fall. If any of the energy-
related measures are not cost-effective, they will not be proposed.
BIG Comment #4 BIG states that requiring existing homes to achieve an energy performance
level equivalent to that of a new home is to stringent.
The current requirement does not require the existing home to achieve its energy performance
based on new home requirements. The existing home as stated in BIG's comments may choose
the performance path for existing homes and achieve the energy savings based on the existing
home, rather than for the new home as BIG noted. This should alleviate BIG's concern that the
project would not be able to meet Title 24 standards. There may have been miscommunication
regarding this during a conversation with BIG yesterday.
Regarding BIG's cost concerns refer to above discussion as it applies here, too.
BIG Comment #5 -The existing multi-family renovation requirement is not practical given the
BIG existing multi-family requirements are not scheduled to be released until the end of2010.
Staff supports requiring 50 points instead of 70 for this category to reflect the fact that achieving
any point threshold is a new requirement compared to the original ordinance. Staff feels
comfortable that a 50 point requirement will serve as a good interim measure while the City
anticipates BIG's "Existing Home for Multi Family" requirements to be released.
TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: CITY MANAGER'S OFFICE
DATE: AUGUST 3, 2009 CMR: 327:09
REPORT TYPE: REPORTS OF OFFICIALS
SUBJECT: Adoption of a Resolution Amending the Structure of the Palo Alto/Stanford
Citizen Corps Council and Establishing the Citizen Corps CounciJ as a
Member of the Palo Alto Emergency Services Council
RECOMMENDATION
Staff recommends that the City Council adopt the attached Resolution regarding the Palo
Alto/Stanford Citizen Corps Council (CCC).
BACKGROUND
Citizen Corps is a best practice and model advocated by the federal government to integrate
volunteers, non-government entities, the private sector, and other groups with local programs
related to homeland security and emergency management (HS/EM). The City first formed a
Citizen Corps Council in 2004 (CMR: 517:04 and Resolution 8491).
The City's Municipal Code places executive authority for emergency services with the City
Manager, who is designated as the statutory director of emergency services, and further
establishes an Emergency Services Council (ESC).
Municipal Code Section 2.12.030(5) specifies that the membership of the ESC may include:
"Such representatives of civic, business, labor, veterans, professional or other organizations
having an official emergency responsibility, as may be appointed by the director with the advice
and consent of the city council."
The purpose of this Resolution is to revise the form of the CCC and establish its role in the ESC
as an advisory body to the City Manager.
CMR: 327:09 Page 1 of7
DISCUSSION
The CCC has been generally inactive since 2005. In 2006, then-Mayor Judy Kleinberg formed
the Palo Alto/Stanford Red Ribbon Task Force on Disaster Preparedness (RRTF). The RRTF
wound down in 2008, concluding that the CCC should be restructured to have a direct, formal
relationship to the ESC and the City Manager. With the transition in City Manager staffing, staff
opted to wait until this fiscal year to move forward on the CCC re-start.
\ When established in 2004, the Citizen Corps Council, through collaboration between its public
and private sector members, was designed to support the residents of and those working in Palo
Alto and the Stanford University community in preparing for and responding to local disasters.
This was to be accomplished through planning, education, training, and field services that target
the development and implementation of appropriate emergency management skills, activities,
and programs.
To further the engagement of civic organizations in emergency planning as contemplated by
PAMC Section 2.12.030(5), staff is recommending that the City Manager's Office coordinate the
formation of an updated CCC and that the Council approve the CCC's role in the ESC as an
advisory body to the City Manager.
Membership
There are various laws and regulations defining the City's roles and responsibilities, most of
which are detailed in the Emergency Operations Plan (EOP). The City's EOP contemplates
collaboration with community groups such as the CCC:
"It is the policy of the City of Palo Alto to build a resilient community. 'Community' is
defined in the broadest, most inclusive sense, encompassing residents, community based
organizations (CBOs), non-governmental organizations (NOOs), the private sector,
public and private educational institutions, faith-based communities, and other entities.
The City will work to build a resilient community by engaging and collaborating with
these partners in all phases of disaster management."
Accordingly, staff will undertake an outreach program to seek members from a wide range of
organizations.
The CCC Steering Committee will be selected by the City Manager and shall consist of the
following thirteen members:
(1) The following six City staff members:
• The City Manager and designees (two members)
• The Police Chief
• The Fire Chief
• The Director of the Public Works Department
CMR: 327:09 Page 2 of7
• The Director of the Utilities Department
(2) The fo llowing seven non-City-staff members from the:
• Neighborhood Sector: representative of the Palo Alto Neighborhoods (PAN) or other
entity
• Business Sector: representative of the Palo Alto Chamber of Commerce or other
entity
• Stanford University Sector: representative of the University, including all affiliated
entities, such as the Stanford Department of Public Safety (Police), the Department of
Environmental Health & Safety, SLAC or other entity
• Medical Sector: representative of the Stanford University Medical Center, Stanford
School of Medicine (including Blood Center), Palo Aho Medical Foundation, Palo
Alto Veterans Association (VA Hospital) or other entity
• Special Needs (Schools, Youth, Seniors, Animals, Shelters) Sector: representative of
the Red Cross, Avenidas, Channing House, Palo Alto Community Child Care, Lytton
Gardens, Stevenson House, the Palo Alto Unified School District, or other entity
serving supporting special needs populations, schools, shelters, animals or related
topics
• Volunteer Sector (two members): representatives of City-or Stanford-Sponsored or
Affiliated Disaster Volunteer Programs and programs with a formal relationship with
the City and/or Stanford University: Community Emergency Response Team
(CERT), Volunteers in Police Services (VIPS), Animal Services Volunteers (Police
Department), Explorer Scouts & Cadet Programs, Block Preparedness Coordinator
Program & Neighborhood Watch, "ARESIRACES, Fire Corps, Medical Reserve
Corps (Medical Reserve Task Force) or other entity
The CCC steering committee will handle matters of policy and finance, make recommendations
to the City Manager on items for consideration by the ESC, and facilitate emergency planning
and preparedness activities by the CCC general membership.
The City Manager shall approve the general membership of the CCC, which may include, but is
not limited to:
• First Responders -Fire, Emergency Medical Services (EMS), Police, and HospitaVEMS
• City and Stanford staff who administer or have nexus to disaster volunteer programs,
public education or other role related to the mission of the CCC
• Volunteer, Nonprofit, and Civic Organizations
• State & Federal Agencies: CRP, Cal Fire, USGS, Civil Air Patrol, National Guard, and
other representatives
• Faith-Based Organizations
CMR: 327:09 Page 3 of7
• Multi-Jurisdictional Entities: the San Francisquito Creek Joint Powers Authority, Fire
Safe councils, the Palo Alto Airport
• The Menlo Park Fire District (including the Town of Atherton and the Cities of Men 10
Park and East Palo Alto) & their Citizen Corps Council
• Other Neighboring Jurisdictions: government and non-government representatives,
including both the County of Santa Clara and the County of San Mateo
• Other entities that can materially further the mission of the Palo Alto/Stanford Citizen
Corps Council
Implementation Plan
Upon approval of the resolution, staff will commence the implementation plan to re-start the
CCC. Once the steering committee and general members are established, the committee will
designate the following work groups in order to manage community preparedness by objectives,
which may include:
• Neighborhood Sector Work Group: This work group will include representatives of
the Palo Alto Neighborhoods (PAN), the Stanford Campus Residential Leaseholders
(SCRL), and other residential members.
• Business Sector (EH&S, Security) Work Group: This work group will include
representatives of the private sector. The Palo Alto Chamber of Commerce
"Emergency Work group" is included here. This work group will work with staff to
develop and maintain a "recovery plan" to help the private sector minimize
operational disruptions during major disasters or criminal events. This work group
will include existing groups that handle hazardous materials (HazMat) or otherwise
pertain to industrial hygiene such as the Stanford Industrial Park EH&S Forum and
expand the network of such professionals. This work group will facilitate
Information sharing among various corporate/private security groups as well as with
the Palo Alto Police Department, the Stanford Department of Public Safety, and other
law enforcement agencies.
• Stanford University Sector Work Group: This work group will include
representatives of Stanford University. This group does not supplant any existing
organizations or reporting structures the University has, but rather seeks to form a
liaison between the University and the City for the CCC.
• Medical Sector Work Group: This work group will include representatives of the
Medical Sector. Hospitals, clinics, and other health care providers will develop plans
within their function and also, as practicable, work with other entities to improve the
resilience of key facilities and capabilities. For example, the Stanford University
Medical Center is working to form a "neighborhood" for their corridor to facilitate
resource sharing in a major disaster among hotels, retail, and medical providers.
CMR: 327:09 Page 4 of7
• Special Needs (Schools, Youth, Seniors, Animals, Shelters) Work Group: This work
group is responsible for topics pertaining to Special Needs Populations, Schools,
Youth, Seniors, Animals, and Shelters. Schools, including all public and private
schools (K-12, etc.), will also be a focus of this group, coordinating with the existing
City-PAUSD Emergency Preparedness Committee (Council Liaison). Animals: The
Palo Alto Police Department Animal Services and other groups involved in pets,
livestock, and other animals will participate in this group.
• Volunteers. Training and Exercise & Public Education Sector Work Group: This
work group will coordinate disaster-related vo lunteer programs and may provide
support to City, Stanford, businesses, and community groups in designing and
conducting drills to evaluate and improve disaster capabilities. This group will also
coordinate public education, including classes, fairs, events, marketing, etc. The
Police Department's Special Operations Group and the City's Special Events Team,
in conjunction with the analogous Stanford University groups, may coordinate with
this work group to optimize the utilization of volunteers in parades, sporting events,
and so forth.
The City Manager and staff members of the steering committee will determine the allocation of
City staff and other resources and likewise will oversee the utilization of the CCC to support
management objectives. For example, City staff may identify opportunities for the CCC to assist
in certain projects. In such cases, in addition to the work groups listed above, the CCC may form
additional work groups or other structures to address projects which may include:
• Emergency Public Information/Warning Workgroup: The group will develop plans
for a Joint Information Center (liC) and other means to coordinate among all entities
with Public Information Officers (PIOs), warning/alerting systems (such as CANS),
broadcast radio (KZSU) or other such systems.
• Technology Workgroup: This group will develop, evaluate, and recommend
technology tools and solutions to address the needs of CCC members. One early
project will be the development of a test bed for a wireless emergency computer
network to be called the Community Disaster Network (CDN). Per the request of
staff, this group will also assist the Police Department in the build-out and operational
support of the new Mobile Command Vehicle. The group will also work with staff
on projects related to Geographic Information Systems (GIS) and upgraded web site
capabilities, such as a common special events and training calendar.
• Midpeninsula Foothills Emergency Forum Workgroup: This group will implement
the MFEF, per the recommendations in the pending 2009 Foothills Management Plan.
In accordance with Municipal Code Section 2.12.080, the CCC shall also develop and submit to
the ESC a Community Emergency Plan (an annex or subplan to the City EOP) which "shall
provide for the effective mobilization of all the resources of this city, both public and private, to
meet any condition constituting an emergency".
CMR: 327:09 Page 5 of7
RESOURCE IMPACT
In 2007, staff reported: "While staff believes that the interdepartmental Steering Committee for
emergency preparedness is still the most effective approach to emergency and disaster planning,
it has become clear in the past year that resources are stretched to achieve what is required in this
area with current staffing.")
As fiscal and staffing constraints further tighten, the staff believes that the CCC will help ensure
public safety by 1) better engaging community members and resources, 2) fostering a "good
neighbor" policy with surrounding jurisdictions through regional problem-solving, and 3)
strengthening our position in finding sources of grant funding from government and other
organizations.
POLICY IMPLICATIONS
Approval of this Resolution is consistent with current City policies and regulations regarding
homeland security and emergency management.
The CCC will allow the City to more fully integrate community members and resources into
emergency planning and supports the three Council priorities of Civic Engagement for the
Common Good, Environmental Protection, and Economic Health of the City:
• Civic Engagement for the Common Good: The CCC will build upon the existing
partnership with the Palo Alto Neighborhoods (PAN) association through the Block
Preparedness Coordinator Program and expand the range and scope of opportunities for
the community to work with the City.
• Environmental Protection: The private sector is both a source of risk (hazardous
chemicals and materials) as well as potential regional asset (trained corporate response
personnel with specialized equipment) in the realm of environmental protection.
• Economic Health of the City: Efforts such as Destination Palo Alto (CMR: 146:08) to
attract visitors/shoppers to the City require not only the perception of safety but the actual
ability to prevent, respond to, and recover from criminal and other events. The CCC will
provide a link from the City to various private sector resources, bolstering resilience.
ENVIRONMENTAL REVIEW
This staff report does not represent a project under the California Environmental Quality Act
(CEQA).
I CMR: 213:07, p. 4 (April 24, 2007).
CMR: 327:09 Page 6 of7
ATTACHMENTS
Attachment A:
Attachment B:
Attachment C:
PREPARED BY:
Palo Alto Resolution (Draft) (undated)
Palo Alto Resolution 8491 (December 13, 2004)
CMR 517:04 (December 13, 2004)
KELL Y MORARIU
DENNIS BURNS
Interim Chief
Police Department
-1l'~Jl/~ d~ rd 1ll · NI~~
Chief
Fife Department
b ...
OFFICER KENNETH DUEKER
Coordinator, Homeland Security
Palo Alto Police Department
Assigned to the City Manager's Office
CITY MANAGER APPROVAL: ~Qc
CMR: 327:09
JAMES KEENE
(I City Manager
~.r
Page 7 of7
Attachment A NOT YET APPROVED
Resolution No.
Resolution of the Council of the City of Palo Alto Amending
the Structure of the Palo Alto Citizen Corps Council and
Establishing the Citizens Corps COWlcil as a Member of the
Palo Alto Emergency Services Committee
WHEREAS, the City of Palo Alto fonned the Citizen Corps Council on December
13, 2004 (Resolution No. 8491) in order to help coordinate volunteer activities that make the
Palo Alto Community safer, stronger, and better prepared to deal with any emergency situation;
and
WHEREAS, the City's emergency organization is set forth in Chapter 2.12 of the
Palo Alto Municipal Code, whichestabrrshes the City Manager as the Director of Emergency
Services and an Emergency Services Council; and
WHEREAS, Palo Alto Municipal Code section 2.12.030(5), provides that the
Emergency Services Council may include "Such representatives of civic, business, labor,
veterans, professional or other organizations having an official emergency responsibility, as may
be appointed by the City Manager with the advice and consent of the city council;" and
WHEREAS, the City recognizes that leveraging community resources and providing
the opportunity for enhanced community involvement in emergency planning can help the City
bolster its emergency preparedness and resilience in the event of a disaster; and
WHEREAS, amending the structure of the Palo Alto Citizen Corps Council will give
the City the ability to expand opportunities for community members and organizations to
participate in emergency planning, prevention, preparedness and response and integrate
additional community resources in to existing and future City emergency preparedness and
response activities; and
NOW, THEREFORE, the City Council of the City of Palo Alto does hereby
RESOLVE as follows:
SECTION 1. Designation ·of the Citizen Corps Council. Resolution No 8491 is
hereby rescinded and the structure of the Palo Alto Citizen Corps Council is hereby amended as
set forth in this Resolution.
SECTION 2. Mission and Responsibilities of Citizen Corps Council. Citizen Corps
Council responsibilities include:
a. Involving the community in prevention, preparedness, and response activities, and to
mobilize the community in a large·scale disaster event;
b. Identifying ways in which the community's volunteer resources can help meet the
needs of its first responders;
c. Coordinating with neighborhoods to design a systematic approach to educate the
public and encourage Citizen Corps participation;
090728 mb 826 1
NOT YET APPROVED
d. Spearheading efforts to offer citizens new and existing volunteer opportunities,
educational infonnation, and training courses to address crime, terrorism, and natural or
man made disasters;
e. Recognizing all activities that promote prevention, preparedness, and response
training as part of Citizen Corps;
f. Organizing special projects and community events to promote Citizen Corps
activities and recruiting volunteers to participate;
g. Fostering a feeling of mutual support by working with Citizen Corps Councils in
neighboring communities; and
h. Capturing innovative practices and reporting accomplishments to the Santa Clara
Operational Area coordinator for Citizen Corps.
SECTION 3. Structure and Functioning of the Citizen Corps Council. The Citizen
Corps Council (CCC) shall serve as an advisory body to the City Manager, who shall serve as
... -coordinator-and-primary~City-contactfor-the .program.-~_ __ .. __ ._. ____ ..
a. Steering Committee. The City Manager shall establish a CCC Steering Committee which
shall be responsible for determining matters of policy and [mance, making
recommendations to the City manager, and assistmg general CCC membership in
facilitating emergency planning and preparedness activities. The Steering Committee
may adopt bylaws or other policies to determine meeting times and other operational
matters consistent with this Resolution. The Steering Committee shall consist of the
following members:
(1) City Manager or designee (2 members)
(2) Police Chief
(3) Fire Chief
(4) Public Works Director
(5) Utilities Director
(6) Neighborhood Sector Representative
(7) Business Sector Representative
(8) Stanford University Representative
(9) Medical Sector Representative
(10) Special Needs Sector Representative
(11) Volunteer Sector Representatives (2 members)
b. CCC General Membership. General membership of the CCC may include representatives
of any entity involved in activities relevant to the mission and responsibilities of the
CCC, including but not limited to first responders, volunteer, nonprofit or civic
organizations, educational organizations, other local entities and state and federal
agencies, and other entities that can materially further the mission of the CCC.
c. CCC Working Groups. The Steering Committee may designate working groups
comprised of CCC members in order to effectively coordinate and further community
emergency preparedness activities.
d. Coordination Between CCC and City Staff/Programs. Upon request of the Steering
Committee and consent of the City Manager, and as time and resources allow, City staff
090707 rnb 8261079 2
NOT YET APPROVED
with relevant expertise may assist the CCC. City departments may also request
assistance from CCC membership as necessary.
SECTION 4. Citizen Corps Council Designated as Member of Emergency Services
Council. The. Citizen Corps Council is hereby designated as a member of the Emergency
Services Council pursuant to Palo Alto Municipal Code section 2.12.030(5). The Citizen Corps
Council shall participate in the Emergency Services Council by serving as an advisory body to
the City Manager and making recommendations to the City Manager regarding community
emergency and disaster planning, prevention, preparedness and response.
SECTION 5. The Council finds that this is not a project under the California
Environmental Quality Act and, therefore, no environmental impact assessment is necessary.
-__ INTROD..UCEDAND..£ASSE"""D-,-: _ ......... ______ .. ____ ._ .. .
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
Senior Deputy City Attorney City Manager
090707 rob 8261079 3
--.-~ .... ~-.. _-_. --.. ... -.. -~~
. ....,.. Attachment B
RESOLUTION NO. 8491
RESOLUTION OF THE COUNCIL OF THE CITY OF PALO
ALTO DESIGNATING THE EXISTING COMMUNITY DISASTER
PREPAREDNESS GROUP AS THE PALO ALTO
CITIZEN CORPS COUNCIL
WHEREAS, President George W. Bush announced the creation
Citizen Corps in the 2002 State of the Union address as a means
of mobilizing volunteer efforts among the residents of the
United States; and
WHEREAS, the goal of the Citizen Corps is to help
coordinate volunteer activities that will make our community
saferl stronger, and better prepared to deal with any emergency
situation; and
WHEREAS, the federal government has asked cities and
counti~s across the nation to create Citizen Corps Councils of
their own design I bringing together first responders, volunteer
organizations, law enforcement agencies, and community-serving
institutions; and
WHEREAS, the Citizen Corps Councils should consist of
existing programs such as Neighborhood Watch, Community
Emergency Response Teams, Volunteers in Police Service, and the
Medical Reserve Corps; and
WHEREAS, Citizen Corps Councils will give local leaders
the ability to expand opportunities for community members to
engage· in volunteer service that will support emergency
preparation, prevention and response; and
WHEREAS, the City of Palo Alto to wants' to renew its
commitment to the needs of the residents and businesses during
the times of natural or man-made disaster.
NOW, THEREFORE, the Council of the City of Palo Alto
does RESOLVE as follows:
SECTION 1. Designation of the Citizen Corps Council -
the Community Disaster Preparedness Group is' hereby designated
the Palo Alto Citizen Corps Council.
SECTION 2. The Citizen Corps Council shall be comprised
of the following programs: Neighborhood Watch, Palo Alto
Neighborhood Disaster Activities (PANDA), Volunteers in Police
041207 cl 0044402 1
Service, and th~ Medical Reserve Corps, in addition to other key
community organizations.
SECTION 3. Citizen Corps Council responsibilities
include:
a. Involving the community
preparednes's, and response
mobi 1 i ze the communi ty in a
event;
in prevention,
activities, and to
large-scale disaster
b. Identify ways in which the community's volunteer
resources can help meet the needs of its first
responde.rs;
c. Coordinate with neighborhoods to
systematic approach to educate the
encourage Citizen Corps participation;
design
public
a
and
d. Spearhead efforts to offer citizens new and
existing volunteer opportunities, educational
information, and training courses to address crime,
terrorism, and natural or man made disasters;
e. Recognize all activities that promote prevention,
preparedness, and response training as part of
Citizen Corps;
. f. Organize special projects and community events to
promote Citizen Corps activities and recruiting
volunteers to participate;
g. Foster a feeling of mutual support by working with
Citizen Corps Councils in neighboring communities;
and
h. Capture innovative practices and reporting
accomplishments to the Santa Clara Operational Area
coordinator for Citizen Corps.
Survey the conunun:(ty to assess increased awareness and Citizen
Corps participation.
SECTION 4 ~ Functioning of' the Citizen Corps Council
the'Citizen Corps Council shall meet on a quarterly basis.
II
II
II
?
SECTION 5. The Council finds that this is not a project
under the California Environmental Quality Act and, therefore,
no environmental impa~t assessment is necessary.
INTRODUCED AND PASSED: December 13, 2004
AYES: BEECHAM, BURCH, CORDELL, FREEMAN, KISHIMOTO, KLEINBERG,
MORTON, MOSSAR / OJAKIAN
NOES:
ABSENT:
ABSTENTIONS:
Vlce Mayor
ey
Attachment C
TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER
DATE: DECEMBER 13, 2004
DEPARTMENT: CITY MANAGER'S
OFFICE
CMR: 517:04
SUBJECT: ADOPTION OF A PALO ALTO CITIZEN CORPS COUNCIL
RECOMMENDATION
Staff recommends that Council adopt a resolution designating the existing Community Disaster
Preparedness Group as the Palo Alto Citizen Corps Council.
BACKGROUND
In the 2002 State of the Union message, President George W. Bush announced the creation of the
Citizen Corps as a means of mobilizing volunteer efforts among the residents of the United
States. The Citizen Corps was designed to incorporate existing programs such as: Neighborhood
Watch, Community Emergency Response Teams, Volunteers in Police Service (VIPS), and
Medical Reserve Corps. The stated goal is to have all citizens participate in making their
communities safer, stronger, and better prepared for preventing and handling threats of terrorism,
crime, and disasters of all kinds.
The Citizen Corps effort is coordinated at the local level by Citizen Corps Councils, which bring
together leaders from various sectors within the community. The purpose is to have key staff at
the table to manage resources and effectively coordinate training efforts to enhance community
awareness and response to emergencies.
Each state governor has appointed a state coordinator for Citizen Corps to facilitate the
implantation of the program. The state coordinator also serves as a contact with the Director for
Local Coordination from the federal Department of Homeland Security. The Director for Local
Coordination oversees the program, however it is important to remember that the key premise of
the program is that local elected officials, staff, and members of the community know best what
risks their communities face.
CMR:517:04 Page 1 of5
A grant program to support Citizen Corps Councils is being managed by FEMA. In order for a
community to receive FEMA funds, it must have a registered Citizen Corps Council coordinating
the work of its various Citizen Corps components. FEMA will pass all the Citizen Corps funds
through the states. In California the funds will go to the Operational Areas, where the
Operational Area Council (Emergency Preparedness Council in Santa Clara County) will
distribute the funds. Although the funds will be distributed to Operational Areas on a per capita
basis, local agreements have to be made on the distribution of the funds to the City level. In order
for the City to be eligible to receive its own grant funds, a Citizen Corps Council has to be
designated as the grant application endorsement body.
DISCUSSION
The City currently operates three federal Citizen Corps programs: Neighborhood Watch, Palo
Alto Neighborhood Disaster Activities (PANDA), and Volunteers in Policing (VIPS). A fourth
program, the Medical Reserve Corps, is operated by the Pacific School of Psychiatry, Stanford
University, and the Veterans Hospital.
Neighborhood Watch
Palo Alto's Neighborhood Watch (NHW) program began in 1981 and serves as a conduit
between the community and the police. The police department reaches many of the NHW groups
by way of neighborhood associations. Each association may have several members that play an
important role as a liaison between their neighborhood and the police. The objective has
continued to be to promote safety and security in neighborhoods. The basic crime prevention
goals are to protect self, be aware of your surroundings and any suspicious people or activities, to
be prepared and to know how to respond to home emergencies. NHW members continue to
participate in a variety of related programs and become leaders in the Palo Alto community.
The Citizens Police Academy (CPA) is one of the most valuable programs that emerged as a
result of residents and NHW members wanting to understand and work with the police. The
Citizens Police Academy provides the opportunity for Palo Alto community members to learn
more about the roles and responsibilities of local law enforcement. Both the NHW and the CPA
groups continue to increase in numbers. As a rule, the NHW members and Citizen Police
Academy graduates become supporters for the Palo Alto Police Department.
PANDA
Through the federally designed 20+ hour training program, PANDA members are equipped with
the skills to begin providing leadership and hands-on response at the neighborhood level in the
first 72 hours after a disaster, when professional first responders maybe overtaxed. These skills
include fire suppression, disaster medicine, light search and rescue, damage assessment, and
disaster psychology. With their distinctive green vests, hard hats, and equipped command posts,
they provide a crucial link between first responders and neighborhoods. The PANDA program
began in September 1999. There are now almost 400 members. Courses are offered eight times
throughout the year, training 80 to 100 new team members annually. Additionally, monthly
refresher or advanced classes are offered. Approximately 30 to 50 members attend each monthly
refresher/advanced class.
CMR:517:04 Page 2 of5
Staff from the Manager's Office, Fblice and Fire Departments are working collaboratively to
identify potential improvements to the Neighborhood Watch and the PANDA programs. The
creation of a Citizen Corps will be incorporated into this review, to help reduce any duplication
of efforts, which should result in stronger programs and increased public participation.
VIPS
The Palo Alto Police Department's volunteer program was established more than 20 years ago
with the goal of involving the public in crime prevention activities. Today, volunteers provide
valuable support to police officers and staff, thereby enhancing the quality and range of service
the department provides to citizens. The 22 volunteers currently on staff help maintain patrol
cars and equipment, assist the Alarm Permit Program, license bicycles, assist detectives, give
station tours, assist with data entry and filing, participate in community events, provide clerical
assistance, and assist with the Citizens' Police Academy. Police department staff continuously
looks for ways to bring citizens into the department to provide support and assistance. Last year,
volunteers provided more than 2,000 hours; nine volunteers received the President's Volunteer
Service Award for donating more than 100 hours in a ] 2-month period. The Animal Services
Division of the department operates a separate volunteer program. The Palo Alto Police
Department registered its volunteer program with the Volunteers in Police Service Program
(VIPS) in 2003. Volunteers in Police Service provides support to state, county, and local law
enforcement in establishing and maintaining volunteer programs.
Medical Reserve Corps
Following the events of 9-11, the National Center on the Psychology of Terrorism (NCPT)
identified a need for a Medical Reserve Corp focused on treating the psychological emergencies
resulting from natural disasters and traumatic events caused by individuals or terrorist groups.
The NCPT applied for and received a grant through the United States Department of Health and
Human Services to begin work on creating a network of volunteers within the Palo Alto
community that is trained and certified in providing up-to-date emergency mental health
services. The Palo Alto Medical Reserve Corps (MRC) is unique in the nation for its emphasis
on the provision of mental health services. The Palo Alto MRC provides training to licensed
mental health professional already serving as emergency mental health responders through
establishing response organizations. Treatment, services and additional training opportunities
will be offered to the community, first responders, and local leaders. Because of its unique
positioning, this program may eventually help to set national standards, which are both
empirically based and real-world tested, for psychological service provision during and after
maj or disasters.
The Palo Alto MRC is a cooperative endeavor that involves many members and organizations
within the community. The City of Palo Alto, Veteran's Affairs Palo Alto Health Care System
and many others have expressed roth their interest and commitment to this program. Doctoral
students from the Pacific Graduate School of Psychology also work collaboratively on this
project with the NCDPT Directors and the community.
CMR:517:04 Page 3 of5
Citizen Corps Council
The City organized the Community Disaster Preparedness Group in 2003. This group is
comprised of 37 participants from 22 different organizations. It meets on a quarterly basis, and
fulfills all necessary requirements to be the Citizen Corps Council for Palo Alto.
Upon City Council approval of the Citizen Corps Council, staff will register Palo Alto with the
federal government, enabling Palo Alto to develop grant proposals through the Citizen Corps
program. In addition to being eligible for grant funding, the Citizen Corps Council will:
• Match the needs of first responders with the skills and abilities of volunteers to make
their families, their homes and their communities safer from the threats of terrorism,
crime and disasters.
• Educate the public on safety, help citizens take an active role in protecting themselves
from harm, and teach citizens what to do in the event of a crisis.
• Spearhead efforts to offer citizens new and existing volunteer opportunities,
educational information, and training courses to address crime, terrorism, and natural
disaster risks.
• Promote all Citizen Corps programs and activities across the community.
• Capture innovative practices and report accomplishments that can be replicated in other
communities nationwide.
• Survey the community to assess increased awareness and Citizen Corps participation.
RESOURCE IMPACT
The adoption of a Citizen Corps will not add any additional impacts to current City operations.
POLICY IMPLICATIONS
This report does not represent any change to existing City policies.
ENVIRONMENTAL REVIEW
This staff report does not represent a project under the California Environmental Quality Act
(CEQA).
ATTACHMENTS
1. Resolution Supporting the Adoption of a Palo Alto Citizen Corps Council
PREPARED BY: Chris Mogensen, Assistant to the City Manager
Barbara Cimino, Disaster Coordinator
Susie Jones, Community Services Officer
CMR:517:04 Page 4 of5
CITY MANAGER APPROVAL:
Emily Harrison, Assistant City Manager
CMR:517:04 Page 5 of5
TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: CITY MANAGER
DATE: AUGUST 3, 2009 CMR: 349:09
REPORT TYPE: REPORTS OF OFFICIALS
SUBJECT: Acceptance of City Manager's Responses to Independent Police Auditor's
Systemic Recommendations Regarding the Children's Theatre Criminal Investigation
RECOMMENDATION
Staff requests that Council review, provide comments, and accept the City Manager's responses
to the systemic recommendations presented by the Independent Police Auditor in his report
regarding the Children's Theatre criminal investigation.
DISCUSSION
On June 1, 2009, the City Council received a report from Michael Gennaco, the City's
Independent Police Auditor, regarding his review of the Children's Theatre criminal
investigation (Attachment A). The City Council took various actions related to the report at the
June 1 and June 8 meetings, including issuing a formal apology to the employees of the
Children's Theatre. At the meetings, the City Manager indicated that he would return to the
Council with responses to the systemic issues identified atthe end of Mr. Gennaco's report. This
report provides the City Manager's response to these systemic issues.
On a general note, the City Manager will be working with the City Attorney, the City Auditor,
and Human Resources staff to develop a more formalized and unified approach towards future
personnel investigations involving City staff. Although each investigation has different
circumstances, there is a strong need for coordination among the key City departments
responsible for addressing and investigating these issues. The ability to have early and frequent
conversations regarding the approach towards personnel' investigations will greatly assist the
City team in resolving these matters in a fair and timely manner.
Recommendation 1: Allegations of financial crimes are often fraught with complexity.
Accordingly, it is recommended that in future cases, the Police Department should consult early
with the District Attorney regarding the structure, form, and strategies of the criminal
investigation.
CMR: 349:09 Page lof4
Staff Response: Staff agrees with the recommendation of the auditor and will consult with the
District Attorney's Office at the outset of potential criminal investigations involving complex
financial matters, particularly those involving City employees or City funds. In cases involving
City employees or funds, the Police Chief would consult with the City Manager and City
Attorney as appropriate.
Recommendation 2: In consultation with the District Attorney, the Department should determine
whether an independent financial audit should be requested before a financial crimes
investigation is begun in earnest.
Staff Response: In the Children's Theatre criminal investigation, the Police Department did hire
a former Internal Revenue Service (IRS) agent at the recommendation of the District Attorney to
assist with the investigation. In the future if a similar situation arises, the Police Department will
consult with the City Manager and the City Auditor to determine whether the situation warrants
an independent financial audit before a financial crimes investigation is initiated. Staff
recognizes that, in such situations, additional complex background research and work may need
to occur before a criminal investigation is warranted.
Recommendation 3: In similar cases, the Police Department should consider the advantages of
referring the investigation to an outside agency.
Staff Response: In the future, the Police Department will seek to determine whether another
agency could perform the investigation. This decision would be made on a case by case basis in
consultation with the City Manager,City Attorney, and the Human Resources Director. A
potential conflict of interest could exist if the Police Department investigates the wrongdoing of
City employees in the course and scope of their duties. It is the City Manager's expectation that,
in complex and high profile cases, staff would be more likely to refer these types of
investigations to outside agencies.
Recommendation 4: Investigators assigned to lead financial crimes investigations should have
training and experience in the conduct of financial crimes investigations.
Staff Response: Staff agrees with this recommendation and will work to ensure the appropriate
assignment of Police personnel if and when future investigations arise. Police Department
command staff will also be preparing a training schedule and proposed curriculum for review
with the City Manager.
Recommendation 5: Ongoing criminal investigations should not be tried in a public forum and
the Department should refrain from substantive public comment during a pending criminal
investigation.
Staff Response: Staff agrees with this recommendation. During criminal investigations, Police
Department staff will work with the City Manager to determine if and when public
communications are necessary.
CMR:349:09 Page 2 of4
Recommendation 6: In cases in which no charges have been filed, the City should consider the
advisability and appropriateness of releasing related police reports, taking into account any
legal requirements that may mandate release.
Staff Response: Typically, police reports are not released in these types of investigations.
However, based on previous public records litigation brought against the City as well as
subsequent case law involving similar issues in other jurisdictions, there has been a precedent set
to release investigation reports involving management employees accused of financial
misconduct. If a future similar situation arises, Police staff will assess the appropriateness of
releasing police reports after consultation with the City Manager and City Attorney. In. those
situations where this may be legally required, the City will make every effort to provide the
appropriate context for the release of the report and the investigation more generally.
Recommendation 7: Police reports should not include conjecture and investigative theories; the
Department should ensure that its detectives receive appropriate training about .compiling
appropriate police reports consistent with the Department's current Report Writing Manual.
Recommendation 8: Training should also be provided to Departmental staff on the need to
search for and document both evidence showing guilt as well as evidence indicative of innocence
consistent with the Department's Report Writing Manual.
Staff Response to Recommendations 7 & 8: Staff agrees with both recommendations.
Conjecture in police reports can demonstrate bias in a report and should be avoided except in
special cases where a report calls for the opinion of an officer based on that officer's specific
expertise in a given area. Police Department staff receive periodic training on report writing
through continuous professional development training seminars that each officer attends
annually. An update to the Department's Report Writing Manual is not warranted at this time.
However, the review of report writing mostly goes back to appropriate and effective supervisory
oversight and work with the Investigations team. The Department will be working to enhance
current investigation oversight practices. Additionally, Police Department command staff will
work to instill in staff members the practice and ability to pause at various points during the
investigation to seek advice from other department members on the approach and efficacy of the
investigation to that point. During high profile and sensitive cases, a team approach should be
utilized so that the investigation does not become the sole responsibility of one individual. This
. team approach will encourage dialogue between department members and will likely result in a
more coordinated and well-developed investigation.
Response to Request from Friends of the Children's Theatre for Legal Fees Reimbursement
While this request technically does not fall within the scope of the necessary staff response to the
auditor's recommendations, staff wanted to provide additional information given the public
attention to this matter; The City Manager and City Attorney believe that the best way to address
this request would be to return to Council in closed session to discuss the matter further. The
closed session would likely be scheduled for late September.
RESOURCE IMPACT
CMR: 349:09 Page 3 of4
There is no resource impact associated with the recommendations in this report.
POLICY IMPLICATIONS
This report is consistent with prior Council direction on this issue.
ENVIRONMENTAL REVIEW
The actions in this report do not constitute a project under the California Environmental Quality
Act (CEQA) guidelines; therefore, no environmental assessment is required.
ATTACHMENTS
Attachment A: Independent Police Auditor's Review ofthe PAPD Children's Theatre Criminal
Investigation
PREPARED BY:
CITY MANAGER APPROVAL:
CMR: 349:09
DENNIS BURNS
Interim Police Chief
~
KELLY MORARIU
Assistant to the City Manager
Page 4 of4
Attachment A
INDEPENDENT POLICE
AUDITOR'S REVIEW OF THE PAPD
CHILDREN'S THEATRE CRIMINAL
INVESTIGA TION
May, 2009
Prepared by Michael Gennaco
OIRGroup
323-890-5425
www.laoir.com
INTRODUCTION
On June 18, 2007 the Children's Theatre ('ICT") in Palo Alto was burglarized.
Officers from the Palo Alto Police Department responded and began a criminal
investigation into the burglary. As with any other burglary investigation, the employees of
the Theater were asked to identify missing items. Several days later, P APD was informed
that pursuant to an investigation being conducted by another law enforcement agency,
traveler's checks made out to employees of the Children's Theatre had been recovered.
Eventually, additional traveler's checks were located and presented to PAPD from another
source.
The traveler's checks that were located had not been reported by the CT employees
as missing from the burglary. As a result, suspicions were raised about actions of certain of
the CT employees. As a result, the tenor ofthe Police Department's investigation
transformed from a routine burglary investigation to suspicions of fraud and
embezzlement on behalf of certain CT employees. A detective was aSSigned full time to the
investigation to attempt to determine whether financial crimes had been committed by any
of the suspected CT employees.
As a result of the PAPD investigator's initial investigation, search warrants were
eventually applied for and o1:ltained for CT offices, residences of certain CT employees, and
storage lockers maintained by the CT. In addition, judicial authority was also obtained to
search lockers maintained by the Friends of the Theatre, a non-profit group formed to
support the CT. After the search Warrants were obtained and as the sear~h warrants for
the CT were being executed, the targeted CT empioyees were visited at work and asked to
travel to the police station for interviews. In the meantime, PAPD personnel were assigned
to search the remaining targeted locations. In order to effectuate the search of the CT, the
theatre was closed.
At that time, the investigation drew significant attention from the citizens of Palo
Alto and local media. As the investigation proceeded, questions and concerns were raised
by the community about the nature of the investigation. The investigation eventually
concluded with a public announcement that no criminal charges would be filed against the
targeted CT employees. At the same time, a redacted version of the lengthy investigative
report was voluntarily released by PAPD. Rather than resolve issues, the clOSing of the
criminal case and the release of the report only served to heighten concern about the
criminal investigation itself. As a result, your Council requested that the Independent
Police Auditor conduct a review of the investigation to assess the decisions made by PAPD
officials as the investigation progressed and offer any recommendations for reforms to
address issues arising out of that assessment. Please consider this report as the IPA
response to that request.
1
DISCUSSION
I. IPA's Assessment Protocol
It was not the intent of IPA to ttre investigate" the investigation in any formal sense.
However, in order to ascertain the thoughts, theories, and steps of the investigation, it
became important to talk with those involved or connected with the investigation. In the
same way, targets of the investigation and actual and potential witnesses to the
investigation had important perspectives to provide on these salient issues. Finally, it was
critical to review the investigative report and related materials in order to address issues
that arose after the investigation became overt. During this analysis, the IPA was able to
gain the cooperation of each of these important sources of information save one.
Unfortunately, the former and now retired Detective Supervisor assigned to lead the
criminal investigation for PAPD declined to speak with the IPA regarding his mindset and
investigative decision making. While that individual's participation in this process would
certainly have provided another important perspective, the cooperation from PAPD and
City officials as well as those directly and indirectly impacted by the criminal investigation
provided the IPA inquiry a wealth of information and perspectives from which to asses~ the
matter.
II. Answers to Questions Presented
The following questions were presented to the IPA for consideration:
Question 1: Based on the information initially presented, was it appropriate to
initially proceed with a criminal investigation?
Answer 1: Perhaps, but for the reasons delineated below, better alternatives
existed that could have eventually obviated the need for a criminal investigation.
Moreover, as detailed below, the Department may not have been appropriately equipped to
conduct a criminal investigation of the sort envisioned.
Question 2: Did the conduct of the criminal investigation follow accepted
practices?
Answer 2: The conduct of the criminal investigation was lacking in several
dimensions as detailed below.
Question 3: Were internal and public communications accurate and consistent
with the evidence obtained and accepted practices?
Answer 3: The decision about what information to release and when to release it
deserves to be revisited for future occurrences.
2
The review also requested recommendations for reforms which are included at the end of
this document. To further flesh out the answers to the questions presented above, it is
important to discuss relevant aspects of investigative decision making as the matter
progressed.
III. The Decision by PAPD to Pursue an Embezzlement Investigation
Certainly, PAPD's initial response to the burglary of the CT was appropriate and
professional. Moreover, when additional information was received about the recovered
traveler's checks, additional inquiry was appropriate about whether irregularities were ,
being undertaken by employees of the CT. While the failure to report the missing traveler's
checks to the responding burglary investigators could have been a simple failure to
remember to report them, a more sinister interpretation could have been, and clearly was
formulated by PAPD personnel. This interpretation was buttressed by the admittedly
"strange accounting" practices for expense reimbursement in place for CT employees. As a
result of these suspicions, the focus of the criminal investigation shifted from one of
commercial burglary to one of financial embezzlement. When the investigative focus '
shifted, a detective supervisor took over responsibility of the investigation. At that time,
some efforts were made to develop a "paper trail" through requests for documents from
City officials and financial institutions. However, most ofthe resource dedication at this
juncture oft-he investigation consisted of interviews with various city officials and other
individuals familiar with City procedures and the financial workings of the CT.
The point at which suspicion began to shift from that of a commercial burglary to a
potential embezzlement investigation was a pivotal moment in the case. At that point, the
Department was faced with various options besides the path taken, namely, the decision to
move ahead on its own with a criminal embezzlement investigation:
• The Department could have recommended that an independent audit be conducted
of the CT's "strange accounting" practices, reimbursement requests, contracts,
dealings with the Friends, and other assorted monetary dealings.
• The Department could have considered referring the matter to an outside agency.
• The Department could have requested an early consult with the District Attorney's
Office.
In retrospect, either of these options, or a combination thereof. may have been the
road better taken. If the Department had worked with City leaders to request an
independent audit, a disciplined professional group could have been tasked to identify
irregularities. A methodical paper trail could have been developed by persons trained,
experienced, and equipped to "follow the money" and then assess how the CT accounted for
3
its expenses, requests for resources and reimbursements, as well as any evidence of undue
financial gain. Once such an audit was completed, the information elicited from that
assessment could then have been used to revisit whether a criminal investigation was
warranted, and if so, what the scope of that investiga~ion should be. Alternatively, the
audit's results could have indicated that a criminal investigation was not appropriate but
that CT financial practices were in need of clear reform and/or that the audit results .
suggested potential violations of City policy indicating an internal administrative
investigation was necessary.
The only real potential disadvantage of conducting an audit of this sort was that it
could "tip off' those involved in potential criminal wrongdoing. While there is certainly a
likelihood that those gUilty of criminal activity might be placed on guard with any overt
financial review, it is much more difficult to cover the tracks of financial crimes cases than
other crimes. The paper trail is difficult to erase, particularly in these days of computer
databases and electronic storage and any real effort to destroy evidence often places the
perpetrator in peril of being caught not for the crime itself but for the criminal "cover up".
In addition, if there is any concern about records being destroyed during an audit,
protective mechanisms can be devised to lessen the likelihood of such occurring. Finally,
those suspected of criminal activity can be interviewed before the audit is begun, "locking
them in" to statements before they are aware of the suspicions against them.
The hand offto an outside agency also has inherent advantages over continued local
control. First, an outside agency may have more expertise and resources at its behest. It is
undisputed thatthe resources eventually dedicated by PAPD to this investigation placed a
significant strain on the Department's other law enforcement responsibilities. Second, an
outside agency will not be potentially subject to attacks from the community ef partiality,
i.e., that the "iconic" status of the CT and its managers caused PAPD to either pursue that
icon with too much or too little zeal. An outside agency is better insulated from both
ongoing and subsequent criticism that the local law enforcement agency may suffer, i.e.,
that a local law enforcement agency cannot be impartial in determining the appropriate
degree of investigative energy to be deployed because of its closeness to the situation and
the persons and organizations targeted for investigation. In fact, when PAPD determined
to continue on with the case, it clearly did recognize from the outset that it was
investigating an organization and individuals which were seen by many as pillars of the
community. That recognition raised concern from PAPD managers that a tepid
investigation might be viewed as an unwillingness to investigate robustly those entities and
may have resulted in conscious or subconscious overcompensation regarding the vigor
with which the investigation was conducted. In any event, outside agencies are certainly
more immune from charges of partiality, either in favor or against the subjects of potential
criminal activity.
4
For financial crimes cases, early and frequent discussion with the prosecuting
agency is a desirable and important feature. White collar crimes are usually complex and
unique and discussion with the prosecutorial entity regarding the necessary evidence and
potential defenses is a discussion that should be had early on in the life of an investigation.
In this case, PAPD eventually did bring the District Attorney's Office into a substantive
discussion but by then much investigative work had already been conducted.1 As a result,
the ability for the District Attorney to meaningfully counsel PAPD regarding the strength of
the evidence, the potential existence of significant defenses, and appropriate investigative
strategies was significantly diminished.
In sum, while PAPD cannot be faulted for its decision to proceed with a criminal
investigation based on the information initially available, it is mindful for future cases to be
aware that other options exist. That behlg said, the decision for PAPD to move forward
with a criminal investigation was not in and of itself inappropriate. It is quite likely that the
decision not to proceed with a criminal investigation would also have subjected the
Department to criticism, as it has regarding recent alleged acts of City employees in
another department that were not investigated criminally. Nonetheless, and as explained
further below, the execution of the criminal investigation was problematic in several
regards.
IV. The Assignment of the Investigation to a Detective with No Apparent
Formal FInanctal Crimes Training
By opting not to avail itself of these alternative paths, the Department was left to its
own devices, resources, and abilities to pursue the investigation. In this case, a veteran
police detective supervisor assigned himself to the case, with his supervisors' approval, and
was largely responsible for the shape and path of the investigation. Unfortunately, while
this individual had a wealth of experience and detective work in other criminal arenas, his
experience in working financial crimes case was not nearly as robust. Even more
importantly, this individual who quarterbacked the investigation may not have received
any formal financial crimes training in his years as a police officer. For financial crimes in
particular, training In how to conduct such investigations is critical. The assignment of an
officer to investigate this complex financial case with no significant formal training in the
1 While there was at least one telephone conversation about the matter with other District Attorney
representatives earlier on in the investigation, the understanding from this review was that the first substantive
meet to consider the state of the evidence with a representative of the District Attorney's Governmental Integrity
Unit occurred in November of 2007, after the Investigation had been well underway. It should also be noted that
the investigative report reflects a telephone conversation between the lead PAPD investigator and a
representative in the District Attorney's Office. While the report reflects support from the DA representative for a
criminal investigation It also recommends conducting an aUdit, a recommendation apparently not carried forward
by the Investigator.
5
area was an unfortunate decision that likely worked to the disadvantage of the resulting
investigation.
V. The Import of Interviews of City Employee Witnesses
As the criminal investigation progressed. numerous City employees were
interviewed in an effort to divine City policies regardIng reimbursement procedures,
approval requirements for contracts, how excess property was to be handled, and the like.
While there is no evidence of dissembling by those witnesses, the focus on ((appropriate"
procedures did not sufficiently consider what procedures and processes had been ('de
facto" tolerated over years and years of operation. In other words, the investigation failed
to sufficiently pursue and assess how City officials had been aware of, allowed, and
endorsed procedures that may have been against the letter of City policy but were both
implicitly and explicitly authorized for years.
For example, one focus of the criminal investigation was the allowance by CT
managers of the Friends to sell costumes that had been created with City funds. The
criminal investigators interviewed City officials and learned that in order to conduct such a
transaction, the CT managers would have needed to obtain authorization for the
transaction at the highest levels of City governance. However, the investigation also
learned that the decision to begin a costume sale did not originate from the current CT
managers and targets of the criminal investigation. Most importantly, the investigation
also learned that the costume sales had been occurring openly and with at least implicit
authorization for years, a fact fatal to any successful criminal prosecution. The failure to
recognize the import of this information was a Significant shortcoming of the investigation.
This recognition fail~re also appears in the investigative report prepared in thIs
matter. For example, the report discusses an incident in which a City employee allegedly
discovered a "misappropriation" by the CT· Director at which time he informed the Director
to cease the activity but she did not do so. The witness further indicated that he then
requested an audit be conducted of CT operath;ms but that because of a friendship with the
Director, the audit did not occur. The report however, fails to recognize the import of this
exchange. If "misappropriation" is in fact going on and the City indeed became aware yet
took no action to learn more about the actions, an embezzlement criminal action cannot
survive years later.
Later in the report, a witness is reputed to have told the investigator that the CT
Director admitted that she was aware of policy but failed to follow it. The witness further
indicated, according to the report, the Director fai~ed to follow the policy, her supervisor
failed to follow the policy, and the staff of the witness failed to follow the policy. Again, the
import of this statement is apparently not recognized by the investigator. The unchecked
policy violations that immediate supervisors and other City staff became aware of and
6
chose to do nothing about provide a strong defense to the CT Director with regard to
potential criminal charges.
From a review of the evidence, it appears that with regard to every other allegation
of criminality, the City's awareness, authorization, and/or tolerance of the actions of CT
managers was devastating to any viable criminal prosecution of the acts being investigated.
In other words, the City's awareness, toleration, and endorsement of the various financial
undertakings by CT authorities provided a complete defense to the criminal charges being
considered. The failure of the investigation to fully understand the import ofthis potential
defense and learn the depth of any such authorization over the years is a fatal flaw.
VI. The Search of the Children's Theater, Personal Residences, and Interview
of CT Officials
After the interviews of the City officials and other witnesses had been undertaken and
some financial documents had been collected, the investigation proceeded to another
phase. At this pOint, affidavits were prepared by the investigatiVe team requesting judicial
authority to search the CT office, residences of CT officials, lockers of the CT and CT
officials, and lockers maintained by the Friends. While the application for the search
warrants was approved by the judge, there is some question about the appropriateness of
the affidavits. The affidavits only contain evidence indicative of guilt and do not iterate the
potential defenses of prior authorization exemplified in the proceeding section. In
addition, it was learned during this review that rather than seek counsel and authorization
from the Deputy District Attorney of the Government Integrity Unit who had been
previously consulted, the affidavits were apparently presented for review to a Deputy
District Attorney unfamiliar with the investigation. As a result, the sifting mechanis.m role
often assumed by the District Attorney's Office was compromised as a result of the initial
consulting Deputy District Attorney not having the opportunity to review the search
warrant applications.
Once the search authorization was obtained, a plan was devised that while the
search of the numerous locations was underway, the subjects of the criminal investigation
would be interviewed. It has been suggested that in order to ensure that the CT employees
would be found at work, recommendations from persons outside the Police Department
that the search of the CT be conducted while the theatre programs were on hiatus were not
accepted. In any event, while there were apparent attempts to conduct the search at the CT
in a way to shield children partiCipants from the law enforcement activity, the success of
these efforts is still open to considerable debate.
As the search and interview operation progressed, it became apparent that the plan
to interview all CT subject employees and all of the search locations was impracticable. As
a result, padlocks were placed on several of the search sites and they were searched several
7
1 ,
days later. More problematic, while the lead subject did agree to be interviewed and was
interviewed for several hours, two other subjects of the investigation were not
interviewed. The fallure of the Department to interview these two individuals on the date
of the search resulted in them never being interviewed as part of the criminal investigation.
Accordingly, the inability of the Department to take advantage of their availability on the
date of the search resulted in critical information, namely the account of two of the subjects
of the criminal investigation not being available to that investigation.
VII. The Processjng of Evidence Obtained During the Search
The search of the CT office, the storage spaces, and residences of the subjects of the
investigation resulted in a raft of documents and other materials. The sheer number of
materials seized overwhelmed the resources available for the investigation. As a result, a
significant portion of the materials collected were not analyzed by investigators and the
depth of the import of some documents was not realized. The investigative report itself
admits that not all of the seized documents were analyzed during the criminal
investigation. Subsequent to the closure of the criminal investigation, other Interested
parties have actually identified documents seized by the investigators that contain
significantly eXCUlpatory information.
Costume Sales
The following documents were retrievable pertaining to the costume sales issue:
• A 2002 memorandum to the City Manager from the CT Director requesting
authorization to donate costumes to the Friends. The approval signature lines
include representatives of Finance, the Director of Community Services, the Director
of Arts and Culture, and the Assistant City Manager. Both the Director of Arts and
Culture and Assistant City Manager's signatures are identifiable.
• A 2004 memorandum to the same effect with similar approval signatures.
[Apparently, no costume sale was held in 2003.]
• An email message in 2006 from the City Community Services Director to
Department Heads setting olit new disposal procedures for department surplus
property.
• An email message in 2006 from the CT Costume Supervisor to the CT Director
requesting direction on whether she needed to fill out a surplus property form for
approval before discarding damaged costumes and the new procedures' on how to
provide costumes to the Friends for sale. The CT Director than forwards these
questions on to an Administrative Services employee.
8
• A return email in 2006 from the Administrative Services Deputy Director to the
Children's Theater Director indicating that the request had been passed on the City
Attorney and City Auditor for feedback given newly instituted policies and
procedures. The email indicates that if there are any issues that need vetting, he
would do so.
• An email message in 2006 from the CT Costume Supervisor to staff detailing a list of
discards for either the Friends costume sale, the EPA job reentry program, or to be
thrown away.
• Several follow up emails in 2006 from the CT Costume Supervisor updating CT staff
on additional information regarding costumes to be donated or discarded.
• An email from the Administrative Services Manager to the CT Director indicating
that current practice is "consistent with the new policy and procedures".
• A flyer announcing the·2006 costume sale by the Friends of the Theatre to be held in
the Ballroom at the Lucie Stern Community Center.
The above documents indicate that the CT Costume Supervisor was made aware of the
new policies for handling surplus property instituted in 2006 and asked her supervisor
whether current practices o(donating to the Friends [which had been authorized in 2002],
the EPA job reentry program, or throwing damaged costumes away was still acceptable.
The CT director forwarded on to the Administrative Services Deputy Director the questions
raised by the CT Costume Supervisor and received a response indicating that he would
forward the question to the City Attorney and City Auditor and that if the current
procedures needed to be revised, he would let CT staff know. In the meantime, the CT
Costume Supervisor dutifully kept track of costumes to be allocated waiting for an answer
from the City. The group of documents finishes with a flyer announcing the fall 2006 sale
of costumes by the Friends.
This trail of documents demonstrates the existence of an overt practice before 2006
of allowing costume sales to be donated to the Friends. When discard practices were due
to be changed in 2006, CT Staff dutifully asked the City whether their practices also needed
to be changed. After hearing from the Administrative Services Director that the current
policies were consistent with the new policy/later that year the costume sale was held.
Surely, the City was placed on notice about the costume sales in 2006 and could have
caused the CT to change their practices at that time had it desired. The evidence also
shows intent on behalf of CT to comply with any new practices and a search for direction
froin City supervisors on how to proceed. The existence of this group of documents is most
likely fatal to any potential prosecution for the sale of costumes by CT staff in that it
demonstrates both City authorization and awareness of the costume sale procedures and
9
the intent by CT staff to follow any new procedures regarding surplus sales instituted 'by
the City.
Agreements for Special Performances
The following documents were retrievable pertaining to the agreements for special
performances:
• A 1988 agreement between the Friends and the Children's Theater whereby the
Friends will hold fund raising events for the CT.
• A 1996 agreement between the Friends and the Children's Theater whereby the
Friends will receive funds from the Children's Theater in exchange for volunteer
help provided by the funds with the understanding that all funds to the Fri~nds will
be used for the benefit of the CT program. The contract is apparently signed by
someone from the City Manager's, Risk Manager, Purchasing and Contract
Administration Departments.
• A 1997 agreement to the same effect.
• A 1998 agreement and purchase order to the same effect.
• A 1999 agreement and purchase order to the same effect.
• A 2000 agreementto the same effect.
• A 2002 agreement and purchase order to the same effect.
The above documents first illustrate a years long practice of contractual arrangements
between the CT and the Friends. The documents are accompanied by receipts showing
payment in support of the contract. Some of the agreements have empty boxes on approval
signature lines for various City entities. On the other hand, some of the agreements do
have approval signatures for City entities, including the City Manager's Office. (There was
no evidence put fol'\tVard in the criminal investigation that these signatures were not actual
signatures of the various department representatives.) While the existence of these
contracts may be contrary to City ordinance and should have been vetted and approved by
both the City Attorney's Office and possibly City Council, the evidence of the contracts and
accompanying purchase orders indicates City knowledge, tolerance, and apparent
authorization for the CT staff to enter into such contracts. The fact that the City paid on the
contracts is further evidence for CT staff to believe that they were authorized to continue to
enter into such contracts. The failure of the City to correct this belief likely provides a
complete defense to CT staff to any criminal prosecution focusing on the execution of
"illegal" contracts.
10
Inquiry Whether the Friends Could Pay CT Staff Expenses
The following documents exemplify CT Staffinquiring of City officials whether
certain actions are permissible:
• An email from the CT director to her supervisor regarding whether the Friends
could pay for CT staff to attend a music festival in Atlanta. The email asks that the
supervisor check into this and ends: "We want to be sure we don't end up doing
something that is deemed unacceptable or can be considered a gift."
• A forwarding email from the supervisor to the City Attorney's Office requesting an
opinion.
• An opinion from the City Attorney's Office authorizing the request and indicating:
"The employees attending need not report the value of the travel OR worry about
the gift limits."
Again, this email chain is indicative of CT staff seeking approval to not violate City policy
and requesting and receiving assurances from the City Attorney that they are not doing so.
Requests for Other Financial Adjustments
The following documents exemplify the looseness with which financial accounts are
"adjusted" with the full knowledge and cooperation of City staff:
• An email "ok" to the CT director from City staff to "adjust)) an account from the
Community Theater to the Children's Theatre because of a mistake made by City
staff.
• An em'ail from the CT Director to her supervisors requesting authorization to
transfer funds from an overspent account because of mistaken charges to that
account and a list of the various mistaken charges. A reply email authorizing the
request for transfers.
• An email from a City official authorizing the juggling of moneys from various
accounts.
The emails above suggest issues regarding the moving of monies among contracts and
accou~ts and "mistakes" by both City and CT staff regarding the charging of expenses to
wrong accounts. However, the em ails also are indicative of CT Staff bringing to the City's
attention such mistakes, requesting authorization to adjust accounts, and receiving such
authorization. The above emails are tip offs to faulty and insuffiCiently monitored
accounting. They also, however, provide an excellent defense to any criminal charge of
embezzlement.
11
A fact soon learned by the criminal investigators and documented in their
investigative report is the disarray of record keeping and documents seized from the
various sites. While that disarray is indicative of poor record keepIng, the disarray is not
consistent with the investigator's criminal theoryj namely, the existence of a group of crafty
criminals carefully counting the days in which the traveler's checks could be cashed free of
detection from the City. Rather the more accurate picture painted by what the
investigators found when they searched the office and other locations was a "rat pack"
collection of materials in disarray that provide no particular sense of purpose, but that
contained a good deal of exculpatory information for those with the stamina, acumen, and
resources to sort the documents out.
The failure of the investigation to possess sufficient resources to process the seized
materials and gain understanding from them caused a good deal of exculpatory material
not to be sufficiently considered by the criminal investigation. Moreover, the gestalt of
what was learned the day of the search aboutthe recordkeeping style of the subjects of the
investigation was not consistent with the theory promoted in favor of criminal prosecution,
VIII. The Determination Not to Interview Certain Witnesses
The actions of the Friends, a non-profit support group of the CT, became a centerpiece
to some of the alleged criminal activity. At some point, the investigator declined to
interview the Friends witnesses due to their having obtained counsel and a stated view
that, as a result, those interviews would have been unhelpful to the investigation.
However, investigations should seek out all potential sources of relevant information. The
mere fact that a witness has retained counsel does not mean that the witness account will
not be helpful to the investigation.
Moreover, an investigator should not equate eXCUlpatory information with unhelpful
information. In many ways, the plumbing of information tending to exonerate criminal
subjects is more important than incriminating evidence. A full examination of potentially
exculpatory information is essential for investigators and prosecutors to determine
whether a crime has been committed and the earlier such information is accessed and
analyzed the better. Any concern that the attorney will be able to strategically gain
knowledge about the details of the investigation can be mitigated by the careful
development and asking of questions. Finally, the mere fact that a witness has retained
counsel does not necessarily mean the witness will be unhelpful; particularly in financial
crimes investigations the wise counsel of an attorney instructing the witness of the need
for honesty will often result in more truthful information being provided to the investigator
than less.
According to the investigative report, another witness to the investigation was not
interviewed due to "scheduling conflicts", Such scheduling conflicts should not have
12
prevented the investigator from obtaining information from this witness. The import of
this investigation and the potential consequences to the City and the subjects of the
investigation demanded a greater effort to obtain any relevant information this witness
could provide. Sometimes grave illness, an ability to locate a witness, great distances, and
non-cooperation can justify the failure to obtain information from a witness; the Report
however, only points to "scheduling conflicts" as a reason for this investigative lead not to
have been pursued.
The failure of the investigation to fully explore the authorization provided CT
managers to conduct the activities that were the focus of the investigation, the decision not
to interview Friends witnesses and another witness because of scheduling issues, and the
failure to fully assess documents that supported an "authorization" defense all point to the
investigation's tendency to ignore facts that suggested a crime may not have been
committed. This failure to evaluate exculpatory information is apparent throughout this
criminal investigation. For example, the original suspicion cast on CT staff stemmed from
their failure to report the missing traveler's checks in the original burglary report.
However, as learned later in the fall, the CT staff also failed to list $17,000 worth of video
projectors as missing during the burglary. This fact tends to suggest a reassessment that
the failure to report the missing traveler's checks may have been more demonstrative of
poor inventory tracking by CT staff rather than a calculated attempt to shield them from
public purview.
As new facts become available, an investigator must reassess the viability of a
criminal prosecution and retain the flexibility to discard original suspicions. Moreover,
complete witness statements must be obtained and analyzed for evidence helpful and
harmful to the criminal investigative theory; certain witness statements cannot be
selectively "shoehorned" to fit the theory while others are discarded. A robust
investigation develops and seeks all of the facts; those helpful to show gUilt as well as those
pointing toward innocence. An investigation that fails to pursue all the relevant facts is not
a complete investigation.
These concepts are well recognized by the PAPD. In its Report Writing Manual, it
explicitly states: "Normally facts which tend to minimize or disprove the subject's guilt
should be documented in your report." It is apparent that in this case, the investigative
report did not fully subscribe to this principle.
IX. The Role of the City Manager In the Investigation
Numerous allegations were raised about the City Manager's role in the criminal
investigation. This review revealed no significant evidence that the City Manager
improperly directed the police investigation, including which witnesses to interview or
how to proceed with the investigation.
13
X. Public Comments from PAPD During an Ongoing Investigation
. At times, police officials commented publicly about the pending criminal investigation.
For example/ at one pOint, a witness who had been interviewed by the investigation
reported to the media about his account of the interview. In response. the Department
contested the witness' account of the interview by referring to the tape recorded witness
interview. While it is sometimes difficult to stand mute while a witness is contesting the
integrity of an ongoing investigation, the. better practice is to hold comment until the
investigation has taken its course. To do otherwise, is to potentially compromise a pending
investigation.
XI. The Preparation of the Investigative Report
From the inception of the financial crimes investigation, a narrative report was
prepared by the lead investigator. In several respects, the report lacks the dispassionate
qualities expected of police reports. First, the report is an amalgam of facts, theories, and
conjecture. While summaries of interviews and investigative tasks provide a helpful road
map to the investigation and are appropriately part of a report, investigative reports
should be free of conjecture, inferences, and investigative theories. In addition, extraneous
information and unattributed and irrelevant statements and acts regarding the subjects of
the investigation should not be included in the official report. For example, unless a
connection can be shown, the fact that CT managers may have gone on expensive trips are
not appropriate for inclusion into a police report. Finally, the use of first names when
referring to some of the witnesses detracts from the professionalism expected of police
reports.
These concepts are recognized and accepted by PAPD. In the I?epartment's Report
Writing Manual, it is noted that "a police report should be written using facts, not
conclusions or opinions. Avoid making inferences about what something means, and
instead just stick to reporting facts." It is apparent that the report eventually released by
the investigator in the CT investigation did not always subscribe to these admonitions.
XII. The Statute of Limitations Issue
The Statute of Limitations issue and the failure of the investigation to recognize how
a prosecution was time barred is worthy of further comment. Crimes such as
embezzlement have provisions for extending the ordinary three year statute oflimitations
to the time at which the scheme is discovered or should have reasonably been discovered.
This legal extension exists so that persons who successfully conceal their financial crimes
can be held criminally accountable when those crimes are discovered.
14
However, in the instant case, the extension of the statute of limitations was not
available since each of the acts investigated had been conducted openly by each of the
subjects. In other words, the weight of the evidence was that the CT employees did little, if
anything, to hid~ their actions or cover their tracks. As exemplified above, numerous
communications were discoverable among the seized materials demonstrating overt
submissions and questions by the subjects to City authorities regarding each of the type of
transactions investigated. The City was placed on clear notice regarding the actions that
became the subject of the criminal investigation, yet little action was taken to address or
sanction the activities. To the contrary, many of the actions were authorized, and thus,
there was no basis for the tolling of the statute of limitations in this case.
XIII. The Stolen Traveler's Checks: Lack of Conversion
As noted above, the criminal investigation was instigated when stolen traveler's
checks were recovered by a neighboring agency. Those checks became the starting point of
the ensuing criminal investigation. However, as eventually pointed out by the District
Attorney, because the checks had never been "converted" by the subject employees of the
CT, an essential element to the misappropriation charge was arguably misSing. The
investigation apparently learned this fact very late in the investigative process. An earlier
consult with the District Attorney could well. have educated the PAPD investigation of this
fact farther upstream and curtalled the need to criminally investigate these transactions
since a key element of the crime being investigated might never be provable.
XIV. The Decision to Close the Investigation and Release a Redacted
Investigative Report
At some point, PAPD revisited the Deputy District Attorney and was told definitively
that there was no case in support of criminal prosecution. However, rather than quietly
close the investigation, the decision was made to release a redacted copy of the
investigative report to the public. This controversial decision was not without some logic.
First, after the investigation became known in the community, there was considerable
pressure from the media, the general public, and elected officials to provide information
about the criminal investigation. Second, it was expected that should the City decide not to
release the report, media outlets and other community entities would seek access to the
report through a Public Records Act request, and the City might well be required to release
the report should it attempt to shield it from public purview.
As a result of these concerns, but contrary to the advice of the Deputy District
Attorney, the report was released. Once released, the report did serve the purpose of
transparency. In fact, and ironically, much of the tumult and criticism raised by concerned
community members about the criminal investigation came from exposure and access to
the information contained in the report ~~ information that might not have been available if
15
the report had not been released. Accordingly, the release of the report did better inform
the public about the nature of the criminal investigation.
On the other hand, various aspects of the report made its release problematic. First,
unlike situations in which criminal investigations result in charges being filed, in this case
no charges were filed. Accordingly, activities about targets of the investigation that were
not subj ect to criminal prosecution were detailed in a report for all to see. While such a
release might be appropriate and helpful to subjects who are exonerated by the criminal
investigation, what made the release of the report in this case particularly problematic was
the continued insistence by PAPD authorities that the subjects of the investigation had
actually committed the criminal acts alleged. A PAPD press statement accompanying the
release of the report indicated that there was evidence of "significant instances of serious
financial misconduct and other possible criminal activity." The release of the report was
not accompanied by a clean bill of exoneration by investigative authorities, rather, the
Department continued to maintain that criminal acts had been committed but that
technicalities such as the statute of limitations were the only reason these subjects could
notbe brought to answer in a criminal prosecution.
The combination of the release of the report and the use of information in the report
to continue to assert that the criminal subjects actually committed criminal acts is
problematic. This is particularly so in this matter in which complete defenses available to
the subjects of the investigation may exist but are not fully set out in the report. And it is
inaccurate to assert that the subjects committed the alleged criminal activity but that
prosecution was not available be<;ause of the technical defense of the statute of limitations.
In this case, the real defense of authorization meant that no criminal actions had been
committed by the subjects.
,Finally, the way in which the report was prepared did not lend itself to public
release. As noted above, the report was an amalgamation of facts, witness summaries,
investigative tasks. as well as investigative theories, unsupported inferences, and
conjecture. Moreover, because the investigation was not focused on cataloguing and
collecting eXCUlpatory evidence, such evidence is not prominently featured in the police
report. In short, the way in which the report was prepared led to justifiable criticism of the
report when i~ was released.
CONCLUSIONS
This review is not intended to render judg~ent on the gUilt or innocence of the
subjects of this investigation. The decision by the District Attorney not to file charges has
already answered that question. Rather, this review is intended to provide an analysis as
to why the investigation took the path it did and suggest areas for reflection and reform.
However, it would be remiss to not indicate that there was no evidence from this review
16
that indicated malice on behalf of anyone affiliated with the investigation, either from the
Police Department or the City. While miscalculations were made during this investigation,
they can be attributable to the milieu in which the suspicions arose and a lack of training
and expertise rather than a calculated plan to investigate and attempt to prosecute certain
individuals, exculpatory evidence notwithstanding. In addition} the poor recordkeeping,
laxity of control, intermixing between public and private entities, poor and outdated
financial practices for reimbursement of CT employees, and the toleration of these
arrangements by City officials that went outside the bounds of appropriate checks and
balances presented a perplexing fact set that was left for PAPD authorities to attempt to'
sort out. As it turned out and for the reasons elicited above, a criminal prosecution was not
viable. However, had both CT employees and City oversight'officials been more attentive
over the years to these administrative financial matters farther upstream, the trauma
wrought on the City and its community by the resulting criminal investigation could have
well been avoided.
With regard to the way financial matters were handled by the CT, the City and its
employees, this review found no heroes. The "system" set up decades earlier by which CT
employees could seek reimbursement was an outdated relic that should have been
reformed years ago. Saddled with such a system, the CT employees dId a poor job of
ensuring appropriate reimbursement, at times seeking multiple reimbursements for the
same expenses and then at times not seeking reimbursement at ail for legitimate expenses.
There were no effective "checks and balances" to the reimbursement system and the
arrangement was permitted to bounce around unregulated and largely unmonitored for
years and years. While there were some attempts over the years during the evaluation
process to message the CT Director of the need to improve accounting practices, there was
no significant follow up to ensure that the accounting practices were, in fact, improved.
The same can be said with regard to the relationship between the CT and the
Friends. Monies and resources were permitted to slosh between the two entities with very
little questioning of whether the transactions were appropriate and consistent with City
policies. Because the entities were seen as working together for the common good, persons
in positions of authority not only tolerated the arrangement but at times endorsed and
authorized it, sometimes contrary to City policy.
As a result, when the police began to be exposed to this "crazy accounting system",
suspicions were raised that persons were stealing city monies. Instead of seeking the
answers through an audit or consulting with an expert, the Police Department decided to
go it alone with a lead investigator not trained in the niceties of financial crimes
investigations. The resulting criminal investigation inevitably was destined to make
mistakes as detailed above. The mistakes of the criminal investigation were made available
to all when the investigative report was released for public scrutiny.
17
It cannot be disputep by the managers of the CT that legitimate expenditures and
reimbursements did not always match up. It also cannot be divined the degree to which CT
employees may have "benefited" from the discrepancies, if at all. On the other hand, the
financial records are iI,1 such disarray that the CT employees may be owed further monies
for expense reimbursements not sought While these discrepancies are disconcerting, the
way in which the City failed to monitor, regulate. and reform the system left any potential
criminal case dead upon arrival.
Many in Palo Alto would agree that there are heroes with regard to the years of good
work of the CT. Once the investigation became overt, CT supporter have been concerned
that the financial irregularities uncovered that ended up not being prosecutable not detract
from the positive experiences the CT provided youngsters in Palo Alto. In fact, because the
energies of the CT managers were almost exclusively focused on providing this service, the
financial issues of keeping track of money and operating according to Hoyle unfortunately
took a back seat. The positive aspect of the attention drawn to this affair is that state of the
art financial systems will replace the anachronistic ones and appropriate controls will
ensure that the CT's financial recordkeeping will not jump the rails in the future. ,
SYSTEMIC RECOMMENDATIONS
1. Allegations of financial crimes are often fraught with complexity. Accordingly, it
is recommended that in future cases, the Police Department should consult early
with the District Attorney regarding the structure, form, and strategies of the
criminal investigation.
2. In consultation with the District Attorney, the Department should determine
whether an Independent financial audit should be requested before a financial
crimes investigation is begun in earnest.
3. In similar cases, the Police Department should consider the advantages of
referring the investigation to an outside agency.
4. Investigators assigned to lead financial crimes investigations should have
training and experience in the conduct of financial crimes Investigations.
5. Ongoing criminal investigations should not be tried In a public forum and the
Department should refrain from substantive public comment during a pending
criminal investigation.
6. In cases in which no charges have been flled, the City should consider the
advisability and appropriateness of releasing related police reports, taking into
account any legal reqUirements that may mandate release.
18
7. Police reports should not include ~e and ~ the
Department should ensure that its detectives receive appropriate training about
compiling appropriate police reports consistent with the Department's current
. Report Writing Manual.
8. Training should also be provided to Departmental staffon the need to search for
and document both evidence showing guilt as well as evidence indicative of
innocence consistent with the Department's Report Writing Manual.
19
TO: HONORABLE CITY COUNCIL
FROM: CITY MANAGER DEPARTMENT: UTILITIES
DATE: AUGUST 3, 2009 CMR: 347:09
REPORT TYPE: REPORTS OF OFFICIALS
SUBJECT: Adoption of a Resolution Approving Amendment One to the Northern
California Power Agency Third Phase Agreement for Western
GeoPower Incorporated Renewable Energy Power Purchase
Agreement for the Acquisition of up to Seven Average Megawatts of
Energy over Twenty Years at an Estimated Cost Not to Exceed $128
Million
RECOMMENDATION
Staff recommends that the Council adopt a resolution, authorizing the City Manager or his
designee to execute Amendment One to the Northern California Power Agency (NCPA) Third
Phase Agreement for Western GeoPower Incorporated (WGI) renewable energy power purchase.
Additionally, for this agreement, staff recommends the Council waive the investment-grade
credit rating requirement under Section 2.30.340(d) of the Palo Alto Municipal Code, which is
otherwise required for these energy contract.
BACKGROUND
On February 19, 2008, the Council adopted resolution no. 8798, approving the NCPA Third
Phase Agreement for WGI renewable energy power purchase and the City's participation in the
agreement for the purchase of up to 5 average megawatts of energy within an average
procurement price cap of $98/megawatt-hour (CMR 141:08). For this agreement, the Council
waived the investment-grade credit rating requirement under Section 2.30.340(d) of the Palo
Alto Municipal Code. The third phase agreement was executed on May 28, 2008 by NCP A.
NCPA also executed an agreement with the Canadian company, WGI, to purchase the power that
is passed through to members, including Palo Alto, at NCPA's cost. The price of the power in
the original agreement is $98 per megawatt-hour (MWh) (9.8 cents per kilowatt-hour).
Unfortunately, the financial crisis of 2008 undermined project financing that WGI was seeking.
Replacement financing is being developed; WGI has informed NCPA that it requires a larger
cash flow (1.5 times debt service payment level) in order to make the financing work or the
CMR: 347:09 Page 1 of6
project development will stop. This cash flow requirement necessitates WGI's request for a
contract price of$117/MWh.
As the price change is a substantial change to the contract and since it will be passed through to
third phase participants, including Palo Alto, the Council must approve an amended third phase
agreement with the new higher delivery price if it wishes for Palo Alto to continue as a project
participant. The amendment increases the price to $117/MWh, adds contract terms that give
NCPA more control of the project operation, if needed, and changes the participation percentage
shares for the project participants.
The Council adopted a Renewable Portfolio Standard (RPS) when it approved the Long-term
Electric Acquisition Plan (LEAP) guidelines in March 2007 (CMR: 158:07). The City'S RPS
goal is to procure 33 percent of the City'S electric power needs by 2015 while limiting the retail
rate impact to 0.5 cents per kilowatt-hour. Currently, renewable resources comprise about 18
percent of the City'S electric power needs. Recently, a contract has been executed for a
renewable power project that will add another 2 percent and is expected to start energy deliveries
in 2010. Without any additional contracts, the City expects to purchase 20 percent of its electric
needs from renewable resources by 2010 with minimal impact on retail rates. It should be noted
that the City's RPS measure excludes large hydro-electric resources that account for
approximately 50 percent of the City'S electric supply in an average hydro generation year.
Staff continues to pursue renewable power through several venues including through the City's
Requests For Proposals (RFPs), through NCPA's Green Power Project and through NCPA's full
membership participation opportunities. The City is still seeking new renewable energy equal to
approximately l3 percent of annual usage to meet the 33 percent renewable portfolio goal by
2015. The City issued a Request for Proposals (RFP) in March 2009 for renewable electric
power supplies. Sixteen project proposals were received by the RFP closing date of April 28,
2009. Staff is still evaluating some of the proposals and negotiating with some of the proposers.
DISCUSSION
The WGI project would contribute another 3 percent of annual energy needs if the City stayed in
the project at the same participation level and agreed to the price increase. The City has the
following options regarding the WGI contract:
1. The City can drop out of the project by not approving the amendment to the third
phase agreement;
2. The City can agree to the contract amendment increasing the price and limit its
participation share to its current 14.95% share, which amounts to about 3.3 average
megawatts (MW), or enough to meet about 3% of the City's annual electric needs;
3. The City can agree to the contract amendment increasing the price and reduce its
participation share to less than the current 14.95% share; or
4. The City can agree to the contract amendment increasing the price and request a share
of other participants' shares if they decide to reduce participation or drop out of the
project.
CMR: 347:09 Page 2 of6
Staff recommends the fourth option to accept the amended price and increase its participation
share to a limit of 26% of the project totaling about 7 average MW, or about 6% of the City's
annual electric needs.
Even at the amended higher price of $117/MWh the contract is reasonably competitive with
other offers Palo Alto received from the 2009 RFP for renewable power. In addition, the WGI
geothermal power adds diversity to the renewable energy supplies, which currently are from
wind and landfill gas to energy projects. The 2009 RFP did receive one proposal for lower-
priced power and Palo Alto is negotiating with that supplier. However, it is not certain whether
that project will actually be developed and it cannot fill the City'S entire remaining need for
renewable power. The levelized cost for the WGI project is slightly lower than that for the
Ameresco Johnson Canyon project that is also under consideration by the Council on August 3,
2009 (CMR: 343:09). The Ameresco Johnson Canyon project is a much smaller project (only
providing 1.1 % of the City's annual energy needs), but it is very likely to be built.
The legislative initiatives for increased statewide RPS targets have increased demand for
renewable resources leading to a sellers' market and higher pricing. In addition, pending
legislation that would require the use of California renewable electric projects for meeting RPS
targets is further raising prices in the California seller's market.
Pricing for renewable power in California appears to be driven by a regulatory benchmark price
called the Market Price Referent published by the California Public Utilities Commission that
was last calculated in 2008 at $117/MWh for 20-year contracts. WGI indicates that it cannot get
project financing cash flow from a price lower than $117 IMWh and, without financing, it is not
able to construct the project. If NCP A were to take over the project and develop it without the
federal incentives that private entities receive, NCP A estimates the cost would also be about
$1 17/MWh.
WGI has obtained the required permits, has substantially completed design work and has begun
well drilling to develop the geothermal project sized for 35 MW of turbine and generator and
about 25 MW of steam field in the Geysers area not far from NCPA's other geothermal facilities.
Because of limitations to the geothermal resource it is anticipated that the plant would normally
run at about a 25 MW level with a 25 MW steam field.
The plant would qualify as a renewable power project under state-adopted definitions, would be
electrically connected to the California Independent System Operator-managed transmission
system and would qualifY as local capacity.
As an energy purchaser rather than as an investor-owner, NCP A and its members would not be
taking the risk that power production levels may decline, as happened with PG&E's former 62
MW plant at this location. Under the terms of the agreement, NCPA members pay a fixed flat
rate for any energy delivered. If delivered volumes decline, NCPA's payments to Western
GeoPower, and thus Palo Alto's payments to NCPA, would be reduced proportionately, freeing
up money to purchase replacement renewable energy from other sources.
CMR: 347:09 Page 3 of6
Nine members of NCPA, including Palo Alto, are participating in the Third Phase Agreement
with NCP A. NCPA allocated participation shares to the interested members in proportion to
those members' loads with the result that Palo Alto's share would be 14.95% of the output, if
Palo Alto and all other current participants receive their governing board approvals for amending
the third phase agreement. At that participation level and expected plant output, Palo Alto's
share would amount to about 3.8 average megawatts, or roughly 3% of its annual energy use. If
one or more other participants do not receive approvals to amend the agreement for their full
shares, there may be additional shares available for project participants, including Palo Alto. In
light of the relative economic competitiveness of the WGI proposal compared to other renewable
resource offerings, staffis seeking Council authority to participate in up to 7 average MWs of the
project.
The Third Phase Agreement has been reviewed by staff and the City Attorney's Office
(Attachment B). The Power Purchase Agreement between NCP A and WGI has also been
reviewed (Attachment C).
Western GeoPower Incorporated is a relatively small company that does not have a credit rating
by Moody's or Standard and Poor's. The stock is carried on the over-the-counter market in the
United States at a current value of $0.22 per share and with a market capitalization of $51
million. Using audited financial statements published by the company, Western GeoPower's
estimated default frequency is 5.8%, equivalent to a credit rating of B to B+. At this credit
rating, WGI is the lowest rated company in the City's portfolio of counterparties.
Since energy deliveries will be tied to a specific generator at a specific location, as opposed to
market contracts whose deliveries are often backed by financial strength or collateral rather than
a physical asset, staff recommends that the Council waive the investment-grade credit
requirement for public agency contracts under Section 2.20.340 (d) of the Palo Alto Municipal
Code. This conforms to Council action on prior renewable resource contracts (CMR: 461 :04).
This waiver is intended only for small companies that do not have credit ratings. The PPA was
reviewed by NCPA staff, Palo Alto Utilities staff, and Palo Alto's Energy Risk Manager to
determine that the combination of value, price, terms, credit worthiness of provider, and any
credit assurances warrant Palo Alto's participation.
COMMITTEE REVIEW AND RECOMMENDATIONS
Representatives from WGI reported to the NCPA Commission on July 23, 2009 that they expect
to close financing in September 2009 and need commitments from project participants based on
the updated pricing by September 7,2009. Due to the timing between WGI's communication to
the NCPA Commission, and the September 7, 2009 deadline, there was not enough time to take
this contract to the Finance Committee for its review and recommendation. However, at its July
21, 2009 meeting, the Finance Committee recommended the Council approve a similarly priced
contract for renewable energy (Ameresco Johnson Canyon landfill gas to energy power purchase
agreement CMR: 305:09). At that meeting, staff provided information that the Western
GeoPower project was having financing difficulties and that the project might be requesting a
price increase in order to get the project built.
CMR: 347:09 Page 4 of6
During the Finance Committee's review and discussion of the Ameresco Johnson Canyon power
purchase agreement on July 21, 2009, the Finance Committee discussed the currently high
premium for renewable energy, and the fact that reducing energy use is another way to reduce
the need to buy power, including both high-priced renewable ("green") energy and traditional
("brown") energy. The Finance Committee recommended that the Council direct staff to review
its energy acquisition and energy efficiency polices and plans with the Utilities Advisory
Commission (CMR: 342:09).
For example, using round numbers, Palo Alto uses about 1 million MWhJyear of electric energy.
In a normal water year, about 50% of that, or 500,000 MWhJyear, is provided by non-carbon
emitting hydroelectric generation. Assuming that renewable energy supplies comprise 20% of
the annual use, or 200,000 MWhJyear, then an additional 13%, or 130,000 MWhJyear, of
renewable energy, is needed to meet a 33% RPS goal. If the 33% RPS goal were met, then about
83% of the portfolio would be from either renewable or hydroelectric sources, leaving 17%, or
170,000 MWhJyear, of "brown power" in the portfolio.
If, however, energy use was reduced 10%, then the total energy needs of the City would be
900,000 MWhJyear. Assuming again that 200,000 MWhJyear of renewable suppliers are already
in place, they would comprise 22% of the annual use, and only 97,000 MWhJyear, an additional
11 %, more would be needed from additional renewables to meet a 33% RPS goal of 297,000
MWhJyear (900,000 MWh times 0.33). In this example, the hydroelectric supplies of 500,000
MWhJyear would account for 55% of the total energy needs so that if a 33% RPS goal were met,
then 88% of the portfolio would be from either renewable or hydroelectric sources leaving 12%,
or 108,000 MWhJyear, of brown power in the supply portfolio. For the sake of comparison, the
WGI project is projected to supply 33,300 MWh/year at the expected participation level of 3.8
average megawatts.
RESOURCE IMPACT
The cost of renewable energy supplies under the Agreement is expected to be $73 million over
20 years. This assumes that Palo Alto's participation level and the plant output would provide
3.8 average MW. If, however, Palo Alto is able to get an increased allocation of the project up to
a maximum of7.0 average MW, then the cost is estimated to be $128 million. In either case, the
incremental rate impact will remain within the 0.5¢/kWh limit adopted by Council.
POLICY IMPLICATIONS
Adoption of this resolution allows the City to participate in Amendment No. One to NCPA's
Third Phase Agreement to purchase renewable energy and thereby is consistent with the Council
Top Four Priority of Environmental Protection. Parti~ipating in the Agreement is also consistent
with the following City policies and guidelines:
1. The Council-approved Climate Protection Plan, adopted December 3, 2007, containing
Utilities Goal 2: Reduce carbon intensity of energy supply provided by Utilities;
2. The Council-approved Utilities Strategic Plan with regard to employing balanced
environmental solutions;
3. The energy risk management policies;
CMR: 347:09 Page 5 of6
4. The rate impact limits and the renewable portfolio targets in LEAP Guideline #6 and the
portfolio diversification goals in LEAP Guideline #3 (CMR: 158:07);
5. The City's Sustainability Policy Statement, adopted April 2, 2001 (CMR 175:01) and
revised June 18,2007 (CMR 260:07), the Green Government Pledge, adopted July 19,
1999 (CMR 284:99);
6. The US Mayors' Climate Protection Agreement;
7. The Comprehensive Plan, specifically:
a. GOAL N-9: A clean, efficient, competitively-priced energy supply that makes use of
cost-effective renewable resources.
b. POLICY N-44: Maintain Palo Alto's long-term supply of electricity and natural gas
while addressing environmental and economic concerns.
c. POLICY N-48: Encourage the appropriate use of alternative energy technologies.
ENVIRONMENT AL REVIEW
Execution of the agreement does not meet the definition of a project, pursuant to section 21065
of the California Environmental Quality Act (CEQA). However, the City and other participating
members intend to receive output from projects that will constitute a project for the purposes of
CEQA. Project developers will be responsible for acquiring necessary environmental reviews
and permits on projects to be developed.
ATTACHMENTS
A: Resolution Approving Amendment One to the NCPA Third Phase Agreement for Western
GeoPower Power Purchase Agreement
B: NCPA Third Phase Agreement for Western GeoPower Power Purchase Agreement
C: Renewable Energy Power Purchase Agreement between Northern California Power Agency
and Western GeoPower Incorporated
D: NCPA Staff Report and Resolution 09-68 Approving an Amendment to the NCPAfWestern
GeoPower Power Purchase Agreement and to Revise the Third Phase Agreement Between
NCPA and Members in the Project
E: CMR: 141 :08 -Adoption of a Resolution Approving the Northern California Power Agency
Third Phase Agreement for Western GeoPower Incorporated Renewable Energy Power
Purchase Agreement for the Acquisition of up to Five Average Megawatts of Energy over
Twenty Years at an Estimated Cost Not to Exceed $86 million (without attachments)
~ PREPARED BY: (J1Y TOM KABAT
Senior Resource Originator
REVIEWED BY: ~ANE RATCHYE
~ Assistant Director, Resource Management
DEPARTMENT APPROVAL: ____ .~~~~~ ____________ _ VALE~ONG
CITY MANAGER APPROVAL:
~ City Manager
CMR: 347:09 Page 60f6
All ACHMENl A
Not Yet Approved
Resolution No
Resolution of the Council of the City of Palo Alto Approving
Amendment One to the Northern California Power Agency
Third Phase Agreement for Western GeoPower Incorporated
Renewable Energy Power Purchase Agreement for the
Acquisition of Up To Seven Average Megawatts of Energy
over Twenty Years At An Estimated Cost Not To Exceed
$128 Million
WHEREAS, the City of Palo Alto (the "City"), a municipal utility and a chartered
city, is a member of the Northern California Power Agency ("NCPA,,), and the City and other
NCPA members have collectively entered into a Power Purchase Agreement (the "PPA") with
Western GeoPower Incorporated ("WGI") for a term of twenty (20) years; and
WHEREAS, WGI seeks an increase in the PPA's price of electricity to $117.00 per
megawatt -hour ("$117/MWh") in order to generate adequate cash flows to secure financing to
build the facility; and
WHEREAS, the NCP A Commission authorized the General Manager to amend the
PP A to reflect a revised PP A price of $117 IMWh; and
WHEREAS, NCPA'S Energy Risk and Counterparty Risk Management Regulations
require that, for power purchases and sales effected for delivery more than one week from the
date of execution of the purchase, competitive bids must be obtained; and
WHEREAS, NCPA's Risk Oversight Committee approved and the NCPA
Commission concurred in granting an exception to standard procurement policy, because the
PPA is an eligible renewable resource at long-term competitive rates, and it also has advantages
due to its physical location adjacent to the NCPA Geothermal project site, thereby giving it
competitive, operational and economic advantages other than price; and
WHEREAS, the NCPA Commission, on January 25,2008, approved the PPA and the
Third Phase Agreement (the "TPA"), which TPA allocates all costs and benefits of the PPA to
participating NCPA members; and
WHEREAS, the City desires to amend the TP A consistent with the execution of the
amendment to the PPA in order to achieve a portion its renewable energy goals, reduce reliance on
fossil fuels and their associated fuel price volatilities, and assist the State of California in meeting its
renewable energy goals; and
WHEREAS, the City, which has been allocated a 14.95% participation share of the
TP A with respect to the costs and benefits of the PP A, wishes to increase its participation share
percentage in the TP A to and not exceeding 26%;
NOW, THEREFORE, the Council of the City of Palo Alto does hereby RESOLVE
as follows:
090729 jb 0073199
Not Yet Approved
SECTION 1. The Council hereby approves Amendment One to the Northern
California Power Agency Third Phase Agreement for Western GeoPower Incorporated
Renewable Energy Power Purchase Agreement, and delegates to the City Manager the authority
to sign the contract on behalf of the City. The Council further approves the City's participation in
the Third Phase Agreement for the purchase of renewable energy of up to seven (7) average
megawatts of energy, within an average procurement price cap of $117 per megawatt-hour. The
total cost of renewable energy purchases to be made in accordance with the Third Phase
Agreement will not exceed $128 million over the twenty-year term.
SECTION 2. With respect to the Third Phase Agreement, the Council hereby waives
the application of the creditworthiness terms and conditions requirements of Palo Alto Municipal
Code section 2.30.340(d), which otherwise applies to the City's purchases of energy, directly or
indirectly, through NCPA.
SECTION 3. The Council finds that the adoption of this resolution does not meet
the definition of a project under Section 21065 of the California Environmental Quality Act and,
therefore, no environmental assessment is required.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST: APPROVED:
City Clerk Mayor
APPROVED AS TO FORM:
City Manager
Sr. Asst. City Attorney
Director of Utilities
Director of Administrative Services
2
090730 jb 0073199
All ACHMENl B
THIRD PHASE AGREEMENT
FOR
WESTERN GEOPOWER INCORPORATED
RENEWABLE ENERGY POWER PURCHASE AGREEMENT
1
THIRD PI-L-iSE AGREEl\ffiNT
FOR THE WESTER..N GEOPOWER, INCORPORATED RENEWABLE POWER PURCI-L-iSE AGREEMENT
//GENSERV /18.23/WESTERNGEOPOWERIIIPHASE
TABLE OF CONTENTS
Section ......................................................................................... .
RECITALS ............................................................................ 3
1. Definitions .......................................................................... 4
2. Effectiveness of Agreement.. ................................................. l0
3. Delivery of Electricity / Allocation of Resource Adequacy ............. .
Capacity and Environmental Attributes .................................. .11
4. Cooperation and Further Assurances ...................................... ll
5. Payment Obligations, Security Account, Invoicing ....................... 12
6. Administration of Agreement ................................................ 16
7. Transfer of Rights by Participants ........................................... 18
8. Withdrawal of Participants ................................................... 18
9. Term and Termination ......................................................... 18
10. Default and Remedies ......................................................... .19
11. Miscellaneous .................................................................... 23
EXHIBIT A
EXHIBITB
2
THIRD PHASE AGREEMENT
FOR THE WESTERN GEOPOWER, INCORPORATED RENEWABLE POWER PURCHASE AGREE1'.1ENT
j jGENSERV j18.23/WESTERNGEOPOWERIIIPHASE
This Third Phase Agreement for Western GeoPower Incorporated Renewable Energy Power
Purchase Agreement is between the Northern California Power Agency, a joint powers agency
of the State of California ("NCPA") and those of its Members who execute this Agreement
("Participants"). NCPA and the Participants are referred to herein individually as a "Party"
and collectively as the "Parties".
RECITALS
A. WHEREAS, NCP A and the Participants are interested in purchasing additional
renewable electric capacity and energy for the benefit of the Participants' customers:
B. WHEREAS, The Participants desire that NCP A negotiate and enter into a
renewable energy power purchase agreement (PPA) with the Western GeoPower Incorporated
("Western GeoPower") for twenty (20) years; and
C. WHEREAS, NCPA has executed a .PPA with Western GeoPower to purchase the
entire expected Project Output from a new Western GeoPower geothermal project ("Project")
located in the Geysers Geothermal Field located in Mayacamas Mountains of Sonoma and Lake
Counties in the State of California; and
D. WHEREAS, NCP A, on behalf of the Participants, will purchase the Project
output of for at a fixed price not to exceed ninety-eight dollars ($98.00) per megawatt hour for
the initial term of twenty (20) years; and
E. WHEREAS, NCP A and the Participants wish to enter into this Agreement to
provide all means necessary for NCP A to fulfill obligations incurred on behalf of NCP A and the
Participants pursuant to the PP A and to enable and obligate the Participants to take delivery of
and pay for such electricity and to pay NCP A for the costs of undertaking the foregoing
activities; and
3
THIRD PI-L\SE AGREEMENT
FOR THE WESTERN GEOPOWER, INCORPORATED RENEWABLE POWER PURCI-L\SE AGREEMENT
/ /GENSERV /18.23/WESTERNGEOPOWERIIIPHASE
WHEREAS, NCPA and its members have (or will have) entered into the Facilities
Agreement dated September 22, 1993, which provides for services which NCPA shall perform
for its members, and for the provisions to be contained in third phase agreements such as this
Agreement.
G. WHEREAS, NCPA and its members have (or will have) entered into the
Scheduling Coordination Program Agreement ("SCP A"), dated August 28, 2002, which
provides for CAISO scheduling services and cost allocations which NCP A shall perform for its
members.
NOW, THEREFORE, in consideration of the foregoing, and the mutual promises and
covenants hereinafter set forth, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree and intend to be legally bound,
as follows:
Section 1. Definitions
1.1 Definitions. Whenever used in this Agreement (including the Recitals
hereto), the following terms shall have the following respective meanings:
1.1.1 /I Agreement" means this NCP A Third Phase Agreement for
Western GeoPower Incorporated Renewable Energy Power Purchase Agreement including all
Exhibits attached hereto, as the same may be amended from time to time in accordance with the
terms and conditions hereof.
1.1.2 "Annual Budget" means the budget for the ensuing Budget
Year adopted by the Commission, as it may be amended from time to time.
1.1.3 "Associate Member" means an associate member of NCP A
admitted to NCPA in accordance with Article IV, Section 7 of the Joint Powers Agreement.
4
THIRD PfL:\SE AGREEMENT
FOR THE WESTERN GEOPOWER, INCORPORATED RENEW"-illLE PO\'V'ER PURCfL\SE AGREErvfENT
/ /GENSERV /18.23/WESTERNGEOPOWERlIIPHASE
1.1.4 "Budget Year" means the NCP A fiscal year; currently the twelve
month period beginning July 1 and ending on the next following June 30.
1.1.5 "Business Day" means any day except a Saturday, Sunday, or a
Federal Reserve Bank holiday. A Business Day shall open at 8:00 a.m. and close at 5:00 p.m.
local time.
1.1.6 "Capacity Attributes" means any current or future defined
characteristic, certificate, tag, credit, or ancillary service attribute, whether general in nature or
specific as to the location or any other attribute of the Project, intended to value any aspect of
the capacity of the Project to produce Energy or ancillary services, including, but not limited to,
any accounting construct so that the full Contract Capacity of the Project may be counted
toward a Resource Adequacy Requirement or any other measure by the CPUC, the CAISO, the
FERC, or any other entity invested with the authority under federal or state law, to require
Buyer to procure, or to procure at Buyer's expense, Resource Adequacy or other such products.
1.1.7 "Claims" has the meaning set forth in Section 11.2.
1.1.8 "Commission" means the NCPA Commission.
1.1.9 Not Applicable under this Agreement.
1.1.10 "Constitutive Documents" means, with respect to NCPA, the
Joint Powers Agreement and any resolutions or bylaws adopted thereunder, and with respect to
each Participant, the California Government Code and other statutory provisions applicable to
such Participant, any applicable agreements, charters, contracts or other documents concerning
the formation, operation or decision making of such Participant, including, if applicable, its City
Charter, and any codes, ordinances, bylaws, and resolutions adopted by such Participant's
governing body.
1.1.11 Not applicable under this Agreement.
5
THIRD PHASE AGREEtvfENT
FOR THE WESTERN GEOPOWER, INCORPORATED RENEWABLE POWER PURCHASE 1\GREEMENT
/ /GENSERV /18.23/WESTERNGEOPOWERlIIPHASE
1.1.12 "Defaulting Party" has the meaning set forth in Section 9.1.
1.1.13 "Not applicable under this Agreement"
1.1.14 "Effective Date" has the meaning set forth in the Section 9 of this
Agreement.
1.1.15 "Electric System" means, with respect to each Participant except
the San Francisco Bay Area Rapid Transit District ("BART"), all properties and assets, real and
personal, tangible and intangible, of the Participant now or hereafter existing, used or
pertaining to the generation, transmission, transformation, distribution or sale of electric
capacity and energy, or the utilization of such, including all additions, extensions, expansions,
improvements and betterments thereto and equipment thereof; provided, however, that to the
extent the Participant is not the sole owner of an asset or property or to the extent that an asset
or property is used in part for the above described purposes, only the Participant's ownership
interest in such asset or property or only the part of the asset or property used for electric
purposes shall be considered to be part of its Electric System.
1.1.16 "Environmental Attributes" means any and all credits, benefits,
emissions reductions, offsets, and allowances, howsoever entitled, directly attributable to the
power purchase. Environmental Attributes include, but are not limited to: (1) any avoided
emissions of pollutants to the air, soil or water such as sulfur oxides (SOx), nitrogen oxides
(NOx), carbon monoxide (CO) and other pollutants; (2) any avoided emissions of carbon
dioxide (C02), methane (CH4) and other greenhouse gases (GHGs) that have been determined
by the United Nations Intergovernmental Panel on Climate Change to contribute to the actual
or potential threat of altering the Earth's climate by trapping heat in the atmosphere; and (3) the
reporting rights to these avoided emissions such as Green Tag Reporting Rights.
Environmental Attributes do not include: (1) any energy, capacity, reliability or other power
attributes; (2) production tax credits associated with the construction or operation of the energy
6
THIRD PHASE AGREEMENT
FOR THE WESTER..N GEOPOW'ER, INCORPOR..-\TED RENEW.ABLE POWER PURCHASE AGREE1fENT
/ /GENSERV /18.23/WESTERNGEOPOWERIIIPHASE
Projects and other financial incentives in the form of credits, reductions, or allowances
associated with the Project that are applicable to a state or federal income taxation obligation:
(3) fuel-related subsidies or "tipping fees" that may be paid to Seller to accept certain fuels, or
local subsidies received by the generator for the destruction of particular pre-existing pollutants
or the promotion of local environmental benefits; or (4) emission reduction credits encumbered
or used by the Unit(s) for compliance with local, state, or federal operating and/or air quality
permits.
1.1.17 "Event of Default" has the meaning set forth in Section 5.5.3 and
Section 10.1.
1.1.18 "Joint Powers Agreement" means that certain Northern
California Power Agency Joint Power Agreement first made July 19, 1968 and revised as of
April 1, 1973, establishing NCP A, as the same may be amended from time to time.
1.1.19 "Member" means any Member of NCPA or Associate Member
of NCPA.
1.1.20 "MW" means megawatt.
1.1.21 "MWh" means megawatt hour.
1.1.22 "NCP A" has the meaning set forth in the preamble hereto.
1.1.23 "Participation Percentage." has the meaning, with respect to
each Project Participant, the percentage of the total capacity of the Project, and the energy
associated with such capacity, to which such Participant is entitled pursuant to the terms of this
Agreement. The Project Participation Percentage for each Project participant shall be in the
percentage set forth in Exhibit B, attached hereto and incorporated herein. Exhibit B, shall be
amended from time to time in accordance with this Agreement.
7
THIRD PHASE AGREE;\fENT
FOR THE WESTERN GEOPOWER, INCORPORATED RENEWABLE POWER PURCHASE AGREEMENT
/ /GENSERV /18.23/WESTERNGEOPOWERIIIPHASE
1.1.24 "Project Cost Allocation" means the Project Costs allocated to
the Participants in the Annual Budget.
1.1.25 "Project Costs" means any and all costs, directly or indirectly,
incurred by NCPA as a result of entering into the PP A. NCPA costs include, but are not limited
to related legal fees and associated staff time, administrative and general overhead costs,
charges for transmission, transmission related costs and costs associated with the .PP A or other
NCP A associated Agreements, including the Facilities Agreement and the SCP A.
1.1.26 "Project Output" means all energy generated from the
geothermal Project currently being developed by Western GeoPower in conjunction with this
Project, related Environmental Attributes and Capacity Attributes;
1.1.27 "Participant" has the meaning set forth in the preamble hereto.
(i) "Party" or "Parties" has the meaning set forth in the
preamble hereto; provided that "Third Parties" are entities that are not party to this
Agreement.
1.1.28 "PPA" means the Renewable Energy Power Purchase
Agreement attached hereto as Exhibit A.
1.1.29 Not applicable under this Agreement.
1.1.30 "Resource Adequacy Capacity" is that capacity in megawatts
that has been approved by each Participant. as capacity available to ensure that adequate
resources are available to meet peak demand and operating and planning reserves for the
purposes of local area and system reliability.
1.1.31 "Revenues" means, with respect to each Participant with the
exception of BART, all income, rents, rates, fees, charges, and other moneys derived by the
8
THIRD PHASE AGREEMENT
FOR THE WESTERN GEOPOWER, INCORPORATED RENEWABLE POWER PURCHASE AGREEMENT
//GENSERV /18.23/W'ESTERNGEOPOW'ERIIIPHASE
Participant from the ownership or operation of its Electric System, includin& without limiting
the generality of the foregoing, (a) all income, rents, rates, fees, charges or other moneys derived
from the sale, furnishing and supplying of electric capacity and energy and other services,
facilities, and commodities sold, furnished, or supplied through the facilities of its Electric
System, (b) the earnings on and income derived from the investment of such income, rents,
rates, fees, charges or other moneys to the extent that the use of such earnings and income is
limited by or pursuant to law to its Electric System, and (c) the proceeds derived by the
Participant, directly or indirectly, from the sale, lease or other disposition of all or a part of the
Electric System, but the term "Revenues" shall not include (i) customers' deposits or any other
deposits subject to refund until such deposits have become the property of the Participant or (ii)
contributions from customers for the payment of costs of construction of facilities to serve them.
In regards to BART, "Revenues" means, all income, rents, rates, fees, charges, grants, fares or
tariffs, subventions and other moneys derived by the Participant from its operation, includin&
without limiting the generality of the foregoing, (i) the earnings on and income derived from
the investment of such income, rents, rates, fees, charges grants, fares or tariffs, subventions or
other moneys and (ii) the proceeds derived by the Participant, directly or indirectly, from the
sale, lease or other disposition of all or a part of its assets, but the term "Revenues" shall not
include any moneys derived from sources, the use of which is limited by law to expenditures
other than operating expenses.
1.1.32 "Scheduling Protocols" means the applicable provisions of the
.SCP A and any other contractual or other arrangements between NCP A and the relevant
Participant concerning the scheduling, delivery and metering of the PP A.
1.1.33 "Security Account" means the account established by NCPA
and funded by the Participants in accordance with Section 5.3, the funds of which are available
for use by NCP A in accordance with the terms and conditions hereof.
1.1.34 Not applicable under this Agreement.
9
THIRD PHASE AGREENfENT
FOR THE WESTERN GEOPOWER, INCORPORATED RENEWABLE POWER PURCI-L-\.SE AGREElvIENT
/ /GENSERV /18.23/WESTERNGEOPOWERIIIPHASE
1.1.35 "Term" has the meaning set forth in Section 9.
1.1.36 Not applicable under this Agreement.
1.1.37 Not applicable under this Agreement.
1.2 Rules of Interpretation. As used in this Agreement (including the Recitals
hereto), unless in any such case the context requires otherwise: the terms "herein," "hereto,"
"herewith" and "hereof" are references to this Agreement taken as a whole and not to any
particular provision; the term "include," "includes" or "including" shall mean "including, for
example and without limitation;" and references to a "Section," "subsection;" "clause," or
"Exhibit" shall mean a Section, subsection, clause or Exhibit of this Agreement, as the case may
be. All references to a given agreement, instrument or other document shall be a reference to
that agreement, instrument or other document as modified, amended, supplemented and
restated through the date as of which such reference is made, and reference to a law, regulation
or ordinance includes any amendment or modification thereof. A reference to a "person"
includes any individual, partnership, firm, company, corporation, joint venture, trust,
association, organization or other entity, in each case whether or not having a separate legal
personality and includes its successors and permitted assigns. The singular shall include the
plural and the masculine shall include the feminine, and vice versa.
Section 2. Effectiveness of Agreement This Agreement shall be effective as to each
Participant as of the Effective Date upon execution by the Participant, as described in Section 9
below.
Section 3. Delivery of Electricity / Allocation of Resource Adequacy Capacity and
Environmental Attributes. By executing this Agreement, each Participant acknowledges and
agrees to be bound by the take-or-pay process contained in or referenced herein. Any electricity
delivered to NCP A under the PPA . shall be delivered to each Participant in proportion to such
Participant's Participation Percentage and each Participant shall accept and pay for its relevant
10
THIRD PHASE AGREE1Y1ENT
FOR THE WESTERN GEOPOWER, INCORPORATED RENEWABLE POWER PURCHASE AGREE~fENT
//GENSERV /18.23/WESlERNGEOPOWERIIIPHASE
percentage of such electricity. To the extent Participant is unable to accept such deliveries in
full, NCP A shall dispose of such surplus in its discretion, in such a manner to maximize
Participant value. Notwithstanding the above, NCPA may allocate and pool capacity and
energy procured through the PPA among the Participants in such percentages as NCP A may, in
its reasonable discretion, determine are necessary, desirable, or appropriate. Such electricity
shall be scheduled for the Participants in accordance with the Scheduling Protocols. Resource
Adequacy Capacity and Environmental Attributes obtained by NCPA as a result of
performance under this Agreement shall likewise be allocated to each Participant by its
Participation Percentage.
3.1 Payments to Counterparty. NCPA shall pay all costs incurred hereunder
using operating funds or Security Account funds, paid to NCP A in accordance with Section 5,
or such other sources as may be agreed upon in writing by the Parties from time to time.
Section 4. Cooperation and Further Assurances Each of the Parties agrees to provide such
information, execute and deliver any instruments and documents and to take such other actions
as may be necessary or reasonably requested by any other Party which are not inconsistent with
the provisions of this Agreement and which do not involve the assumption of obligations other
than those provided for in this Agreement, in order to give full effect to this Agreement and to
carry out the intent of this Agreement. Further, the Parties agree to cooperate and act in good
faith in connection with obtaining any credit support required in order to procure electricity
from an Eligible Contract Purchase, including, with respect to negotiating and executing, any
agreements to implement any credit support arrangements.
Section 5. Payment Obligations, Security Account, Invoicing
5.1 Participant Payment Obligations. Each Participant agrees to pay to
NCP A each month its respective portion of the Project Costs. In addition, each Participant shall
maintain working capital in accordance with NCP A' s Annual Budget, and maintain its Security
Account as provided in this Agreement.
11
THIRD PHASE AGREEMENT
FOR THE WESTERN GEOPOWER, INCORPORATED RENEWABLE POWER PURCHASE AGREEMENT
/ /GENSERV/18.23/WESTERNGEOPOWERIIIPHASE
5.2 Calculation of and True-Up for Project Costs. Upon the conclusion of a
Budget Year NCP A shall compare each Participant's payment of estimated Project Costs with
the actual Project Costs incurred on behalf of each Participant such that overpayments will be
credited to, and underpayments will debited to the Participant's account in accordance with
NCPA's Annual Budget settlements.
5.3 Security Account.
5.3.1 Initial Amounts. NCPA shall notify each Participant three
months prior to the expected initial delivery of power of the initial security amounts which
Participant shall be obligated to pay for under this Agreement. Each Participant shall ensure
that sufficient funds are on deposit in the Security Account equal to the highest (3) months of
the immediately following (12) months of estimated Project Costs ; provided, however, that
such deposit may be satisfied, in whole or part, either in cash or through a letter of credit
satisfactory to NCPA's General Manager.
5.3.2 Subsequent Deposits. Periodically, and at least quarterly, NCPA
shall review and revise its estimate of all costs for which Participant shall be obligated to pay for
under this Agreement for the succeeding twelve (12) months. Following such review, NCP A
shall determine whether each Participant has a sufficient balance in the Security Account. To
the extent that any Participant's balance in the Security Account is greater than one hundred
and ten percent (110%) of the amount required herein, NCPA shall credit such amount as soon
as practicable to the Participant's next following invoice. To the extent that any Participant's
balance in the Security Account is less than ninety percent (90%) of the amount required herein,
NCP A shall add such amount as soon as practicable to such Participant's next invoice. Credits
or additions shall not be made to Participants who satisfy these Security Account requirements
in whole, through the use of a letter of credit, provided that the amount of the letter of credit
shall be adjusted in a like manner to assure an amount equal to the highest three (3) months of
estimated Project Costs.
12
THIRD Pf-L-\.SE AGREEl\:1ENT
FOR THE WESTERN GEOPOWER, INCORPORATED RENEWABLE POWER PURCf-L-\.SE AGREE:rvrnNT
/ /GENSERV /18.23/WESTERNGEOPOWERIIIPHASE
5.3.3 Use of Security Account Funds. NCPA may use any and all
funds deposited into the Security Account to pay any costs it incurs hereunder, including
making payments to the counterparty under the PP A. NCP A may use any and all funds
without regard to any individual Participant's balance in the Security Account or proportionate
share of Project Costs and irrespective of whether NCP A has issued an invoice for such costs to
the Participants or whether a Participant has made timely payments of invoices. Should
Participant have satisfied its Security Account requirements, in whole or in part, through a
letter of credit, NCP A may draw on such letter of credit to satisfy Participant's obligations
hereunder.
5.3.4 Emergency Additions. In the event that the funds are
withdrawn pursuant to section 5.3.3, or if the Security Account is insufficient to allow payment
of an invoice, demand, request for further assurances by Third Parties, or Claims, NCP A shall
notify all Participants and then prepare and send a special or emergency assessment to the
Participants. Each Participant shall pay to NCP A such assessment when and if assessed by
NCP A within two (2) Business Days of the invoice date of the assessment or consent to and
direct NCP A to draw on any existing letter of credit Participant has established for such
purposes.
5.3.5 Accounting and Interest. NCP A shall maintain a detailed
accounting of each Participant's deposits into and shares of withdrawals from the Security
Account. Interest earned on the Security Account shall be proportionately credited to the
Participants in accordance with their Security Account balances. Any losses in the Security
Account caused by early termination of investments shall be allocated among the Participants in
accordance with their proportionate Participation Percentages.
5.3.6 Return of Funds. On the termination of this Agreement with
respect to a Participant or a permitted withdrawal of a Participant in accordance with this
Agreement, the affected Participant or Participants may apply to NCPA for the return of their
13
THIRD PHASE .A.GREElYfENT
FOR THE WESTERN GEOPOWER, INCORPORATED RENEWABLE POW'ER PURCfL\SE AGREEMENT
/ /GENSERV /18.23/WESTERNGEOPOWERIIIPHASE
share of Security Account funds ninety (90) days after the effective date of such termination or
withdrawal. NCP A shall, in its sole discretion, as determined by the General Manager, estimate
the then outstanding liabilities of the Participant(s), including any estimated contingent
liabilities and shall retain all such funds until all such liabilities have been fully paid or
otherwise satisfied in full. 'The balance of the Participant's share of the Security Account will be
refunded to the Participant.
5.4 Invoicing.
5.4.1 Invoices. As part of NCPA's regular, monthly, advance billing
or by separate special invoice, as required in the circumstances, NCP A will issue an invoice to
each Participant for its proportionate share of the Project Costs due (or any adjustments thereto)
based on Sections 5.1 and 5.2 above. Such invoices may include estimated costs and estimated
settlement and meter data. Each invoice shall include: (i) the total Project Costs attributable to
the activities under this Agreement for such month and the relevant Participant's share thereof;
(ii) the quantity of electricity, Resource Adequacy Capacity and Environmental Attributes.
delivered to such Participant (or an estimate thereof) and the unit price for such electricity; (iii)
appropriate settlement and meter data (or an estimate thereof); (iv) including any adjustments
to prior invoices required based on actual data received that was estimated in a previous
invoice. In addition NCPA may invoice an amount, if any, that NCPA has paid or reasonably
expects to pay using funds available in the Security Account; and amounts due from (or
credited to) such Participant under Section 5.3.2.
5.4.2 Payment of Invoices. All invoices delivered by NCPA
hereunder are due and payable on the date indicated on such invoice, provided, however, that
any amount due on a day other than a Business Day may be paid on the following Business
Day. NCPA may apply a Participant's share of the Security Account to the payment of all or
any portion of an invoice issued to such Participant, provided that application of such funds
from the Security Account shall not relieve the Participant from any late payment charges
14
THIRD PHASE AGREErvfENT
FOR THE WESTERN GEOPOWER, INCORPORATED RENEWABLE POWER PURCHASE AGREEfvfENT
/ /GENSERV /18.23/WESTERNGEOPOWERlIIPHASE
pursuant to Section 5.4.3. To the extent that NCP A applies funds from the Security Account to
pay an amount due under an invoice, following receipt of payment of such invoice by the
relevant Participant, NCP A shall deposit the relevant portion of the payment into the Security
Account and credit such deposit to such Participant.
5.4.3 Late Payments. Any amount due and not paid by a Participant
in accordance with Section 5.4.2 shall bear interest computed on a daily basis until paid at the
lesser of (i) the per annum prime rate (or reference rate) of the Bank of America NT&SA then in
effect, plus two percent (2%) or (ii) the maximum rate permitted by law.
5.5 Settlement Data and Examination of Books and Records.
5.5.1 Settlement Data. NCPA will make metering and settlement data
available to the Participants. Procedures and formats for the provision of such data will be as
established by the Participants and NCPA from time to time.
5.5.2 Examination of Books and Records. Any Participant to this
Agreement shall have the right to examine the books and records created and maintained by
NCP A pursuant to this Agreement at any reasonable, mutually agreed upon time.
5.5.3 Revenue Covenant. Any failure of a Participant to meet its
obligations hereunder or to cure such failure in a timely manner shall constitute a Default and
the Defaulting Party shall be subject to such remedies of NCP A as provided for herein. Each
Participant covenants and agrees (i) to continue to pay or advance to NCP A, from its electric
department revenues only or, in the case of BART, its tariffs, fees or other sources of revenue,
provided that such sources shall not include any sums derived from sources, the use of which is
limited by law to expenditures other than operating expenses, its percentage share of the costs
authorized by Participants in accordance with this Agreement in connection with its
participation in the Project. Each Participant further agrees that it will fix the rates and charges
for services provided by its electric department, or in the case of BART, its general revenues, so
15
THIRD PH::\SE AGREEMENT
FOR THE 'W'ESTERN GEOPO'W'ER, INCORPORATED RENEWABLE PO'W'ER PURCHASE AGREEl'vfENT
//GENSERV /18.23/WESTERNGEOPOWERIIIPHASE
that it will at all times have sufficient money in its department revenue funds to meet this
obligation; (ii) to make payments under this Agreement from the Revenues of, and as an
operating expense of, its Electric System, or in the case of BART, its general revenues; (iii) to
make payments under this Agreement whether or not there is an interruption in, interference
with, or reduction or suspension of services provided under this Agreement; such payments not
being subject to any reduction, whether by offset or otherwise, and regardless of whether any
dispute exists provided such interruption, interference or reduction in services is caused by
forces constituting an Act of God and not reasonably contemplated by the Parties; and (iv) to
operate Electric System., or in the case of BART, its transit system, in an efficient manner and
to maintain its facilities in good repair, condition and working order so that: (a) the Participant's
obligations to make payments under this Agreement are not adversely affected or threatened;
and (b) NCPA's bond rating and ability to negotiate and enter into a .PPA are not adversely
affected or threatened.
Section 6. Administration of Agreement
6.1 General. The NCPA Commission has sole overall responsibility and
authority for the administration of this Agreement. Any acts, decisions or approvals taken,
made or sought by NCP A under this Agreement shall be taken, made or sought, as applicable,
in accordance with NCPA's Constitutive Documents and Section 6.2.
6.2 Action by Participating Members.
(a) Forum: Whenever any action anticipated by this
Agreement is required to be taken by the Participating Members, such actions shall be taken at a
regular or special meeting of the NCPA Commission but shall be participated in only by those
Commissioners, or their designated alternates, who are Participants.
(b) Quorum: A quorum at NCPA Commission meetings for
purposes of acting upon matters relating to this Agreement shall consist of Commissioners, or
16
THIRD PHASE AGREErvIENT
FOR THE WESTERN GEOPOWER, INCORPORATED RENEWABLE POWER PURCHASE AGREErvIENT
/ /GENSERV /18.23/WESTERNGEOPOWERIIIPHASE
their designated alternates representing at least two Participants having a combined majority
interest based upon Participation Percentages.
(c) Voting: Each Participant shall have the right to cast one
vote with respect to matters pertaining to this Agreement, with a majority vote of the
Participating Menbers required for action subject to the following exceptions:
(i) Upon request of any Participant representative, the voting
on an issue related to this Agreement shall be by Participation Percentage with a 65% or more
favorable vote necessary to carry the action. The 65% required by the preceding sentence shall
be reduced by the amount that the Participation Percentage of any Participant exceeds 35%, but
shall not be reduced below a majority interest.
(li) After any decision related to this Agreement is taken by
the affirmative vote of less than 65% of the Program Participants, the action can be reviewed
and revised if a Participant gives notice of intention to seek such review and revision to NCP A
and each of the other Participants within ten (10) days following the date on which such action
was taken. Upon receipt of such a request for reconsideration, the Chair Person of the
Commission shall agendize the matter for reconsideration at the next regular meeting of the
Commission or at a special meeting if the circumstances so warrant. The action shall be upheld
upon the affirmative vote of authorized representatives the Participants. Any action taken upon
reconsideration shall be final.
Secticlfl 7. Transfer of Rights by Participants
7.1 A Participant has the right to make transfers, sales, assignments and
excranges (collectively "transfers(s)") its Participation Percentage and rights thereto. If a
Participant desires to transfer a portion or its entire share of the Project for a specific time
intervat or permanently, NPCA wilt if requested by such Participant, use its best efforts to
tr ansfer that portion of the Participant's share of the Project.
17
THIRD PHASE AGREE1vIENT
FOR THE WESTERN GEOPOWER, INCORPOR.,.\TED RENEWABLE POWER PURCHASE AGREEi\ffiNT
//GENSERV /18.23/WESTERNGEOPOWERIIIPHASE
7.2 Before NCP A may transfer an excess Project share pursuant to section 7.1
to any person or entity other than a Participant it shall give all Participants the right to
purchase the share on the same terms and conditions. Before NCP A may transfer an excess
Project share pursuant to section 7.1 to any person or entity other than an NCPA member, it
shall give all NCP A members the right to purchase the share on the same terms and conditions.
Such right shall be exercised within thirty (30) days of receipt of notice of said right.
7.3 No transfer shall relieve a Participant of any of its obligations under this
Agreement except to the extent that NCP A receives payment of these obligations from a
transferee.
Section 8. Withdrawal of Participants. No Participant may withdraw from this
Agreement except as provided herein Refer Section 7 above for discussion. However, NCPA
will use its best efforts to assist any Participant that wishes to transfer all or any portion of its
rights pursuant to Section 7 above.
Section 9. Term and Termination. This Agreement shall become effective when it has
been executed and delivered to NCP A by Participants, the Participation Percentages of which,
in the aggregate, equal at least 65% participation in the Project. NCP A shall provide written
notices to all Participants establishing the /I effective date". The remaining Participants listed in
Exhibit B shall have 45 days, following the notice of the effective date to execute and deliver
counterparts of this Agreement to NCP A. If any Participants listed on Exhibit B fails to execute
and deliver this Agreement within such 45 days, unless otherwise agreed to by the Participants
who have executed the Agreement, the Participating Percentages of such member or members
shall be spread among those Participants in proportion to their Participation Percentages. This
Agreement shall be coterminous with the PP A contained in Exhibit A.
18
THIRD PHASE AGREEivlENT
FOR THE WESTER..~ GEOPOWER, INCORPORATED RENEWrV3LE POWER PURCHASE AGREE~IENT
/ /GENSERV /18.23/WESTERNGEOPOWERlIIPHASE
Section 10. Default and Remedies
10.1 An Event of Default under this Agreement shall exist
with respect to a Party ("Defaulting Party") upon the occurrence of anyone or more of the
following:
(i) if any Party fails to make any payment or to provide assurances as
required of NCPA under this Agreement when due hereunder two (2) Business Days after
receipt of notice given by NCP A of such non-payment; or
(li) the failure of the Defaulting Party to perform any other covenant
or obligation under this Agreement where such failure is not cured within ten (10) days
following receipt of a notice from NCP A demanding cure (provided that this shall not apply to
any failure to make payments (which is covered by Section 10.1 (i»; or
(iii) if any representation or warranty of the Defaulting Party material
to the transactions contemplated hereby shall prove to have been incorrect in any material
respect when made and the Defaulting Party does not cure the facts underlying such incorrect
representation or warranty so that the representation or warranty becomes true and correct
within ten (10) calendar days of the date of receipt of notice from any other Party demanding
cure; or
(iv) if a Participant is in default or in breach of any of its covenants
under any other agreement with NCP A and such default or breach is not cured within the time
periods specified in such agreement; or
(v) the failure of NCP A to perform any covenant or obligation under
this Agreement following a ten (10) day notice to cure by any non-defaulting Member.
10.2 Cure of an Event of Default. An Event of Default shall be deemed cured
only if such default shall be remedied within the time period specified in Section 10.1, above, as
may be applicable after written notice has been sent to the Defaulting Party from NCPA
19
TillRD PI-L\SE AGREE~fENT
FOR THE WESTERN GEOPO\'{7ER, INCORPORATED RENEWABLE POWER PURCHASE AGREEMENT
/ /GENSERV /18.23/WESTERNGEOPOWERIIIPHASE
specifying the default and demanding that the same be remedied provided that failure of a
Party to provide such notice shall not be deemed a waiver of such default.
10.3 Participation Rights Of Defaulting Party. Notwithstanding anything
herein to the contrary, upon the occurrence of an Event of Default and until such Event of
Default is cured, the Participant that is the Defaulting Party shall not have the right to
participate under Section 6.2 on any matters with respect to this Agreement.
10.4 Remedies in the Event of Default.
10.4.1 Remedies of NCPA. Upon the occurrence of an Event of Default
where a Participant is the Defaulting Party, without limiting its other rights or remedies
available under this Agreement, at law or in equity, and without constituting or resulting in a
waiver, release or estoppels of any right, action or cause of action NCP A may have against the
Participant, NCPA may:
(i) suspend the provision of services under this Agreement to such
Defaulting Party, including the delivery of electricity and other attributes of the PPA until the
Event of Default is cured; and
(ii) demand that the Defaulting Party provide further assurances to
compel the correction of the default, including mandating the collection of a surcharge to
produce Revenues to secure the cure of the Event of Default; and
(iii) terminate this Agreement as to the Defaulting Party on ten (10)
days prior written notice to the Defaulting Party and following approval of the non-defaulting
Participants.
10.4.2 SalefTransfer of Participants Account Upon Default. Upon any
default of a Participant caused by the failure of such Participant to pay any sums due, and
provided that such default is not cured in a timely manner, then NCPA shall use its best efforts
20
THIRD PHASE AGREEMENT
FOR THE WESTERN GEOPOWER, INCORPOR.{\TED RENEWABLE POWER PURGL\SE AGREEfv.lENT
/ /GENSERV /18.23/WESTERNGEOPOWERlIIPHASE
to sell and transfer for the defaulting Participant's account all or a portion of the Participant's
capacity and/or energy and/or Environmental Attributes for the remainder of the term of this
Agreement. Notwithstanding that all or any portion of the Participant's capacity is so sold or
transferred, the Participant shall remain liable for all of its obligations hereunder unless released
therefrom by NCP A upon assumption by a transferee or assignee.
10.4.3 Remedies of Participants. Upon the occurrence of an Event of
Default, and following the applicable cure periods, where NCPA is the Defaulting Party, the
Participant may, without limiting their other rights or remedies available under this Agreement,
at law or in equity, and without constituting or resulting in a waiver, release or estoppel of any
right, action or cause of action the Participants may have against NCP A, terminate this
Agreement in whole, subject to the provisions of Section10.5.4.
10.4.4 Special Covenants Regarding Security Account. In the event
that a Participant's balance of the Security Account is insufficient to cover all invoices for costs
incurred under this Agreement sent to such Participant, then, without limiting NCPA's other
rights or remedies available under this Agreement, at law or in equity, such Participant shall
cooperate in good faith with NCPA and shall cure the default within thirty (30) days, on an
emergency basis, taking all such action as is necessary, including, but not limited to, raising
rates and charges to its customers to increase its Revenues to replenish its share of the Security
Account as provided herein, drawing on its cash-on-hand and lines of credit, obtaining further
assurances by way of credit support and letters of credit, and taking all such other action as will
cure the default.
10.5 Effect of Termination or Suspension.
10.5.1 The suspension or termination of this Agreement will not
terminate, waive, or otherwise discharge any ongoing or undischarged contingent liabilities or
obligations arising from this Agreement until such obligations are satisfied in fult and all of the
21
THIRD PHASE .-\GREEj'yffiNT
FOR THE WESTERN GEOPOWER, INCORPOR.-\TED RENEW.-lBLE POWER PURCHASE AGREE1ffiNT
//GENSERV /18.23/WESTERNGEOPOWERIIIPHASE
costs incurred by NCPA in connection with such suspension or termination, including
reasonable attorneys' fees, the fees and expenses of other experts, including auditors and
accountants, other costs and expenses that NCP A is entitled to recover under this Agreement,
and other reasonable and necessary costs associated with any and all of the remedies, are paid
in full.
10.5.2 Suspension by NCP A. If performance of all or any portion of
this Agreement is suspended by NCP A with respect to a Participant in accordance with Section
10.4.1(i), such Participant shall pay any and all costs and obligations incurred by NCPA as a
result of such suspension, including reasonable attorneys' fees, the fees and expenses of other
experts, including auditors and accountants, other reasonable and necessary costs associated
with such suspension and any portion of the Project Costs that were not recovered from such
Participant as a result of such suspension.
10.5.3 Termination by NCP A. If this Agreement is terminated by
NCPA with respect to a Participant in accordance with Section 10.4.1 (iii), (i) such Participant
shall pay any and all costs and obligations incurred by NCP A as a result of such termination
including reasonable attorneys' fees, the fees and expenses of other experts, including auditors
and accountants, other reasonable and necessary costs associated with such termination and
any portion of the Project Costs that were not, or will not be, recovered from such Participant as
a result of such termination; provided, however, if NCPA terminates this Agreement with
respect to the last Participant, then this Agreement shall terminate.
10.5.4 Termination by Participants. If this Agreement is terminated by
all Participants in accordance with Section 10.4.3, or by unanimous consent of all of the Parties
hereto, then the Participants shall pay to NCPA all previously unpaid costs and obligations
incurred as of the date of such termination" and following such termination, the Participants
shall cooperate and act in good faith to negotiate and agree upon the method of allocating
among the Participants in proportion to their respective Participation Percentages the costs and
22
THIRD PI-L-\SE AGREElYffiNT
FOR THE WESTERN GEOPOWER, INCORPORATED RENEWABLE POWER PURCI-L-\SE AGREElvffiNT
/ /GENSERV /18.23/WESTERNGEOPOWERIIIPHASE
benefits of the PP A and any financing agreements or commitments and any matters pertaining
to the administration, management, control, operation and maintenance of the PP A. NCP A
shall reasonably cooperate with the Participants in connection with implementing the foregoing
and the Participants shall indemnify NCPA for any costs and obligations incurred in connection
therewith, including reasonable attorneys' fees, fees and expenses of other experts, including
auditors and accountants and other reasonable and necessary costs. If the Parties are unable to
reach agreement as to the foregoing, then the Parties agree to submit the matter to mediation
with a mutually agreed upon mediator. If the Parties are still unable to reach agreement
following mediation, then the matter shall be submitted to binding arbitration subject to the
rules of the American Arbitration Association, the costs of such arbitration being borne
proportionally among the Participants.
Section 11. Miscellaneous
11.1 Confidentiality. The Participants and NCPA will keep confidential all
confidential or trade secret inforIl'ation made available to them in connection with this
Agreement, to the extent pOSSible, consistent with applicable laws, including the California
Public Records Act. It shall be the responsibility of the holder of the claim of confidentiality or
trade secret to defend at its expense against any request that such information be disclosed.
Confidential or trade secret information shall be marked or expressly identified as such.
11.2 Indemnification and Hold Harmless. Subject to the provisions of Section
11.4, each Participant agrees to indemnify, defend and hold harmless NCP A and its Members,
including their respective governing officials, officers, agents, and employees, from and against
any and all claims, suits, losses, costs, damages, expenses and liability of any kind or nature,
including reasonable attorneys' fees and the costs of litigation, including experts ("Claims"), to
the extent caused by any acts, omissions, breach of contract, negligence (active or passive), gross
negligence, recklessness, or willful misconduct of a Participant, its governing officials, officers,
employees, subcontractors or agents, to the maximum extent permitted by law.
23
THIRD Pl-IASE AGREEMENT
FOR THE WESTERN GEOPO\VER, INCORPORATED RENEWABLE POWER PURCH.,.-\SE AGREEl\IENT
/ /GENSERV /18.23/WESTERNGEOPO\VERIIIPHASE
11.3 Several Liabilities. No Participant shall be liable under this Agreement
for the obligations of any other Participant and each Participant shall be solely responsible and
liable for performance of its obligations under this Agreement, except as otherwise provided for
herein, and the obligation of each Participant under this Agreement is a several obligation and
not a joint obligation with those of the other Participants.
11.4 No Consequential Damages. FOR ANY BREACH OF ANY PROVISION
OF THIS AGREEMENT FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES
IS PROVIDED IN THIS AGREEMENT, THE LIABILITY OF THE DEFAULTING PARTY
SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION, AND ALL OTHER DAMAGES
OR REMEDIES ARE HEREBY WANED. IF NO REMEDY OR MEASURE OF DAMAGE IS
EXPRESSLY PROVIDED, THE LIABILITY OF THE DEFAULTING PARTY SHALL BE
LIMITED TO ACTUAL DAMAGES ONLY AND ALL OTHER DAMAGES AND REMEDIES
ARE HEREBY WANED. IN NO EVENT SHALL NCPA OR ANY PARTICIPANT OR THEIR
RESPECTNE SUCCESSORS, ASSIGNS, REPRESENTATNES, DIRECTORS, OFFICERS,
AGENTS, OR EMPLOYEES BE LIABLE FOR ANY LOST PROFITS, CONSEQUENTIAL,
SPECIAL, EXEMPLARY, INDIRECT, PUNITIVE OR INCIDENTAL LOSSES OR DAMAGES,
INCLUDING LOSS OF USE, LOSS OF GOODWILL, LOST REVENUES, LOSS OF PROFIT OR
LOSS OF CONTRACTS EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES, AND NCPA AND EACH PARTICIPANT EACH HEREBY WANES
SUCH CLAIMS AND RELEASES EACH OTHER AND EACH OF SUCH PERSONS FROM
ANY SUCH LIABILITY.
The Parties acknowledge that California Civil Code section 1542 provides that: "A general
release does not extend to claims which the creditor does not know or suspect to exist in his or
her favor at the time of executing the release, which if known by him or her must have
materially affected his or her settlement with the debtor." The Parties waive the provisions of
section 1542, or other similar provisions of law, and intend that the waiver and release provided
24
THIRD PfL:\SE AGREEJl.1ENT
FOR THE WESTERN GEOPOWER, INCORPORATED RENEW1lliLE POWER PURCHASE AGREEJ\1ENT
//GENSERV /18.23/WESTERNGEOPOWERIIIPHASE
by this section of this Agreement shall be fully enforceable despite its reference to future or
unknown claims.
11.5 Amendments. Except where this Agreement specifically provides
otherwise, this Agreement may be amended only by written instrument executed by the Parties
with the same formality as this Agreement.
11.6 Severability. In the event that any of the terms, covenants or conditions
of this Agreement or the application of any such term, covenant or condition, shall be held
invalid as to any person or circumstance by any court having jurisdiction, all other terms,
covenants or conditions of this Agreement and their application shall not be affected thereby,
but shall remain in force and effect unless the court holds that such provisions are not severable
from all other provisions of this Agreement.
11.7 Governing Law. This Agreement shall be interpreted, governed by, and
construed under the laws of the State of California.
11.8 Headings. All indices, titles, subject headings, section titles and similar
items are provided for the purpose of convenience and are not intended to be inclusive,
definitive, or affect the meaning of the contents of this Agreement or the scope thereof.
11.9 Notices. Any notice, demand or request required or authorized by this
Agreement to be given to any Party shall be in writing, and shall either be personally delivered
to a Participant and the Secretary of the Commission or transmitted to the Participant and the
Secretary of the Commission at the address shown on the signature pages hereof. The
designation of such address may be changed at any time by written notice given to the
Secretary of the Commission who shall thereupon give written notice of such change to each
Participant.
11.10 Warranty of Authority. Each Participant, and NCPA, represents and
warrants that it has been duly authorized by all requisite approval and action to execute and
25
THIRD PfL\SE .\GREEl\ffiNT
FOR THE \,{'ESTERN GEOPOWER, INCORPORATED RENEWABLE POWER PURCHASE .\GREEl\ffiNT
/ /GENSERV /18.23/WESTERNGEOPOWERIIIPHASE
deliver this Agreement and that this Agreement is a binding, legal, and valid agreement
enforceable in accordance with its terms as to the Participant and as to NCP A. Upon execution
of this Agreement, each Participant shall deliver to NCPA a resolution of the governing body of
such Participant, evidencing approval of and authority to enter into this Agreement, that such
authority was duly exercised in accordance with such Participant's Constitutive Documents.
11.11 Counterparts. This Agreement may be executed in any number of
counterparts, and each executed counterpart shall have the same force and effect as an original
instrument and as if all the signatories to all of the counterparts had signed the same
instrument. Any signature page of this Agreement may be detached from any counterpart of
this Agreement without impairing the legal effect of any signatures thereon, and may be
attached to another counterpart of this Agreement identical in form hereto but having attached
to it one or more signature pages.
11.12 Assignment. Except as provided by Section 7 no Participant may assign
or otherwise transfer its interest in its Participation Percentage or any other rights and
obligations under this Agreement without the express written consent of NCP A, which shall
not be unreasonably withheld.
11.13 Exercise of the Right of First RefusaL Participants shall abide by the
NCPA Facilities Agreement in the exercise of any options by NCPA to purchase the underlying
assets of the PP A as per the voting procedures of this Agreement outlined in Section 6.
Participation in any such purchase shall be in accordance with the then existing Participation
Percentages, unless such Participation Percentages are otherwise agreed upon by the
Participants.
11.14 List of Exhibits. The Exhibits referenced herein shall be denoted as
follows:
26
THIRD PI-L-iSE AGREEIYfENT
FOR THE 'W'ESTERN GEOPO'W'ER, INCORPORATED RENEW.-iBLE POW'ER PURCHASE AGREEMENT
/ /GENSERV /18.23/WESTERNGEOPOWERIIIPHASE
Exhibit A -RENEWABLE ENERGY POWER PURCHASE AGREEMENT between
NORTHERN CALIFORNIA POWER AGENCY and WESTERN GEOPOWER
INCORPORA TED
Exhibit B -P ARTICIPA nON PERCENTAGES
27
THIRD PHASE AGREE}'fENT
FOR THE 'WESTERN GEOPO'WER, INCORPORA.TED RENEWABLE PO'WER PURCHASE AGREEMENT
j jGENSERV /18.23jWESTERNGEOPOWERIIIPHASE
IN WITNESS WHEREOF, each Participant has executed this Agreement with the approval of its
governing body, and NCP A has authorized this Agreement in accordance with the authorization
of its Commission.
NORTHERN CALIFORNIA
POWER AGENCY
[Address]
[City, State, Zip]
[Telephone]
[Facsimile]
Title: ___________ _
Date:, ____________ _
Approved as to form:
Its: Attorney
Date: ___________ _
BAY AREA RAPID TRANSIT
[Address]
[City, State, Zip]
[Telephone]
[Facsimile]
Title: ___________ _
Date: ___________ _
Approved as to form:
Its: Attorney
Date: ___________ _
ALAMEDA POWER AND TELECOM
[Address]
[City, State, Zip]
[Telephone]
[Facsimile]
Title: ____________ _
Approved as to form:
CITY OF LODI
[Address]
[City, State, Zip]
[Telephone]
[Facsimile]
By: ____________ _
Title: ____________ _
Date: ___________ _
Approved as to form:
Date: ___________ _
CITY OF LOMPOC
[Address]
[City, State, Zip]
[Telephone]
[Facsimile]
Title: ___________ _
Date: ___________ _
Approved as to form:
Date: ___________ _
PLUMAS-SIERRA RURAL
ELECTRIC COOPERATIVE
[Address]
[City, State, Zip]
[Telephone]
[Facsimile]
Title: ___________ _
Date: ___________ _
Approved as to form:
Its: Attorney
Date: ___________ _
CITY OF PALO ALTO
[Address]
[City, State, Zip]
[Telephone]
[Facsimile]
Title: ____________ _
Date: ___________ _
Approved as to form:
Its: Attorney
Date: ___________ _
PORT OF OAKLAND
[Address]
[City, State, Zip]
[Telephone]
[Facsimile]
Title:
Date: ___________ _
Approved as to form:
By: ___________ _
Its: Attorney
Date: ___________ _
CITY OF ROSEVILLE
[Address]
[City, State, Zip]
[Telephone]
[Facsimile]
By: ____________ _
Title: ___________ _
Date: ___________ _
Approved as to form:
By: ____________ _
Its: Attorney
Date: ___________ _
TRUCKEE DONNER PUBLIC
UTILITY DISTRICT
[Address]
[City, State, Zip]
[Telephone]
[F acsimile]
By: ___________ _
Title: ___________ _
Date: ___________ _
Approved as to form:
By: ____________ _
Its: Attorney
Date: ___________ _
SILICON VALLEY POWER
[Address]
[City, State, Zip]
[Telephone]
[Facsimile]
By: ____________ _
Title: ___________ _
Date: ___________ _
Approved as to form:
By: ____________ _
Its: Attorney
Date: ___________ _
CITY OF TURLOCK
[Address]
[City, State, Zip]
[Telephone]
[Facsimile]
By: ___________ _
Title: ___________ _
Date: ___________ _
Approved as to form:
By: ___________ _
Its: Attorney
Date: ___________ _
ATTACHMENT C
RENEWABLE ENERGY POWER PURCHASE AGREEMENT
between
NORTHERN CALIFORNIA POWER AGENCY
And
WESTERN GEOPOWER, INC.
May 16,2008
/ /GenServ/18.23/WestemGeoPowerPPA
TABLE OF CONTENTS
PREAMBLE ................................ ········· .. ·· .. ·· .... ···· .. ·· .. ··· .. ·· .. ·· .. ···· .. ····· .. · .. ·· .... · .... ·· .. 1
ARTICLE 1 DEFINITIONS ............ ········· .. ·· .... ·· .. · .. · .... ····· .. · .. · .... ·· .......... · .. · .. · .. ···· .. 2
ARTICLE 2 TERM TERMINATION AND SURVIVAL OF OBLIGATIONS .. · ............... 12
Section 2.1
Section 2.2
Effective Date and Term ............................................................ 12
Effect of Termination -Survival of Obligations ............................... 12
ARTICLE 3 PURCHASE AND SALE··· ............. · ..................................................... 12
Section 3.1
Section 3.2
Section 3.3
Section 3.4
Section 3.5
Purchase and Sale of OUtput ....................................................... 12
Delivery Point ......................................................................... 13
Environmental Attributes and Capacity Attributes ........................... 13
Tax Credits .................................................................................. 15
Right of First Refusal for Purchase of Existing Plant or Expansion
of Plant and Expansion Plant Output ............................................ 15
ARTICLE 4 METERING·· .. ·· ................................................................................. 16
Section 4.1
Section 4.2
Section 4.3
Metering Requirements .............................................................. 16
Meter Inaccuracies and Retroactive Adjustments ............................ 17
Records and Audits .................................................................. 17
ARTICLE 5 BILLING AND PAYMENT .................................................................... 18
Section 5.1 Billing .................................................................................... 18
Section 5.2 Payment ................................................................................. 18
Section 5.3 Netting of Payments .................................................................. 19
Section 5.4 Allocation of Taxes ................................................................... 19
ARTICLE 6 CREDIT REQUIREMENTS .. ·· .. · ................................................ '" .......... 19
Section 6.1 Financial Information ................................................................ 19
ARTICLE 7 SELLER'S ADDITIONAL OBLIGATIONS .. ··· ... · ....................................... 20
Section 7.1
Section 7.2
Section 7.3
Section 7.4
Section 7.5
Section 7.6
Construction, Operating and Maintenance of the Generating Facility .. 20
Milestones .............................................................................. 20
Commercial Operation Performance Tests ..................................... 22
Performance Guaranties ............................................................ 22
Obligation to Schedule and Deliver .............................................. 23
Modifications to the Generating Facility ........................................ 23
ARTICLE 8 FORCE MAJElTRE'" .............................................................................. 24
Section 8.1
Section 8.2
Section 8.3
Force Majeure Events ................................................................ 24
Conditions .............................................................................. 25
Termination due to Force Majeure Event.. ..................................... 25
ARTICLE 9 DEFAULT jREMEDIESjTERMINATION ............................................... 26
Section 9.1 Events of Default Generally ........................................................ 26
1
2008 Power Purchase Agreement
Section 9.2
Section 9.3
Section 9.4
Additional Events of Default by Seller .......................................... 26
Remedies; Termination for Default ............................................... 27
Indemnification ........................................................................ 27
ARTICLE 10 REPRESENTATIONS, WARRANTIES AND COVENANTS· ...................... 28
Section 10.1
Section 10.2
Seller's Representations, Warranties and Covenants ........................ 28
Buyer's Representations ,Warranties and Covenants ........................ 29
ARTICLE 11 MISCELLANEOUS ................................................................................ 30
Section 11.1
Section 11.2
Section 11.3
Section 11.4
Section 11.5
Section 11.6
Section 11.7
Section 11.8
Section 11.9
Section 11.10
Section 11.11
Section 11.12
Section 11.13
Section 11.14
Section 11.15
Section 11.16
Section 11.17
Section 11.18
Section 11.19
Section 11.20
Section 11.21
Section 11.22
EXHIBITS
Reserved
Notices ................................................................................... 30
Dispute Resolution ................................................................... 30
Regulatory Compliance ............................................................. 31
No Dedication of Facilities ......................................................... 31
Confidentiality ........................................................................ 31
Assignment ............................................................................. 32
Waiver of Rights ...................................................................... 32
Section Headings ..................................................................... 33
No third Party Beneficiary ......................................................... 33
Forward Contract ..................................................................... 33
Applicable Law ........................................................................ 33
Venue ..................................................................................... 33
Nature of Relationship ............................................................... 33
Good Faith and Fair Dealing; Reasonableness ................................. 33
Severability ............................................................................. 34
Counterparts ........................................................................... 34
Cooperation ............................................................................ 34
Limitation of Liabilities .............................................................. 34
Further Assurances ................................................................... 35
Time is of the Essence ............................................................... 35
Construction ........................................................................... 35
Entire Agreement Integration ................................... '" ................ 36
Exhibit 1
Exhibit 2
Exhibit 2.1
Exhibit 2.2
Exhibit 2.3
Exhibit 3
Exhibit 4
ExhibitS
Exhibit 6
Exhibit 7
Exhibit 8
Exhibit 9
Exhibit 10
Exhibit 11
Exhibit 12
Exhibit13a
Exhibit13b
Description of Generating Facility
Leasehold Description
Map of Leasehold
Map of Delivery Point
Commercial Operation Performance Tests
Contract Price
Reserved
Expected Annual Contract Quantity Form
Milestones
Reserved
Reserved
Operations Forecasts and Scheduling Protocols
Form of Attestation
Payment / Wire Instructions
Contacts, Buyer
Contacts, Seller
ii
2008 Power Purchase Agreement
Exhibit 14
Exhibit 15
Example of Availability Shortfall Damages
Seller's Insurance Information
iii
2008 Power Purchase Agreement
RENffiNABLEENERGYPO~RPURCHASEAGREEMENT
This Renewable Energy Power Purchase Agreement, together with the exhibits,
attachments, and any referenced collateral agreement or similar arrangement between
the Parties (collectively, the II Agreement") is made and effective as of the following
date: May 16, 2008 (" Effective Date") by and between the Northern California Power
Agency, a joint powers agency established pursuant to the laws of the State of
California ("Buyer" or "NCPA"), and Western GeoPower, Inc., a corporation organized
and existing pursuant to the laws of the State of California ("Seller").
WHEREAS, Seller intends to construct, own, and operate a 33 net MW
geothermal-powered generating facility, which qualifies as of the Effective Date as an
eligible renewable energy resource ("ERR") under the State of California Renewable
Portfolio Standard Program ("RPS"), as codified at California Public Utilities Code
Section 399.11, et seq. and desires to exclusively sell electricity produced by such
Generating Facility together with all Environmental Attributes and Capacity Attributes,
each as defined below, to Buyer pursuant to the terms and conditions set forth herein;
and
WHEREAS, Buyer desires to be the exclusive purchaser of electricity generated
by Seller's Generating Facility, together with all Environmental Attributes and Capacity
Attributes pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises hereof, and the covenants
and conditions contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Buyer and Seller, intending to
be legally bound, hereby agree as follows.
1
2008 Power Purchase Agreement
AGREEMENT
ARTICLE 1: DEFINITIONS
Unless otherwise required by the context in which any term appears, (i) initially-
capitalized terms used in this Agreement shall have the meanings specified in this
Article; (ii) terms defined in the singular shall include the plural and vice versa; (iii)
references to II Articles/' IISections/' and IIExhibitsll shall be to articles, sections, or
exhibits hereof; (iv) all references to a particular entity shall include a reference to such
entity's successors and permitted assigns; (v) the words "herein/' IIhereof/' and
"hereunderll shall refer to this Agreement as a whole and not to any particular section
or subsection hereof; (vi) all accounting terms not specifically defined herein shall be
construed in accordance with GAAP, consistently applied; (vii) references to this
Agreement shall include all appendices and Exhibits hereto, as the same may be
amended, modified, supplemented, or replaced from time to time; (viii) terms used in
the masculine shall include the feminine and neuter and vice versa; and (ix) the term
II including/' when used in this Agreement, shall mean to include without limitation.
1.1 /I Adjustment Period" means (i) the period of time when inaccurate
measurements were made by a defective Meter, if that period of time can be
determined to the mutual satisfaction of the Parties, or (ii) if the period of time
cannot be determined to the mutual satisfaction of the Parties, one-half the
period of time from the date of the last previous test of the Meter to the date such
meter failure is discovered.
1.2 II Agreementll has the meaning set forth in the recitals of this Agreement.
1.3 II Availability" means the Delivered Quantity divided by the Contract Capacity.
Availability 100 x Delivered Quan?ty
Contract CapaCIty
1.4 "Availability Shortfall Damages" has the meaning as set forth in Section 7.4.
1.5 II Available Hours" means the number of hours in any month in which the
Generating Facility is capable of delivering Energy to the Delivery Point;
provided that, to the extent that the Generating Facility is not capable of
delivering 100% of the Contract Capacity in any hour, the Available Hours with
respect to such hour shall be reduced pro rata to reflect the fraction of the
Contract Capacity that the Generating Facility is capable of delivering in such
hour.
2
2008 Power Purchase Agreement
1.6 "Base Hours" means the total number of hours during any month minus the
agreed upon scheduled outage hours and/ or Force Majeure hours.
1.7 "Business Day" means any day except a Saturday, Sunday, or a Federal Reserve
Bank holiday. A Business Day shall begin at 8:00 a.m. and end at 5:00 p.m. local
time for the relevant Party's principal place of business. The relevant Party, in
each instance unless otherwise specified, shall be the Party from whom the
notice, payment or delivery is being sent or by whom the notice, payment or
delivery is received, as the context requires.
1.8 "Buyer" has the meaning set forth in the preamble of this Agreement.
1.9 "CAISO" means the California Independent System Operator.
1.10 "CAISO Settlement Process" means the process currently used by the CAISO to
settle energy transactions. This process may change upon adoption of the
proposed Market Redesign and Technology Update (MRTU) Tariff.
1.11 "CAISO Tariff" means the duly authorized tarift rules, protocols and other
requirements of the CAISO, as amended from time to time.
1.12 "Capacity Attributes" means any and all current or future defined
characteristics, certificates, tags, credits, ancillary service attributes, or accounting
constructs, including but not limited to Integrated Forward Market Load Uplift
Obligation as defined within CAISO Tariff Appendix A Master Definitions
Supplement, howsoever entitled, including Resource Adequacy Benefits, and
any tracking or accounting associated with the foregoing, attributed to or
associated with the electricity generating capacity of the Generating Facility, or
any unit of electricity generating capacity of the Generating Facility, during the
Term.
1.13 "CEC" means the California Energy Commission.
1.14 "Commercial Operation" means that: (i) the Generating Facility has been
constructed in accordance with Prudent Utility Practice, as defined herein, all
Permits, Requirements of Law, and the specifications set forth in Exhibit 2
[Description of Generating Facility]; (ii) all of the requirements set forth in Article
7 have been satisfied; and (iii) Seller has successfully completed the Commercial
Operation Performance Tests.
1.15 "Commercial Operation Date" means the date on which Commercial Operation
first occurs.
1.16 "Commercial Operation Performance Tests" means the tests set forth in Exhibit 3
[Commercial Operation Performance Tests].
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2008 Power Purchase Agreement
1.17 "Confidential Information" means information with respect to the business of
either Party provided by one Party to the other in accordance with, or in
furtherance of, this Agreement including, the content of documents, ideas,
business methods, finances, prices, business plans, financial development plans,
manpower plans, customer lists or details, computer systems, software, know-
how, trade secrets or other matters connected with such Party's obligations
hereunder; provided, however, that "Confidential Information" shall not include
information that (i) at the time of disclosure or thereafter is generally available to,
or known by, the public other than as a result of a disclosure by the receiving
Party or its representatives; (ii) was available to the receiving Party on a non-
confidential basis from a source other than the disclosing Party; or (iii) was
otherwise independently acquired or developed by the receiving Party without
violating its obligations hereunder.
1.18 "Contract Capacity" means the forecast of monthly electricity generation output
of the Generating Facility, net of all expected on-site uses (e.g. parasitic loads)
and any other known and knowable impacts such as planned outage, line or
transformation losses to the Delivery Point to NCPA. This forecast shall be
delivered in writing to NCP A at least ten (10) days prior to the beginning of each
month. Unless otherwise agreed to mutually, the above forecast shall be within
5 % of the previous month's actual generation.
1.19 "Contract Price" means the price in United States Dollars. (unless otherwise
provided for) to be paid by Buyer to Seller for the purchase of the Output, as
specified in Exhibit 4 [Contract Pricel.
1.20 "Contractual Obligations" means, as to Seller, any material agreement,
instrument or undertaking to which Seller is a party or by which it or any of its
property is bound.
1.21 "Contract Year" means each year beginning on January 1st and ending on
December 31st of such year following the Commercial Operation Date; provided,
however, that the first Contract Year shall commence on the Commercial
Operation Date and end on the following December 31st, and the last Contract
Year shall end on the relevant anniversary of the Commercial Operation Date as
set forth in Section 2.1.
1.22 "Control Area" means the electric power system or successor (or combination of
electric power systems) under the operational control of the CAISO or any other
electric power system under the operational control of another organization
vested with authority comparable to that of the CAISO.
1.23 "Damages" has the meaning set forth in Section 9.4.
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2008 Power Purchase Agreement
1.23A "Day-Ahead Inter-SC Trade Period" means the time period in which the CAISO
will accept Inter-SC Trades of Energy within the Day-Ahead Market from
Scheduling Coordinators as defined in the Market Redesign and Technology
Upgrade (MRTU) Tariff as filed at FERC under docket no. ER06-615-000.
1.23B "Day-Ahead Market" means a series of processes conducted in the Day-Ahead
time period as defined in the Market Redesign and Technology Upgrade (MRTU)
Tariff as filed at FERC under docket no. ER06-615-000.
1.24 IIDelay Liquidated Damages" means an amount equal to $1 per day.
1.25 "Delivered Quantity" means the Inter-SC Trade quantity, scheduled during the
Day-Ahead Inter-SC Trade Period, for Energy based on the final results of the
Day-Ahead Market.
1.26 "Delivery Point" means the point at which the Output will be delivered by Seller
and received by Buyer hereunder, as specified in Exhibits 2 [Description of
Generating Facility] and depicted in Exhibit 2.3 [Map of Delivery Point ].
1.27 "Deviation Band" means a defined MW range, generally 3%, in which a specific
generation resource or the summation of a load/ resource portfolio may deviate
from expected energy without incurring a penalty, which may include but is not
limited to the MSS Deviation Band or the compliance range utilized to compute
Uninstructed Deviation Penalties, as defined in the CAISO Tariff.
1.28 "Effective Date" has the meaning set forth in the preamble of this Agreement.
1.29 "Emergency" means any condition or situation which poses an imminent threat
to: (i) life or property, or (ii) Buyer's, or any of its member's, ability to maintain
safe, adequate, and continuous electric power and energy service to its
customers.
1.30 "Energy" means the electricity generated by the Generating Facility pursuant to
this Agreement, as expressed in units of kWh or MWh as measured at the
Meter(s).
1.31 II Environmental Attributes" means any and all credits, benefits, enussIOns
reductions, offsets, and allowances, howsoever entitled, attributable to the
generation from the Generating Facility or Expansion Plant(s), as the case may
be, and its displacement of conventional energy generation. Environmental
Attributes include: (i) any avoided emissions of pollutants to the air, soil or
water such as sulfur oxides (SOx), nitrogen oxides (NOx), carbon monoxide (CO)
and other pollutants; (ii) any avoided emissions of carbon dioxide (C02),
methane (CH4) and other greenhouse gases that have been determined by the
United Nations Intergovernmental Panel on Climate Change to contribute to the
actual or potential threat of altering the Earth's climate by trapping heat in the
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2008 Power Purchase Agreement
atmosphere; and (iii) the reporting rights to these avoided emissions such as
Green Tag Reporting Rights.
Environmental Attributes do not include: (i) any energy, capacity, reliability or
other power attributes from the Generating Facility or Expansion Plant(s), (ii)
Production Tax Credits associated with the construction or operation of the
Generating Facility, or Expansion Plant(s), and other financial incentives in the
form of credits, reductions, or allowances associated with the Generating Facility
or Expansion Plant(s) that are applicable to a state or federal income taxation
obligation, (iii) fuel-related subsidies or "tipping fees" that may be paid to Seller
to accept certain fuels, or local subsidies received by Seller or the owners of the
Site for the destruction of particular pre-existing pollutants or the promotion of
local environmental benefits, or (iv) emission reduction credits encumbered or
used by the Generating Facility or Expansion Plant(s) for compliance with local,
state, or federal operating and/ or air quality permits.
1.32 "Environmental Attributes (EA) Agency" means any local, state or federal entity,
or any other Person, that has responsibility for or jurisdiction over a program
involving transferability of Environmental Attributes, including, but not limited .
to, the Clean Air Markets Division of the United States Environmental Protection
Agency, the CEC, the California Public Utilities Commission, and any successor
agency thereto.
1.33 "Environmental Attributes Reporting Rights" means all rights to report
ownership of the Environmental Attributes to any Person, including under
Section 1605(b) of the Energy Policy Act of 1992.
1.34 "ERR" has the meaning set forth in the recitals of this Agreement.
1.35 "Event of Default" has the meaning set forth in Article 9.
1.36 "Expansion Plant" means any expansion of the Generating Facility from its
nameplate rating capacity. Each such expansion of the Generating Facility shall
be deemed to be an Expansion Plant. Production from the equipment and/ or
resources defined in Exhibit 2 [Description of Generating Facility] shall be
exempt from Expansion of Plant.
1.37 "Expansion Plant Output" means all capacity and associated Energy, and
associated Environmental Attributes and Capacity Attributes produced by Seller
at any Expansion Plant.
1.38 "Expected Annual Contract Quantity" means the amount of Energy and
Environmental Attributes that Seller expects to deliver to Buyer hereunder in a
given Contract Year other than the first and last Contract Years (which may be
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2008 Power Purchase Agreement
partial years), as set forth in Exhibit 6 [Expected Annual Contract Quantity
Forml.
1.39 "Expected Commercial Operation Date" means the date on which the
Commercial Operation Date is expected to occur, as specified in Exhibit 7
[Milestones 1.
1.40 "FERC" means the Federal Energy Regulatory Commission and its successor
organization, if any.
1.41 "Force Majeure Event" has the meaning set forth in Section 8.1.
1.42 "GAAP" means Generally Accepted Accounting Principles in the United States
of America that is consistently applied.
1.43 "Generating Facility" means Seller's electricity generating facility as more
particularly described in Exhibit 2 [Description of Generating Facility], together
with all materials, equipment systems, structures, features and improvements
necessary to produce electricity at such facility, excluding the Site, land rights
and interests in land.
1.44 "Governmental Authority" means any federal or state government, or political
subdivision thereot including, any municipality, township or county, or any
entity or authority exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, including, any
corporation or other entity owned or controlled by any of the foregoing.
1.45 "Green Tag Reporting Rights" are the right of a Green Tag purchaser to report
the ownership of accumulated Green Tags in compliance with federal or state
law, if applicable, and to a federal or state agency or any other party at the Green
Tag purchaser's discretion, and include those Green Tag Reporting Rights
accruing under Section 1605(b) of The Energy Policy Act of 1992 and any present
or future federal, state, or local law, regulation or bill, and international or
foreign emissions trading program. Green Tags are accumulated on MWh basis
and one Green Tag represents the Environmental Attributes associated with one
(1) MWh of energy.
1.46 Reserved
1.47 Reserved
1.48 "Interconnection" means the interconnection of the Generating Facility with the
Transmission System, including construction, installation, operation and
maintenance of all Interconnection Facilities.
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2008 Power Purchase Agreement
1.49 "Interconnection Agreement" means the agreement between Seller and the
Transmission Provider pursuant to which Seller and the Transmission Provider
set forth the terms and conditions for Interconnection of the Generating Facility
to the Transmission Systeml as amended from time to time.
1.50 "Interconnection Facilities!! means all of the facilities installed for the purpose of
interconnecting the Generating Facility to the Transmission System, including
transformers and associated equipment, relay and switching equipment and
safety equipment.
1.51 Jllnterest Rate" means, for any date! the lesser of: (i) the per annum prime
lending rate (or reference rate) of interest of the Bank of America NT & SA ., then
in effect as may from time to time be published by the Bank of America NT &
SA. (or if not published on such day on the most recent preceding day on which
published); and (ii) the maximum rate permitted by applicable law.
1.52 "Investment Tax Credits" or "ITC' means investment tax credits under Section
48 of the Internal Revenue Code, as amended from time-to-time during the Term.
1.53 "kWh" means 1,000 Watt-hours of electric energy.
1.54 "Lender(s)" means any Person(s) providing money or extending credit
(including any capital lease) to Seller for: (i) the construction of the Generating
Facility; or (ii) the term or permanent financing of the Generating Facility.
1.55 "Meters" means the physical metering devices, data processing equipment and
apparatus associated with the meters owned by Seller or Transmission Provider
or its designee, and used to determine the quantities of Energy generated by the
Generating Facility and to record other related parameters required for the
reporting of data to Seller in accordance with the requirements of Article 4.
1.56 "Meter Service Agreement for CAISO Metered Entities" has the meaning set
forth in the CAISO Tariff.
1.57 "Milestones" means the events that are set forth in Exhibit 7 [Milestones].
1.58 "MW" means 1,000 Kilowatts of electric energy.
1.59 "MWh" means 1,000 kWh of electric energy.
1.60 "Outage" means a phYSical state in which all or a portion of the Generating
Facility is unavailable to provide Energy to the Delivery Point, including any
derating or reduction in the capacity of the Generating Facility, whether planned
or unplanned.
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2008 Power Purchase Agreement
1.61 "Output" means (i) the Contract Capacity and associated Energy, and (ii) all
Environmental Attributes and Capacity Attributes.
1.62 "Participating Generator Agreement" has the meaning set forth in the CAISO
tariff.
1.63 "Parties" means Buyer and Seller, and their respective successors and permitted
assignees.
1.64 "Party" means Buyer or Seller, and each such Party's respective successors and
permitted assignees.
1.65 "Peak Months" means, collectively, the months of June, July, August and
September during each Contract Year.
1.66 "Permits" means, collectively, all federal, state or local authorizations,
certificates, permits, licenses and approvals required by any Governmental
Authority for the construction, ownership, operation and maintenance of the
Generating Facility.
1.67 "Person" means an individual, partnership, corporation (including a business
trust), limited liability company, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity.
1.68 "Inter-SC Trades" means the proposed rules for Inter-SC Trade functionality
under the CAISO Market Redesign and Technology Upgrade (MRTU) Tariff as
filed at FERC under docket no. ER06-615-000.
1.69 "Production Tax Credits" or "PTC" means production tax credits under Section
45 of the Internal Revenue Code, as amended from time-to-time during the Term.
1.70 "Prudent Utility Practice" means those practices, methods and equipment, as
changed from time to time, that: (i) when engaged in, or employed, are
commonly used in the State of California in prudent electrical engineering and
operations to operate electricity equipment lawfully and with safety, reliability,
efficiency and expedition; or (ii) in the exercise of reasonable judgment
considering the facts known, when engaged in could have been expected to
achieve the desired result consistent with applicable law, safety, reliability,
efficiency and expedition.
Prudent Utility Practices are not limited to an optimum practice, method,
selection of equipment or act, but rather are a range of acceptable practices,
methods, selections of equipment or acts.
1.71 "Resource Adequacy Benefits" means the rights and privileges attached to any
generating resource that satisfy any entity's resource adequacy obligations.
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2008 Power Purchase Agreement
1.72 "Requirements of Law' means, collectively, any federal or state law, treaty,
franchise, rule, regulation, order, writ, judgment, injunction, decree, award or
determination of any arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon Seller or Buyer or any of their property
or to which Seller or Buyer or any of their respective properties are subject.
1.73 "RPS" or "Renewable Portfolio Standard Program" has the meaning set forth in
the recitals of this Agreement.
1.74 "Schedule" or "Scheduling" means the actions of Seller, Buyer and/or their
designated representatives, including each Party's Transmission Providers, if
applicable, of notifying, requesting and confirming to each other the quantity of
Energy to be delivered on any given day or days hereunder during the Term at
the Delivery Point.
1.75 "Scheduling Coordinator (SC)" means an entity certified by the CAISO for the
purposes of undertaking the responsibilities specified by CAISO Tariff Section
2.2.6, as amended from time-to-time.
1.76 "Seller" has the meaning set forth in the preamble of this Agreement.
1.77 "Site" means the real property on which the Generating Facility is to be built and
located, as more particularly described in Exhibit 2 [Description of Generating
Facility].
1.78 "Site Control" means the point at which Seller satisfies one or more of the
following conditions: (i) Seller is (a) the lessee under a lease, or (b) the grantee
under an exclusive easement, in each case with the owner of the Site that allows
Seller to construct and operate the Generating Facility at the Site during the Term
in accordance with this Agreement; (ii) Seller has a fee ownership of the Site; or
(iii) any other form of site control acceptable to Buyer in its reasonable discretion.
1.79 "Taxes" means any federal, state, local or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental, customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real property
(including assessments, fees or other charges based on the use or ownership of
real property), personal property, transactional, sales, use, transfer, registration,
value added, alternative or add on minimum, estimated tax, or other tax of any
kind whatsoever, or any liability for unclaimed property or escheatment under
common law principles, including any interest, penalty or addition thereto,
whether disputed or not, including any item for which liability arises as a
transferee or successor-in-interest.
1.80 "Term" has the meaning set forth in Section 2.1.
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2008 Power Purchase Agreement
1.81 "Test Energy" means Energy generated by the Generating Facility prior to the
Commercial Operation Date.
1.82 "Transmission Provider" means any entity or entities responsible for the
Interconnection of the Generating Facility with a Control Area or transmitting
Energy on behalf of Seller from the Generating Facility to the Delivery Point and
on behalf of Buyer from the Delivery Point.
1.83 IJTransmission System" means the facilities used for the transmission of
electricity in interstate commerce, including any modifications or upgrades made
to such facilities, owned or operated by the Transmission Provider.
1.84 IIWREGIS" means the Western Renewable Energy Generation Information
System, or any successor renewable energy tracking system for implementing
California's Renewables Portfolio Standard.
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2008 Power Purchase Agreement
ARTICLE 2: TERM, TERMINATION AND SURVIVAL OF OBLIGATIONS
2.1 Effective Date and Term
This Agreement shall become effective on the Effective Date and, shall continue
until the day before the twentieth (20th) year anniversary of the Commercial
Operation Date, unless extended or terminated pursuant to this Agreement.
("Term").
2.2 Effect of Termination -Survival of Obligations
(a) Upon expiration or termination of this Agreement, neither Party shall
have future or further rights or obligations under this Agreement, except as
provided in Section 2.2(b) below.
(b) Survival of Obligations. The following rights, obligations or provisions
shall survive termination or expiration of this Agreement:
(i) obligations by one Party to the other for payment of any amounts, or
for performance of any duties, that have accrued or arose prior to, or
have directly resulted from, the expiration or termination of this
Agreement;
(ii) indemnity obligations contained in Section 9.4, which shall survive
to the full extent of the statute of limitations period applicable to any
third party claim;
(iii) limitation of liability provisions contained in Section 11.18;
(iv) for a period of one (1) year after the expiration or termination date,
the right to dispute an invoice pursuant to Section 5.1(b); or
(v) the obligations under Section 11.5.
ARTICLE 3: PURCHASE AND SALE
3.1 Purchase and Sale of Output
(a) In accordance with the terms and conditions hereof, commencing on the
Commercial Operation Date and continuing throughout the Term, Seller shall
sell, exclusively from the Generating Facility, to Buyer and deliver at the
Delivery Point, and Buyer shall purchase and accept from Seller at the Delivery
Point, and pay the Contract Price of ninety-eight dollars ($98.00) as set forth in
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2008 Power Purchase Agreement
Exhibit 4 [Contract Price], for all of the Delivered Quantity from the Generating
Facility.
(b) Buyer, at Seller's request shall purchase Test Energy during the plant
startup phase, provided Seller appoints Buyer as its Scheduling Coordinator
(SC). Buyer shall pay Seller $88 per MWh of Test Energy delivered. In the event
the CAISO imposes any costs or penalties on Buyer for failure to meet Buyer's
+ / -3% Deviation Band for all of Buyer's scheduled resourcesl Seller agrees to
compensate Buyer for the proportionate share of such costs or penalties
attributable to Seller's failure to deliver the Test Energy scheduled from the
Generating Facility.
(c) Scheduled and Delivered Amounts. Following the Commercial Operation
Datel Seller shall use good faith efforts to ensure that the amounts Scheduled
hereunder match the amounts generated by the Generating Facility.
Notwithstanding anything herein to the contrary, the Parties acknowledge that,
because of the scheduling requirements of the CAISOI Scheduled deliveries and
metered generation may be unequal during any period.
3.2 Delivery Point
(a) Allocation of Costs and Risks. Seller shall be responsible for any costs or
charges imposed on or associated with the Output or the delivery of the Output
hereunder up to and at the Delivery Point. Buyer shall be responsible for any
costs or charges imposed on or associated with the Outputl or its receiptl after
the Delivery Point.
(b) Title and Risk of Loss. Title tOI and risk of loss related tOI the Output shall
transfer from Seller to Buyer after at the Delivery Point.
3.3 Environmental Attributes and Capacity Attributes
(a) Generally. Throughout the Terml Seller shall transfer to Buyerl and Buyer
shall receive from Seller, all rights, titles and interest in and to the Environmental
Attributes and Capacity Attributes, if any, whether now existing or subsequently
generated or acquired (other than by direct purchase from a third party) by
Seller, or that hereafter come into existence, during the Term, as a component of
the Output purchased by Buyer from Seller hereunder. Seller agrees to transfer
and make such Environmental Attributes and Capacity Attributes available to
Buyer immediately to the fullest extent allowed by applicable law upon Seller's
production or acquisition of the Environmental Attributes and Capacity
Attributes. Seller agrees that the Contract Price is the full compensation for all
Energy, Environmental Attributes, and Capacity Attributes.
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2008 Power Purchase Agreement
(b) No Assignment. Seller shall not assign, transfer, convey, encumber, sell or
otherwise dispose of any portion of the Environmental Attributes and Capacity
Attributes to any Person other than Buyer.
(c) RPS Compliance. Before delivery of any Energy hereunder, Seller shall
cause: (i) the Generating Facility to be certified by the appropriate entity having
jurisdiction as an ERR for purposes of the RPS legislation; and (ii) all Output
delivered to Buyer from the Generating Facility to qualify as output of an ERR
for purposes of the RPS legislation. Seller shall ensure that the Generating
Facility maintains ERR status throughout the Term of this Agreement. Seller
shall cooperate reasonably with Buyer and provide such certifications or
attestations to Buyer as are reasonably necessary to verify that all Environmental
Attributes attributable to the Energy have been transferred to Buyer.
(d) Reporting Rights. During the Term, Seller shall not report to any Person
that the Environmental Attributes and Capacity Attributes granted hereunder to
Buyer belong to anyone other than Buyer, and Buyer may report under any
program that such attributes purchased hereunder belong to it.
(e) Attestation. Seller shall be responsible for complying, at its own expense,
with requests for information associated with the Western Renewable Energy
Generation Information System (nWREGIS") and/ or another entity, if any, that
Buyer uses to verify its renewable energy purchases and that requires
registration, inspections, certification or other evidence of the capability of the
Project to produce Environmental Attributes or evidence of the quality and/ or
quantity of such Environmental Attributes produced. Seller shall document the
production of Environmental Attributes under this Agreement by delivering
with each invoice to Buyer an attestation for Environmental Attributes produced
by the Generating Facility and purchased by Buyer in the preceding calendar
month. On or before March 31st of each year following a Contract Year, Seller
shall document the transfer of Environmental Attributes to Buyer under this
Agreement by delivering to Buyer an attestation for Environmental Attributes
transferred under this Agreement in the preceding Contract Year. The form of
attestation is set forth as Exhibit 11 [Form of Attestationl. Exhibit 11 [Form of
Attestation] shall be updated or changed by the Parties as necessary to ensure
that Buyer receives full and complete title to, and the ability to record with any
EA Agency as its own, all of the Environmental Attributes purchased hereunder.
(f) Documentation. At Buyer's request, the Parties, each at their own
expense, shall execute all such documents and instruments in order to effect the
transfer of the Environmental Attributes specified in this Agreement to Buyer or
its designees, as Buyer may reasonably request. Upon notification by an EA
Agency that any transfers contemplated by this Agreement will not be recorded,
the Parties shall promptly cooperate in taking all reasonable actions necessary so
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2008 Power Purchase Agreement
that such transfer can be recorded. Each Party shall promptly give the other
Party copies of all documents it submits to the EA Agency to effectuate any
transfers.
3.4 Tax Credits
Buyer agrees and acknowledges that all PICs, ITCs and other tax
credits/ incentives in effect on the Effective Date shall be owned by Seller and/ or
the owners of the Site. In the event that the value of such credits/incentives
applicable to the Generating Facility or the Output is increased after the Effective
Date and during the Term of the Agreement, Seller agrees to share with Buyer
twenty-five percent (25%) of the increased value of such credits/incentives
realized by Seller or its affiliates with respect to the Generating Facility or the
Output.
3.5 Right of First Refusal for Purchase of Expansion Plant Output
(a) Buyer's Right to Purchase. Seller may in its sole discretion determine,
from time to time, during the Term to develop, finance, construct and/ or operate
an Expansion Plant. Each time such a determination is made, Seller shall notify
Buyer of such determination and shall offer in writing to sell the Expansion Plant
Output to Buyer at a contract price to be determined by the offer and the
acceptance. The offer shall include the price to be paid by Buyer for the
Expansion Plant Output, and the term of the proposed Power Purchase
Agreement (/lpp A"). The PP A shall otherwise conform to the terms and
conditions of this Agreement. If Buyer wishes to accept such offer to purchase all
(or a portion) of the Expansion Plant Output, Buyer shall so notify Seller within
sixty (60) days of its receipt of such offer. The Parties shall promptly thereafter
enter into a definitive PPA incorporating the terms of such offer. Until such an
Expansion Plant PP A is executed, Seller's proposal accepted by Buyer (including
any modifications agreed upon in writing by both Parties), shall control all
dealings between the Parties relating to the Expansion Plant.
(b) Seller's Right to Sell to Third Parties. If Buyer does not accept Seller's
offer to purchase all of the Expansion Plant Output within ninety (90) days of
receipt of Seller's offer, Seller shall be free to offer to sell that portion of the
Expansion Plant Output not accepted by Buyer to one or more third parties at a
price and on other terms and conditions which, taken as a whole, are at least as
favorable to Seller as the price and other terms and conditions set forth in Seller's
offer to Buyer. H Buyer does not purchase the Expansion Plant Output and Seller
sells such Expansion Plant Output to a third party, it shall promptly certify in
writing to Buyer that the terms and conditions of sale of such Expansion Plant
Output to such third party, taken as a whole, are at least as favorable to Seller as
the price and other terms and conditions set forth in Seller's offer to Buyer, and
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2008 Power Purchase Agreement
Seller shall provide the relevant contract and any other supporting
documentation for such certification. Upon the sale of such Expansion Plant
Output in compliance with this Agreement, Buyer shall have no further rights to
be offered or to purchase such Expansion Plant Output. Buyer's refusal of
Expansion Plant Output from one Expansion Plant shall not affect Buyer's right
to purchase the Expansion Plant Output from a later Expansion Plant under the
terms of this Agreement. Seller shall not sell nor provide Buyers Expansion
Plant Output to any third party unless it can do so without compromising in any
material way its ability to provide the Output to Buyer hereunder. The
materiality of any such impact shall be determined by Buyer in its reasonable
discretion.
ARTICLE 4: METERING
4.1 Metering Requirements
(a) Meters. The transfer of Energy from Seller to Buyer shall be measured by
CAISO certified revenue quality Meters at the Delivery Point or corrected to the
Delivery Point Such Meters shall be selected, provided, installed, owned,
maintained and operated, at Seller's sole cost and expense, by Seller or its
designee in accordance with the CAISO Tariff. Seller shall exercise reasonable
care in the maintenance and operation of the Meters, and shall test and verify the
accuracy of each Meter at least annually. Seller shall inform Buyer in advance of
the time and date of these tests, and shall permit Buyer to be present at such tests
and to receive the results of such tests.
(b) SCADA. Seller shall install and maintain all equipment and data circuits
necessary to determine and transmit real time supervisory control and data
acquisition ("SCADA") system data and real time data from the Meters to the
CAISO. Seller shall provide to Buyer a copy of each certificate of compliance
issued by CAISO, if any.
(c) Access by Buyer. Buyer, at its discretion, shall be provided access to all
monitored SCADA points to be used for real time monitoring. Buyer may
further, at its sole cost and expense, install any updates or upgrades to the
Meters, as well as install and maintain check meters and all associated measuring
equipment necessary to permit an accurate determination of the quantities of
Energy delivered under this Agreement, provided that such equipment does not
interfere with Seller's Meters. Seller shall permit Buyer or Buyers representative
access to its Generating Facility for the purpose of installing and maintaining
such check meters.
(d) ISO Requirements. Seller shall submit to the CAISO, or allow the CAISO
to retrieve, any meter data required by the CAISO related to the Generating
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2008 Power Purchase Agreement
Facility and its Output in accordance with the CAISO's settlement and billing
protocol and meter data tariffs.
4.2 Meter Inaccuracies and Retroactive Adjustments
If a Meter fails to register, or if the measurement made by a Meter is found upon
testing to be inaccurate by an amount exceeding plus or minus one percent (1 %),
an adjustment shall be made correcting all measurements made by the inaccurate
or defective Meter during the Adjustment Period. If the Parties are unable to
agree on the amount of the adjustment to be applied to the Adjustment Period,
the amount of the adjustment shall be determined: (i) by correcting the error if
the percentage of error is ascertainable by calibration, tests or mathematical
calculation, or (ii) if not so ascertainable, by estimating on the basis of the
deliveries under similar conditions during periods when the Meter was
registering accurately. Upon the determination of the amount of any adjustment
and upon acceptance of such adjustment by the CAISO, if applicable, Buyer shall
pay to Seller any additional amounts then due for deliveries of Output during
the Adjustment Period at such time as other payments are due for the billing
period in which the determination is made, or Buyer shall be entitled to a credit
against the next subsequent payments due for the deliveries of Output,
whichever case is applicable. The Parties agree to abide by protocols under the
CAISO Tariff for handling Meter inaccuracies.
4.3 Records and Audits
Seller and Buyer shall each keep complete and accurate records and all other
data required by each Party for the purposes of proper administration of this
Agreement! including such records as may be required by state or federal
regulatory authorities. To facilitate payment and verification! Seller and Buyer
shall keep all books and records necessary for billing and payments and grant
the other Party reasonable access to those records. Seller and Buyer! at their own
expense! shall have the right to audit and to examine the billing and operating
records and data kept by the other Party relating to the transactions under! and
the administration ot this Agreement at any time during normal business hours
throughout the Term of this Agreement and for two (2) years thereafter. All such
records and data shall be maintained by each Party throughout the Term of this
Agreement and for a period of not less than two (2) years following the
termination hereof. All such audits and examinations shall be conducted upon
reasonable notice and during normal business hours.
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2008 Power Purchase Agreement
ARTICLE 5: BILLING AND PAYMENT
5.1 Billing
(a) Seller shall provide to Buyer on or before the tenth (10th) day of the
following month:
(i) An invoice based upon the Energy produced and delivered to the
Delivery Point in such previous calendar month.
(ii) The corresponding attestation pursuant to Exhibit 11 [Form of
Attestation]. Such invoice shall be delivered as specified under
Section 11.1.
(b) Disputes over Invoice. Should either Seller or Buyer determine at a later
date, but in no event later than one (1) year after the original invoice date, that
the invoice amount was incorrect, that Party shall promptly notify the other
Party of the error. In the event that an invoice or portion thereof, or any other
claim or adjustment arising hereunder, is disputed, payment of the undisputed
portion of the invoice shall be required to be made when due, with notice of the
objection given to the other Party. Payment of the disputed amount shall not be
required until the dispute is resolved. Upon resolution of the dispute, any
required payment shall be made within thirty (30) Business Days of such
resolution along with interest accrued at the Interest Rate from, and including,
the due date to, but excluding the date paid. Inadvertent overpayments by
Buyer shall be returned upon request or deducted by Seller from subsequent
payments, with interest accrued at the Interest Rate from, and including, the date
of such overpayment to, but excluding the date repaid or deducted by, Seller.
Any dispute with respect to an invoice is waived unless the other Party is
notified in accordance with this Section 5.1(b) within one (1) year after the
invoice is rendered or any specific adjustment to the invoice is made. If an
invoice is not rendered within one (1) year after the close of the month during
which performance occurred, the right to payment for such performance is
waived. Failure of Buyer or its agent to withhold any payment amount is not a
waiver of Buyer's right to challenge such amount.
5.2 Payment
(a) Subject to Section 5.1(b), all invoices under this Agreement shall be due
and payable on the twentieth (20th) day of the month in which the invoice was
received or the tenth (10th) day after receipt of the invoice which ever is later or, if
such day is not a Business Day, then on the next Business Day. Each Party shall
make payments by electronic funds transfer as set forth in Exhibit 12
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2008 Power Purchase Agreement
[Payment/Wire Instructionst or by other mutually agreeable method(s), to the
account designated by the other Party.
(b) Late Payments and Interest Rate. Payments made after the due date shall
be considered late and shall bear interest on the unpaid balance at an annual rate
equal to two percent (2%) plus the Interest Rate. Interest shall be computed on
the basis of a three hundred sixty five (365) -day year.
5.3 Netting of Payments
The Parties hereby agree that they shall discharge debts and payment obligations
due and owing to the other on the same date through netting, in which case all
amounts owed by each Party to the other for the purchase and sale of Output
during the monthly billing period under this Agreement, including any related
damages, interest, and payments or credits, shall be netted so that only the excess
amount remaining due shall be paid by the Party who owes it.
5.4 Allocation of Taxes
Seller shall payor cause to be paid all Taxes on or with respect to the Output sold
and delivered hereunder arising at, or prior to, the Delivery Point. Buyer shall
payor cause to be paid all Taxes on or with respect to the Output purchased and
received from the Delivery Point (other than ad valorem, franchise or income
taxes which are related to the sale of the Output and are, therefore, the
responsibility of Seller). In the event Seller is required by law or regulation to
remit or pay Taxes which are Buyer's responsibility hereunder, Buyer shall
promptly reimburse Seller for such Taxes. If Buyer is required by law or
regulation to remit or pay Taxes which are Seller's responsibility hereunder,
Buyer may deduct the amount of any such Taxes from the sums due to Seller
under this Agreement. Nothing shall obligate or cause a Party to payor be liable
to pay any Taxes for which it is exempt under the law.
ARTICLE 6: CREDIT REQUIREMENTS
6.1 Financial Information
If requested by one Party, the other Party shall deliver: (i) within one hundred
and eighty (180) days following the end of each fiscal year, a copy of the other
Party's annual report containing audited consolidated financial statements for
such fiscal year, and (ii) within sixty (60) days after the end of each of its first
three (3) fiscal quarters of each fiscal year, a copy of the other Party's quarterly
report containing unaudited consolidated financial statements for such fiscal
quarter. In all cases the statements shall be for the most recent accounting period
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2008 Power Purchase Agreement
and prepared in accordance with GAAP; provided, however, that should any
such statements not be available on a timely basis due to a delay in preparation
or certification, such delay shall not be an Event of Default so long as the other
Party diligently pursues the preparation, certification and delivery of the
statements. In the event that such Party does not prepare audited financial
statements, such Party shall provide financial statements prepared in accordance
with GAAP demonstrating its financial condition in form and substance
reasonably acceptable to the other Party.
ARTICLE 7: SELLER'S ADDITIONAL OBLIGATIONS
During the Term of this Agreement, Seller hereby agrees to perform the
following obligations, in addition to Seller's obligations pursuant to Articles 3, 4,
5, and 6:
7.1 Construction, Operation and Maintenance of the Generating Facility
(a) Generally. Seller shall develop, finance, construct, own, operate, and
maintain the Generating Facility in accordance with this Agreement, all
Requirements of Law, Contractual Obligations, Permits and Prudent Utility
Practice.
(b) Compliance. Seller shall, in its own name and at its own expense, seek,
obtain, maintain, comply with and, as necessary, renew and modify from time to
time, all Permits and other authorizations that are required by any Requirements
of Law or Governmental Authority as are necessary for Seller to engage in the
activities and obligations required by the Agreement.
(c) Records. Seller shall keep complete and accurate operating and other
records and all other data for the purposes of proper administration of this
Agreement as reasonably required by Buyer, including such records as may be
required by any Governmental Authority or Prudent Utility Practice.
(d) Disclosure. Seller shall provide to Buyer such information regarding the
permitting, engineering, construction or operations of the Generating Facility as
Buyer may from time to time reasonably request, subject to licensing or other
restrictions of Seller or a third party with respect to confidentiality, disclosure or
use.
(e) Insurance. Seller shall obtain and maintain the policies of insurance in
amounts and with coverage as set forth in Exhibit 15 [Seller's Insurance
Informationl.
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2008 Power Purchase Agreement
7.2 Milestones
(a) Generally. Seller covenants that it will diligently pursue all Milestones set
forth in Exhibit 7 [Milestones], including the Commercial Operation Date. The
Parties agree that time is of the essence in connection with the completion of the
Generating Facility, and for achieving Commercial Operation, and that certain
Milestones for the development, financing and construction of the Generating
Facility must be achieved in a timely fashion or Buyer shall suffer damages.
Seller shall achieve the Milestones by the corresponding dates set forth in Exhibit
7 [Milestones J.
(b) Monthly Reports. Starting on the Effective Date, Seller shall provide to
Buyer monthly progress reports concerning the progress towards completion of
the Milestones. In addition, within five (5) Business Days of the completion of
each Milestone, Seller shall provide a certification to Buyer (along with any
supporting documentation) demonstrating the satisfaction of such Milestone.
Seller shall provide to Buyer additional information concerning Seller's progress
towards, or confirmation ot achievement of the Milestones, as Buyer may
reasonably request from time to time.
(c) Notice of Failure To Achieve a Milestone. Upon becoming aware that
Seller wilt or is reasonably likely to, fail to achieve one or more Milestone(s) by
the required date, for any reason including a Force Majeure Event, Seller shall so
notify Buyer in writing as soon as is reasonably practicaL Such notice shall
explain the cause of the delay, provide an updated date for achievement of the
Milestone(s), and describe Seller's plan for meeting such Milestone(s). Seller's
notice will also explain any impact such delay mayor will have on any other
Milestone, and the measures to be taken to mitigate such impact.
(d) Failure To Achieve Milestone. In the event that Seller fails to meet any
Milestone by the applicable NIilestone deadline as set forth in Exhibit 7
[Milestones]' as such deadline may be extended as a result of a Force Majeure
Event in accordance with Section 7.2(e), Seller shall be liable for Delay Liquidated
Damages for each full month (with parts of a month pro rated) that Seller is late in
satisfying the Milestone. So long as Seller is paying such Delay Liquidated
Damages on a monthly basis Buyer shall not be permitted to terminate this
Agreement, provided that in no event shall the combined extensions by payment
of Delay Liquidated Damages for any or all of the Milestones exceed eighteen
(18) months. If any Milestone has not been satisfied within eighteen (18) months
following the relevant Milestone deadline, or if for any reason Seller fails to pay,
or discontinues paying, the monthly Delay Liquidated Damages provided for
above, Seller shall have committed an Event of Default. The eighteen (18) month
period referred to in the prior sentence shall not be extended as a result of a
Force Majeure Event.
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2008 Power Purchase Agreement
(e) Force Majeure Event. In the event that a Force Majeure Event causes any
delay in the achievement of a Milestone, such Milestone's deadline may be
extended, together with any Force Majeure Event extensions for other
Milestones, for a period not to exceed, in the aggregate, six (6) months. The
extension of the deadline for any Milestone shall extend the deadline for all
subsequent Milestones, provided that in no event shall the combined extensions
for Force Majeure Events for any or all of the Milestones exceed six (6) months.
The extension provided for in this Section 7.2(e) shall be the only effect of a Force
Majeure Event on Seller's obligations with respect to the Milestones.
(f) Waiver of Right. Buyer may, at its discretion, grant waivers for Seller's
failure to meet any of the Milestones, but in no way shall any such waiver
constitute a waiver of any future failures by Seller to meet other Milestones. '
7.3 Commercial Operation Performance Tests
No later than fourteen (14) days prior to conducting its Commercial Operation
Performance Tests in accordance with Exhibit 3 [Commercial Operation
Performance Tests] Seller shall notify Buyer of the date on which it intends to
conduct such tests. Within seven (7) days of the successful completion of Seller's
Commercial Operation Performance Tests, Seller shall provide to Buyer written
notification of the Commercial Operation Date, including any relevant data
demonstrating that Commercial Operation has occurred. Buyer has the right to
be present during any Commercial Operation Performance Test, and to receive
all information, including meter and performance data associated with such
tests. Seller may change the date for such tests upon written notice to Buyer,
provided that Buyer has at least fourteen (14) days notice of the date of such
tests.
7.4 Performance Guaranties
(a) Availability. Seller shall provide to Buyer an account of Availability on a
monthly basis. At the end of the Contract Year, Buyer shall calculate Availability
for the Contract Year. If the Availability, adjusted for Force Majeure Events, for
the year is at or above 90%, irrespective of the fluctuations from month to month,
there will not be any Availability Shortfall Damages due from Seller to Buyer. In
the event, the Availability, adjusted for Force Majeure Events, is below 90% for
the Contract Year, Seller shall pay Buyer the Availability Shortfall Damages. The
Availability Shortfall Damages shall be calculated by comparing the Contract
Capacity, adjusted for Force Majeure Events, against the Delivered Quantity for
that month. Only the months where the Availability was less than 90% will be
subject to the Availability Shortfall Damages. The difference between the
Contract Capacity, adjusted for Force Majeure Events, and the Delivered
Quantity for that month multiplied by five dollars ($5) will be the amount of the
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2008 Power Purchase Agreement
Availability Shortfall Damages. The total of the Available Shortfall Damages for
the Contract Year will reflect the amount Seller will be obligated to pay to Buyer.
Buyer shall send an invoice to Seller reflecting the amount due, and Seller shall
make the payment to Buyer within 30 days of the invoice date (An example of
how the Availability Shortfall Damages are to be calculated as set forth in the
attached Exhibit 14 [Example of Availability Shortfall Damages]).
(b) Limitations. The Parties recognize and agree that (i) the actual damages to
Buyer for a failure by Seller to meet the required Availability are difficult or
inconvenient to determine, (ii) payment of amounts by Seller pursuant to this
Section 7.4 is an appropriate remedy, and (iii) any such payment does not
constitute a forfeiture or penalty of any kind, but rather constitutes anticipated
costs to Buyer under the terms of this Agreement.
7.5 Obligation to Schedule and Deliver
(a) Scheduling. Immediately following the Effective Date, the Parties will
meet and negotiate in good faith the terms and conditions of an agreement
whereby NCP A shall act as Scheduling Coordinator for Seller. In the event the
Parties are unable to agree on the terms and conditions of such an agreement,
Seller shall provide Buyer with written notice of its Scheduling Coordinator, and
the Parties shall thereafter make reasonable efforts to comply with applicable
CAISO requirements and the provisions of Exhibit 10 [Operations Forecasts and
Scheduling Protocols 1.
(b) Agreement with Transmission Provider. Seller shalt at its own cost and
expense, negotiate and enter into an Interconnection Agreement and such other
agreements with the Transmission Provider as needed to enable Seller to
transmit Energy to the Delivery Point.
(c) Agreements with CAISO. Seller shalt at its own cost and expense,
negotiate and enter into any agreements with the CAISO required by the CAISO
for generators delivering power into the CAISO-controlled grid, including a
Meter Service Agreement for CAISO Metered Entities and a Participating
Generator Agreement.
(d) Start-ups and Shut-downs. Seller shall coordinate all Generating Facility
start-ups and shut-downs, in whole or in part, with Buyer in accordance with
CAISO scheduling protocols and the reasonable protocols established by Buyer
that are not inconsistent with the CAISO Tariff and CAISO procedures, as
specified in Exhibit 10 [Operations Forecasts and Scheduling Protocols].
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2008 Power Purchase Agreement
7.6 Modifications to the Generating Facility
Seller shall obtain Buyer's written consent, which shall not be unreasonably
withheld or delayed, prior to making any modifications to the Generating
Facility that are likely to adversely affect Seller's or Buyer's ability to perform its
obligations under this Agreement, including the delivery of the Expected Annual
Contract Quantity and meeting the Availability requirements of Section 7.4. Any
such modifications shall be conducted in accordance with Prudent Utility
Practice and all applicable laws and reliability criteria, as such may be amended
from time to time.
ARTICLE 8: FORCE MAJEURE
8.1 Force Majeure Events
(a) Definition. "Force Majeure Event" may include, subject to Section 8.1(a)
above and (c) below:
(i) acts of God such as storms, floods, lightning and earthquakes;
(ii) sabotage or destruction by a third party of facilities and equipment
relating to the performance by the affected Party of its obligations
under this Agreement;
(iii) Transmission System or generating equipment failure;
(iv) war, riot, acts of a public enemy or other civil disturbance;
(v) strike, walkout, lockout or other significant labor dispute;
(vi) curtailment by the CAISO, or its successor, but only to the extent that
the CAISO declares a "Force Majeure" under the CAISO Tariff; or
(vii) failures or delays by the Transmission Provider or the CAISO in
entering into, or performing under, all agreements with Seller
contemplated by this Agreement.
(b) Exclusion. "Force Majeure Event" does not include the following:
(i) economic hardship of either Party;
(ii) an Outage, except if caused directly by an event or circumstance that
meets the requirements set forth in this Section 8.1;
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2008 Power Purchase Agreement
(iii) failure or delay in the granting of Permits;
(iv) curtailment or interruption of transmission services, other than by
the CAISO where the CAISO declares a "Force Majeure" under the
CAISO Tariff.
(c) Excuse. Subject to Section 8.2 below, and except as expressly set forth
herein, neither Party shall be considered in default under this Agreement for any
delay or failure in its performance under this Agreement (including any
obligation to deliver or accept Output) if such delay or failure is due to a Force
Majeure Event, but only to the extent that:
(i) such Force Majeure Event is not attributable to fault or negligence on
the part of that Party;
(ii) such Force Majeure Event is caused by factors beyond that Party's
reasonable control; and
(iii) despite taking all reasonable technical and commercial precautions
and measures to prevent, avoid, mitigate or overcome such event
and the consequences thereof, the Party affected has been unable to
prevent, avoid, mitigate or overcome such event or consequences.
8.2 Conditions
In addition to the conditions set forth in Section 8.1(a) above, a Party may rely on
a claim of a Force Majeure Event to excuse its performance only to the extent that
such Party:
(i) provides prompt notice of such Force Majeure Event to the other
Party, giving an estimate of its expected duration and the probable
impact on the performance of its obligations under this Agreement;
(ii) exercises all reasonable efforts to continue to perform its obligations
under this Agreement;
(iii) expeditiously takes action to correct or cure the event or condition
excusing performance so that the suspension of performance is no
greater in scope and no longer in duration than is dictated by the
problem; provided, however, that settlement of strikes or other labor
disputes shall be completely within the sole discretion of the Party
affected by such strike or labor dispute;
(iv) exercises all reasonable efforts to mitigate or limit damages to the
other Party; and
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2008 Power Purchase Agreement
(v) provides prompt notice to the other Party of the cessation of the
event or condition giving rise to its excuse from performance.
8.3 Termination Due To Force Majeure Event
In addition to and without limiting any other provisions of this Agreement, if a
Party is prevented from performing its material obligations under this
Agreement for a period of either (i) three hundred and sixty five (365)
consecutive days or more, or (ii) seven hundred and thirty (730) non-consecutive
days or more (whether full or partial days), the unaffected Party may terminate
this Agreement, without liability of either Party to the other, upon thirty (30)
days written notice at any time during the Force Majeure Event.
ARTICLE 9: DEFAULTjREMEDIES/TERMINATION
9.1 Events of Default Generally
An "Event of Default" shall mean, with respect to each Party, the occurrence of
any of the following:
(i) the failure to make, when due, any payment required pursuant to
this Agreement if such failure is not remedied within thirty (30)
Business Days after written notice;
(ii) any representation or warranty made by such Party herein is false or
misleading in any material respect when made or when deemed
made or repeated;
(iii) the failure to perform any material covenant or obligation set forth in
this Agreement (except to the extent constituting a separate Event of
Default, and except for the obligations set forth in Section 7.4, the
exclusive remedies for which are provided in such Section) if such
failure is not remedied within thirty (30) days after written notice
(provided that if such failure is not capable of being remedied within
such period, then for such longer period as is reasonably needed to
effect the remedy, not to exceed one-hundred-eighty (180) days, so
long as the failing Party diligently pursues such remedy);
(iv) the initiation of an involuntary proceeding against such Party under
the bankruptcy or insolvency laws, which involuntary proceeding
remains undismissed for sixty (60) days, or in the event of the
initiation by such Party of a voluntary proceeding under the
bankruptcy or insolvency laws;
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2008 Power Purchase Agreement
(v) such Party consolidates or amalgamates with, or merges with or into,
or transfers all or substantially all of its assets to, another entity and,
at the time of such consolidation, amalgamation, merger or transfer,
the resulting, surviving or transferee entity fails to assume all the
obligations of such Party under this Agreement to which it or its
predecessor was a party by operation of law or pursuant to an
agreement reasonably satisfactory to the other Party; or
9.2 Additional Events of Default by Seller
In addition to the Events of Default in Sections 7.2 and 9.1 above, the following
shall each constitute an "Event of Default" by Seller:
(i) Seller Schedules and/or delivers to Buyer energy or other product
from a resource other than the Generating Facility specified in this
Agreement;
(ii) Seller sells or transfers Buyer's share of the Output (or any
individual component thereof) to any Person other than Buyer.
9.3 Remedies; Termination for Default
(a) Termination for Default. In the event the defaulting Party fails to cure the
Event of Default within the period for curative action under Sections 9.1 or 9.2, as
applicable, the non-defaulting Party may terminate the Agreement by notifying
the defaulting Party in writing of (i) the decision to terminate, and (ii.) the
effective date of the termination.
(b) Remedies. For all claims, causes of action and damages with respect to an
Event of Default, in addition to the right to termination under Section 9.3(a), the
non-defaulting Party shall be entitled to foreclose upon, or otherwise employ,
any security provided by the defaulting Party, and to recover actual damages
allowed by law unless otherwise limited by this Agreement. Neither the
enumeration of Events of Default in Sections 9.1 and 9.2, nor the termination of
this Agreement by a non-defaulting Party pursuant to Section 9.3(a), shall limit
the right of a non-defaulting Party to rights and remedies available at law,
including claims for breach of contract or failure to perform by the other Party
and for direct damages incurred by the non-defaulting Party as a result of the
termination of this Agreement.
(c) Limitations. Except as otherwise specifically and expressly provided in
this Agreement, neither Party shall be liable to the other under this Agreement
for any indirect, special or consequential damages, including loss of use, loss of
revenues, loss of profit, interest charges, cost of capital or claims of its customers
or members to which service is made. Under no circumstances shall the non-
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2008 Power Purchase Agreement
defaulting Party be required to make a termination payment or other payment in
respect of any damages to the defaulting Party (except for payments due under
this Agreement for performance prior to termination).
9.4 Indemnification
Seller and Buyer agree to defendl indemnifYI and hold each otherl and their
respective officersl directorsl employees and agentsl harmless from and against
all claimsl demandsl lossesl liabilitiesl and expenses (including reasonable
attorneys' fees) (collectively, I'Damagesll
) for personal injury or death to persons
and damage to each other!s physical property or facilities or the property of any
other Person to the extent arising out ot resulting from, or caused by the
negligent or intentional and wrongful actsl errorsl or omissions of the
indemnifying Party. This indemnification obligation shall apply
notwithstanding any negligent or intentional acts, errors or omissions of the
indemnitees but the indemnifying Party's liability to pay Damages to the
indemnified Party shall be reduced in proportion to the percentage by which the
indemnitees' negligent or intentional acts, errors or omissions caused the
Damages. N either Party shall be indemnified for its Damages resulting from its
sole negligence or willful misconduct. These indemnity provisions shall not be
construed to relieve any insurer of its obligation to pay claims consistent with the
provisions of a valid insurance policy.
ARTICLE 10: REPRESENTATIONS, WARRANTIES AND COVENANTS
10.1 Seller's Representations, Warranties and Covenants
Seller represents, warrants and covenants to Buyer that as of the Effective Date:
(i) Seller is duly organized and validly existing as a corporation under
the laws of the State of California, and has the lawful power to
engage in the business it presently conducts and contemplates
conducting in this Agreement and Seller is duly qualified in each
jurisdiction wherein the nature of the business transacted by it
makes such qualification necessary;
(ii) Seller has the legal power and authority to make and carry out this
Agreement and to perform its obligations hereunder; all such actions
have been duly authorized by all necessary proceedings on its part.
As of the Commercial Operation Date, (a) the Generating Facility is a
II qualifying small power production facility" as that term is defined
in Section 3(17)(C) of the Federal Power Act, and will possess all of
the exemptions from regulation provided in 18 C.F.R. Sections
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2008 Power Purchase Agreement
292.601(c) and 292.602; or (b) Seller has market-based rate authority,
and has made all filings required in connection with this Agreement,
under Federal Power Act;
(iii) throughout the Term: (a) the Generating Facility will qualify and be
certified by the CEC as an ERR under the rules and requirements in
effect as of the Effective Date; and (b) the Output delivered to Buyer
will qualify as output from an ERR under the requirements of the
RPS in effect as of the Effective Date;
(iv) this Agreement has been duly and validly executed and delivered by
Seller and, as of the Effective Date, constitutes a legal, valid and
binding obligation of Seller, enforceable in accordance with its terms
against Seller, except to the extent that its enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the rights of creditors generally or by
general principles of equity;
(v) there are no actions, suits, proceedings or investigations pending or,
to the knowledge of Seller, threatened in writing against Seller, at
law or in equity before any Governmental Authority, which
individually or in the aggregate are reasonably likely to have a
materially adverse effect on the business, properties or assets or the
condition, financial or otherwise, of Seller, or to result in any
impairment of Seller's ability to perform its obligations under this
Agreement;
(vi) Seller will deliver to Buyer at the Delivery Point the Output free and
clear of all liens, security interests, claims and encumbrances or any
interest therein, or thereto, by any Person;
(vii) Seller holds and will hold throughout the Term, the rights to all
Environmental Attributes and Capacity Attributes, which it has
conveyed and has committed to convey to Buyer hereunder; and
(viii) the execution, delivery and performance of this Agreement by Seller
will not conflict with its governing documents, any applicable laws,
or any covenant, agreement, understanding, decree or order to
which Seller is a party or by which it is bound or affected.
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2008 Power Purchase Agreement
10.2 Buyer's Representations, Warranties, and Covenants
Buyer represents and warrants to Seller that as of the Effective Date:
(i) Buyer is a joint powers agency established pursuant to the laws of
the State of California, and has all requisite corporate power and
authority to own, lease, and operate its properties and to carryon its
business as is now being conducted;
(ii) Buyer is duly qualified or licensed to do business as a joint powers
agency and is in good standing in each jurisdiction in which the
property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except
where the failure to be so duly qualified or licensed and in good
standing would not have a material adverse effect;
(iii) Buyer has the legal power and authority to make and carry out this
Agreement and to perform its obligations hereunder and all such
actions have been duly authorized by all necessary proceedings on
its part;
(iv) the execution, delivery and performance of this Agreement by Buyer
will not conflict with its governing documents, any applicable laws
or any covenant, agreement, understanding, decree or order to
which Buyer is a party or by which it is bound or affected;
(v) this Agreement has been duly and validly executed and delivered by
Buyer and, as of the Effective Date, constitutes a legal, valid and
binding obligation of Buyer, enforceable in accordance with its terms
against Buyer, except to the extent that its enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the rights of creditors generally or by
general principles of equity; and
(vi) there are no actions, suits, proceedings or investigations pending or,
to the knowledge of Buyer, threatened in writing against Buyer, at
law or in equity before any Governmental Authority, which
individually or in the aggregate are reasonably likely to have a
materially adverse effect on the business, properties or assets or the
condition, financial or otherwise, of Buyer, or to result in any
impairment of Buyer's ability to perform its obligations under this
Agreement.
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2008 Power Purchase Agreement
ARTICLE 11: MISCELLANEOUS
11.1 Notices
All written notices, requests, statements or payments under this Agreement
shall, unless otherwise specified herein, be deemed properly sent if delivered in
person or sent by facsimile, reliable overnight courier, or sent by registered or
certified mail, postage prepaid to the persons specified in Exhibit 13A & B
[Contacts]. Notice by facsimile or hand delivery shall be effective at the close of
business on the day actually received, if received during a Business Day, and
otherwise shall be effective at the close of the next Business Day. Notice by
overnight United States mail or courier shall be effective on the next Business
Day after it was sent. A Party may change its contact information by providing
notice of same in accordance herewith.
11.2 Dispute Resolution
(a) Non-binding Arbitration or Mediation. Subject to Section 5.1(b), any
dispute under this Agreement between Seller and Buyer shall, at the request of
any Party, be referred to a senior representative of each of the Parties for
resolution on an informal basis as promptly as practicable. In the event the
senior representatives are unable to resolve the dispute, the matter may be
submitted to non-binding arbitration or mediation on such terms and conditions
as the Parties may agree.
(b) Litigation. In the event the Parties are unable to satisfactorily resolve the
Dispute within thirty (30) calendar days of such referral or such other period as
the Parties may mutually agree, subject to any extensions of time as may be
mutually agreed upon in writing, or any arbitration agreement, either Party may
initiate litigation in a court of law with jurisdiction located in Sonoma County,
California, or pursuant to Section 11.12, if applicable, which shall be the exclusive
venue to litigate disputes.
(c) Remedies. Nothing in this Section 11.2 shall be construed to delay the
exercise of remedies pursuant to Section 9.3 pending the resolution of any
dispute.
11.3 Regulatory Compliance
Each Party shall at all times comply with all applicable laws, ordinances, rules
and regulations applicable to it. As applicable, each Party shall give all required
notices, shall procure and maintain all Permits necessary for performance of this
Agreement, and shall pay its respective charges and fees in connection therewith.
In the event of any change to the CAISO Tariff that materially impacts either
Party's obligations or ability to perform under this Agreement, either Party may
31
2008 Power Purchase Agreement
request that the Parties engage in good faith negotiations to amend this
Agreement such that an equitable balance of benefits and burdens may be
restored to the Parties. In the event that the Parties are unable to agree upon any
amendments to this Agreement within sixty (60) days of the request for
negotiations, either Party may invoke the dispute resolution provisions of
Section 11.2. Pending any resolution under Section 11.2, the Parties shall
continue to comply with the provisions of this Agreement.
11.4 No Dedication of Facilities
Any undertaking by one Party to the other under any prOVIsIon of this
Agreement shall not constitute the dedication of the Generating Facility or any
portion thereof to the public or to any portion thereof.
11.5 Confidentiality
All Confidential Information obtained by either Party from the other Party shall
be used only in connection with such Party's exercise of its rights or performance
of its obligations under this Agreement and shall not be disclosed to any third
party, except as may be required by law, applicable regulation or judicial
process; provided, however, that if the receiving Party is required to disclose
such Confidential Information by applicable law, regulation or legal process, the
receiving Party shall promptly notify the disclosing Party of such pending
disclosure prior to such disclosure; provided further that Buyer may, at any time,
disclose any information (i) determined by its attorney to be required by law to
be disclosed by a public entity such as the Buyer, and (ii) to those of its members
that receive some or all of the Output, whether directly or indirectly, from Buyer.
The provisions of this Section 11.5 shall survive for three (3) years after the
termination of this Agreement.
11.6 Assignment
(a) Buyer. Buyer may, without the consent of Seller (and without relieving
itself from liability hereunder) assign this Agreement or assign or delegate its
rights and obligations under this Agreement, if such assignment is made to: (i)
one or more of its member municipal utilities; or (ii) where such assignment does
not occur by operation of law, any successor to Buyer provided such successor is
a municipal utility or public utility holding a certificate of public convenience
and necessity granted by the California Public Utilities Commission.
(b) Seller. Seller may, without the consent of Buyer (and without relieving
itself from liability hereunder): pledge, encumber, or assign this Agreement or
the account, revenues or proceeds hereof as collateral security in connection with
any financing or other financial arrangements for the Generating Facility,
32
2008 Power Purchase Agreement
provided that in connection with any such pledge, encumbrance, or assignment
the assignee agrees that upon any foreclosure or exercise of similar remedies
upon the Generating Facility or material assets thereof, such assignee shall be
bound by this Agreement.
(c) Written Consent Needed. Except as stated above, neither this Agreement
nor any of the rights, interests, or obligations hereunder shall be assigned by
either Party, without the prior written consent of the other Party, which consent
shall not be unreasonably withheld or delayed. Any assignment of this
Agreement in violation of the foregoing shall be, at the option of the non-
assigning Party, void.
(d) Binding on Parties. This Agreement and all of the provisions hereof are
binding upon, and inure to the benefit of, the Parties and their respective
successors and permitted assigns.
11.7 Waiver of Rights
Waivers of any rights hereunder must be in writing and shall not be implied
from performance or usage of trade. The failure of either Party to enforce or
insist upon compliance with or strict performance of any of the terms or
conditions hereot or to take advantage of any of its rights hereunder, shall not
constitute a waiver or relinquishment of any such terms, conditions or rights, but
the same shall be and remain at all times in full force and effect.
11.8 Section Headings
All titles, subject headings, section titles and similar items are provided for the
purpose of reference and convenience and are not intended to be inclusive,
definitive or to affect the meaning of the contents or scope of the Agreement.
11.9 No Third Party Beneficiary
This Agreement shall not be construed to create rights in, or to grant remedies to,
any third party (other than a permitted successor or assignee bound to this
Agreement) as a beneficiary of this Agreement or any duty, obligation or
undertaking established herein.
11.10 Forward Contract
The Parties acknowledge and agree that this Agreement and the transactions
contemplated by this Agreement constitute a "forward contract" within the
meaning of the United States Bankruptcy Code.
33
2008 Power Purchase Agreement
11.11 Applicable Law
This Agreement is made in the State of California and shall be interpreted and
governed by the laws of the State of California and/or the laws of the United
States, as applicable.
11.12 Venue
As provided in Section 11.2 above, the Parties agree to the exclusive jurisdiction
of the state courts sitting in the Country of Sonoma, State of California.
11.13 Nature of Relationship
The duties, obligations and liabilities of the Parties are intended to be several and
not joint or collective. The Agreement shall not be interpreted or construed to
create an association, joint venture, fiduciary relationship or partnership between
Seller and Buyer or to impose any partnership obligation or liability or any trust
or agency obligation or relationship upon either Party. A Party shall not have
any right, power or authority to enter into any agreement or undertaking for, or
act on behalf of, or act as or be an agent or representative of or otherwise bind
the other Party.
11.14 Good Faith and Fair Dealing; Reasonableness
The Parties agree to act reasonably and in accordance with the principles of good
faith and fair dealing in the performance of this Agreement. Unless expressly
provided otherwise in this Agreement: (i) wherever the Agreement requires the
consent, approval or similar action by a Party, such consent, approval or similar
action shall not be unreasonably withheld or delayed; and (ii) wherever the
Agreement gives a Party a right to determine, require, specify or take similar
action with respect to matters, such determination, requirement, specification or
similar action shall be reasonable.
11.15 Severability
Should any prOVISIOn of this Agreement be or become void, illegal or
unenforceable, the validity or enforceability of the other provisions of this
Agreement shall not be affected and shall continue in full force and effect. The
Parties will, however, use their best endeavors to agree on the replacement of the
void, illegal, or unenforceable provision(s) with legally acceptable clauses that
correspond as closely as possible to the sense and purpose of the affected
provision.
34
2008 Power Purchase Agreement
11.16 Counterparts
This Agreement may be executed in two or more counterparts and by different
Parties on separate counterparts, all of which shall be considered one and the
same Agreement, and each of which shall be deemed an original.
11.17 Cooperation
The Parties agree to reasonably cooperate with each other in the implementation
and performance of the Agreement. Such duty to cooperate shall not require
either Party to act in a manner inconsistent with its rights under this Agreement.
11.18 Limitation of Liabilities
To the extent permitted by law, no Party's directors, members of its governing
bodies, officers or employees shall be liable to any other party or parties for any
loss or damage to property, loss of earnings or revenues, personal injury, or any
other direct, indirect, or consequential damages or injury, or punitive damages,
which may occur or result from the performance or non-performance of this
Agreement, including any negligence arising hereunder. Any liability or
damages faced by an officer or employee of a federal agency or by that agency
that would result from the operation of this provision shall not be inconsistent
with federal law. THERE IS NO WARRANTY OF MERCHANT ABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, AND ANY AND ALL IMPLIED
WARRANTIES ARE DISCLAIMED. THE PARTIES CONFIRM THAT THE
EXPRESS REMEDIES AND MEASURES OF DAMAGES PROVIDED IN THIS
AGREEMENT SATISFY THE ESSENTIAL PURPOSES HEREOF. FOR BREACH
OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF
DAMAGES IS PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF
DAMAGES SHALL BE THE SOLE AND EXCLUSIVE RENIEDY, THE
OBLIGOR'S LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH
PROVISION AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN
EQUITY ARE WAIVED, UNLESS THE PROVISION IN QUESTION PROVIDES
THAT THE EXPRESS REMEDIES ARE IN ADDITION TO OTHER REMEDIES
THAT MAY BE AVAILABLE. IF NO REMEDY OR MEASURE OF DAMAGES
IS EXPRESSLY PROVIDED HEREIN, THE OBLIGOR'S LIABILITY SHALL BE
LIMITED TO DIRECT ACTUAL DAMAGES ONLY, SUCH DIRECT ACTUAL
DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY AND ALL
OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED.
UNLESS EXPRESSLY HEREIN PROVIDED, NEITHER PARTY SHALL BE
LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR
INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS
INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR CONTRACT,
UNDER ANY INDEMNITY PROVISION OR OTHERWISE. UNLESS
35
2008 Power Purchase Agreement
EXPRESSLY HEREIN PROVIDED, AND SUBJECT TO THE PROVISIONS OF
SECTION 9.4, IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS
HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE
WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO,
INCLUDING THE NEGLIGENCE OF ANY P ARTY, WHETHER SUCH
NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE.
TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER
ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES
ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OR OTHERWISE
OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND THE
DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE
APPROXIMATION OF THE HARM OR LOSS.
11.19 Further Assurances
The Parties hereto agree to execute and deliver promptly, at the expense of the
Party requesting such action, any and all other and further instruments,
documents and information that a Party may request, and that are reasonably
necessary, or appropriate, to give full force and effect to the terms and intent of
this Agreement.
11.20 Time is of the Essence
Time is of the essence to this Agreement and in the performance of all of the
covenants, obligations and conditions hereof.
11.21 Construction
The Parties acknowledge that this Agreement was jointly prepared by them, by
and through their respective legal counsel, and any uncertainty or ambiguity
existing herein shall not be interpreted against either Party on the basis that the
Party drafted the language, but otherwise shall be interpreted according to the
application of the rules on interpretation of contracts.
11.22 Entire Agreement; Integration
This Agreement, together with all exhibits attached hereto, constitutes the entire
agreement between the Parties as of the Effective Date and supersedes any and
all prior oral or written understandings. No amendment, addition to or
modification of any provision hereof shall be binding upon the Parties, and
neither Party shall be deemed to have waived any provision or any remedy
available to it, unless such amendment, addition, modification or waiver is in
writing and signed by a duly authorized officer or representative of the Parties.
36
2008 Power Purchase Agreement
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized representatives on the Effective Date first
written.
BUYER: SELLER:
NORTHERN CALIFORNIA POWER AGENCY WESTERN GEOPOWER, INC.
By: ________________________________ __ By:
Name: Name: ----------------------------------------------------
Title: ______________________________ _ Title:
Attest:
Assistant Secretary of the Commission
Approved as to Form:
General Counsel
37
2008 Power Purchase Agreement
Exhibit 1
Exhibit 2
Exhibit 2.1
Exhibit 2.2
Exhibit 2.3
Exhibit 3
Exhibit 4
===5
Exhibit 6
Exhibit 7
Exhibit 8
Exhibit 9
Exhibit 10
Exhibit 11
~~12
Exhibit 13a
EXHIBITS
Reserved
Description of Generating Facility
Leasehold Description
Map of Leasehold
Map of Delivery Point
Commercial Operation Performance Tests
Contract Price
Reserved
Expected Annual Contract Quantity Form
Milestones
Reserved
Reserved
Operations Forecasts and Scheduling Protocols
Form of Attestation
Payment / Wire Instructions
Contacts, Buyer
Exhibit 13b Contacts, Seller
Exhibit 14 Example of Availability Shortfall Damages
=== 15 Seller's Insurance Information
2008 Power Purchase Agreement
Exhibit 1
RESERVED
Exhibit 1
2008 Power Purchase Agreement
Exhibit 2
DESCRIPTION OF GENERATING FACILITY
Western GeoPower Unit #1 (WGP 1) is a geothermaL condensing steam turbine
Generating Facility utilizing the following key systems to generate power to the
electrical grid:
• Steam Gathering and Injection System
• Power Generation Facility
• Transmission Interconnection
Steam Gathering and Injection System
The steam gathering system (SGS) will consist of steam production wells. The actual
number of production wells will depend on initial drilling results and expected
sustainable production well capacity. The production wells will be connected to the
Generating Facility via a steam pipeline. The available condensed steam generated in
the Generating Facility will be re-injected to the geothermal reservoir through injection
wells.
Generating Facility
The Generating Facility (GF) will consist of a dual flow, top exhausting condensing
steam turbine. The GF will consist of the following key systems:
• Steam Turbine-Generator
o Fuji Dual Flow, Top Exhaust Condensing Steam Turbine,
o Seven stage turbine, 19.9 inch length last stage blades
o Design and materials proven for geothermal service
o Fuji 45MV A, TEW AC Generator
• Condensing System
o 100% Steam Bypass Capability
o Hybrid Non Condensable Gas Extraction (NCG) System, including
flexible capacity gas ejectors and liquid ring vacuum pumps
• Cooling System
o Counterflow, Film-fill Cooling Tower
o Vertical Can Type Circulating Water Pumps
• Auxiliary Cooling Water System
Exhibit 2
2008 Power Purchase Agreement
o 2x100% Capacity Auxiliary Cooling Water Pumps for use in plant
cooling systems (oil coolers, generator coolers, NCG intercondensers,
etc)
• H2S Abatement System
o Abatement system for removing H2S in the Non-Condensible gas stream
and the steam condensate. The abatement system will be designed to
meet the requirements of the Northern Sonoma County Air Pollution
Control District regulations.
• Plant Support Systems
o Support systems, including fire protection, instrument air system, service
water system, chemical treatment systems, plant drains and HV AC.
• Plant Electrical and Controls System
o Generator Step-up Transformer, 13.8 kV: 115kV
o Station Transformer, 4.16 kV : 13.8 kV
o Auxiliary Transformer, 0.48 kV: 4.16 kV
o Plant Switchgear and MCC's
o Metering and Relaying Equipment
o Plant Control System
Transmission Interconnection
The Generating Facility will interconnect with the CAISO controlled Geysers #3-
Cloverdale 115 kV Transmission Line as depicted in the map attached as Exhibit 2.3.
This transmission line crosses the project property and taps to the Cloverdale
Substation to the west and the Geysers Unit 3, 4 Ring Bus to the northeast of the Site.
The Generating Facility will utilize a Generator Step-up Transformer to step up the 13.8
kV generator voltage to the 115 kV transmission voltage.
PG&E has completed an Interconnection System Impact Study of the interconnection of
the Generating Facility to the Geysers #3-Cloverdale line. PG&E determined that the
interconnection will not cause any CAISO Normal or Category B overloads. PG&E
further concluded that the Generating Facility will not cause reactive power deficiencies
or impact the transmission system's transient performance.
Exhibit 2
2008 Power Purchase Agreement
Exhibit 2.1
LEASEHOLD DESCRIPTION
Mayacamas Energy Leasehold:
DESCRIPTION:
All that certain real property situated in the County of Sonoma, State of
California, described as follows:
PARCEL ONE:
Lots L 2, 3, 4, 5, 6, 7, 9, 10, 11, 12, 13, 14 and 16 of Section 14, Township 11 North,
8 Range 9 West, M.D.B.&M., according to the official plat thereof.
SAVING AND EXCEPTING THEREFROM, that portion of Lots 3, 4, and 16,
lying northerly of the center of Big Sulpher Creek
ALSO, SAVING AND EXCEPTING THEREFROM, that portion thereof conveyed
to Frank Albert Dewey, et ux, by Deed dated September 2,1950 and recorded
September 11, 1950 as Recorder's Serial No. D-22340, Sonoma County Records.
ALSO, SA VING AND EXCEPTING THEREFROM, the mining rights reserved by
Walter Wayne Woods, et at in Deed to Frank Albert Dewey, et ux, dated September 2,
1950 and recorded September 11, 1950 as Recorder's Serial No. D-22340, Sonoma
County Records.
ALSO, SAVING AND EXCEPTING THEREFROM, that portion of Lots 9 and 14
conveyed to Daniel J. Nielsen, et ux, by Deed dated January 25, 1950 and recorded
February 1,1950 as Recorder's Serial No. D-6082, Sonoma County Records.
ALSO, SA VING AND EXCEPTING THEREFROM, that portion thereof lying
within the bounds of the lands described in the Deed to Regan B. Kidd, et ux, dated
November 25, 1951 and recorded December 7, 1951 and Recorder1s Serial No. D-55754,
Sonoma County Records.
ALSO SAVING AND EXCEPTING the West one-half of Lot 4, as granted to G.
William Filley, by Deed dated June 20, 1962 and recorded July 9, 1962 in Book 1900 of
Official Records at page 39, as Recorder's Serial No. G-99005, Sonoma County Records.
ALSO, EXCEPTING THEREFROM that portion thereof conveyed to Pacific Gas
and Electric Company, a California corporation recorded November 14, 1978 in Book
3482 of Official Records at page 825, Sonoma County Records, and by Instrument
recorded November 14,1978 in Book 3482 of Official records at page 833, Sonoma
County Records.
PARCEL 1WO:
All that parcel of land located in Section 14, Township 11 North, Range 9 West,
M.D.B. & M.,lying west of the centerline of the creek closest to the west boundary of the
Exhibit 2.1
2008 Power Purchase Agreement
Dewey property and south of the county road to Cloverdale, all as the location of these
landmarks existed on July 3D, 1951 and as the above described parcel was granted to
Buckman Inc., a corporation by Deed dated July 3D, 1951 and recorded August 7,1951
as Recorder's Serial No. D-47201, Sonoma County Records.
PARCEL THREE:
The Southwest one-quarter of the Northeast one-quarter and the Southeast one-
quarter of the Northeast quarter of Section 15, in Township 11 North, Range 9 West,
M.D.B. & M., according to the official plat thereof.
SAVING AND EXCEPTING THEREFROM, all mineral rights in the Southeast
one-quarter of the Northeast one-quarter, as same were granted to C. William Filley, by
Deed dated June 20, 1962, and recorded July 9, 1962 in Book 1900 of Official Records at
page 39, as Recorder's Serial No. G-99005, Sonoma County Records.
PARCEL FOUR:
That portion of the East one-half of the Southwest one-quarter of the Southwest
quarter of Section 11, Township 11 North, Range 9 West, according to the official plat
thereof, lying southerly of Big Sulpher Creek.
Filley Leasehold:
DESCRIPTION:
All that certain real property situated in the County of Sonoma, State of
California, described as follows:
PARCEL ONE:
The Northeast one-quarter of the Northeast one-quarter of Section 15 Township
11 North, Range 9 West, M.D.B. & M.
PARCEL TWO:
All that portion lying South of the centerline of Big Sulphur Creek of the
Southeast one-quarter of the Southeast, one-quarter of Section 10, Township 11 North,
Range 9 West, M.D.B. & M.
PARCEL THREE:
All that portion lying Southwesterly of the centerline of Big Sulphur Creek in the
West one-half of the Southwest one-quarter of the Southwest, one-quarter of Section 11
Township 11 North, Range 9 West, M.D.B. & M.
Together with all mineral rights in the Southeast one-quarter of the Northeast
One-quarter of Section 15, Township 11 North, Range 9 West M.D.B. & M.
Exhibit 2.1
2008 Power Purchase AI1TE~emE:nt
Filley-Brown Leasehold:
DESCRIPTION:
All that real property situated in the Unincorporated Area, County of Sonoma,
State of California, described as follows:
The Southwest one-quarter of the Southeast one-quarter of Section 10 and the
Northwest one-quarter of the Northeast one-quarter of Section 15, Township 11 North,
Range 9 West, M.D.B. & M.,
EXCEPTING THEREFROM that portion of the Southwest one-quarter of the
Southeast one-quarter of Section 10, Township 11 North, M.D.B. & M., described as
follows:
Beginning at an iron stake set at the southeast corner of said Southwest one-
quarter of the Southeast one-quarter of Section 10, thence north 700 feet along the
easterly line of the Southwest one-quarter of the Southeast one-quarter of said section
10, to an iron stake; thence west 350 feet to a point; thence south 700 feet to a point in
the south line of said section 10; thence east 350 feet along said section line to the point
of beginning.
Abril Leasehold:
DESCRIPTION
All that real property located in the County of Sonoma, State of California,
described as follows:
PARCEL ONE:
Lot 9 of Section 15 and Lot 19 of Section 14, all in Township 11 North, Range 9
West, M. D. M. & M., containing 30 acres.
APN: 141-010-004 portion
APN: 141-010-014 portion
PARCEL TWO:
The Southwest quarter of Section 10, Township 11 North, Range 9 West, M. D. M.
& M., containing 72.73 acres.
APN: 117-190-014
EXCLUDING THEREFROM the real property described in that certain Geothermal
Lease and Agreement dated June 29, 1982, entered into by and between Annie Abril et
at Lessor, and Union Oil Company of California, Lessee, a Memorandum of which was
recorded October 4, 1982, as instrument number 82053574, as amended between Lessor
Exhibit 2.1
2008 Power Purchase Agreement
and Lessee October 6, 1987, a Memorandum of which was recorded March 4, 1988, as
instrument number 88017757, Official Records of Sonoma County, CA.
PARCEL THREE:
Lots 1, 2 and 8, and the North 1/2 of the Northwest 1/4 of Section 15,
Township 11 North, Range 9 West, M. D. M. & M., containing 190 acres.
APN: 141-010-004 portion
APN: 117-150-001 portion
PARCEL FOUR:
Lot 7 and the South 1/2 of the Northwest 1/4 of Section 15, Township 11
North, Range 9 West, M. D. M. & M., containing 120 acres.
APN: 141-010-004 portion
APN: 117-150-001 portion
Exhibit 2.1
2008 Power Purchase Agreement
,
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2008 Power Purchase Agreement
Exhibit 2.2
MAP OF THE LEASEHOLD
Exhibit 2.2
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/ /
I
Exhibit 2.3
MAP OF DELIVERY POINT
/
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2008 Power Purchase Agreement
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Exhibit 2.3
IESTERN GEO POWEll
GEOTllERHl palER ~Ll~r
M1-1
Exhibit 3
COMMERCIAL OPERATION PERFORMANCE TESTS
Seller shall coordinate and schedule with Buyer a Performance Test after completion of all
equipment startup and commissioning activities. This Performance Test may be
performed before completing punch list items. Buyer shall be permitted to witness the
Performance Test, including access to and copies of control room logs, control system
display screens and instrumentation data for a reasonable period of time before, during
and after the Performance Test, and may also concurrently conduct a site inspection of the
Generating Facility, systems and equipment. Seller shall be responsible for and bear the
costs of any Performance Test. Buyer shall pay for energy produced in accordance with
3.1.b. Seller shall supply a written copy of the Performance Test results to Buyer within
five (5) business days following the conclusion of such test. The Performance Test shall
consist of uninterrupted operation of the Generating Facility for a period of no less than
seven (7) days.
1) Compliance. The Performance Test shall demonstrate the ability of the Generating
Facility to comply with all material safety, system reliability, environmental, and other
Requirements of Law, this Agreement, and any related Agreements, including any
interconnection Agreements.
2) Contract Capacity. The Performance Test shall demonstrate the ability of the
Generating Facility to reliably generate up to thirty-two (32) megawatts, net capacity at
corrected design conditions.
Exhibit 3
2008 Power Purchase Agreement
Exhibit 4
CONTRACT PRICE
Contract Price
Seller shall arrange for its Scheduling Coordinator to transact with NCP A through the
submission of Inter-SC Trade during the Day-Ahead Inter-SC Trade Period. Such Inter-
SC Trade of energy will be scheduled at the individual pricing node of the Generating
Facility. If an Inter-SC Trade scheduled at the individual pricing node of the Generating
Facility is modified or rejected prior to the close of the Day-Ahead Inter-SC Trade Period,
Buyer and Seller may mutually agree to schedule an Inter-SC Trade at a different pricing
point within the CAISO system. Inter-SC Trades of energy at the individual pricing node
of the Generating Facility is subject to physical validation within the CAISO Day-Ahead
Market process, and Seller shall self schedule an amount of energy from the Generating
Facility that is equal to the Inter-SC Trade. Buyer shall pay to Seller ninety-eight dollars
($98) per MWh times the Delivered Quantity for all Energy, Environmental Attributes, and
Capacity Attributes delivered to Buyer.
In addition, an Environmental Attribute adjustment of twenty dollars ($20) per MWh shall
be applied for the difference between the sum of the Delivered Quantity and the sum of
the actual Energy produced, for the month. In the event the sum of the actual Energy
produced is greater than the sum of the Delivered Quantity, for the month, Seller shall
receive credit equal to the difference between the sum of the actual Energy produced and
the sum of the Delivered Quantity times twenty dollars ($20) per MWh. Seller shall, in
accordance with Article 5.1 (i) Billing, adjust the invoice accordingly. In the event the sum
of the actual Energy produced is less than the sum of the Delivered Quantity, for the
month, Buyer shall receive credit equal to the difference between the sum of the actual
Energy produced and the sum of the Delivered Quantity times twenty dollars ($20) per
MWh. Seller shall, in accordance with Article 5.1 (i) Billing, adjust the invoice accordingly.
NCP A Scheduling Coordinator Option
If under Section 7.5 (a), NCPA is selected by Seller as the Scheduling Coordinator for the
Generating Facility, Buyer shall pay to Seller ninety-eight dollars ($98) per MWh times the
actual Energy produced in consideration for all Energy, Environmental Attributes, and
Capacity Attributes delivered to Buyer; provided further that the Scheduling Coordination
agreement between the Parties shall govern the settlement of other CAISO charges and
credits, and other services rendered.
Exhibit 4
2008 Power Purchase Agreement
2008 Power Purchase Agreement
Exhibit 5
RESERVED
Exhibit 5
Exhibit 6
EXPECTED ANNUAL CONTRACT QUANTITY
GENERATING FACILITY
MWH
YEAR (Assume 33 MW Capacity)
1 (April 2010) 200,216
2 265,006
3 262,716
4 260,622
5 258,544
6 259,872
7 264,568
8 262,459
9 260,366
10 258,291
11 259,000
12 263,428
13 261,329
14 259,245
15 257,179
16 235,221
17 262,294
18 260,203
19 258,129
20 256,071
21 256,774
Exhibit 6
2008 Power Purchase Agreement
Exhibit 7
CONSTRUCTION MILESTONE SCHEDULE
I
Milestones Estimated Date for Completion I
File CEC Certification and Verification Completed
Application
Submit Interconnection Application Completed
File Permit Resource Management July 2008
Department (Use) Permit
Execute Construction Contract November 2008
Order major Equipment for Facility Steam Turbine Generator-Completed
Other Major Equipment-October 2008
Receive Completed System Impact Study Completed
Begin Construction of Facility Drilling March 2008
Plant Construction -April 2009
Receive Conditional Use Permit February 2009
Receive Completed Interconnection Facility July 2008
Study
Receive Authority to Construct from March 2009
Sonoma Air Quality Management District
Achieve Initial O~ . ...., ,1 Apri12010
Exhibit 7
2008 Power Purchase Agreement
2008 Power Purchase Agreement
Exhibit 8
RESERVEDesa
Exhibit 8
2008 Power Purchase Agreement
Exhibit 9
RESERVED
Exhibit 9
Exhibit 10
OPERATIONS FORECASTS
and
SCHEDULING PROTOCOLS
This section shall be updated as the CAISO modifies or amends reporting, scheduling, or
other rules/protocols.
1. Annual Operations Forecast
1.1. No later than September 10th of each Contract Year, Seller will provide an
Annual Operations Forecast detailing hourly expected generation and all
proposed planned outages for the next calendar year. The Annual Operations
Forecast for the first calendar year shall be provided no later than ninety (90)
days prior to the Commercial Operation Date.
1.2. Buyer may request modifications to the Annual Operations Forecast at any
time, and Seller shall use good faith efforts to accommodate Buyer's requested
modifications.
1.3. Seller shall not conduct planned outages at times other than as set forth in its
Annual Operations Forecast, unless approved in advance by Seller, which
approval shall not be withheld or delayed unreasonably.
1.4. Seller shall not conduct planned outages during the Peak Months and
furthermore, shall coordinate the outages with NCP A.
2. Short Term Operations Forecasts
2.1. Quarterly Operations Forecast
2.1.1. Twenty (20) days prior to the beginning of each calendar quarter, Seller
shall provide a Quarterly Operations Forecast by hour of expected
generation and all proposed planned outages as approved by NCP A in
advance.
2.1.2. Quarterly Operations Forecast will also include any requested additions
or modifications to planned outages for the next twelve (12) months.
2.1.3. Buyer will approve or require modifications to the proposed Quarterly
Exhibit 10
2008 Power Purchase Agreement
Operations Forecast within ten (10) calendar days of receipt of the
Quarterly Operations Forecast.
2.1.4. If required by Buyer, Seller will provide a modified Quarterly Operations
Forecast to Buyer no later than seven (7) calendar days after receipt of
required modifications from Buyer.
2.2. Weekly Update
2.2.1. No later than 14:00 each Wednesday prior to the following week (Sunday
through Saturday), Seller may provide an electronic update, in a format
specified by Buyer, to the Quarterly Operations Forecast for the next
seven (7) calendar days.
2.2.2. The Weekly Update shall include hourly expected generation and all
proposed planned Outages.
3. Outage Detail for Annual and Short Term Operations Forecasts
3.1. Outage information provided by Seller is to include, at a minimum, start and
stop time of Outage, capacity out of service (kWh), equipment out of service,
and reason for the Outage.
4. General Scheduling Protocols
4.1. Daily modifications to forecasts. Unless otherwise mutually agreed, Seller may
make changes to the weekly forecasts by providing such changes to Buyer prior to
08:00 two (2) Business Days before the active scheduling day.
4.1.1. Active scheduling day as determined by the WECC Prescheduling
calendar.
4.1.2. Example: For power that is scheduled for generation or delivery on
Thursday, March 29, changes must be submitted to Buyer no later than
08:00 on Tuesday, March 27.
4.2. Hourly modifications to active schedules. Unless otherwise mutually agreed,
Seller may make changes to active schedules by providing such changes to Buyer
with a minimum of four (4) hours notice before the active hour to be changed.
Changes to active schedules are limited to two (2) changes per day, excluding
forced outages, unless otherwise agreed to between the parties. One request
for a schedule change, of one hour or multiple hours duration, constitutes one
schedule change.
Exhibit 10
2008 Power Purchase Agreement
4.2.1. Example: For power that is scheduled for generation or delivery in
hour ending 15:00 (for the period from 14:01 to 15:00), changes must
be submitted to Buyer no later than 10:00.
4.3. At Seller's request, Buyer may modify generation and load schedules for
unforeseen circumstances in accordance with the above scheduling timeline
constraints and Buyer's Schedule Coordination Agreement.
4.4. In the absence of forecasts and schedules as required by this Agreement or this
Exhibit, Buyer shall utilize the most current information provided by Seller in the
development and submission of Schedules.
5. Additional Scheduling Protocols When NCP A is the Scheduling Coordinator
5.1. Seller is to notify NCP A of all planned or forced generation outages to ensure
compliance with CAISO Outage Coordination and Enforcement Protocols.
5.1.1. Outage information provided by Seller is to include, at a minimum, start and
stop time of Outage, capacity out of service (kW), equipment out of service,
and reason for the Outage.
5.1.2. Planned Outages not included in the Annual Operations Forecast, the
Quarterly Operations Forecast, or the Weekly Update, shall be provided by
Seller to Buyer at least four (4) business days prior to the start of the
requested outage.
5.2. Forced Outages
5.2.1. "Forced Outages" are any unplanned reductions in the capability of the
Generating Facility.
5.2.2. Forced Outages shall be reported by Seller to NCP A within twenty (20)
minutes of such outages.
5.2.3. Notice by Seller to NCP A of a Forced Outage shall include the reason for the
outage (if known), expected duration of the outage, and the capacity
reduction.
5.2.4. Within forty-six (46) hours of a Forced Outage, a detailed verbal report shall
be provided by Seller to NCP A specifying the reason for the outage,
expected duration of such outage, capacity reduction, and actions taken to
mitigate such outage.
5.3. Commencement of an Outage -Seller shall not begin any planned Outage
without prior approval of NCPA and the CAISO.
Exhibit 10
2008 Power Purchase Agreement
5.4. Return to Service -Seller shall notify NCP A immediately whenever a generating
unit is returned to service.
6. When NCP A is not the Scheduling Coordinator
6.1. Seller shall cause its Scheduling Coordinator to provide all required Outage
reporting information directly to the CAlSO as required by the then existing
CAISO scheduling protocols.
6.2 Buyer shall transfer to Seller a MW quantity of Integrated Forward Market Load
Uplift Obligation equal to the Delivered Quantity using an Integrated Forward
Market Load Uplift Obligation Inter-SC Trade.
7. Notices
7.1. All Scheduling notices and Schedules are to be submitted to Buyer by phone, fax
or email to the following persons:
7.1.1. For Day Ahead Schedule changes, inform the Buyer'S Pre-Scheduling
Contact listed in Exhibit 13a [Contacts, Buyer].
7.1.2. For Hourly Modifications, inform the Buyer's Schedule Coordinator Contact
listed in Exhibit 13a [Contacts, Buyer].
7.1.3. For forced Outages, inform the Buyer's Dispatcher Contact listed in Exhibit
13a [Contacts, Buyer].
Exhibit 10
2008 Power Purchase Agreement
8. Example Form Of Day~Ahead Schedule:
MMlDDIYY
Hour Ended
1
2
•
3
4
5
6
7
I 8
9
•
10
11
12
•
13
i 14
! 15
16
17
18
19
20
21
22
23
24
Expected Daily Temperatures (in Fahrenheit):
Low
__ High
Contact Information:
Scheduling Coordinator:
2008 Power Purchase Agreement
Exhibit 10
Expected Capability
33MW
33MW
33MW
33MW
33MW
33MW
33MW
33MW
33MW
33MW
33MW
33MW
33MW
33MW
33MW
33MW
33MW
33MW
33MW
33MW
33MW
33MW
33MW
33MW
Exhibit 11
FORM OF ATTESTATION
Environmental Attribute Attestation and Bill of Sale
[Name of Seller] ("Seller") hereby sells, transfers and delivers to Northern California Power Agency
("Buyer") the Environmental Attributes and Environmental Attributes Reporting Rights associated with the
generation of the indicated Energy for delivery to the grid (as such terms are defined in the Renewable
Energy Power Purchase Agreement (JI Agreement") dated [Dat4 between Buyer and Seller) arising from the
generation for delivery to the grid of the energy by the Generating Facility:
Facility name and location: Proiect Name \ _____ County, California)
EIA ID #: CEC ID #: ISO Meter ID #: __ _
Fuel Type: ___ _ Capacity (MW): ___ _ Operational Date:
MWhrs generated MWhrs generated
In the amount of one Environmental Attribute for each megaWatt hour generated; and Seller further attests,
warrants and represents as follows:
i) to the best of its knowledge, the information provided herein is true and correct;
ii) this transfer to Buyer is the one and only sale of the Environmental Attributes and associated
Environmental Attributes Reporting Rights referenced herein;
iii) the Facility generated and delivered to the grid the energy in the amount indicated as
undifferentiated energy; and
(check one)
iv) Seller owns the Generating Facility, or
iv) to the best of Seller's knowledge, each of the Environmental Attributes associated with the
generation of the indicated Energy for delivery to the grid have been generated and sold by the
Generating Facility.
This serves as a Bill of Sale, transferring from Seller to Buyer all of Seller's right, title and interest in and to
the Environmental Attributes associated with the generation of the Energy for delivery to the grid.
Seller:
By
Title
Date:
2008 Power Purchase Agreement
Exhibit 11
Exhibit 12
PAYMENT I WIRE INSTRUCTIONS
------------------------------------------------------------------------------------------
NORTHERN CALIFORNIA POWER AGENCY (Buyer)
WIRE INSTRUCTIONS
The following information is to be used when wiring funds for deposit to Buyer:
U.S. Bank
ABA# 121122676
For Deposit to:
Northern California Power Agency
Acct. No. 1-534-0216-2744
For information purposes, please fax a copy of the wire instructions to Buyer at (916) 781-
4255, Attention Treasurer-Controller.
The following information is to be used for all other statements or payments to Buyer by
mail:
NCPA
Attention: Treasurer-Controller
180 Cirby Way
Roseville, CA 95678.
WESTERN GEOPOWER INC (Seller)
WIRE INSTRUCTIONS
The following information is to be used when wiring funds for deposit to Seller
[To Be ProvidedJ
For information purposes, please fax a copy of the wire instructions to [Seller's Name] at
[Seller's phone numberJ, Attention [Seller's relevant contact person].
Exhibit 12
2008 Power Purchase Agreement
1.
2.
3.
Contract Management
Name
Ken Speer
BillinglInvoice Issues
Name
Bob Caracristi
Mike Whitney
NCPA Pre-Scheduling
Exhibit 13a
NCPA(BUYER) CONTACTS
Phone
916-781-4201
Phone
916-781-4224
916-781-4205
Email
Ken.Speer@ncpagen.com
Email
bob.caracristi@ncpa.com
mike. whitney@ncpa.com
Monthly, weekly and daily generation schedules are to be provided to NCPA Pre-
Scheduling contacts.
Name
Kevin McMahan
Norm Worthington
Don Imamura
Ken Goeke
Pre-Scheduling
Phone
916-786-0123
916-781-4227
916-786-0124
916-781-4240
916-781-4290
(FAX) 916-781A239
Email
kevin.mcmahan@ncpa.com
norm. worthington@ncpa.com
don.imamura@ncpa.com
ken.goeke@ncpa.com
4. NCP A Schedule Coordination
All Hour Ahead or Real-Time Schedule changes are to be provided to NCP A Scheduling
Coordinator Contacts.
Name Phone Email
NCPA Scheduling Coordinator 916-781-4237
(FAX) 916-781-4226
5. NCP A Dispatch/Outage Coordination
SC2@ncpa.com
All Planned and/or Forced Outages of Generating Facilities are to be provided to NCPA
Dispatch/Outage Coordination.
Name Phone Email
Dave Wilke 916-781-4225 dave. wilke@ncpa.com
(Supervisor of Dispatch Operations)
Exhibit13a
2008 Power Purchase Agreement
NCPA Dispatch 916-786-3518
NCPA Scheduling Coordinator 916-781-4237
NCPA Dispatch (FAX) 916-781-4226
Exhibit 13a
2008 Power Purchase Agreement
Dispatch@ncpa.com
SC2@ncpa.com
Exhibit 13b
WESTERN GEOPOWER, INC. (SELLER) CONTACTS
1. Contract Management
Name
Kenneth MacLeod
Mike Long
2. BillinglInvoice Issues
Name
Rupi Khanuja
Phone
866-662-3322
866-662-3322
Phone
866-662-3322
3. Pre-Scheduling and Dispatch/Outage Coordination
Email
kmacleod@geopower.ca
mlong@geopower.ca
Email
rupi@geopower.ca
Annual, Quarterly, Weekly and Daily generation schedules:
Name Phone Email
Mike Long 866-662-3322 mlong@geopower.ca
Pre-Scheduling (FAX) (to come)
4. Operator and Real Time Issues
All Planned and/or Forced Outages of generation facilities are to be provided to NCPA
Dispatch/Outage Coordination.
Name Phone Email
Dave Wilke 916-781-4225 dave.wilke@ncpa.com
(FAX) 916-781-4226
Exhibit 13b
2008 Power Purchase Agreement
Contract
year
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Total
Availability
Exhibit 14
Example of Availability Shortfall Damages
Contract Delivered Delivered Availability
Capacity Quantity Quantity A vailability% Shortfall
MWH Case 1 Case 2 (Case 2) Damages
18600 18600 0 0 $93,000
15456 15000 15000 97.04969 0
18600 18600 18600 100 0
9000 9000 9000 100 0
18600 9000 9000 48.3871 48000
18000 18000 18000 100 0
14880 15500 15500 104.1667 0
14880 14880 14880 100 0
16560 16000 16000 96.61836 0
18600 18600 18600 100 0
18000 17800 0 0 90000
18600 18600 18600 100 0
199776 189580 153180 76.67588 $231,000
94.89628 76.67588
Under Case 1, Availability was 94.90%, higher than 90%, therefore no Availability Shortfall Damages due
Under Case 2, Availability was76.68%, lower than 90%, therefore Availability Shortfall Damages due.
Under Case 2, January, May and November were below 90%, hence the Available Shortfall Damages
were calculated as shown totaling to $231,000.
Force Majeure Event -Assume that in May, due to a force majeure event, only 9000 MWH was delivered.
The Available Shortfall Damages would be $183,000, reduced from $231,000. This is because Contract
Capacity must be reduced to 9000 MWH, and therefore, the Availability must be readjusted to 100%,
resulting in $0 for Availability Shortfall Damages for May, reduced from $48,000.
Exhibit 14
2008 Power Purchase Agreement
EXHIBIT 15
SELLER'S INSURANCE INFORMATION
Certificate of Insurance (Example) No. Dated:
This document su ersedes an certificate reviousl issued under this number
~
This is to certify that the Policy(ies) of insurance listed below ("Policy" or "Policies") have been issued to the Named Insured identified
below for the policy period(s) indicated. This certificate issued as a matter of infonnation only and confers no rights upon the Certificate
Holder named below other than those provided by the Policy(ies).
Notwithstanding any requirement, tenn or condition of any contract or any other document with respect to which this certificate may be
issued or may pertain, the insurance afforded by the Policy(ies) is subject to all the tenns, conditions and exclusions of such PoIicy(ies).
This certificate does not amend, extend or alter the coverage afforded by the Policy(ies). Limits shown are intended to address contractual
obligations of the Named Insured.
Limits may have been reduced since Policy effective date(s) as a result of a clam or claims.
Certificate Holder: Named Insured and Address:
To Whom It may Concern
This certificate is issued regarding: Western GeoPower Corp., Meager Creek Development Corp., and
Western GeoPower, Inc.
Type(s) ofInsurance Insurer(s) r-:POliCY Effective/ Sums Insured or Limits of Liability
umber(s) Expiry Dates
COMMERCIAL GENERAL Each Occurrence (including USD 1,000,000
LIABILITY Tenants Legal Liability)
• Each Occurrence (including Employers Liability USD 1,000,000
Tenants Legal Liability)
• Personal or Advertising General Aggregate Limit USD 5,000,000
Injury Limit
• Products & Completed Medical Expense USD 25,000
Operations
• General Aggregate Limits Non-Owned Auto USD 1,000,000
Personal or Advertising USD 1,000,000
Injury Limit
Products & Completed USD 1,000,000
Operations Aggregate
UMBRELLA AI/PI Aggregate Limit USD 9,000,000
• AI/PI Aggregate Limit
• Each Occurrence Limit Each Occurrence Limit USD 9,000,000
• Excess Coverage other
Aggregate Limit Excess Coverage other USD 9,000,000 • Products Completed Aggregate Limit
Operations Aggregate Limit Products Completed USD 9,000,000 • Umbrella Coverages Operations Aggregate Aggregate Limit Limit F Cov~."" USD 9,000,000 te Limit
WORKERS COMPENSATION As Required by Law
Exhibit 15
2008 Power Purchase Agreement
I
•
ATT ACHMENT D
Commission Staff Report
Date: July 23, 2009
To: NCPA Commission
651 Commerce Drive
Roseville. CA 95678
phone (916) 781-3636
fax (916) 783-7693
web www.ncpa.com
AGENDA ITEM NO.:~
Subject: Western GeoPower Inc. Power Plant Project -Power Purchase Agreement
Amendment
Proposal
Authorize the General Manager to amend the Power Purchase Agreement (PPA) with the
Western GeoPower Inc. (WGI) to reflect a revised PPA price of $117 per MWh.
Background
NCPA and WGI executed a Renewable Power Purchase Agreement as of May 16, 2008. Under
the terms of PPA, NCPA agreed to purchase energy, capacity and renewable attributes from a
new twenty-five (25) MW to thirty-five (35) MW geothermal power plant at a fixed price of ninety-
eight dollars ($98) per MWh for a term of twenty (20) years (the Project). WGI began drilling
geothermal wells and ordered the major equipment including the turbines, generators, etc. WGI
was progressing toward achieving the major milestone of beginning the plant construction in
February 2009. However, the current economic situation has prevented WGI from being able to
economically finance the Project. In the meantime, the capital cost of the Project has escalated
including the labor and the finanCing costs.
To address the current situation relating to the difficulties in financing at small scale, WGI is
joining with other companies such as GTO Resources, Polaris Geothermal and Ram Power
specialized in the development of geothermal resources to raise additional equity and establish
investor grade credit potential to pursue geothermal development collectively. In this regard, WGI
has retained financial advisor Raymond James to assist in the financing of the Project.
WGI has met with NCPA staff to explore various ways to successfully finance the Project. One of
the options was a 'prepay' under which NCPA would pay for power in advanCe of construction .
. Another was for NCPA to assume certain equity position. NCPA has indicated to WGI that it
preferred to stay with the already executed 'Take and Pay' PPA structure.
WGI met with NCPA again on July 21, 2009, and shared its financial analysis. WGI advised that
it was collecting close to sixty million dollars ($60) million through the process of joining with
others. However, even with that much infusion of capital, WGl's debt service coverage ratio has
dropped to 1.2:1 from 2.7:1. Raymond James has advised WGI that in order to achieve financing
WGI must meet a minimum threshold of 1.5:1. And, in order to come close to the debt service
coverage ratio of 1.5:1, the PPA price of ninety-eight dollars ($98) needs to be raised to one
hundred seventeen dollars ($117) per MWh.
WGI would prefer to finance the Project in September 2009, in order to begin the construction in
October 2009,.and have the plant ready for generation by July 2011, a delay of fifteen (15)
SR: 188:9
,
Western GeoPower Inc. Power Plant Project -Power Purchase Agreement Amendment
July 23, 2009
Page 2
months from the proposed April 2010 date shown in the current PPA. In the event WGI were to
not meet the October 2009 construction window, the Project will be delayed further by at least six
(6) more months resulting from the weather and equipment delivery constraints, resulting in an
increased cost and delayed output.
Staff has consulted with the General Counsel to seek ways to expedite the execution of a revised
PPA reflecting the new pricing of One Hundred Seventeen Dollars ($117), to assist WGI in
meeting its tight schedule.
If some members wish to remain a participant in the Project under the one hundred seventeen
dollar ($117) pricing formula, General Counsel has recommended the following approach:
• Amend the existing PPA to reflect the revised purchase price of One Hundred Seventeen
Dollars ($117). At the same time, NCPA needs to revise the existing Third Phase
. Agreement to reflect any changes in the membership as well as the revised pricing.
Fiscal Impact
Under the proposed 'Take-and-Pay' PPA, and because the Project is not expected to be
operational until the 2011 time period, there is no fiscal impact until the members start receiving
energy from the Project. Prior to the expected operational date, staff will develop a budget for
approval by the participants covering the expected cost.
Environmental Analysis
The recommended Commission action would amend the existing Agreement with the WGI.
Therefore, the Commission action does not constitute an activity defined by the California
Environmental Quality Act (CEQA) as a "projecf', and therefore, no environmental approvals
under CEQA are required.
Recommendation
Staff recommends the Commission approve Resolution 09-68 authorizing the General Manager
to execute a revised PPA with Western GeoPower Incorporated reflecting the revised price of
One Hundred Seventeen Dollars ($117) per MWh delivered to NCPA, including the capacity and
renewable energy attributes associated with the generation, such revised PPA to be contingent
upon execution of a revised Third Phase Agreement fully subscribing the Project at the revised
price. In addition, the Resolution authorizes the General Manager to submit a revised Third
Phase Agreement to the partiCipating members for approval by its governing authority. Staff
further recommends that it authorize the General Manager to make any and all non-substantive
changes to the Third Phase Agreement and PPA as deemed appropriate by the General
Counsel.
Respectfully submitted,
HM/KS/dg
Attachment: Resolution
SR: 188:9
pri~red by: K~EF~
Assistant General Manager
Generation Services
RESOLUTION 09-68
RESOLUTION OF THE NORTHERN CALIFORNIA POWER AGENCY APPROVING AN AMENDMENT TO
THE POWER PURCHASE AGREEMENT WITH WESTERN GEOPOWER INCORPORATED AND TO
REVISE THE THIRD PHASE AGREEMENT WITH MEMBERS IN THE PROJECT
WHEREAS, NCPA and the Participants are interested in purchasing additional renewable electric
capacity and energy for the benefit of the Participants' customers; and
WHEREAS, NCPA has executed a Renewable Power Purchase Agreement (PPA) with Western
GeoPower Incorporated (WGI) for twenty (20) years, at a price of ninety-eight Dollars ($98) per MWh
delivered; and
WHEREAS, WGI is requesting that NCPA revise the purchase price to one hundred seventeen
Dollars ($117) per MWh to make it possible for it to finance the Project and deliver the energy to NCPA
participants; and
WHEREAS, NCPA and the Participants wish to enter into a revised Power Purchase Agreement on
behalf of the Participants and obligate the Participants to take delivery of and pay for such electricity and to
pay NCPA for the costs of undertaking the foregoing activities; and
WHEREAS, the environmental impact is addressed in Staff Report #188:9; and
NOW, THEREFORE BE IT RESOLVED, by the Commission of the Northern California Power
Agency as follows:
1. Authorize the General Manager to execute a revised Power Purchase Agreement with the
Western GeoPower Inc., reflecting a revised PPA price of one hundred seventeen dollars ($117) per MWh
delivered subject to the approval of a revised Third Phase Agreement with the Project Participants, and such
minor and non-substantive changes as may be made as per the advice and approval of the General
Counsel.
2. Authorize the General Manager to prepare and submit for execution a revised Third Phase
Agreement with the members for their approval including minor and non-substantive changes made to
document as per the advice and approval of the General Counsel.
PASSED, ADOPTED and APPROVED this 23rd day of July 2009 by the following vote on roll call:
v~e Abstained Absent
Alameda
BART K
Biggs ~
Gridley ~' Healdsburg
Lodi ~ Lompoc
Palo Alto
Port of Oakland 9 Redding
Roseville nO
Santa Clara ¥ TID ' "~
Truckee Donner ~
Ukiah X.
Plumas-Sierra ~
.~~
ArrEST: DENISE DOW
ASSISTANT SECRETARY
TO:
FROM:
DATE:
SUBJECT:
ATTACHMENT E
5
HONORABLE CITY COUNCIL
CITY MANAGER DEPARTMENT: UTILITIES
FEBRUARY 19,2008 CMR: 141:08
ADOPTION OF A RESOLUTION APPROVING THE NORTHERN
CALIFORNIA POWER AGENCY THIRD PHASE AGREEMENT
FOR WESTERN GEOPOWER INCORPORATED RENEWABLE
ENERGY POWER PURCHASE AGREEMENT FOR THE
ACQUISITION OF UP TO FIVE AVERAGE MEGAWATTS OF
ENERGY OVER TWENTY YEARS AT AN ESTIMATED COST
NOT TO EXCEED $86 MILLION
RECOMMENDATION
Staff recommends that the City Council adopt a resolution approving the Northern California
Power Agency (NCPA) Third Phase Agreement for Western Geopower Incorporated renewable
energy power purchase. Additionally, for this agreement, staff recommends Council waive the
investment-grade credit rating requirement under Section 2.30.340(d) of the Palo Alto Municipal
Code.
BACKGROUND
In 2002, the Council adopted a renewable resource portfolio standard with the objective of
meeting 20 percent of the City's electrical load with renewable resources by 2015, while
ensuring the retail rate impact does not exceed 0.5 cents per kilowatt-hour (¢/kWh) on average,
or approximately 5 percent of the average retail rate premium (CMR:398:02).
In March 2007, Council advanced and increased the renewable portfolio standard with a target to
meet 20 percent of City loads with renewable resources by 2008 and 33 percent by 2015. The
new target was to be achieved while maintaining the retail rate impact measure of 0.5¢/kWh
(CMR:158:07). It should be noted that the City'S renewable portfolio standard measure excludes
large hydro-electric resources that account for approximately 50 percent of the City'S electric
supply in an average hydro year.
CMR: 141:08 Page 1 of4
The City made considerable renewable resource commitments in 2004 and 2005 at prices of 5 to
6 ¢/k Wh, and should reach the 20 percent renewable portfolio goal by 2008 with minimal impact
on retail rates. The City is still seeking new amounts of renewable energy equal to
approximately 13% of annual usage to meet the 33 percent renewable portfolio goal by 2015.
The search is proceeding in 3 venues: through City requests for proposals, through NCPA's
Green Power Project, and through NCPA's full membership participation opportunities. The
current recommendation is one ofNCPA's full membership opportunities.
DISCUSSION
NCPA owns and operates two geothermal plants in the Geysers area of Sonoma County and
Lake County, California and was recently approached by a British Columbia corporation,
Western GeoPower Incorporated (WGI), which has rights to deVelop a geothermal project
roughly sized between 15 to 35 megawatts (MW) in the Geysers area not far from NCPA's other
facilities. WGI would like to enter into a Power Purchase Agreement (PPA) with NCPA to sell
all output from the plant to NCP A for a fixed price of $98/MWh for a term of 20 years.
The plant, which qualifies as a renewable power project under state-adopted definitions, would
be electrically connected to the California Independent System Operator-managed transmission
system. The plant would be built on the site of a former Pacific Gas and Electric Company
(PG&E) 62 MW plant that operated from 1979 to 1989 before being dismantled. As a power
output purchaser rather than as an investor-owner, NCP A and its members would not be taking
the risk that power production levels may decline, as happened with PG&E's former 62 MW
plant at this location. Under the terms of the PP A, NCPA members pay a fixed rate for any
energy delivered. If delivered volumes decline, NCPA's payments to WGI, and thus Palo Alto's
payments to NCPA, would be reduced proportionately, freeing up money to purchase
replacement renewable energy from other sources.
Eleven members of NCPA, including Palo Alto, expressed interest in purchasing shares that
totaled more than 400% of the PP A. NCPA allocated participation shares to the interested
members in proportion to those members' loads with the result that Palo Alto's share would be
11.28% of the output if all other interested members receive their governing board approvals for
their shares. At that participation level and expected plant output, Palo Alto's share would
amount to about 2.8 average megawatts equaling roughly 2% of its load. If one or more other
participants do not receive approvals for their full shares, there may be additional shares
available for consideration.
In light of the relative economic attractiveness of the WGI proposal compared to other renewable
resource offerings, staff is seeking Council authority to participate in up to 5 average MW of the
project even though preliminary estimates are that Palo Alto's nominal share is likely to be about
2.8 MW (11.28% times 25 MW). More output may materialize for Palo Alto in two ways: it is
possible some members may decrease their share giving Palo Alto a chance to increase its share,
and it is possible the steam field may be more productive than estimated. Even if Palo Alto were
able to get 5 average MW from the WGI project, the City would still need 8 more average MW
to reach its renewable energy procurement goals for 2015.
CMR: 141:08 Page 2 of4
The Third Phase Agreement has been reviewed by staff and approved by the City Attorney's
Office (Attachment 8). The Pro Forma Power Purchase Agreement between NCPA and WGP
has also been reviewed (Attachment C).
Western GeoPower is a relatively small company that does not have a credit rating by Moody's
or Standard and Poor's. Since energy deliveries will be tied to a specific generator at a specific
location, as opposed to market contracts whose deliveries are often backed by financial strength
or collateral rather than a physical asset, staff recommends that Council waive the investment-
grade credit requirement for public agency contracts required under Section 2.20.340 (d) of the
Palo Alto Municipal Code. This conforms to Council action on prior renewable resource
contracts (CMR: 461 :04). This waiver is intended only for small companies that do not have
credit ratings. The PPA was reviewed by NCPA staff, Palo Alto Utilities staff, and Palo Alto's
Energy Risk Manager to determine that the combination of value, price, terms, credit worthiness
of provider, and any credit assurances warrant Palo Alto's participation.
RESOURCE IMPACT
The cost of renewable supplies under the Agreement is expected to be $46 million over 20 years.
This assumes that Palo Alto's participation level and the plant output would provide 2.8 aMW
(about 2% of Palo Alto's load). If, however, Palo Alto is able to get an increased allocation of
the project up to a maximum of 5.0 average MW, then the cost is estimated to be $86 million. In
ether case, the incremental rate impact will remain within the 0.5¢/kWh limit adopted by
Council.
POLICY IMPLICATIONS
Adoption of this resolution allows the City to participate in the NCPA Third Phase Agreement to
purchase renewable energy and thereby is consistent with the Council Top Four Priority of
Environmental Protection. Participating in the Agreement is also consistent with the following
City policies and guidelines:
1. The Council-approved Climate Protection Plan adopted December 3, 2007 containing
Utilities Goal 2: Reduce carbon intensity of energy supply provided by Utilities;
2. The Council-approved Utilities Strategic Plan with regard to employing balanced
environmental solutions;
3. The energy risk management policies;
4. The rate impact limits and the renewable portfolio targets in LEAP Guideline #6;
5. The portfolio diversification goals in LEAP Guideline #3; and
6. The City'S Sustainability Policy Statement, adopted April 2, 2001 (CMR 175:01) and
revised June 18, 2007 (CMR 260:07), the Green Government Pledge, adopted July 19,
1999 (CMR 284:99);
7. The US Mayors' Climate Protection Agreement;
8. The Comprehensive Plan, specifically:
a. GOAL N-9: A clean, efficient, competitively-priced energy supply that makes use of
cost-effective renewable resources.
b. POLICY N-44: Maintain Palo Alto's long-term supply of electricity and natural gas
while addressing environmental and economic concerns.
c. POLICY N-48: Encourage the appropriate use of alternative energy technologies.
CMR: 141:08 Page 30[4
ENVIRONMENTAL REVIEW
Execution of the agreement does not meet the definition of a project, pursuant to section 21065
of the California Environmental Quality Act (CEQA). However, the City and other participating
members intend to receive output from projects that will constitute a project for the purposes of
CEQA. Project developers will be responsible for acquiring necessary environmental reviews
and permits on projects to be developed.
ATTACHMENTS
A: Resolution approving NCPA Third Phase Agreement for Western GeoPower Power Purchase
Agreement
B: NCPA Third Phase Agreement for Western GeoPower Power Purchase Agreement
C: Renewable Energy Power Purchase Agreement between Northern California Power Agency
and Western GeoPower Incorporated
D: NCPA Staff Report and Resolution 08-07 Approving both the 3rd Phase Agreement between
NCPA and members for Western GeoPower Power Purchase Agreement and the NCPAI
Western GeoPower Power Purchase Agreement
PREPARED BY:
DEPARTMENT APPROVAL:
CITY MANAGER APPROVAL:
CMR: 141:08
TOM KABAT
Senior Resource Originator
VALERIE O. FONG
Director of Utilities
EMILY HARRISON
Assistant City Manager
Page 4 of4
247 La Cuesta Drive
Portola Valley, CA 94028
(650) 854-0540 fax (650) 854-9702 smobile (650) 619-5500
sherrylund@aol.com
TO:
FROM:
DATE:
RE:
The Honorable City Council
City of Palo Alto
Sherry Lund
July 30,2009
Proposed Evaluation Criteria for City Manager
Attached is a draft of evaluation criteria for the City Manager. This draft was developed
with the involvement and input of James Keene. This revised criteria reflects Mr.
Keene's leadership style, the broad scope of the job, and elements of generally good
leadership and management practice. We look forward to hearing your feedback.
At the Monday, August 3 Council meeting, I will be asking for your comments, edits and
approval of this proposed criteria and evaluation form.
Thank you for your assistance and best regards,
Sherry Lund
Principal
of Palo Alto
Se tember 2, 2008 -June 30, 2009
Note: Continue hard copy comments on back or attach pages, if needed.
1. 2008-2009 Goals and
Accomplishments (from workplan and
previous Council development goals. Note:
No official goals were set in the past 9
months.)
Out-
t dl san ng
(See attached self-assessment of goal completIon)
Comments:
I 2. Vision and Strategy
The City Manager:
Out-
standing
Exceeds
Expecta-
I tons
Exceeds
Expecta-
tions
Meets
Expecta-
I tons
Meets
Expecta-
tions
Needs
Improve-Unsatis-
ment f actory
Needs
Improve-Unsatls-
ment factory
• Supports the development of the Council's vision; communicates and fosters it
throughout the organization and within the community.
• Supports Council's development of a city-wide strategy.
• Strikes the right balance of dealing with day-to-day demands vs. attending to long-
term strategic interests of the City.
• Encourages the City to tackle difficult, but necessary, long-range challenges.
• Prevents crises whenever possible but responds to crises when necessary.
Comments:
Prepared by Sherry L. Lund Associates, Portola Valley, CA (650) 854-0540 Page 1
Exceeds Meets Needs
Out-Expecta-Expecta-Improve-Unsatls-
r-:----= __ --::-::-=-.".--:--_.,--____ ---. __ -..-=s:::ta:.:.;n:=di:.:.;ns,-g_...:t::.:io:.:.;n:;.s __ ....:ti:;:.o:.::;ns=------, ment factory 13. Council Relationship I I I I
The City Manager:
• Identifies problems and recommends solutions.
• Keeps Council members appropriately and equally informed and does so in a timely
manner.
• Assures Council has access to information when needed.
• Understands and acts on Council agreedwupon priorities.
• Demonstrates the appropriate level of leadership/participation during Council meetings.
• Assures that staff members' participation in Council meetings demonstrates
adequate preparation, clear analysis and appropriate participation.
• Demonstrates the ability to listen to performance feedback and translate that
feedback into action.
• Is respectful, yet forthright in interacting with Council.
Comments:
Please list any specific Improvement{s) that the City Manager can make to strengthen
his/her relationship with Council.
4. Communit Relationshi
The City Manager:
• Listens openly to public requests and suggestions.
• Is responsive to requests from the public, within the context of his job responsibilities.
• Manages boundaries and expectations well.
• Is engaged and committed to building and sustaining community by fostering strong
bonds among different Interests and stakeholders and the City.
• Is visible and present In the community.
• Is a good representative of the City and a capable communicator.
Comments:
Prepared by Sherry L. Lund Associates, Portola Valley. CA (G50) 854-0540 Page 2
5. Relationship With Key Stakeholders
and Partners
The City Manager:
• Ensures that management staff is appropriately engaged with Commissions and
Advisory Boards.
• Maintains the right level of engagement (balancing time and benefit) with other key
stakeholders (e.g., government organizations at the local, regional state and
federal level; boards and agencies, school districts, Stanford University, the
Chamber of Commerce, friends' groups, the media, and other organizations).
• Does a good job In representing the City of Palo Alto's interests with key stakeholders
(e.g., government organizations at the local, regional state and federal level; boards
and agencies, school districts, Stanford University. the Chamber of Commerce,
friends' groups, and other organizations).
• Is a good negotiator with key stakeholders and partners.
Comments:
6. Executive Leadershi
The City Manager:
• Exercises sound judgment
• Sets and models high ethical standards.
• Models and leads through mission, values, and personal example.
• Fosters the right balance of creativity and Innovation with getting things done.
• Moves the organization forward through planning and effective change
management.
• Effectively manages in an environment of conflicting values and opinions.
.. Can build consensus and negotiate differences in a complex environment of
conflicting values and opinions.
• Is respected and trusted by staff.
Comments:
Prepared by Sherry L. Lund Associates, Portola Valley, CA (650) 854-0540 Page 3
7. Organization Culture and
Effectiveness
The City Manager:
• Helps create and communicate an Intra-organizational vision that Is aligned with
the Council's vision and the needs of the community.
• Builds and sustains a strong and capable organization through:
o Recruiting and retaining quality employees.
o Managing employee and organizational performance.
o Reducing unnecessary bureaucracy; simplifying and streamlining systems
and processes where needed.
o Fostering balanced and considered risk-raking.
o Building a culture of service and responsibility.
• Attends to the creation and maintenance of a positive work environment, e.g.,
through open and regular communication, teamwork, cross-departmental
collaboration, and employee participation and recognition.
• Coaches staff members and assures that employees are engaging in professional
development and growth.
Comments:
8. 0 erational Mana ement
The City Manager:
• Attends to the long-term financial health of the City.
• Effectively assures competent budget development, execution, and financial
controls and monitoring.
• Foster competent and accountable personnel management in the organization
• Negotiates fairly and effectively on behalf 01 the city with unions, developers and
other interests.
• Assures the organization gets things done that matter through clear staff goals
and accountability to those goals.
• Advances the use of technology in the delivery of city services
• Encourages high performance and continuous improvement among staff and In all
City operations.
Comments:
Prepared by Sherry L. Lund Associates, Portola Valley, CA (650) 854-0540 Page 4
9. Professional Contribution and
Development
The City Manager:
Out-
standing
Exceeds
Expecta-
tions
Meets
Expecta-
tions
Needs
Improve-Unsatls-
ment factory
• Is a respected and recognized leader in his field; makes contributions, within a
reasonable and prudent level, In the world of local government and public affairs.
• Continuously learns and improves his own capability,
• Maintains a sensible work/life balance, understanding the demands of this position.
Comments:
Prepared by Sherry L. Lund Associates, Portola Valley, CA (650) 854-0540 Page 5
110. Overall Strengths:
Comments:
1 11. Overall Areas for Developmentllmprovement:
Comments:
112. Overall Rating (Circle/highlight one)
Outstanding
5
Exceeds
Expectations
4
Meets
Expectations
3
Needs
Improvement
2
Prepared by Sherry L. Lund Associates, Portola Valley, CA (650) 854·0540
Unsatisfactory
1
Page 6
1 13. Suggested City Manager developmental goals for 2009-2010 -list these below
Comments:
114. CITY MANAGER COMMENTS (may continue on back or add pages as needed):
Signed.~ __________________________________ ___
Mayor
Signed ____________________________________ ___
Chair, CAO Review Committee
Signed~~~--------------------------------City Manager
Date
Date
Date
Signature does not indicate agreement with review comments. Signature acknowledges that
review discussion of comments and ratings took place on date above and that employee has
received a copy of evaluation comments.
Prepared by Sherry L. Lund Associates, Portola Valley, CA (G50) 854·0540 Page 7