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HomeMy WebLinkAbout2020-02-03 City Council Agenda PacketCity Council 1 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. Monday, February 3, 2020 Special Meeting Council Chambers 5:00 PM Agenda posted according to PAMC Section 2.04.070. Supporting materials are available in the Council Chambers on the Thursday 11 days preceding the meeting. PUBLIC COMMENT Members of the public may speak to agendized items; up to three minutes per speaker, to be determined by the presiding officer. If you wish to address the Council on any issue that is on this agenda, please complete a speaker request card located on the table at the entrance to the Council Chambers, and deliver it to the City Clerk prior to discussion of the item. You are not required to give your name on the speaker card in order to speak to the Council, but it is very helpful. Public comment may be addressed to the full City Council via email at City.Council@cityofpaloalto.org. TIME ESTIMATES Time estimates are provided as part of the Council's effort to manage its time at Council meetings. Listed times are estimates only and are subject to change at any time, including while the meeting is in progress. The Council reserves the right to use more or less time on any item, to change the order of items and/or to continue items to another meeting. Particular items may be heard before or after the time estimated on the agenda. This may occur in order to best manage the time at a meeting or to adapt to the participation of the public. To ensure participation in a particular item, we suggest arriving at the beginning of the meeting and remaining until the item is called. HEARINGS REQUIRED BY LAW Applicants and/or appellants may have up to ten minutes at the outset of the public discussion to make their remarks and up to three minutes for concluding remarks after other members of the public have spoken. Call to Order Special Orders of the Day 5:00-5:30 PM 1.Recognition of Palo Alto City Library 2020 Kids and Teen Writing Contest Winners 2.Fire Safety Month Poster Award Recognition to Palo Alto Unified School District Students for Excellence in Art, Creativity, and Messaging Closed Session 5:30-7:00 PM Public Comments: Members of the public may speak to the Closed Session item(s); three minutes per speaker. 3.CONFERENCE WITH CITY ATTORNEY-EXISTING LITIGATION Subject: Miriam Green v. City of Palo Alto Santa Clara County Superior Court Case No. 16CV300760 (One Case, as Defendant) Authority: Government Code Section 54956.9(d)(1) REVISED 2 February 3, 2020 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. 4.CONFERENCE WITH CITY ATTORNEY-EXISTING LITIGATION Subject: Andrew Valentine v. City of Palo Alto Santa Clara County Superior Court Case No. 19CV344693 (One Case, as Defendant) Authority: Government Code Section 54956.9(d)(1) Agenda Changes, Additions and Deletions Oral Communications 7:00-7:15 PM Members of the public may speak to any item NOT on the agenda. Council reserves the right to limit the duration of Oral Communications period to 30 minutes. Minutes Approval 7:15-7:20 PM 5.Approval of Action Minutes for the January 21, 2020 Council Meeting Consent Calendar 7:20-7:25 PM Items will be voted on in one motion unless removed from the calendar by three Council Members. 6.Approval and Authorization for the City Manager or Designee to Execute Contract Number C20175147 for an Emergency Vehicle Traffic Signal Preemption System (PL-19000) With Trafficware as a Pilot Project in a Total Not-to-Exceed Amount of $597,500, for a Maximum of Four Years 7.Approval of Contract Number C20174814 With Lime Energy Services for a Total Not-to-Exceed Amount of $1,820,000, and for a Term of Three Years, to Provide Energy Efficiency Services to Small and Medium Businesses 8.Approval of Amendment Number 3 to Contract Number C16161210 With Shah Kawasaki Architects, Inc. to add a Not-to-Exceed Amount of $102,141 to Provide Continued Construction Administration and LEED Certification Services for the Fire Station 3 Replacement Project (PE- 15003), for a new Total Not-to-Exceed Amount of $916,383 9.Approval of Contract Number C20177344 With Bear Electrical Services for the Provision of On-call Traffic Signal and Electrical Services for a Term of 36 Months With a Maximum Total Compensation Not-to- Exceed $375,000 10.Appointment of 2020 Emergency Standby Council City Manager Comments 7:25-7:35 PM Q & A Q & A Q & A Q & A MEMO 3 February 3, 2020 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. Action Items Include: Reports of Committees/Commissions, Ordinances and Resolutions, Public Hearings, Reports of Officials, Unfinished Business and Council Matters. 7:35-9:30 PM 11.Update and Discussion of the Planning and Development Services Housing Work Plan and Direction to Modify or Direct new Assignments Related to Housing and Other Department Assignments (Continued From January 21, 2020) 9:30-10:30 PM 12.Finance Committee Recommends Council Accept the Fiscal Year 2021 - Fiscal Year 2030 Long Range Financial Forecast and Fiscal Year 2021 Budget Development Guidelines Council Member Questions, Comments and Announcements Members of the public may not speak to the item(s) Adjournment AMERICANS WITH DISABILITY ACT (ADA) Persons with disabilities who require auxiliary aids or services in using City facilities, services or programs or who would like information on the City’s compliance with the Americans with Disabilities Act (ADA) of 1990, may contact (650) 329-2550 (Voice) 24 hours in advance. 4 February 3, 2020 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. Additional Information Standing Committee Meetings Finance Committee Meeting February 4, 2020 Schedule of Meetings Schedule of Meetings Tentative Agenda Tentative Agenda Public Letters to Council Set 1 CITY OF PALO ALTO OFFICE OF THE CITY CLERK February 3, 2020 The Honorable City Council Attention: Finance Committee Palo Alto, California Approval of Action Minutes for the January 21, 2020 Council Meeting Staff is requesting Council review and approve the attached Action Minutes. ATTACHMENTS: • Attachment A: 01-21-20 DRAFT Action Minutes (PDF) Department Head: Beth Minor, City Clerk Page 2 CITY OF PALO ALTO CITY COUNCIL DRAFT ACTION MINUTES Page 1 of 2 Special Meeting January 21, 2020 The City Council of the City of Palo Alto met on this date in the Council Chambers at 6:02 P.M. Present: Cormack, DuBois, Filseth, Fine, Kniss, Kou, Tanaka Absent: Study Session 1. Presentation and Review of Utilities Wildfire Mitigation Plan. Action Items 2. Connecting Palo Alto Rail Grade Separation: A) Receive an Update and Recommendation From the Expanded Community Advisory Panel (XCAP), and Potential Modification of the List of Grade Separation Alternatives to add up to Three Concepts (Additional Alternatives for Study) at the Churchill, Charleston, and Meadow Grade Crossings; and B) Provide Direction to Staff Regarding Next Steps Including a Consultant Contract Amendment for Scope, Budget, and Schedule Modifications. Council took a break from 8:03 P.M. and returned at 8:11 P.M. MOTION: Council Member Kniss moved, seconded by Council Member Cormack to direct Staff to move forward with exploring the “Constant Flow Underpass for Charleston and Meadow” concept. MOTION PASSED: 7-0 MOTION: Mayor Fine moved, seconded by Council Member Kniss to direct Staff to move forward with exploring the “Churchill Partial Underpass” concept. MOTION PASSED: 7-0 MOTION: Council Member Kniss moved, seconded by Council Member Filseth to not re-think Embarcadero at Alma. MOTION PASSED: 7-0 DRAFT ACTION MINUTES Page 2 of 2 City Council Meeting Draft Action Minutes: 01/21/2020 MOTION: Council Member Kniss moved, seconded by Vice Mayor DuBois to continue Agenda Item Number 4, “Council Appointed Officers Committee Recommendation That Council Discuss…” to February 24, 2020. MOTION PASSED: 7-0 MOTION: Vice Mayor DuBois moved, seconded by Council Member XX to ask the XCAP to eliminate options. MOTION FAILED DUE TO THE LACK OF A SECOND. 3. Update and Discussion of the Planning and Development Services Housing Work Plan and Direction to Modify or Direct new Assignments Related to Housing and Other Department Assignments. MOTION: Council Member Kniss moved, seconded by Council Member Filseth to continue Agenda Item Number 3, “Update and Discussion of the Planning and Development Services Housing Work Plan…” to a future date. MOTION PASSED: 7-0 4. Council Appointed Officers Committee Recommendation That Council Discuss and Accept the City Auditor’s Office Organizational Study Report and Provide Direction on Next Steps. Adjournment: The meeting was adjourned at 10:26 P.M. with a special acknowledgement for the continued safety and enhanced quality of life for Palo Alto residents. City of Palo Alto (ID # 10429) City Council Staff Report Report Type: Consent Calendar Meeting Date: 2/3/2020 City of Palo Alto Page 1 Summary Title: Emergency Vehicle Traffic Signal Preemption System Contract Title: Approval and Authorization for the City Manager or Designee to Execute an Emergency Vehicle Traffic Signal Preemption System (PL-19000) Contract With Trafficware as a Pilot Project in an Amount Not-to-Exceed $597,500 for a Maximum of Four Years From: City Manager Lead Department: Fire Recommendation Staff recommends that Council approve and authorize the City Manager or his designee to execute the attached purchase of the Emergency.now feature with Trafficware (Attachment A) in an amount not to exceed $597,500 for the Emergency Vehicle Traffic Signal Preemption System Pilot Project (PL-19000). Background The Emergency Vehicle Traffic Signal Preemption System Pilot (PL-19000) was approved as part of the FY2019 Adopted Capital Budget. This project will purchase a software feature for the City’s current traffic management software package, Trafficware, to outfit 25 City intersections. The Emergency.now signal preemption feature will allow for adjustments to intersection traffic signals along the route of an emergency vehicle to reduce the impact of traffic on the travel time of emergency response vehicles. This project was funded and anticipated to be expended in FY 2019, but because of a shortage of resources in the City’s Purchasing Division, this project was not able to be awarded in FY 2019. As a result the project was delayed and the funding was approved by Council to be reappropriated to FY 2020 on October 21, 2019 (CMR 10658). Discussion Project Description Staff recommends approval of the purchase of an additional feature to the City’s current traffic management system for 25 intersections. The $597,500 will be used to purchase the Emergency.now feature from Trafficware. This feature will be able to adjust traffic City of Palo Alto Page 2 signals at intersections along the route of an emergency vehicle, using priority signal operation well in advance of the arrival of the emergency vehicle. By the time the emergency vehicle reaches each intersection, it would potentially be relieved of traffic, allowing for safe and rapid progress. The purchase is primarily for goods in the amount of $485,000 for the license and installation of the Emergency.now feature, and for services in the amount of $122,500 for a 3-year warranty and ongoing maintenance through 2023. Sole Source Justification This is the purchase of an optional feature for the City’s current traffic management system. This is the only signal preemption option that would be compatible with the City’s current traffic management system, Trafficware. It is also compatible with the City’s existing Computer Aided Dispatch systems for seamless integration. Timeline The project is expected to be completed by Fall 2020, with ongoing maintenance continuing through 2023. Stakeholder Engagement No stakeholder engagement is required for this purchase. Resource Impact Funding is available in the Emergency Vehicle Traffic Signal Preemption System Pilot Project (PL-19000) as a result of Council’s approval of the re-appropriation of funding for this project from FY 2019 to FY2020 on October 21, 2019 (CMR 10658). If the results of the pilot are favorable and the project is recommended to continue, funding for future years of warranty and maintenance costs will be addressed as part of future budget processes in the Fire Department’s operating budget, subject to Council’s appropriation of funds. Policy Implications The proposed action is consistent with City policy. Environmental Review The recommendation in this report does not constitute a project requiring review under the California Environmental Quality Act (CEQA). Attachments: • ATTACHMENT A_Cubic Contract Professional Services Rev. April 27, 2018 Page 1 of 27 CITY OF PALO ALTO CONTRACT NO. C20175147 AGREEMENT BETWEEN THE CITY OF PALO ALTO AND CUBIC CORPORATION AND SUBSIDIARIES, INCORPORATED, (DOING BUSINESS AS CUBIC ITS, INC.) FOR PROFESSIONAL SERVICES This Agreement is entered into as of the 3rd day of February, 2020, (“Agreement”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and Cubic Corporation and Subsidiaries, Incorporated, (Doing Business As Cubic ITS, Inc.), a Texas Corporation, located at 522 Gillingham Lane, Sugar Land, Texas 77478 ("CONSULTANT"). RECITALS The following recitals are a substantive portion of this Agreement and are fully incorporated herein by this reference: A. CITY intends to purchase, install and implement the Emergency Module software to integrate with the City’s central traffic management software system, entitled “ATMS”, to provide safer and quicker response times for emergency vehicles (“Project”) and desires to engage a consultant to conduct the installation, implementation, and software maintenance and technical support services in connection with the Project as detailed in this Agreement (the “Services”). B. CONSULTANT has represented that it has the necessary professional expertise, qualifications, and capability, and all required rights, titles, licenses and/or certifications to provide the Services. C. CITY in reliance on these representations desires to engage CONSULTANT to provide the Services as more fully described in Exhibit “A”, attached to and made a part of this Agreement. NOW, THEREFORE, in consideration of the recitals, covenants, terms, and conditions, in this Agreement, the parties agree: AGREEMENT SECTION 1. SCOPE OF SERVICES. CONSULTANT shall perform the Services described at Exhibit “A” in accordance with the terms and conditions contained in this Agreement. The performance of all Services shall be to the reasonable satisfaction of CITY. SECTION 2. TERM. The term of this Agreement shall be from the date of its full execution through completion of the services in accordance with the Schedule of Performance attached at Exhibit “B” unless terminated earlier pursuant to Section 19 of this Agreement. DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 2 of 27 SECTION 3. SCHEDULE OF PERFORMANCE. Time is of the essence in the performance of Services under this Agreement. CONSULTANT shall complete the Services within the term of this Agreement and in accordance with the schedule set forth in Exhibit “B”, attached to and made a part of this Agreement. Any Services for which times for performance are not specified in this Agreement shall be commenced and completed by CONSULTANT in a reasonably prompt and timely manner based upon the circumstances and direction communicated to the CONSULTANT. CITY’s agreement to extend the term or the schedule for performance shall not preclude recovery of damages for delay if the extension is required due to the fault of CONSULTANT. SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be paid to CONSULTANT for performance of the Services described in Exhibit “A” (also referred to herein as the “Basic Services”), and any reimbursable expenses specified in Exhibit “C”, shall not exceed Five Hundred Ninety Seven Thousand Five Hundred Dollars ($597,500). CONSULTANT agrees to complete all Basic Services, including any specified reimbursable expenses, within this amount. Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth herein shall be at no cost to the CITY. SECTION 5. INVOICES. In order to request payment, CONSULTANT shall submit monthly invoices to the CITY describing the Services performed and the applicable charges (including, as applicable, an identification of personnel who performed the Services, hours worked, hourly rates, and any reimbursable expenses specified in Exhibit C) based upon Exhibit C. If applicable, the invoice shall also describe the percentage of completion of each task. The information in CONSULTANT’s payment requests shall be subject to verification by CITY. CONSULTANT shall send all invoices to the City’s Project Manager at the address specified in Section 13 (“Project Management”) below. The City will generally process and pay invoices within thirty (30) days of receipt. SECTION 6. QUALIFICATIONS/STANDARD OF CARE. All of the Services shall be performed by CONSULTANT or under CONSULTANT’s supervision. CONSULTANT represents that it possesses the professional and technical personnel necessary to perform the Services required by this Agreement and that the personnel have sufficient skill and experience to perform the Services assigned to them. CONSULTANT represents that it, its employees and subconsultants, if permitted, have and shall maintain during the term of this Agreement all licenses, permits, qualifications, insurance and approvals of whatever nature that are legally required to perform the Services. All of the services to be furnished by CONSULTANT under this agreement shall meet the professional standard and quality that prevail among professionals in the same discipline and of similar knowledge and skill engaged in related work throughout California under the same or similar circumstances. SECTION 7. COMPLIANCE WITH LAWS. CONSULTANT shall keep itself informed of and in compliance with all federal, state and local laws, ordinances, regulations, and orders that DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 3 of 27 may affect in any manner the Project or the performance of the Services or those engaged to perform Services under this Agreement. CONSULTANT shall procure all permits and licenses, pay all charges and fees, and give all notices required by law in the performance of the Services. SECTION 8. ERRORS/OMISSIONS. CONSULTANT is solely responsible for costs, including, but not limited to, increases in the cost of Services, arising from or caused by CONSULTANT’s errors and omissions, including, but not limited to, the costs of corrections such errors and omissions, any change order markup costs, or costs arising from delay caused by the errors and omissions or unreasonable delay in correcting the errors and omissions. SECTION 9. COST ESTIMATES. If this Agreement pertains to the design of a public works project, CONSULTANT shall submit estimates of probable construction costs at each phase of design submittal. If the total estimated construction cost at any submittal exceeds ten percent (10%) of CITY’s stated construction budget, CONSULTANT shall make recommendations to CITY for aligning the PROJECT design with the budget, incorporate CITY approved recommendations, and revise the design to meet the Project budget, at no additional cost to CITY. SECTION 10. INDEPENDENT CONTRACTOR. It is understood and agreed that in performing the Services under this Agreement CONSULTANT, and any person employed by or contracted with CONSULTANT to furnish labor and/or materials under this Agreement, shall act as and be an independent contractor and not an agent or employee of CITY. SECTION 11. ASSIGNMENT. The parties agree that the expertise and experience of CONSULTANT are material considerations for this Agreement. CONSULTANT shall not assign or transfer any interest in this Agreement nor the performance of any of CONSULTANT’s obligations hereunder without the prior written consent of the city manager. Consent to one assignment will not be deemed to be consent to any subsequent assignment. Any assignment made without the approval of the city manager will be void. SECTION 12. SUBCONTRACTING. Option A: No Subcontractor: CONSULTANT shall not subcontract any portion of the work to be performed under this Agreement without the prior written authorization of the City Manager or designee. Option B: Subcontracts Authorized: Notwithstanding Section 11 (“Assignment”) above, CITY agrees that subconsultants may be used to complete the Services. The subcontractors/ subconsultants authorized by CITY to perform work on this Project are: CONSULTANT shall be responsible for directing the work of any subcontractors/subconsultants and for any compensation due to subcontractor/subconsultants. CITY assumes no responsibility whatsoever concerning compensation. CONSULTANT shall be fully responsible to CITY for all acts and omissions of a subcontractor/subconsultant. CONSULTANT shall change or add subcontractors/subconsultants only with the prior approval of the City Manager or designee. DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 4 of 27 SECTION 13. PROJECT MANAGEMENT. CONSULTANT will assign Marshall Cheek as the CONSULTANT’s Project Manager to have supervisory responsibility for the performance, progress, execution of the Services and to represent CONSULTANT during the day-to-day work on the Project. If circumstances cause the substitution of the CONSULTANT’s Project Manager, project coordinator, or any other of CONSULTANT’s key personnel for any reason, the appointment of a substitute Project Manager and the assignment of any key new or replacement personnel will be subject to the prior written approval of the CITY’s Project Manager. CONSULTANT, at CITY’s request, shall promptly remove CONSULTANT personnel who CITY finds do not perform the Services in an acceptable manner, are uncooperative, or present a threat to the adequate or timely completion of the Project or a threat to the safety of persons or property. CITY’s Project Manager is Amber Cameron, Senior Management Analyst, Fire Department, 250 Hamilton Avenue, Palo Alto, CA 94303, Telephone: (650) 329-2374. The CITY’s Project Manager will be CONSULTANT’s point of contact with respect to performance, progress and execution of the Services. CITY may designate an alternate Project Manager from time to time. SECTION 14. INTELLECTUAL PROPERTY; DATA. Upon delivery, all work product, including without limitation, all writings, drawings, plans, reports, specifications, calculations, documents, other materials and copyright interests developed under this Agreement as unique to this engagement with CITY shall be and remain the exclusive property of CITY without restriction or limitation upon their use. CONSULTANT makes no representation of the suitability of the work product for use in or application to circumstances not contemplated by the scope of work. 14.1 Intellectual Property Rights in the Software. CONSULTANT retains all right, title, and interest in and to the software to be provided by CONSULTANT to CITY and its Authorized Users pursuant to this Agreement as detailed in Exhibit A (“Scope of Services”)(the “Software”). This Agreement does not grant CITY any intellectual property license or rights in or to the Software or any of its components or any Documentation (defined below) except those expressly granted herein. CITY recognizes that the Software and its components and the Documentation are protected by copyright and other laws. “Documentation” means the technical publications relating to the use of the SaaS, such as reference, installation, administrative and programmer or user manuals, made available by Contractor to CITY. 14.2 Grant of License to the Software. CONSULTANT hereby grants to CITY a limited, non-exclusive, non-transferable term license to use, access and benefit from the Software in fulfilling the CITY’s public mission during the term of this Agreement. The license granted to CITY hereunder includes the right to provide to the CITY’s Authorized Users access to the Software in accordance with this Agreement. “Authorized User” means all persons holding a valid ID and password issued by the CITY pursuant to this Agreement. 14.3 Ownership of Data; Grant of License to City Data. The parties acknowledge and agree that CITY owns the City data, content, documents, materials and other information, in any format or media, collected, stored, imported or inputted into, or gathered by, the Software, DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 5 of 27 including without limitation data from third parties (“City Data”); that the CITY has a right to control, access and retrieve City Data at any time during the term of the Agreement, in computer- readable format. The CITY hereby grants to CONSULTANT and its subcontractors, if any, the limited, non-exclusive, non-transferable, revocable rights to access and use City Data during the term of this Agreement solely for the purposes of performing CONSULTANT’s obligations to CITY hereunder and supporting CITY’s use of the Software hereunder, and as is otherwise expressly permitted under this Agreement. This Agreement does not grant CONSULTANT or its subcontractors any intellectual property license or rights in or to the City Data except those expressly granted herein. Upon termination or expiration, if any City Data is in the possession of the CONSULTANT, CONSULTANT and CITY shall work together to provide CITY with a copy of City Data in mutually-agreed computer-readable format(s). CITY shall have the option to choose from one of several methods to obtain a copy of City Data. Once such data has been provided to CITY, CONSULTANT shall use industry-standard secure means of destruction or erasure of any City Data remaining in its possession and, at the CITY’s request, certify the same. SECTION 15. AUDITS. CONSULTANT will permit CITY to audit, at any reasonable time during the term of this Agreement and for three (3) years thereafter, CONSULTANT’s records pertaining to matters covered by this Agreement. CONSULTANT further agrees to maintain and retain such records for at least three (3) years after the expiration or earlier termination of this Agreement. SECTION 16. INDEMNITY. 16.1. To the fullest extent permitted by law, CONSULTANT shall protect, indemnify, defend and hold harmless CITY, its Council members, officers, employees and agents (each an “Indemnified Party”) from and against any and all demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, including all costs and expenses of whatever nature including attorneys fees, experts fees, court costs and disbursements (“Claims”) resulting from, arising out of or in any manner related to performance or nonperformance by CONSULTANT, its officers, employees, agents or contractors under this Agreement, regardless of whether or not it is caused in part by an Indemnified Party. 16.2. Notwithstanding the above, nothing in this Section 16 shall be construed to require CONSULTANT to indemnify an Indemnified Party from Claims arising from the active negligence, sole negligence or willful misconduct of an Indemnified Party. 16.3. The acceptance of CONSULTANT’s services and duties by CITY shall not operate as a waiver of the right of indemnification. The provisions of this Section 16 shall survive the expiration or early termination of this Agreement. SECTION 17. WAIVERS. The waiver by either party of any breach or violation of any covenant, term, condition or provision of this Agreement, or of the provisions of any ordinance or law, will not be deemed to be a waiver of any other term, covenant, condition, provisions, ordinance or law, or of any subsequent breach or violation of the same or of any other term, covenant, condition, provision, ordinance or law. DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 6 of 27 SECTION 18. INSURANCE. 18.1. CONSULTANT, at its sole cost and expense, shall obtain and maintain, in full force and effect during the term of this Agreement, the insurance coverage described in Exhibit "D". CONSULTANT and its contractors, if any, shall obtain a policy endorsement naming CITY as an additional insured under any general liability or automobile policy or policies. 18.2. All insurance coverage required hereunder shall be provided through carriers with AM Best’s Key Rating Guide ratings of A-:VII or higher which are licensed or authorized to transact insurance business in the State of California. Any and all contractors of CONSULTANT retained to perform Services under this Agreement will obtain and maintain, in full force and effect during the term of this Agreement, identical insurance coverage, naming CITY as an additional insured under such policies as required above. 18.3. Certificates evidencing such insurance shall be filed with CITY concurrently with the execution of this Agreement. The certificates will be subject to the approval of CITY’s Risk Manager and will contain an endorsement stating that the insurance is primary coverage and will not be canceled, or materially reduced in coverage or limits, by the insurer except after filing with the Purchasing Manager thirty (30) days' prior written notice of the cancellation or modification. If the insurer cancels or modifies the insurance and provides less than thirty (30) days’ notice to CONSULTANT, CONSULTANT shall provide the Purchasing Manager written notice of the cancellation or modification within two (2) business days of the CONSULTANT’s receipt of such notice. CONSULTANT shall be responsible for ensuring that current certificates evidencing the insurance are provided to CITY’s Chief Procurement Officer during the entire term of this Agreement. 18.4. The procuring of such required policy or policies of insurance will not be construed to limit CONSULTANT's liability hereunder nor to fulfill the indemnification provisions of this Agreement. Notwithstanding the policy or policies of insurance, CONSULTANT will be obligated for the full and total amount of any damage, injury, or loss caused by or directly arising as a result of the Services performed under this Agreement, including such damage, injury, or loss arising after the Agreement is terminated or the term has expired. SECTION 19. TERMINATION OR SUSPENSION OF AGREEMENT OR SERVICES. 19.1. The City Manager may suspend the performance of the Services, in whole or in part, or terminate this Agreement, with or without cause, by giving ten (10) business days prior written notice thereof to CONSULTANT. Upon receipt of such notice, CONSULTANT will immediately discontinue its performance of the Services. 19.2. CONSULTANT may terminate this Agreement or suspend its performance of the Services by giving thirty (30) days prior written notice thereof to CITY, but only in the event of a substantial failure of performance by CITY. DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 7 of 27 19.3. Upon such suspension or termination, CONSULTANT shall deliver to the City Manager immediately any and all copies of studies, sketches, drawings, computations, and other data, whether or not completed, prepared by CONSULTANT or its contractors, if any, or given to CONSULTANT or its contractors, if any, in connection with this Agreement. Such materials will become the property of CITY. 19.4. Upon such suspension or termination by CITY, CONSULTANT will be paid for the Services rendered or materials delivered to CITY in accordance with the scope of services on or before the effective date (i.e., 10 days after giving notice) of suspension or termination; provided, however, if this Agreement is suspended or terminated on account of a default by CONSULTANT, CITY will be obligated to compensate CONSULTANT only for that portion of CONSULTANT’s services which are of direct and immediate benefit to CITY as such determination may be made by the City Manager acting in the reasonable exercise of his/her discretion. The following Sections will survive any expiration or termination of this Agreement: 14, 15, 16, 17, 19.3, 19.4, 19.5, 20, 25, 27 and 28. 19.5. No payment, partial payment, acceptance, or partial acceptance by CITY will operate as a waiver on the part of CITY of any of its rights under this Agreement. SECTION 20. NOTICES. All notices hereunder will be given in writing and mailed, postage prepaid, by certified mail, addressed as follows: To CITY: Office of the City Clerk City of Palo Alto Post Office Box 10250 Palo Alto, CA 94303 With a copy to the Purchasing Manager To CONSULTANT: Attention of the project director at the address of CONSULTANT recited above SECTION 21. CONFLICT OF INTEREST. 21.1. In executing this Agreement, CONSULTANT covenants that it presently has no interest, and will not acquire any interest, direct or indirect, financial or otherwise, which would conflict in any manner or degree with the performance of the Services. 21.2. CONSULTANT further covenants that, in the performance of this Agreement, it will not employ subconsultants, contractors or persons having such an interest. CONSULTANT certifies that no person who has or will have any financial interest under this Agreement is an officer or employee of CITY; this provision will be interpreted in accordance with the applicable provisions of the Palo Alto Municipal Code and the Government Code of the DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 8 of 27 State of California. 21.3. If the Project Manager determines that CONSULTANT is a “Consultant” as that term is defined by the Regulations of the Fair Political Practices Commission, CONSULTANT shall be required and agrees to file the appropriate financial disclosure documents required by the Palo Alto Municipal Code and the Political Reform Act. SECTION 22. NONDISCRIMINATION. As set forth in Palo Alto Municipal Code section 2.30.510, CONSULTANT certifies that in the performance of this Agreement, it shall not discriminate in the employment of any person due to that person’s race, skin color, gender, gender identity, age, religion, disability, national origin, ancestry, sexual orientation, pregnancy, genetic information or condition, housing status, marital status, familial status, weight or height of such person. CONSULTANT acknowledges that it has read and understands the provisions of Section 2.30.510 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and agrees to meet all requirements of Section 2.30.510 pertaining to nondiscrimination in employment. SECTION 23. ENVIRONMENTALLY PREFERRED PURCHASING AND ZERO WASTE REQUIREMENTS. CONSULTANT shall comply with the CITY’s Environmentally Preferred Purchasing policies which are available at CITY’s Purchasing Department, incorporated by reference and may be amended from time to time. CONSULTANT shall comply with waste reduction, reuse, recycling and disposal requirements of CITY’s Zero Waste Program. Zero Waste best practices include first minimizing and reducing waste; second, reusing waste and third, recycling or composting waste. In particular, CONSULTANT shall comply with the following zero waste requirements: (a) All printed materials provided by CONSULTANT to CITY generated from a personal computer and printer including but not limited to, proposals, quotes, invoices, reports, and public education materials, shall be double-sided and printed on a minimum of 30% or greater post-consumer content paper, unless otherwise approved by CITY’s Project Manager. Any submitted materials printed by a professional printing company shall be a minimum of 30% or greater post- consumer material and printed with vegetable based inks. (b) Goods purchased by CONSULTANT on behalf of CITY shall be purchased in accordance with CITY’s Environmental Purchasing Policy including but not limited to Extended Producer Responsibility requirements for products and packaging. A copy of this policy is on file at the Purchasing Division’s office. (c) Reusable/returnable pallets shall be taken back by CONSULTANT, at no additional cost to CITY, for reuse or recycling. CONSULTANT shall provide documentation from the facility accepting the pallets to verify that pallets are not being disposed. SECTION 24. COMPLIANCE WITH PALO ALTO MINIMUM WAGE ORDINANCE. CONSULTANT shall comply with all requirements of the Palo Alto Municipal Code Chapter 4.62 (Citywide Minimum Wage), as it may be amended from time to time. In particular, for any employee otherwise entitled to the State minimum wage, who performs at least two (2) hours of work in a calendar week within the geographic boundaries of the City, CONSULTANT shall pay DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 9 of 27 such employees no less than the minimum wage set forth in Palo Alto Municipal Code section 4.62.030 for each hour worked within the geographic boundaries of the City of Palo Alto. In addition, CONSULTANT shall post notices regarding the Palo Alto Minimum Wage Ordinance in accordance with Palo Alto Municipal Code section 4.62.060. SECTION 25. NON-APPROPRIATION 25.1. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that funds are not appropriated for the following fiscal year, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds for this Agreement are no longer available. This section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Agreement. SECTION 26. PREVAILING WAGES AND DIR REGISTRATION FOR PUBLIC WORKS CONTRACTS 26.1 This Project is not subject to prevailing wages. CONSULTANT is not required to pay prevailing wages in the performance and implementation of the Project in accordance with SB 7 if the contract is not a public works contract, if the contract does not include a public works construction project of more than $25,000, or the contract does not include a public works alteration, demolition, repair, or maintenance (collectively, ‘improvement’) project of more than $15,000. SECTION 27. MISCELLANEOUS PROVISIONS. 27.1 This Agreement will be governed by California law, without regard to its conflict of law provisions. 27.2 In the event that an action is brought, the parties agree that trial of such action will be vested exclusively in the state courts of California in the County of Santa Clara, State of California. 27.3 The prevailing party in any action brought to enforce the provisions of this Agreement may recover its reasonable costs and attorneys' fees expended in connection with that action. The prevailing party shall be entitled to recover an amount equal to the fair market value of legal services provided by attorneys employed by it as well as any attorneys’ fees paid to third parties. 27.4 This Agreement, including all exhibits, constitutes the entire and integrated agreement between the parties with respect to the subject matter of this Agreement, and supersedes all prior agreements, negotiations, representations, statements and undertakings, either oral or written. This Agreement may be amended only by a written instrument, which is signed by the authorized representatives of the parties and approved as required under Palo Alto Municipal Code. DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 10 of 27 27.5. The covenants, terms, conditions and provisions of this Agreement will apply to, and will bind, the heirs, successors, executors, administrators, assignees, and consultants of the parties. 27.6 If a court of competent jurisdiction finds or rules that any provision of this Agreement is void or unenforceable, the unaffected provisions of this Agreement will remain in full force and effect. 27.7 All exhibits, addenda, appendices, attachments, and schedules (collectively, “exhibits”) referred to in this Agreement are, by such reference, incorporated into this Agreement in full and deemed a part of this Agreement. 27.8 In the event of a conflict between the terms of this Agreement and the exhibits hereto or CONSULTANT’s proposal (if any), the Agreement shall control. In the case of any conflict between the exhibits hereto and CONSULTANT’s proposal (if any), the exhibits shall control. 27.9 If, pursuant to this Agreement with CONSULTANT, CITY shares with CONSULTANT any personal information as defined in California Civil Code section 1798.81.5(d) about a California resident (“Personal Information”), CONSULTANT shall maintain reasonable and appropriate security procedures to protect that Personal Information, and shall inform City immediately upon learning that there has been a breach in the security of the system or in the security of the Personal Information. CONSULTANT shall not use Personal Information for direct marketing purposes without City’s express written consent. 27.10 CONSULTANT understands and agrees that, in connection with this Agreement, the CONSULTANT may have access to proprietary and/or confidential information which may be owned or controlled by the CITY, the disclosure of which to third parties may be damaging to the CITY, its employees or customers/residents. CONSULTANT also understands and agrees that the disclosure of such information may violate state and/or federal law and may subject the CONSULTANT to civil liability. Consequently, CONSULTANT agrees that all information disclosed by the CITY to the CONSULTANT shall only be used in the performance of this Agreement, unless disclosure is required by law or court order. CONSULTANT shall exercise the same standard of care to protect such information as is used to protect its own proprietary and/or confidential information and in no case less than a reasonable standard of care. 27.11 The provisions of all checked boxes in this Agreement shall apply to this Agreement; the provisions of any unchecked boxes shall not apply to this Agreement. 27.12 The individuals executing this Agreement represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities. 27.13 This Agreement may be signed in multiple counterparts, which, when executed by all the parties, shall together constitute a single binding agreement. DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 11 of 27 SECTION 28. EXHIBITS. Each of the following exhibits, if the check box for such exhibit is selected below, is hereby attached and incorporated into this Agreement by reference as though fully set forth herein: EXHIBIT “A”: SCOPE OF SERVICES EXHIBIT “B”: SCHEDULE OF PERFORMANCE EXHIBIT “C”: COMPENSATION EXHIBIT “D”: INSURANCE REQUIREMENTS EXHIBIT “E” ATMS SYSTEM MAINTENANCE & SUPPORT EXHIBIT “F” DESCRIPTION OF EMERGENCY MODULE THIS AGREEMENT IS NOT COMPLETE UNLESS ALL SELECTED EXHIBITS ARE ATTACHED. DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 12 of 27 CONTRACT No. C20175147 SIGNATURE PAGE IN WITNESS WHEREOF, the parties hereto have by their duly authorized representatives executed this Agreement effective as of the date first above written. CITY OF PALO ALTO ____________________________ City Manager APPROVED AS TO FORM: __________________________ City Attorney or designee (Required on Contracts over $25,000) CUBIC CORPORATION AND SUBSIDIARIES, INCORPORATED, (DOING BUSINESS AS CUBIC ITS, INC.) Officer 1 By: Name: Joseph Cuter Title: VP and General Manager Officer 2 By: Name: Rhys Williams Title: Treasurer DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 13 of 27 EXHIBIT “A” SCOPE OF SERVICES CONSULTANT will integrate the CONSULTANT’s Emergency Module software into the City’s existing central traffic management software system entitled “ATMS” (contracted-for with CONSULTANT by separate agreement) covering twenty-five (25) intersections identified by the City and CONSULTANT will provide initial system configuration and other services, as detailed in this Scope of Services. This Scope of Services is applicable to the initial 25 intersections only. CONSULTANT will add its Emergency Module capability to the City’s ATMS software system that manages the traffic lights to connect to the City’s emergency dispatch system. This added software module will allow the City to change the green lights at intersections to a red signal to prevent traffic from getting in the way of emergency response vehicles. The Emergency Module software to be provided under this Agreement is more fully described in Exhibit F (“Description of Emergency Module”). The CONSULTANT will install the additional software module, integrate the two systems into one system, test it, and provide warranty, maintenance and support for three years after written acceptance by the City (as detailed in Exhibit C). Any expansion of the system beyond the initial 25 intersections will require a separate scope of work via written amendment to this Agreement in accordance with Section 27.4 herein. Task 1: Project Kickoff and System Design Meetings After the project notice to proceed (“NTP”), CONSULTANT will conduct two meetings, one a project kickoff meeting, and the second a system design meeting with CITY technical staff. The kickoff meeting will review project scope, deliverables, scheduling and any administrative items. The system design meeting will focus on solving technical issues involving the computer-aided dispatch (“CAD”) and automated vehicle location (“AVL”) integration, coordination of software installation plans, as well as establishing baseline settings (System Settings Template) and rules to be implemented at each intersection with respect to the Emergency Module. The City will identify the 25 intersections to receive the Emergency Module during this time. Task 2: Emergency Module Installation CONSULTANT will install the Emergency Module on the City’s existing servers. Installation of the software will be conducted online, remotely, downloaded electronically to CITY’s servers, per the “Project Assumptions” section below. This installation process will require the CITY’s ATMS system to be offline for up to eight (8) hours during the installation process. In addition to the software installation, CONSULTANT will also modify appropriate SQL database to support the Emergency Module. After the installation of software and modification of the SQL databases, CONSULTANT will perform a functional test and will submit the results to the City. After software installation, Emergency Module ATMS users will be able to be accessed from all City ATMS Client Applications. Task 3: Traffic Controller Emergency Module CONSULTANT’s field application engineer (“FAE”) will license the Emergency Module on all DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 14 of 27 City traffic controllers. Traffic controllers must operate CONSULTANT’s V.76 Local Controller Software. The licensing process requires that the intersection be placed into “Flash” operations for up to 10 minutes while the software is relicensed. All 25 initial intersections will require controller relicensing. Any existing licenses on controllers (e.g., SynchroGreen) will remain in place. CONSULTANT’s requests that a City technician accompany CONSULTANT’s FAEs while intersections are placed into Flash operations. Task 4: Emergency Module Configuration, Initial Test and Onsite Adjustments CONSULTANT’s Traffic Engineers will design Emergency Module settings for each of the 25 intersections. Settings will be based on a standard template established under Task 1, System Settings Template. Settings will then be entered and will be tested at each intersection. All testing will be performed remotely during off-peak hours. Minor deviations from templates may be performed if appropriate in order to satisfy the requirements of a non-standard intersection type. Task 5: System Testing and Adjustments This process will involve the City’s emergency response personnel. CONSULTANT and City staff (Traffic Operations and Emergency Responders) will establish up to five (5) test routes and will test the system and response based on these routes. In addition to this onsite system testing, this will be an opportunity to adjust system settings for more optimal system operations. It is expected that up to one (1) week of onsite system testing and adjustments will be appropriate for this project. A system testing document will be provided at the end of this task noting tests performed and whether the test was successful. Task 6: System Training CONSULTANT will perform up to four (4) days of onsite system training. All training will primarily be hands on system training, as opposed to classroom style training. This training will better allow the City to see the type of adjustments required to obtain the desired response. In addition, CONSULTANT will also outline the system architecture as part of this project to better help the City understand how the Emergency Module obtains CAD and AVL data and makes the appropriate decisions. Task 7: System Acceptance CONSULTANT will prepare and submit final documentation and request official Project acceptance from the City. These documents will provide the City with details outlining how the system has been configured to meet CITY’s needs. Upon Project acceptance by CITY, the system will be under warranty. The City’s three (3) year warranty, system support and maintenance term will commence once the final acceptance has been received. Task 8: System Warranty and System Support and Maintenance Upon Project acceptance by CITY in writing (as detailed in Exhibit C), the system will be under warranty and CONSULTANT will provide system maintenance and technical support services as detailed in Exhibit E (“ATMS System Maintenance and Support”), for three (3) years from the date of written acceptance by City as provided for in Exhibit C (“Compensation”) of this Agreement. DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 15 of 27 Project Assumptions  Intergraph 9.2 CAD System will be utilized by the CITY and the traffic interface is enabled on the system.  City Traffic Operations staff will accompany CONSULTANT personnel when intersections are put into “Flash” operations  City Traffic Operations staff will be available to assist with system testing. It is expected that up to five (5) days of system testing may be required.  CONSULTANT will install (as below) the Emergency Module software on the City’s existing ATMS system, run on the City’s servers.  The CITY will facilitate any questions with the CAD system vendor, if requested.  All training will be performed at the CITY’s facilities.  Installation of all system software and initial system configuration will be performed remotely using the CITY’s existing virtual private network (“VPN”) and remote desktop (“RDP”) system. DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 16 of 27 EXHIBIT “B” SCHEDULE OF PERFORMANCE CONSULTANT shall perform the Services so as to complete each milestone within the number of days/weeks specified below. The time to complete each milestone may be increased or decreased by mutual written agreement of the project managers for CONSULTANT and CITY so long as all work is completed within the term of the Agreement. CONSULTANT shall provide a detailed schedule of work consistent with the schedule below within 2 weeks of receipt of the notice to proceed (“NTP”). Milestones Completion (Tasks per No. of Days/Weeks Appendix A) from NTP (or as otherwise specified below) Task 1. Project Kickoff and System Design Meetings 30 days Task 2. Emergency Module Installation 90 days Task 3. Traffic Controller Emergency Module 90 days Task 4. Emergency Module Configuration, Initial Test 120 days and Onsite Adjustments Task 5. System Testing and Adjustments 150 days Task 6. System Training 180 days Task 7. System Acceptance 200 days Task 8. Maintenance and Support 3 years from the date of acceptance in writing by City as detailed in Exhibit C DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 17 of 27 EXHIBIT “C” COMPENSATION The CITY agrees to compensate the CONSULTANT for the Services performed in accordance with the terms and conditions of this Agreement, and as set forth in the budget schedule below. Compensation shall be calculated based on the not to exceed budget amount for each task set forth below. CONSULTANT shall perform the tasks and categories of work as outlined and budgeted below. The CITY’s Project Manager may approve in writing the transfer of budget amounts between any of the tasks or categories listed below provided the total compensation for Basic Services, including reimbursable expenses, and the total compensation for Additional Services (if any are specified herein) do not exceed the amounts set forth in Section 4 of this Agreement. CONSULTANT shall invoice the CITY’s Project Manager after Tasks 1 through 7 are completed, and the system acceptance has been approved in writing by the CITY’s Project Manager. The CONSULTANT shall invoice the CITY’s Project Manager for Task 8 on an annual basis, commencing with the start date for system maintenance and support services which shall be the date on which system acceptance is approved in writing by the CITY’s Project Manager. BUDGET SCHEDULE NOT TO EXCEED AMOUNT Task 1 $25,000 (Project Kickoff and System Design Meetings) Module Intersection Database development, $1,000 per intersection for 25 intersections. Task 2 $30,000 (Emergency Module Installation) Emergency module remote integration and installation on Palo Alto servers. Task 3 $430,000 (Traffic Controller Emergency Module) Emergency module license, initial fee of $305,000 and per intersection fee of $5,000 for each of the 25 intersections. Task 4 $0.00 (included in Task 3 cost) (Emergency Module Configuration, Initial Test and Onsite Adjustments) Task 5 $0.00 (included in Task 3 cost) (System Testing and Adjustments) Task 6 $0.00 (included in Task 3 cost) (System Training) DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 18 of 27 Task 7 $0.00 (included in Task 3 cost) (System Acceptance) Task 8 $112,500 ($37,000/yr for 3 years) (System Maintenance and Support for Three Years from written acceptance by City) Sub-total Basic Services $597,500 Total Basic Services $597,500 Maximum Total Compensation $597,500 DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 19 of 27 EXHIBIT “D” INSURANCE REQUIREMENTS CONTRACTORS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, SHALL FOR THE TERM OF THE CONTRACT OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW, AFFORDED BY COMPANIES WITH AM BEST’S KEY RATING OF A-:VII, OR HIGHER, LICENSED OR AUTHORIZED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF CALIFORNIA. AWARD IS CONTINGENT ON COMPLIANCE WITH CITY’S INSURANCE REQUIREMENTS, AS SPECIFIED, BELOW: REQUIRED TYPE OF COVERAGE REQUIREMENT MINIMUM LIMITS EACH OCCURRENCE AGGREGATE YES YES WORKER’S COMPENSATION EMPLOYER’S LIABILITY STATUTORY STATUTORY YES GENERAL LIABILITY, INCLUDING PERSONAL INJURY, BROAD FORM PROPERTY DAMAGE BLANKET CONTRACTUAL, AND FIRE LEGAL LIABILITY BODILY INJURY PROPERTY DAMAGE BODILY INJURY & PROPERTY DAMAGE COMBINED. $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 YES AUTOMOBILE LIABILITY, INCLUDING ALL OWNED, HIRED, NON-OWNED BODILY INJURY - EACH PERSON - EACH OCCURRENCE PROPERTY DAMAGE BODILY INJURY AND PROPERTY DAMAGE, COMBINED $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 YES PROFESSIONAL LIABILITY, INCLUDING, ERRORS AND OMISSIONS, MALPRACTICE (WHEN APPLICABLE), AND NEGLIGENT PERFORMANCE ALL DAMAGES $1,000,000 YES THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: CONTRACTOR, AT ITS SOLE COST AND EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE AND EFFECT THROUGHOUT THE ENTIRE TERM OF ANY RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY CONTRACTOR AND ITS SUBCONSULTANTS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS’ COMPENSATION, EMPLOYER’S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS ADDITIONAL INSUREDS CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES. I. INSURANCE COVERAGE MUST INCLUDE: A. A PROVISION FOR A WRITTEN THIRTY (30) DAY ADVANCE NOTICE TO CITY OF CHANGE IN COVERAGE OR OF COVERAGE CANCELLATION; AND B. A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR CONTRACTOR’S AGREEMENT TO INDEMNIFY CITY. C. DEDUCTIBLE AMOUNTS IN EXCESS OF $5,000 REQUIRE CITY’S PRIOR APPROVAL. II. CONTACTOR MUST SUBMIT CERTIFICATES(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE AT THE FOLLOWING URL: https://www.planetbids.com/portal/portal.cfm?CompanyID=25569. III. ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO “ADDITIONAL INSUREDS” A. PRIMARY COVERAGE WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED, INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR CONTRIBUTING WITH ANY OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE ADDITIONAL INSUREDS. DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 20 of 27 B. CROSS LIABILITY THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS POLICY. C. NOTICE OF CANCELLATION 1. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, THE CONSULTANT SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. 2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON- PAYMENT OF PREMIUM, THE CONSULTANT SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. VENDORS ARE REQUIRED TO FILE THEIR EVIDENCE OF INSURANCE AND ANY OTHER RELATED NOTICES WITH THE CITY OF PALO ALTO AT THE FOLLOWING URL: HTTPS://WWW.PLANETBIDS.COM/PORTAL/PORTAL.CFM?COMPANYID=25569 OR HTTP://WWW.CITYOFPALOALTO.ORG/GOV/DEPTS/ASD/PLANET_BIDS_HOW_TO.ASP DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 21 of 27 EXHIBIT E ATMS SYSTEM MAINTENANCE AND SUPPORT CONSULTANT will provide CITY with ATMS traffic management system maintenance and technical support as described in this exhibit for the CONSULTANT’s ATMS traffic management system including the integrated Emergency Module licensed to CITY pursuant to this Agreement. MAINTENANCE AND SUPPORT SCOPE and RESPONSIBILITIES ATMS System maintenance and support covers the following products and services during the term of the Agreement: 1) Free software upgrade to the latest full version of ATMS core system software (including without limitation the integrated Emergency Module) at the beginning of the term of the Agreement via remote access, with three years of maintenance. CONSULTANT and CITY will work together to schedule a mutually acceptable time for such installation; 2) Free software updates (all .dot releases) of the ATMS core system software via remote access. a. In its first year since the release of ATMS 2.0, CONSULTANT has released two .dot releases of ATMS. CONSULTANT expects that pace to be roughly the same on a going-forward basis but may vary the times for release depending on which additional features are included. .dot release may also include technical updates to the MicrosoftTM and other technology standards used in ATMS. b. CONSULTANT and CITY will work together to schedule a mutually acceptable time for such installation. 3) A yearly system “health check” on the IT environment in which ATMS software resides and recommendations to improve system performance. CITY will provide remote access to its system so that CONSULTANT may complete the “health check.” 4) Designated and priority support from CONSULTANT’s ATMS systems support group 5) Telephone support: Times: 7:00am to 7:00pm (Central Time) Days: Monday to Friday except for holidays recognized by CONSULTANT COVERAGE Maintenance and support services will be provided for the following core and/or optional system software modules : Emergency Responder Module EXCLUSIONS ATMS maintenance does not cover commercial off the shelf (COTS) software by third parties that may be required for correct system function, computer hardware, communications hardware of field equipment. START OF MAINTENANCE AND SUPPORT SERVICES Provision of software system maintenance and support services begins immediately upon written acceptance by the CITY as provided in Exhibit C (“Compensation”) of this Agreement and shall continue for three (3) years thereafter. CONSULTANT will provide a quotation for renewal at least 60 days prior to the expiration of the three-year maintenance and support term. If CITY does not renew the maintenance and support services, software updates and prioritized support will end immediately upon the end of the three-year maintenance and support term. DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 22 of 27 DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 23 of 27 DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 24 of 27 DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 25 of 27 DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 26 of 27 DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 Professional Services Rev. April 27, 2018 Page 27 of 27 DocuSign Envelope ID: EA6AA4DA-C664-4464-BC98-FA8ED0687194 City of Palo Alto (ID # 10809) City Council Staff Report Report Type: Consent Calendar Meeting Date: 2/3/2020 City of Palo Alto Page 1 Summary Title: Approval of Contract with Lime Energy Services Title: Approval of Contract Number C20174814 With Lime Energy Services, for a Total Not-to-Exceed Amount of $1,820,000 and for a Term of Three Years to Provide Energy Efficiency Services to Small and Medium Businesses From: City Manager Lead Department: Utilities RECOMMENDATION 1. Staff recommends that Council approve and authorize the City Manager or designee to execute the attached contract C20174814 with Lime Energy Services Co. (Attachment A) in the not-to-exceed amount of $1,820,000 for three years, to deliver energy efficiency services to the small and medium business community on behalf of the City’s electric and gas utilities. 2. Staff recommends that Council delegate authority to the City Manager or designee to approve and execute optional extension(s) to extend the provisions of this Agreement up to an additional twenty-four (24) months, in an amount not to exceed $613,000 per year or $1,226,000 over a 24-month extension. EXECUTIVE SUMMARY Council has adopted several policies which support maximizing the deployment of cost- effective, reliable and feasible energy efficiency (EE) within the City of Palo Alto (“City”). The City Council last updated the City’s ten-year electric and gas efficiency goals in January 2017 for the period between 2018 and 2027. The cumulative savings targets based on these goals are 5.7% of the City’s projected electric usage and 5.1% of the City’s projected gas usage. In order to achieve its ambitious EE goals, the City of Palo Alto Utilities (CPAU) has contracted with third-party EE service providers since 2006 to expand the suite of EE programs for its customers. A significant fraction of the savings delivered by these third-party providers comes from commercial customer efficiency savings. During FY 2018, EE savings in the commercial sector accounted for close to 85% of the electric savings and over 60% of the gas savings. These savings almost entirely came from the City’s 50 key accounts rather than the 4,000 small and medium business (SMB) customers. City of Palo Alto Page 2 The City has been without an EE program for its SMB customers since FY 2018. The previous program, which ran from FY 2010 to FY 2018, was a turnkey direct-install program. The contract was not renewed because the contractor could no longer make the program profitable due to the compensation model and difficulty finding opportunities. Part of the reason for this was staff resources, and because it is also a very difficult customer segment to serve. Business owners or building landlords do not usually have full-time facility managers to implement projects, requiring extensive (and expensive) assistance from the utility, meaning that it is difficult to find cost-effective EE savings. Nevertheless, recent customer surveys show that SMB customers still want help managing their bills and are dissatisfied without a program to help them do that. To fulfill its customer service goals, staff believes it is important to serve these customers. In addition, innovations in energy efficiency services have improved the potential cost-effectiveness and available opportunities in the SMB sector. Entering into a contract with Lime Energy Services Co. will enable staff to provide those services. If fully implemented, this contract will cost $1,825,000 between February 3, 2020 and February 3, 2023. If the City Manager approves both one-year extension options, the maximum contract cost would not exceed $3,046,000 through February 3, 2025. Total potential energy savings would be significant from these programs, representing 4.5 million kWh and 1500 therms of efficiency savings. Funding for this contract would come from the “Public Benefits Charge” assessed on all customer bills to fund EE programs. BACKGROUND State Public Utilities Code Section 9615 requires that each local publicly owned electric utility (POU), in procuring energy to serve the load of its retail end-use customers, shall first acquire all available energy efficiency and demand reduction resources that are cost effective, reliable, and feasible. State law (Public Utilities Code Section 385) requires POUs to establish a public benefit charge of 2.85% of revenue to fund any or all of the following “public benefit” programs: • Cost-effective, Demand Side Management (DSM) services to promote EE and energy conservation. • New investment in renewable energy resources and technologies consistent with existing statutes and regulations that promote those resources and technologies. • Research, development and demonstration programs in the public interest which advance science, or a technology not being adequately provided for by competitive and regulated markets. • Services for low-income electricity customers including, but not limited to, targeted EE installations and rate discounts. POUs are also required by State law to develop annual electric efficiency targets over ten years based on all potentially achievable cost-effective energy savings and update the goals every four years. The City Council adopted the first set of ten-year electric and gas efficiency goals for the City in April 2007. The most recent electric and gas efficiency goals were adopted by the City Council in January 2017 for the period between 2018 and 2027. The cumulative savings City of Palo Alto Page 3 targets based on these goals are 5.7% of the City’s projected electric usage and 5.1% of the City’s projected gas usage. DISCUSSION To re-commence energy efficiency service to the City’s SMB customers, staff issued an RFP for third-party EE program services in August 2018. The RFP requested proposals for five different types of programs and services for utility customers. One of the RFP requests was for proposals to “develop and administer electric and/or natural gas efficiency programs for small to medium-sized commercial customers.” The small and medium commercial segment is considered “hard to reach” and includes non-franchised businesses, restaurants and non-profit organizations with limited resources dedicated to address utility-related issues. These businesses often operate in a leased space on a short-term basis (less than five years), and therefore have lower payback tolerance for EE investments. EE improvements targeting these customers often involve financing or direct installation assistance. City of Palo Alto Page 4 The timeline for the solicitation was as follows: Small and Medium Business Efficiency Programs - Bid Timelines (All Tasks Completed): Task Date RFP Issued August 7, 2018 Pre-bid Conference August 7, 2018 Proposals Due Total of 5 responses received for this task August 28, 2018 3:00 PM Consultant selected: Lime Energy June 25, 2019 Proposals were evaluated based on the following criteria: • Quality of the proposal • Quality, performance and effectiveness of the solution, goods and/or services to be provided by the contractor • Contractor's experience, including the experience of staff to be assigned to the project, with engagements of similar scope and complexity • Cost to the city • Contractor's financial stability • Contractor's ability to perform the contract within the time specified • Contractor's prior record of performance with city or others • Contractor's ability to provide future maintenance, repairs parts and/or services • Contractor's compliance with applicable laws, regulations, policies (including city council policies), guidelines and orders governing prior or existing contracts performed by the contractor • Any other factor the city deems relevant as specified in the request for proposals As noted above, staff received five proposals in this category. Lime Energy Services Co. was not only the lowest cost bidder, but they also included several innovations that would enable a pay- per-kWh (and per-therm) energy savings compensation structure (rather than pay-per- measure) that enables a greater range of savings opportunities, as well as vendor financing for the customer’s share of projects. Staff recommends approval of an agreement with the following vendor: Lime Energy Services Co. (Contract C20174814) Under this agreement Lime Energy Services Co. (Lime) will deliver turn-key, comprehensive energy efficiency retrofits to SMB customers, with a primary focus of targeting hard-to-reach establishments. As part of the program Lime will also offer an Efficiency as a Service financing (EAAS) option. EAAS is an off-balance sheet financing solution that allows customers to implement energy efficiency projects with lower upfront capital expenditure. Once a project is completed the customers make monthly payments solely based on the savings realized within a monthly billing period through an Energy Service Agreement (ESA) with Lime. The ESA payments will continue until the entire project cost has been paid in full. The ESA model City of Palo Alto Page 5 enabled the utility to negotiate a compensation structure involving payments per kWh/therms saved rather than payment for measures installed, which creates incentives for Lime to creatively maximize the energy savings at each site rather than focusing on attempting to install specific measures to gain compensation. It also limits any risk to the City associated with the contract. In addition to the services described above, Lime will offer its staff to advise on EE at no cost to the participating customer as part of the Program, including assisting program participants through the program and EAAS process, performing initial site assessments, and conducting a post-installation verification of the actual savings from whatever equipment was installed. The monitoring systems installed as part of the post-installation verification also provide feedback to the customer on energy use, providing additional EE savings beyond those resulting simply from the equipment installed. TIMELINE Upon approval of the contract, the consultant will develop a program implementation and marketing plan within sixty days and launch the program after staff approval of the program implementation and marketing plan. RESOURCE IMPACT No resource impact is anticipated from this contract, because paying this contractor and these customers to reduce their energy use is less costly than buying energy and transporting it to the City, leading to an overall cost savings for the utility. This contract has a not-to-exceed limit of $1.82 million during the initial term, which represents 20 million lifetime kWh and 50 thousand lifetime therms of efficiency savings, essentially the potential savings from the program over the contract term. If the City opts to extend the contract for the full 24-month extension term, the contract has a not-to-exceed limit of $3,046,000, which represents additional EE savings of 13,480 million kWh and 32 thousand therms. The contract is pay for performance, meaning that the vendor is only paid for the verified energy savings realized. Funding for this program comes from the City’s Public Benefits surcharge, a State-mandated surcharge utilities collect to fund energy efficiency programs. These funds are tracked separately from other ratepayer funds and are used for specific purposes (see “Background” section above). Funding is available in the FY2020 Electric and Gas budgets without increasing the surcharge. In FY 2019 $4.3M was available for energy efficiency and other programs, but only $3.5M was spent. Lime will be compensated according to the costs avoided by the City for the installation of these EE measures at $0.09 cents/kWh and $0.40 cents/therm. Most SMB programs are slightly less than cost-effective compared to the avoided energy purchases, and are implemented as a customer service measure rather than a utility cost savings measure. In this case, Lime’s business model enables both the cost-effectiveness and customer service goals to be achieved. SMB EE measures installed by Lime will produce savings for the utility roughly equivalent to the payments made to Lime, but will provide customer service benefits. In essence, the utility will be able to deliver energy management services to its SMB customers at no net cost to the utility. City of Palo Alto Page 6 POLICY IMPLICATIONS The utility is mandated by the State to pursue all cost-effective electric energy efficiency as an alternative to purchasing additional energy supplies, and has included this as a Council-adopted policy in its Electric Integrated Resource Plan. This contract contributes toward these goals. In addition, this contract furthers the Utilities Strategic Plan Collaboration priority (Action 1, increasing communication and engagement with the community). Lastly, energy and gas efficiency reduce carbon and further the goals of the Sustainability and Climate Action Plan. STAKEHOLDER ENGAGEMENT In 2018 and 2019 staff participated in a benchmarking survey of Palo Alto SMB utility customers. The utility’s survey results were compared against twelve other utilities. A diverse group of Palo Alto customers responded, 73 in all, representing a range of industries and both tenants and building owners. Customer satisfaction was lower than average. As with most customer groups, price and reliability were this group’s highest priority, but being able to contact the utility and having efficiency services were also priorities. Respondents expressed interest in a variety of efficiency measures. Barriers included lack of awareness of programs and the up-front cost involved. The program enabled by adoption of this contract will give the utility a way to develop better relationships with these customers without adding staff, and the financing component of the program will address the issue of up-front cost to the customer. ENVIRONMENTAL REVIEW Approval of the contract proposed in this staff report does not meet the definition of a project pursuant to Section 21065 of the California Public Resources Code, thus no environmental review under the California Environmental Quality Act (CEQA) is required and the work performed by consultants and staff in connection with these programs is categorically exempt from CEQA pursuant to Section 15301 of Title 14 of the California Code of Regulations. Attachments: • Attachment A: C20174814 With Lime Energy Professional Services Rev. April 27, 2018 1 CITY OF PALO ALTO CONTRACT NO. AGREEMENT BETWEEN THE CITY OF PALO ALTO AND LIME ENERGY SERVICE FOR PROFESSIONAL SERVICES This Agreement is entered into on this 3rd day of February, 2020, (“Agreement”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and LIME ENERGY SERVICES CO. (LESCO), a Massachusetts Corporation, located at 650 E. Hospitality Lane, Suite 400, San Bernardino, CA 92408 ("CONSULTANT"). RECITALS The following recitals are a substantive portion of this Agreement. A. CITY intends to deliver turn-key, multi-measure, comprehensive energy efficiency retrofits to small and medium size business customers of the City’s utilities (“Project”) and desires to engage a consultant to provide services in connection with the Project (“Services”). B. CONSULTANT has represented that it has the necessary professional expertise, qualifications, and capability, and all required licenses and/or certifications to provide the Services. C. CITY in reliance on these representations desires to engage CONSULTANT to provide the Services as more fully described in Exhibit “A”, attached to and made a part of this Agreement. NOW, THEREFORE, in consideration of the recitals, covenants, terms, and conditions, in this Agreement, the parties agree: AGREEMENT SECTION 1. SCOPE OF SERVICES. CONSULTANT shall perform the Services described at Exhibit “A” in accordance with the terms and conditions contained in this Agreement. The performance of all Services shall be to the reasonable satisfaction of CITY. SECTION 2. TERM. The term of this Agreement shall be from February 3, 2020 through February 3, 2023 (“Initial Term”) unless terminated earlier pursuant to Section 19 of this Agreement. The parties further agree that CITY, at its sole discretion, has the option to extend the provisions of this Agreement for up to an additional twenty-four (24) months beyond the original Term (“Extended Term”), to allow CONSULTANT to continue to provide the Services as fully described in Exhibit “A” with compensation not to exceed the amounts shown in Exhibit “C”. The authority to exercise the option to extend this Agreement beyond the initial three-year Term is hereby delegated to the City Manager and shall be confirmed by written notice delivered to CONSULTANT by City Manager at least 30 days prior to the end of the initial Term of this Agreement, or prior to the end of any Extended Term if less than 24 months. DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 10 SECTION 3. SCHEDULE OF PERFORMANCE. Time is of the essence in the performance of Services under this Agreement. CONSULTANT shall complete the Services within the term of this Agreement and in accordance with the schedule set forth in Exhibit “B”, attached to and made a part of this Agreement. Any Services for which times for performance are not specified in this Agreement shall be commenced and completed by CONSULTANT in a reasonably prompt and timely manner based upon the circumstances and direction communicated to the CONSULTANT. CITY’s agreement to extend the term or the schedule for performance shall not preclude recovery of damages for delay if the extension is required due to the fault of CONSULTANT. SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be paid to CONSULTANT for performance of the Services described in Exhibit “A” (“Basic Services”), and reimbursable expenses, shall not exceed One Million Eight Hundred Twenty Thousand Dollars ($1,820,000.00) during the Initial Term, and not to exceed Six Hundred Thirteen Thousand Dollars ($613,000) per year during the Extended Term, if the option to extend is exercised. In no event shall compensation over the maximum five-year term exceed Three Million, Forty-Six Thousand Dollars ($3,046,000). CONSULTANT agrees to complete all Basic Services, including reimbursable expenses, within this amount. The applicable rates and schedule of payment are set out in Exhibit “C”. Additional Services, if any, shall be authorized in accordance with and subject to the provisions of Exhibit “C”. CONSULTANT shall not receive any compensation for Additional Services performed without the prior written authorization of CITY. Additional Services shall mean any work that is determined by CITY to be necessary for the proper completion of the Project, but which is not included within the Scope of Services described at Exhibit “A”. SECTION 5. INVOICES. In order to request payment, CONSULTANT shall submit monthly invoices to the CITY describing the services performed and the applicable charges as set forth in Section 4.3 of Exhibit “A”. The information in CONSULTANT’s payment requests shall be subject to verification by CITY. CONSULTANT shall send all invoices to the City’s project manager at the address specified in Section 13 below. The City will generally process and pay invoices within thirty (30) days of receipt. SECTION 6. QUALIFICATIONS/STANDARD OF CARE. All of the Services shall be performed by CONSULTANT or under CONSULTANT’s supervision. CONSULTANT represents that it possesses the professional and technical personnel necessary to perform the Services required by this Agreement and that the personnel have sufficient skill and experience to perform the Services assigned to them. CONSULTANT represents that it, its employees and subconsultants if permitted, have and shall maintain during the term of this Agreement all licenses, permits, qualifications, insurance and approvals of whatever nature that are legally required to perform the Services. All of the services to be furnished by CONSULTANT and its contractors under this agreement shall meet the professional standard and quality that prevail among professionals in the same discipline and of similar knowledge and skill engaged in related work throughout California under the same or similar circumstances. DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 11 SECTION 7. COMPLIANCE WITH LAWS. CONSULTANT and its contractors shall keep informed of and in compliance with all federal, state and local laws, ordinances, regulations, and orders that may affect in any manner the Project or the performance of the Services or those engaged to perform Services under this Agreement. CONSULTANT shall procure all permits and licenses, pay all charges and fees, and give all notices required by law in the performance of the Services. CONSULTANT understands and agrees that the performance of the Services under this Agreement may involve access to CITY data which is confidential information. CONSULTANT and any subcontractors or agents shall use confidential information only in accordance with all applicable local, state and federal laws restricting the access, use, and disclosure of confidential information and only as necessary in the performance of this Agreement. CONSULTANT and its contractors or agents shall not use confidential information for direct marketing purposes without CITY’s express written consent. CONSULTANT's failure to comply with any such requirements shall be deemed a material breach for which CITY may terminate the Agreement, in addition to any other remedies it may have at law and equity. CONSULTANT agrees to include all of the terms and conditions regarding confidential information contained in this Agreement in all subcontractor or agency contracts providing services under this Agreement. CONSULTANT shall comply with CITY’s “Vendor Cybersecurity Terms and Conditions”, as set forth in Exhibit “E”, attached to and made a part of this Agreement, with the CITY’s Vendor Information Security Assessment (VISA) Questionnaire, as set forth in Exhibit “F”, attached to and made a part of this Agreement, and with CITY’s “Information Privacy Policy,” as set forth in Exhibit “G”, attached to and made a part of this Agreement. SECTION 8. ERRORS/OMISSIONS. CONSULTANT is solely responsible for costs, including, but not limited to, increases in the cost of Services, arising from or caused by CONSULTANT’s errors and omissions, including, but not limited to, the costs of corrections of such errors and omissions, any change order markup costs, or costs arising from delay caused by the errors and omissions or unreasonable delay in correcting the errors and omissions. SECTION 9. COST ESTIMATES. If this Agreement pertains to the design of a public works project, CONSULTANT shall submit estimates of probable construction costs at each phase of design submittal. If the total estimated construction cost at any submittal exceeds ten percent (10%) of CITY’s stated construction budget, CONSULTANT shall make recommendations to CITY for aligning the PROJECT design with the budget, incorporate CITY approved recommendations, and revise the design to meet the Project budget, at no additional cost to CITY. SECTION 10. INDEPENDENT CONTRACTOR. It is understood and agreed that in performing the Services under this Agreement, CONSULTANT, and any person employed by or contracted with CONSULTANT to furnish labor and/or materials under this Agreement, shall act as and be an independent contractor and not an agent or employee of CITY. DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 12 SECTION 11. ASSIGNMENT. The parties agree that the expertise and experience of CONSULTANT are material considerations for this Agreement. CONSULTANT shall not assign or transfer any interest in this Agreement nor the performance of any of CONSULTANT’s obligations hereunder without the prior written consent of the city manager. Consent to one assignment will not be deemed to be consent to any subsequent assignment. Any assignment made without the approval of the City Manager will be void. SECTION 12. SUBCONTRACTING. Option A: No Subcontractor: CONSULTANT shall not subcontract any portion of the work to be performed under this Agreement without the prior written authorization of the city manager or designee. Option B: Subcontracts Authorized: Notwithstanding Section 11 above, CITY agrees that subcontractors may be used to complete the Services. The subcontractors authorized by CITY to perform work on this Project are: As set forth in Exhibit “A”, ”A2” CONSULTANT shall be responsible for directing the work of any subconsultants and for any compensation due to subconsultants. CITY assumes no responsibility whatsoever concerning compensation. CONSULTANT shall be fully responsible to CITY for all acts and omissions of a subconsultant. CONSULTANT shall change or add subconsultants only with the prior approval of the city manager or his designee. SECTION 13. PROJECT MANAGEMENT. CONSULTANT will assign Dominic Molinari as the Program Manager to have supervisory responsibility for the performance, progress, and execution of the Services and to represent CONSULTANT during the day-to-day work on the Project. If circumstances cause the substitution of the project director, project coordinator, or any other key personnel for any reason, the appointment of a substitute project director and the assignment of any key new or replacement personnel will be subject to the prior written approval of the CITY’s project manager. CONSULTANT, at CITY’s request, shall promptly remove personnel who CITY finds do not perform the Services in an acceptable manner, are uncooperative, or present a threat to the adequate or timely completion of the Project or a threat to the safety of persons or property. CITY’s program manager is the Manager of Utility Program Services or his or her designee, Utilities Department, Resource Management Division, 250 Hamilton Ave, Palo Alto, CA 94303, Telephone: 650-329-2244. The program manager will be CONSULTANT’s point of contact with respect to performance, progress and execution of the Services. CITY may designate an alternate project manager from time to time. DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 13 SECTION 14. OWNERSHIP OF MATERIALS. Upon delivery, all work product, including without limitation, all writings, drawings, plans, reports, specifications, calculations, documents, other materials and copyright interests developed under this Agreement shall be and remain the exclusive property of CITY without restriction or limitation upon their use. CONSULTANT agrees that all copyrights which arise from creation of the work pursuant to this Agreement shall be vested in CITY, and CONSULTANT waives and relinquishes all claims to copyright or other intellectual property rights in favor of the CITY. Neither CONSULTANT nor its contractors, if any, shall make any of such materials available to any individual or organization without the prior written approval of the City Manager or designee. CONSULTANT makes no representation of the suitability of the work product for use in or application to circumstances not contemplated by the scope of work. SECTION 15. AUDITS. CONSULTANT will permit CITY to audit, at any reasonable time during the term of this Agreement and for three (3) years thereafter, CONSULTANT’s record pertaining to matters covered by this Agreement, including, as necessary, records of subcontractors related to Agreement. CONSULTANT further agrees to maintain and retain such records for at least three (3) years after the expiration or earlier termination of this Agreement. CONSULTANT agrees to include this clause in all subcontractor or agency contracts providing services under this Agreement. SECTION 16. INDEMNITY. [Option A applies to the following design professionals pursuant to Civil Code Section 2782.8: architects; landscape architects; registered professional engineers and licensed professional land surveyors.] 16.1. To the fullest extent permitted by law, CONSULTANT shall protect, indemnify, defend and hold harmless CITY, its Council members, officers, employees and agents (each an “Indemnified Party”) from and against any and all demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, including all costs and expenses of whatever nature including attorney’s fees, experts fees, court costs and disbursements (“Claims”) that arise out of, pertain to, or relate to the negligence, recklessness, or willful misconduct of CONSULTANT, its officers, employees, agents or contractors under this Agreement, regardless of whether or not it is caused in part by an Indemnified Party. [Option B applies to any consultant who does not qualify as a design professional as defined in Civil Code Section 2782.8.] 16.1. To the fullest extent permitted by law, CONSULTANT shall protect, indemnify, defend and hold harmless CITY, its Council members, officers, employees and agents (each an “Indemnified Party”) from and against any and all demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, including all costs and expenses of whatever nature including attorney’s fees, experts fees, court costs and disbursements (“Claims”) resulting from, arising out of or in any manner related to performance or nonperformance by CONSULTANT, its officers, employees, agents or contractors under this Agreement, regardless of whether or DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 14 not it is caused in part by an Indemnified Party. 16.2. Notwithstanding the above, nothing in this Section 16 shall be construed to require CONSULTANT to indemnify an Indemnified Party from Claims arising from the active negligence, sole negligence or willful misconduct of an Indemnified Party. 16.3. The acceptance of CONSULTANT’s services and duties by CITY shall not operate as a waiver of the right of indemnification. The provisions of this Section 16 shall survive the expiration or early termination of this Agreement. SECTION 17. WAIVERS. The waiver by either party of any breach or violation of any covenant, term, condition or provision of this Agreement, or of the provisions of any ordinance or law, will not be deemed to be a waiver of any other term, covenant, condition, provisions, ordinance or law, or of any subsequent breach or violation of the same or of any other term, covenant, condition, provision, ordinance or law. SECTION 18. INSURANCE. 18.1. CONSULTANT, at its sole cost and expense, shall obtain and maintain, in full force and effect during the term of this Agreement, the insurance coverage described in Exhibit "D". CONSULTANT and its contractors, if any, shall obtain a policy endorsement naming CITY as an additional insured under any general liability or automobile policy or policies. 18.2. All insurance coverage required hereunder shall be provided through carriers with AM Best’s Key Rating Guide ratings of A-:VII or higher which are licensed or authorized to transact insurance business in the State of California. Any and all contractors of CONSULTANT retained to perform Services under this Agreement will obtain and maintain, in full force and effect during the term of this Agreement, identical insurance coverage, naming CITY as an additional insured under such policies as required above. 18.3. Certificates evidencing such insurance shall be filed with CITY concurrent- ly with the execution of this Agreement. The certificates will be subject to the approval of CITY’s Risk Manager and will contain an endorsement stating that the insurance is primary coverage and will not be canceled, or materially reduced in coverage or limits, by the insurer except after filing with the Purchasing Manager thirty (30) days' prior written notice of the cancellation or modification. If the insurer cancels or modifies the insurance and provides less than thirty (30) days’ notice to CONSULTANT, CONSULTANT shall provide the Purchasing Manager written notice of the cancellation or modification within two (2) business days of the CONSULTANT’s receipt of such notice. CONSULTANT shall be responsible for ensuring that current certificates evidencing the insurance are provided to CITY’s Chief Procurement Officer during the entire term of this Agreement. 18.4. The procuring of such required policy or policies of insurance will not be construed to limit CONSULTANT's liability hereunder nor to fulfill the indemnification provisions of this Agreement. Notwithstanding the policy or policies of insurance, CONSULTANT will be obligated for the full and total amount of any damage, injury, or loss DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 15 caused by or directly arising as a result of the Services performed under this Agreement, including such damage, injury, or loss arising after the Agreement is terminated or the term has expired. SECTION 19. TERMINATION OR SUSPENSION OF AGREEMENT OR SERVICES. 19.1. The City Manager may suspend the performance of the Services, in whole or in part, or terminate this Agreement, with or without cause, by giving ten (10) days prior written notice thereof to CONSULTANT. Upon receipt of such notice, CONSULTANT will immediately discontinue its performance of the Services. 19.2. CONSULTANT may terminate this Agreement or suspend its performance of the Services by giving thirty (30) days prior written notice thereof to CITY, but only in the event of a substantial failure of performance by CITY. 19.3. Upon such suspension or termination, CONSULTANT shall deliver to the City Manager immediately any and all copies of studies, sketches, drawings, computations, and other data, whether or not completed, prepared by CONSULTANT or its contractors, if any, or given to CONSULTANT or its contractors, if any, in connection with this Agreement. Such materials will become the property of CITY. 19.4. Upon such suspension or termination by CITY, CONSULTANT will be paid for the Services rendered or materials delivered to CITY in accordance with the scope of services on or before the effective date (i.e., 10 days after giving notice) of suspension or termination; provided, however, if this Agreement is suspended or terminated on account of a default by CONSULTANT, CITY will be obligated to compensate CONSULTANT only for that portion of CONSULTANT’s services which are of direct and immediate benefit to CITY as such determination may be made by the City Manager acting in the reasonable exercise of his/her discretion. The following Sections will survive any expiration or termination of this Agreement: 14, 15, 16, 19.4, 20, and 25. 19.5. No payment, partial payment, acceptance, or partial acceptance by CITY will operate as a waiver on the part of CITY of any of its rights under this Agreement. SECTION 20. NOTICES. All notices hereunder will be given in writing and mailed, postage prepaid, by certified mail, addressed as follows: To CITY: Office of the City Clerk City of Palo Alto Post Office Box 10250 Palo Alto, CA 94303 With a copy to the Purchasing Manager To CONSULTANT: Attention of the project director DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 16 Lime Energy Services Co. (LESCO) 650 E. Hospitality Lane, Suite 400 San Bernardino, CA 93408 SECTION 21. CONFLICT OF INTEREST. 21.1. In accepting this Agreement, CONSULTANT covenants that it presently has no interest, and will not acquire any interest, direct or indirect, financial or otherwise, which would conflict in any manner or degree with the performance of the Services. 21.2. CONSULTANT further covenants that, in the performance of this Agreement, it will not employ subconsultants, contractors or persons having such an interest. CONSULTANT certifies that no person who has or will have any financial interest under this Agreement is an officer or employee of CITY; this provision will be interpreted in accordance with the applicable provisions of the Palo Alto Municipal Code and the Government Code of the State of California. 21.3. If the Project Manager determines that CONSULTANT is a “Consultant” as that term is defined by the Regulations of the Fair Political Practices Commission, CONSULTANT shall be required and agrees to file the appropriate financial disclosure documents required by the Palo Alto Municipal Code and the Political Reform Act. SECTION 22. NONDISCRIMINATION. As set forth in Palo Alto Municipal Code section 2.30.510, CONSULTANT certifies that in the performance of this Agreement, CONSULTANT and its contractors shall not discriminate in the employment of any person due to that person’s race, skin color, gender, gender identity, age, religion, disability, national origin, ancestry, sexual orientation, pregnancy, genetic information or condition, housing status, marital status, familial status, weight or height of such person. CONSULTANT acknowledges that it has read and understands the provisions of Section 2.30.510 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and agrees to meet all requirements of Section 2.30.510 pertaining to nondiscrimination in employment. CONSULTANT agrees to include this clause in all subcontractor or agency contracts providing services under this Agreement. SECTION 23. ENVIRONMENTALLY PREFERRED PURCHASING AND ZERO WASTE REQUIREMENTS. CONSULTANT and its contractors shall comply with the CITY’s Environmentally Preferred Purchasing policies which are available at CITY’s Purchasing Department, incorporated by reference and may be amended from time to time. CONSULTANT and its contractors shall comply with waste reduction, reuse, recycling and disposal requirements of CITY’s Zero Waste Program. Zero Waste best practices include first minimizing and reducing waste; second, reusing waste and third, recycling or composting waste. In particular, CONSULTANT shall comply with the following zero waste requirements: (a) All printed materials provided by CONSULTANT or its contractors to CITY generated from a personal computer and printer including but not limited to, DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 17 proposals, quotes, invoices, reports, and public education materials, shall be double- sided and printed on a minimum of 30% or greater post-consumer content paper, unless otherwise approved by CITY’s Project Manager. Any submitted materials printed by a professional printing company shall be a minimum of 30% or greater post- consumer material and printed with vegetable based inks. (b) Goods purchased by CONSULTANT or its contractors on behalf of CITY shall be purchased in accordance with CITY’s Environmental Purchasing Policy including but not limited to Extended Producer Responsibility requirements for products and packaging. A copy of this policy is on file at the Purchasing Division’s office. (c) Reusable/returnable pallets shall be taken back by CONSULTANT, at no additional cost to CITY, for reuse or recycling. CONSULTANT shall provide documentation from the facility accepting the pallets to verify that pallets are not being disposed. CONSULTANT agrees to include this clause in all subcontractor or agency contracts providing services under this Agreement. SECTION 24. COMPLIANCE WITH PALO ALTO MINIMUM WAGE ORDINANCE. CONSULTANT shall comply with all requirements of the Palo Alto Municipal Code Chapter 4.62 (Citywide Minimum Wage), as it may be amended from time to time. In particular, for any employee otherwise entitled to the State minimum wage, who performs at least two (2) hours of work in a calendar week within the geographic boundaries of the City, CONSULTANT shall pay such employees no less than the minimum wage set forth in Palo Alto Municipal Code section 4.62.030 for each hour worked within the geographic boundaries of the City of Palo Alto. In addition, CONSULTANT shall post notices regarding the Palo Alto Minimum Wage Ordinance in accordance with Palo Alto Municipal Code section 4.62.060. CONSULTANT agrees to include this clause in all subcontractor or agency contracts providing services under this Agreement. SECTION 25. NON-APPROPRIATION 25.1. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that funds are not appropriated for the following fiscal year, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds for this Agreement are no longer available. This section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Agreement. SECTION 26. PREVAILING WAGES AND DIR REGISTRATION FOR PUBLIC WORKS CONTRACTS 26.1 This Project is not subject to prevailing wages. CONSULTANT is not required to pay prevailing wages in the performance and implementation of the Project in accordance with SB 7 if the contract is not a public works contract, if the contract does not include a public works construction project of more than $25,000, or the contract does not include a public works alteration, demolition, repair, or maintenance (collectively, DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 18 ‘improvement’) project of more than $15,000. OR 26.1 CONSULTANT is required to pay general prevailing wages as defined in Subchapter 3, Title 8 of the California Code of Regulations and Section 16000 et seq. and Section of the California Labor Code. Pursuant to the provisions of Section 1773 of the Labor Code of the State of California, the City Council has obtained the general prevailing rate of per diem wages and the general rate for holiday and overtime work in this locality for each craft, classification, or type of worker needed to execute the contract for this Project from the Director of the Department of Industrial Relations (“DIR”). Copies of these rates may be obtained at the Purchasing Division’s office of the City of Palo Alto. CONSULTANT shall provide a copy of prevailing wage rates to any staff or subcontractor hired, and shall pay the adopted prevailing wage rates as a minimum. CONSULTANT shall comply with the provisions of all sections, including, but not limited to, Sections 1775, 1776, 1777.5, 1782, 1810, and 1813, of the Labor Code pertaining to prevailing wages. 26.2 CONSULTANT shall comply with the requirements of Exhibit “E” for any contract for public works construction, alteration, demolition, repair or maintenance. SECTION 27. MISCELLANEOUS PROVISIONS. 27.1. This Agreement will be governed by the laws of the State of California. 27.2. In the event that an action is brought, the parties agree that trial of such action will be vested exclusively in the state courts of California in the County of Santa Clara, State of California. 27.3. The prevailing party in any action brought to enforce the provisions of this Agreement may recover its reasonable costs and attorneys' fees expended in connection with that action. The prevailing party shall be entitled to recover an amount equal to the fair market value of legal services provided by attorneys employed by it as well as any attorneys’ fees paid to third parties. This document represents the entire and integrated agreement between the parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This document may be amended only by a written instrument, which is signed by the parties. 27.4. The covenants, terms, conditions and provisions of this Agreement will apply to, and will bind, the heirs, successors, executors, administrators, assignees, and consultants of the parties. 27.5. If a court of competent jurisdiction finds or rules that any provision of this Agreement or any amendment thereto is void or unenforceable, the unaffected provisions of this Agreement and any amendments thereto will remain in full force and effect. DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 19 27.6. All exhibits referred to in this Agreement and any addenda, appendices, attachments, and schedules to this Agreement which, from time to time, may be referred to in any duly executed amendment hereto are by such reference incorporated in this Agreement and will be deemed to be a part of this Agreement. 27.8 In the event of a conflict between the terms of this Agreement and the exhibits hereto or CONSULTANT’s proposal (if any), the Agreement shall control. In the case of any conflict between the exhibits hereto and CONSULTANT’s proposal, the exhibits shall control. 27.9 If, pursuant to this contract with CONSULTANT, CITY shares with CONSULTANT personal information as defined in California Civil Code section 1798.81.5(d) about a California resident (“Personal Information”), CONSULTANT and its contractors and agents shall maintain reasonable and appropriate security procedures to protect that Personal Information, and shall inform City immediately upon learning that there has been a breach in the security of the system or in the security of the Personal Information. CONSULTANT and its contractors and agents shall not use Personal Information for direct marketing purposes without City’s express written consent. CONSULTANT agrees to include this clause in all subcontractor or agency contracts providing services under this Agreement 27.10 All unchecked boxes do not apply to this Agreement. 27.11 The individuals executing this Agreement represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities. 27.12 This Agreement may be signed in multiple counterparts, which shall, when executed by all the parties, constitute a single binding agreement. DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 20 CONTRACT No. C20174814 SIGNATURE PAGE IN WITNESS WHEREOF, the parties hereto have by their duly authorized representatives executed this Agreement on the date first above written. CITY OF PALO ALTO City Manager APPROVED AS TO FORM: City Attorney or designee LIME ENERGY SERVICES CO Officer 1 By: Name: Adam Procell Title: President Attachments: EXHIBIT “A”: SCOPE OF SERVICES EXHIBIT “A-1” PRE-APPROVED ELIGIBLE MEASURES EXHIBIT “A2” PRE-APRROVED SUBCONTRACTORS EXHIBIT “B”: SCHEDULE OF PERFORMANCE EXHIBIT “C”: COMPENSATION EXHIBIT “D”: INSURANCE REQUIREMENTS EXHIBIT “E”: VENDOR CYSBERSECURITY TERMS AND CONDITIONS EXHIBIT “F” VENDOR INFORMATION SECURITY ASSESSMENT (VISA) QUESTIONNAIRE EXHIBIT “G” INFORMATION PRIVACY POLICY DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 21 EXHIBIT “A” SCOPE OF SERVICES CONSULTANT will deliver the Lime Energy SMB SAVE Program (the “PROGRAM”) to the small and medium sized business utilities customers of the City of Palo Alto Utilities Department (“CITY”). A: PROGRAM OVERVIEW CONSULTANT will deliver turn-key, multi-measure, comprehensive energy efficiency retrofits to small and medium size businesses (SMB), defined as a commercial business not identified by the City of Palo Alto Utilities as a Key Account customer, with a primary focus of targeting hard-to-reach establishments. The PROGRAM design will balance service, reliability and innovation to respond to the significant market and regulatory changes that occur. As part of the Lime Energy SMB SAVE Program, CONSULTANT will also offer SMBs Efficiency as a Service financing (EAAS) option. EAAS is an off-balance sheet financing solution that allows customers to implement energy efficiency projects with less upfront capital expenditures. Once a project is completed the customers make monthly payments solely based on the savings realized within a monthly billing period through an Energy Service Agreement (ESA). The ESA payments will continue until the entire project cost has been paid in full. The Lime Energy SMB SAVE Program will deliver the following benefits to the CITY and its customers: (1) cost- effective energy savings, (2) customer service, (3) comprehensiveness, (4) flexible innovation, and (5) specific augmentations for CITY as described herein. In addition to the general services described above, CONSULTANT agrees to offer Energy Efficiency (EE)expertise at no cost to the participating customer as part of the Program, including, but not limited to: • Dedicated Staff: A full-time, dedicated CONSULTANT staff members to assist program participants through the program and EAAS process. • Initial Site Assessment: A detailed report of EE measure recommendations including associated energy savings, cost savings, payback, incentive opportunities and EAAS options. CONSULTANT program staff will present these results to the customer to ensure the customer's understanding and comfort level with the recommendations. • Post-installation verification of realized savings. This is not only for CITY to confirm actual energy savings, but also helps customers feel more comfortable investing in the recommended solutions and potential EAAS payment calculations. DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 22 Target Markets CONSULTANT’s primary target markets for the PROGRAM include private schools and nonprofits, retail/office spaces, convenience/grocery store, restaurants, institutions, hotels, motels, and small and medium commercial establishments, excluding the CITY’s designated Key Account Customers. CITY buildings are not included under this PROGRAM, and CITY shall not pay for any services provided on property of the state or a political subdivision of the state. No energy efficiency improvements performed under this Agreement are intended to reduce costs that would otherwise be incurred by the state or a political subdivision of the state. Energy Savings Targets PROGRAM’s energy savings targets for the term of the Agreement are as provided in Table A-1. Table A-1. Program Estimated Lifetime Savings Targets Annually Gross Lifetime kWh Gross Lifetime Therms 02/2020 – 02/2021 6,000,000 10,000 02/2021 – 02/2022 7,000,000 20,000 02/2022 – 02/2023 7,000,000 20,000 Customer Service CONSULTANT agrees to provide small and medium commercial customers with the necessary customer service support to ensure ease of adoption. CONSULTANT will provide cost-free audits, PROGRAM proposal documents, customer technical assistance, turn-key management of installation, PROGRAM quality assurance and control. Eligible Measures CONSULTANT’s team will specify, sell, and manage the installation of Eligible Measures at SMBs, including interior and exterior lighting, HVAC controls and optimization, refrigeration equipment/controls, hot water efficiency measures and all other CITY approved measurers. The CITY will only compensate for CONSULTANT installation of Eligible Measures at SMBs. The CITY provides CONSULTANT with (1) a list of Pre-Approved Eligible Measures; and (2) a process by which CONSULTANT may suggest, and the CITY may elect to approve, in its sole discretion, integration of New Technology and measures as Eligible Measures. All new measures must be approved by CITY as an Eligible Measure in advance of installation in order for CONSULTANT to receive any compensation for such measure. CONSULTANT shall only offer lighting measures that are ENERGY STAR, or Design Lights Consortium (DLC) qualified products. CONSULTANT may require SMB customer co-payment for Eligible Measures. On average, CITY expects that the customer co-pay will cover 20-40% of the installed job cost. Customer co- pays are paid directly to Lime Energy Service Company, the installation CONSULTANT DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 23 installing the Eligible Measure. Pre-Approved Eligible Measures The lists of Pre-Approved Eligible Measures under the PROGRAM are set forth in Exhibit A-1 Integration of New Technologies as Eligible Measures Over the Term of the Agreement, CONSULTANT and/or CITY may identify New Technologies as candidates for approval by CITY as Eligible Measures, including, for instance, commercialized efficiency and early market technologies (e.g. Advanced Lighting Controls and advanced HVAC Roof Top Unit controls and optimization). Where CONSULTANT and/or CITY have identified such New Technology, CONSULTANT and/or CITY will suggest integrating the New Technology into CITY’s existing Eligible Measure list (EXHIBIT A-1). The Parties’ Program Managers can authorize changes to Exhibit A-1 by mutual agreement, which shall not require a formal amendment to this Agreement. For New Technologies suggested by CONSULTANT, CITY reserves the right to request all information reasonably necessary to evaluate the suitability of the New Technology as an Eligible Measure, including, without limitation CITY-requested testing at CONSULTANT’s expense, information concerning the technology’s performance and energy savings potential, and CONSULTANT work papers. CITY reserves the right, in its sole discretion, to decide whether to approve New Technology as an Eligible Measure. All New Technology must be approved as an Eligible Measure by CITY, in advance and in writing, prior to installation in order for CONSULTANT to receive compensation for such New Technology as an Eligible Measure. Where CONSULTANT fails to secure CITY’s advance written approval of a New Technology as an Eligible Measure, no compensation in any form will be allowed for the installation from CITY. Program Staffing CONSULTANT agrees to staff the PROGRAM in accordance with the staffing set forth in Table A-2 below. CONSULTANT shall notify CITY concerning proposed changes to the staffing plan, and all such changes require the prior written consent of the CITY. CONSULTANT shall maintain a local Program Manager for the City of Palo Alto Utilities (CPAU) territory and approved by the CITY, who shall direct the daily activities of the auditors, sub- contractors and administrative staff, and is also the primary point of contact for CITY. The Program Manager shall be accountable to the CITY and held to all applicable service level requirements. CITY reserves the right to (1) request CONSULTANT conduct criminal background checks to CITY’s satisfaction on all CONSULTANT’s staff, subconsultants or agents that may enter customer property, and (2) require that any staff, subconsultant or agent of CONSULTANT that fails the background check shall not be permitted to enter any customer premises. Without limiting Section 16 (Indemnity) of the Agreement, CONSULTANT agrees and understands it is responsible for all costs and damages associated with any theft, vandalism, damage or criminal acts involving or committed by CONSULTANT staff, subconsultants or DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 24 agents involving a customer or customer premises. Table A-2. PROGRAM Staff Contacts Name Title Phone Email Arjun Saroya Senior Vice President 917-882-9921 asaroya@lime-energy.com Andrew Ginn Senior Vice President 704-237-5526 aginn@lime-energy.com Dominic Molinari CPAU Program Manager 415-230-8424 dmolinari@willdan.com Joe Hui Vice President Operation 909-855-8609 joe.hui@lime-energy.com B: PROGRAM IMPLEMENTATION AND DELIVERY Task 1 – Program Kick Off Meeting (Program Development) Task 1.1 Agenda for Program Kick-Off Meeting CONSULTANT will supply agenda. Task 1.2 Kick Off Meeting CONSULTANT shall organize a PROGRAM Kick-Off Meeting/Meetings with CITY staff to review PROGRAM design and delivery, roles, timelines and priorities in the delivery of the PROGRAM. The meeting will also cover logistics, marketing, coordination, evaluation, monitoring and verification activities, establishing workflow systems, supply chain identification and agreements, invoicing requirements, reporting, customer service processes, confirm communication structures, scope of work, launch and delivery and any remaining contractual questions. CONSULTANT and CITY will discuss New Technologies as potential Eligible Measures, where appropriate, refine timelines and identify additional CITY needs for the PROGRAM. CITY will provide eligible customer list. CONSULTANT will refine its initial market research, and work with CITY to identify individual customer contacts for each market segment. CONSULTANT will also review with CITY the agreements between CONSULTANT and installation sub-contractors and vendors to assure all proposed measures can be delivered under those contracts. CONSULTANT will transcribe meeting minutes and shall provide a copy to CITY. Task 1.3 Coordination with CITY’s other Programs CONSULTANT will coordinate with CITY to leverage CONSULTANT interactions with participating small and medium sized businesses in order to promote CITY's other programs including but not limited to, renewable and water program offering. Task 2 - Program Design and Launch Task 2.1 Program Manuals CONSULTANT shall develop and maintain a PROGRAM policies and procedures manual, which shall include but not limited to: program overview, program process flow, steps to sign up customers for the PROGRAM, contact information, safety information, and any other pertinent items per CITY request and subject to approval by the CITY. The policies and procedures manual DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 25 shall be updated by CONSULTANT Program Manager, per CITY’s approval, at least biannually and any other time per CITY’s request. Task 2.2 Program Schedule CONSULTANT shall develop a Program Schedule per CITY’s approval. CITY shall review and approve any changes to the Program Schedule, if acceptable. Task 2.3 Strategy Planning CONSULTANT shall prepare long term strategic objectives for the PROGRAM which shall include audit and enrollment goals (based on PROGRAM projections), starting with the first year of this Agreement and for all subsequent years for the term of the Agreement. Task 2.4 Sales Staff and Sub Contractors List CONSULTANT shall develop a comprehensive staffing plan for field employees and supply a list of contractors to CITY. Current pre-approved subcontractors for the PROGRAM are listed in Exhibit A2. CITY shall hold final approval authority over subcontractors and the internal staffing plan for field employees. The Parties Program Managers can authorize changes to Exhibit A2 by mutual agreement, which shall not require a formal amendment to this Agreement. Task 2.5 Market Analysis CONSULTANT shall conduct segmentation analysis of customers to prepare for launch of the PROGRAM. CONSULTANT shall perform on-going market analysis as warranted and requested by CITY as PROGRAM progresses. Task 3: Marketing and Outreach CONSULTANT will prepare and present a marketing plan to CITY for the PROGRAM. CONSULTANT will work with CITY to finalize contents, establish time frames, and define deliverables. CONSULTANT will update or refresh the marketing plan upon CITY’s request at no additional cost to CITY. In addition to the other marketing efforts CONSULTANT commits to undertake under this Agreement, CONSULTANT will utilize in person door-to-door sales efforts and enlist the assistance of local affinity groups, including the Palo Alto Chamber of Commerce, the Palo Alto Merchant Association and various property management companies to better enable CONSULTANT to serve CPAU customers. CONSULTANT shall be responsible for performing initial service territory-specific market research prior to PROGRAM launch which shall be incorporated into program strategy per CITY’s approval. CONSULTANT shall perform on-going market research as warranted and requested by CITY as the PROGRAM progresses. CONSULTANT shall track and capture data on how customers are finding out about the PROGRAM. Task 3.1 Marketing Plan CONSULTANT shall develop a Marketing Plan subject to CITY approval. The Marketing Plan shall establish best method(s) for recruiting customers to participate in the PROGRAM. The Marketing Plan shall be updated at CITY’s request as needed. CONSULTANT shall share any previous applicable market research it DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 26 has conducted for similar programs and shall perform on-going market research as warranted and requested by CITY as the PROGRAM progresses. Task 3.2 Development of Marketing Material In collaboration with CITY staff, CONSULTANT will develop marketing material that may include but not be limited to brochures, flyers, displays, postcards, direct mail letters, bill inserts and press releases. CITY shall have final decision-making authority about if and when to print and mail marketing material. CITY maintains the right to control all materials being distributed by CONSULTANT. Customer mailing lists for direct mail pieces shall be determined by CITY; however, CONSULTANT may provide input, suggested mailing lists and methodologies. If applicable, CONSULTANT and CITY shall design email marketing campaigns and email customer satisfaction surveys; CITY maintains final rights of approval. CITY shall be responsible for sending the email marketing information and tracking responses if they choose. CONSULTANT shall co- brand all marketing material with CPAU’s logo in a prominent location. CONSULTANT shall not use CPAU’s logos or brand standards without the approval of CITY. Task 3.3 Web Site Development CONSULTANT shall design and produce informational web content related to the PROGRAM. CITY shall provide input on web content as requested by CONSULTANT and CITY maintains final rights approval. Task 3.4 Development of Customer Forms CONSULTANT will develop all customer and subcontractor facing forms and contracts. Forms will be reviewed and approved by CITY, and modified by CITY as needed to ensure that all work proposed, agreed to, installed and inspected will have documentation deemed proper and sufficient by CITY. Task 4: Program Reporting and Data Management TASK 4.1 Program Reports CONSULTANT will collect all data points required for CITY to conduct Evaluation Measurement & Verification (EM&V) on the PROGRAM. At CITY’s discretion, CONSULTANT may be required to work with CITY’s EM&V consultant(s) to review and/or develop a plan that accurately validates PROGRAM savings, to CITY’s satisfaction. The baseline (pre-retrofit) data points, together with the energy auditor-specified new equipment to be installed, comprise the dataset needed by CONSULTANT to perform the retrofit job cost, energy savings, and payback analyses. These same data points may be utilized for both internal and external PROGRAM evaluation. CONSULTANT shall use the SMB lifetime kWh and Therm savings calculator provided by CITY to calculate energy savings for all non-lighting measures. CONSULTANT shall use measured energy savings for all lighting projects using an EM&V method pre-approved by the CITY. The SMB lifetime savings calculator may be changed and or eliminated at the CITY’s discretion. DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 27 For new Eligible Measures, or if the City eliminates the use of the SMB calculator and measured savings capabilities, the CITY shall provide 90 days written notice, and the CONSULTANT shall ensure that only energy savings that are incremental to the minimum energy savings mandated by the prevailing building efficiency standards (Title 24) are counted towards PROGRAM reported savings. Savings in retrofits which are below the prevailing building efficiency standards (Title 24) will be assumed that the remaining useful life (RUL) will be one-third of the expected useful life of the of Eligible Measure. To that end, either the California Municipal Utilities Association Technical Reference Manual (TRM), as the same may be amended from time to time, or a similar tool should be used as the individual reference source for determining annual energy savings. In the absence of TRM guidance the most current version of DEER will be the source for Net and Gross savings as well as Net to Gross Ratios. CITY will base energy savings on gross and net savings. Net savings are lower than gross savings because they account for free-ridership. Any measured savings which do not have a direct attribution to an Eligible Measure will be assumed to have a lifetime of 1 year and Net to Gross Ratio of 0.85. CONSULTANT shall provide the estimated energy savings and work paper(s) or reference source documenting the savings estimation methodology for CITY review and approval. CONSULTANT shall provide reports to CITY on a monthly basis or as requested by CITY. CITY at its own discretion may change reporting requirements as needed. These reports are subject to CITY approval and review and may include but are not limited to: • Number of customers participating in the PROGRAM • Energy Savings, based on CITY-approved savings values per measure (SMB gross lifetime savings calculator) and net lifetime saving including kWh, kW and Therms. • Customer project completed • Status of PROGRAM compared to projections • Financial summary per Program budget, calculated as the energy savings of completed projects at the rate agreed (Exhibit C). • Eligible Measure information (types of Eligible Measures installed, number of Eligible Measures installed, and any other relevant specifications as requested by CITY) • A mechanical equipment inventory of customers’ facilities will be examined during the assessment. Such equipment shall include type and quantity of existing lighting fixtures not addressed in the project scope of work, type and quantity of heating and cooling equipment, type and quantity of water heating equipment, and other energy consuming systems that have a potential for cost effective retrofit or replacement. • Updated customer contact information including primary business contact name, email address (es), updated phone number, company name (if different than name on utility account), business type. • Summary of customer compliments and/or complaints • Reasons for rejection of proposed installations by customer or CONSULTANT • Number of projects rescheduled per customer request or CONSULTANT request – clearly marked as “customer” or “CONSULTANT” DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 28 • Customer EAS agreements • Installer production, summary of any issues with installs Task 4.2 Tracking and Reporting System Files CONSULTANT shall provide the necessary PROGRAM data in the format, timeframe and material specified by CITY and CITY’s database provider to track PROGRAM performance on a schedule to be determined by CITY. CONSULTANT shall set up and maintain the process for updating this data, at least on a quarterly basis. CONSULTANT shall be responsible for any and all work required by CITY to ensure that the customer extract data is maintained in full compliance with all CITY policies. CONSULTANT will interface directly with the CITY’s software tracking systems for tracking Eligible Measures and savings. Task 4.3 Invoicing CONSULTANT shall invoice CITY on a monthly basis for performance payment reimbursements. CITY shall only be invoiced for completed projects wherein the installation is complete, post inspected by the CONSULTANT and a signed project completion form has been obtained from the customer. Invoicing should include services provided, including but not limited to the following information at a minimum for each project included within the invoice: • Customer name and address • Observations from energy assessment • Date and time of completed installation • Number and type of measures installed • Price per measure installed • kWh, kW and Therm savings per measure • Total project cost • Performance payment amount based on lifetime kWh and Therms saved, at the rates provided in Exhibit “C”. • Total customers serviced • Total kWh and Therm savings • Annual estimated kWh, kW and Therm savings CONSULTANT shall comply with any and all CITY requirements on additional invoicing details. CONSULTANT shall comply with all quality control processes pertaining to invoicing required by CITY. Before an invoice is submitted to CITY, all Customer Projects shall be reviewed to ensure complete accuracy compared to all supporting documentation for each Customer Project. When an invoice is submitted for review by CITY, if the cost details of a Customer Project (either the performance payment portion of the cost which requires payment from CITY or the Customer’s portion of the project costs) listed on an invoice differs from the supporting documentation (project completion form) due to a change order or any other factor, this reasoning shall be tracked, documented and explained in a manner acceptable to and approved by CITY. DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 29 Invoices submitted to CITY shall be fully accurate, meeting all criteria required by CITY on 100% of invoices. If any issues arise, these issues must be fully corrected and an updated invoice must be submitted to CITY, containing all corrections, within 3 business day of request. CONSULTANT shall avoid, to the best of their ability, submitting a Customer Project incentive for payment more than once. Task 4.4 Program Monitoring Software System CONSULTANT shall provide CITY with a secure, internet accessible software tool (dashboard) which tracks PROGRAM progress in near real-time which should include the following features: • Initial customer contact summary which includes but not limited to: o Customers (leads) not yet contacted & lead source o Initial customer contact o Customers in need of follow up o Assessments Scheduled o Assessments completed o Dates/Times for each • Access to actual customer proposals • Details on proposals pending sale as well as sold proposals pending installation • Details on installation progress • Access to project completion forms • Access to past and present invoices • High-level overview of all the above categories with at least the following data for each to include but not be limited to: o Project price o Performance Payment amount o kWh, kW and Therm savings o Total kWh, kW and Therm savings to date sold by month/year o Total projects sold by month/year o Total projects completed by month/year Task 4.5 Lead Generation & Program Cross-Promotion CONSULTANT shall be responsible for creating & maintaining a lead generation tracking system (within CONSULTANT’s customer relationship management system (CRM)/energy assessment software) wherein CONSULTANT sales staff shall identify opportunities for cross- program promotion and lead generation for other CPAU programs to customers, per CITY’s approval. This system shall be functional at PROGRAM Launch. Leads shall be provided on a regular basis as determined by CITY. Task 5 Facility Audits and Customer Enrollment Task 5.1 Energy Survey and Retrofit Job Specification CONSULTANT’s Energy Specialist will make the initial in-person visit to the customer. CONSULTANT Energy Specialist will begin enrollment with this visit by explaining the benefit of the PROGRAM and securing the customer's agreement to complete an energy and water DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 30 assessment. CONSULTANT shall conduct free, no obligation energy assessments at the customers’ facilities, and assess inventory of all existing lighting and mechanical systems that have reasonable potential for cost effective retrofit or replacement. CONSULTANT’s Energy Specialist then consults with the decision maker (e.g. property owner and/or tenant) to determine the hours of operation for the facility, including the site’s various sub-areas (e.g., front counter, office, and kitchen). For efficiency measures not covered as Eligible Measures by the PROGRAM, CONSULTANT will refer businesses to other CITY programs as applicable. CONSULTANT’s Energy Specialist will then design a proposal that incorporates pre- approved measures. This proposal includes a detailed description of work, specification of components, pricing, CPAU incentive, amount of customer co-pay, or program EAAS availability, estimated monthly savings, and contract term in months and project payback for non EAAS projects. CONSULTANT then presents the proposal to the customer and incorporates any customer-requested changes to the proposed measures. If and when the customer commits to moving forward with the work as proposed, CONSULTANT proceeds with the retrofit project as described in Task 6, Work Flow Management and Contractor Management, CONSULTANT will ensure the quality of the retrofit design. CONSULTANT field staff will ensure that retrofit designs are as comprehensive and complete as possible within the constraints of PROGRAM not to exceed amounts set forth in Exhibit “C” Task 5.2 Energy Assessment Software Tool CONSULTANT shall utilize a single, mobile software platform that integrates all Eligible Measures into the facility inventory. Platform must be capable of building, tracking and reporting on all facility equipment inventories. Energy assessment software tool must be functional in calculating customer project incentives as outlined in Exhibit “C”. Energy assessment software tool must be capable of incorporating CPAU’s SMB lifetime energy saving calculation tool. CONSULTANT shall integrate any quality control mechanisms into the software tool as required by CITY. Software platform shall be capable of producing an onsite proposal incorporating all proposed energy and water efficiency measures. Proposal shall include all information included in the customer’s energy assessment proposal, including all contractual and legal content, subject to CITY review and final approval. Any revisions or updates made to proposal document shall be subject to CITY review and approval. Task 5.3 Authorization Forms CONSULTANT shall use CITY-approved Energy Assessment, Project Installation Authorization and EAAS contract forms to secure customer consent and approval prior to completing energy assessment and installation. When appropriate authorization forms have been signed by eligible customer, said forms shall serve as the customer’s authorization to move forward with scheduling energy and water assessment and measure installations. CONSULTANT shall be held accountable and shall be responsible for meeting all service level time frames set forth in Task 5.5. CONSULTANT shall use approved landlord or authorized representative consent agreement DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 31 forms in order to gain authorization for energy and water measure installations after conducting assessment, if facility is tenant occupied. CONSULTANT shall ensure all authorization forms are completed prior to energy assessments, change order authorizations, installation of any measures and project completion. All authorization forms shall be kept as electronic records for each customer project and shall be accessible when requested by CITY. Task 5.4 Project Completion Form Upon customer’s project completion, CONSULTANT shall obtain customer signature to confirm and verify installation of recommended measures. The customer’s project completion form shall contain a scope of all installed measures and a summary of estimated energy savings as approved by CITY. Project completion form must be approved by CPAU and signed by eligible customer. Task 5.5 Installation CONSULTANT shall work to ensure that the customer experiences minimal disruption of business operations during measure installations. CONSULTANT shall also ensure that the turnaround time from signed proposal to completed installation is less than 45 business days unless customer requests a date beyond the designated timeframe. Any projects which exceed this time line shall be brought to the attention of CITY with documented explanations. Task 6: Work Flow Management and Contractor Management Task 6.1 Pre-Qualified Installation Contractors CONSULTANT maintains contractual agreements with all qualified and pre- screened installation Contractors (“Contractors”) to complete PROGRAM retrofits. CONSULTANT’s team of approved and pre-screened Contractors will obtain and maintain all necessary licenses, permits and certification and adequate insurance coverage to perform work on behalf of CONSULTANT and adhere to standard equipment specifications, warranty levels (including the provision of all applicable manufacturer’s warranties for equipment installed to customer), installation standards, and project completion deadlines. If the PROGRAM Contractor Participation Contract between CONSULTANT and Contractors is amended over the Term of this Agreement, any changes will be at least as protective and approved by CITY. Once a customer is enrolled in the PROGRAM, CONSULTANT will assign the customer's job to one or more Contractors from CONSULTANT’s pool of pre-qualified installers. CONSULTANT will utilize several Contractors, each specializing in a different end uses (e.g., separate Contractors for HVAC, refrigeration, lighting). All Contractors are coordinated by CONSULTANT. Contractors and customers enter into a two-party contract specifying the upgrade work to be completed. The scope of the agreed work must be substantially identical in price and work to be performed that which was previously presented by CONSULTANT and accepted by the customer in the proposal. The Contractor(s) will visit the site to coordinate the installation logistics with the property or business decision maker(s). All work will be scheduled by the Contractor at a time convenient to the customer. The Contractor is obligated to obtain necessary permit(s) for the installation along DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 32 with all necessary materials. Contractors will adhere to applicable federal, state and local ordinances regarding all equipment handled, stored, transported, removed, disposed of or recycled in connection with the PROGRAM. CONSULTANT will have a contract with the Contractors to ensure such a requirement is complied with. Per CONSULTANT’s contract with the Contractors, mercury-containing lamps and PCB-containing ballasts must be recycled through certified handlers (with proper documentation). CONSULTANT and its Contractors shall be deemed to be in exclusive possession and control of all equipment and materials picked up and disposed and/or recycled in connection with this PROGRAM. CONSULTANT is responsible for any damages or injury caused by its handling, transport, disposal, or recycling of appliances and associated equipment and materials in connection with this PROGRAM, including, without limitation any spills, leaks, discharges, improper disposal or recycling, or releases of any metals, substances or other hazardous materials. In the event of any spill, leak, discharge, improper disposal or recycling, or releases CONSULTANT is responsible for: (a) notifying federal, state or local regulatory agencies where such notification is required by law or regulation; (b) remedying, removing, remediating and cleaning up any such spill, leak, discharge, improper disposal or recycling or releases wherever they occur to a level sufficient to receive a “No Further Action Required”, “Closure Letter” or other standard otherwise required by the appropriate regulatory authority. These requirements are applicable to all work performed by CONSULTANT in connection with this PROGRAM. Contractor will complete, and CONSULTANT will ensure that the installation is completed according to the job specifications and at the unit pricing levels established by the PROGRAM. Task 6.2 Fixed Pricing on Labor and Materials All Contractors have agreed with CONSULTANT to a price for labor, materials, and equipment mark-ups that is fixed for the PROGRAM period. CONSULTANT also maintains agreements with manufacturers and equipment suppliers for fixed materials pricing and stock levels. Prices for the equipment installed in the retrofits will not be higher than those which CONSULTANT has pre- negotiated. Task 7 Quality Assurance/Quality Control and Customer Service Task 7.1 Quality Assurance and Quality Control (“QC”) CONSULTANT will carry out pre- and post-installation inspections and will promptly remedy customer service and warranty issues. CONSULTANT staff will conduct all inspections. All (100%) of projects are thoroughly inspected by CONSULTANT post installation. If a high volume of projects are completed in a given billing cycle, a lesser amount may be approved at the City’s discretion. The CITY also reserves the right to inspect energy assessments for accuracy and quality as well as inspect facilities prior to equipment installation where an assessment has been completed. CITY shall inspect post installation a minimum of 25% of jobs with CONSULTANT staff to ensure proper installation. If any installation is deemed incomplete or deficient upon inspection by CONSULTANT’s program staff or the CITY, the Contractor is notified and must DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 33 perform all services necessary to meet completion requirements at Contractor’s own expense within five (5) business days of notification of incompleteness. CONSULTANT will thoroughly assess all Contractors and manage them to industry standards on workmanship and conduct. Task 7.2 Customer Service CONSULTANT shall obtain a completed customer satisfaction survey on all completed installations. CONSULTANT shall produce an action plan within 7 calendar days to resolve all issues where action is deemed necessary by CITY. The action plan shall specifically identify a root cause and resolution timeline for the identified issue. CONSULTANT shall comply with any and all actions that CITY deems necessary arising from issues and concerns discovered through customer satisfaction surveying, up to and including the removal of CONSULTANT staff and subconsultants/Contractor staffs from the PROGRAM. Task 7.3 Staff Conduct CONSULTANT shall ensure person(s) acting on behalf of CITY or CONSULTANT shall exhibit professional, courteous demeanor and practice efficient and safe work habits. CITY reserves the right to conduct random site audits of CONSULTANT(s) and all affiliates. Additionally, CITY reserves the right to disallow any CONSULTANT(s) personnel from working on the PROGRAM. Task 7.4 Sub-Contractor Issues CONSULTANT shall notify any sub-contractors of customer complaints and handle any inappropriate conduct in a manner to remedy the problem, including cancellation of any contracts with sub-contractors or removal of any personnel from working on the PROGRAM, as necessary. Additionally, CITY reserves the right to disallow sub-Contractors from working on the PROGRAM. Task 7.5 Equipment Performance CONSULTANT shall ensure all equipment offered meets any and all equipment standards as required by CITY. CONSULTANT shall notify CITY of all unusual and/or recurring customer equipment performance problems and shall describe the resolution of all warranty work related to such problems. Task 7.6 Warranty CONSULTANT shall offer a minimum of one-year warranty including labor from the date of original installation of each Eligible Measure. The warranty packet provided to customers shall indicate any other product warranties available and offered to the customer. CONSULTANT shall establish a dedicated warranty hotline for customers to call with any warranty or equipment-related issues. CONSULTANT shall fully describe their warranty processes and procedures to customers during sale. Task 7.7 Audits CONSULTANT shall be subject to CITY auditing of PROGRAM financials, reports, and other relevant documentation as it relates to CITY’s PROGRAM. CITY reserves the right to inspect all books, accounts, records, and other writings related to the performance of the PROGRAM. Task 8 Financing DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 34 Task 8.1 Energy As A Service (EAAS) Financing CONSULTANT shall administer and offer the EAAS payment options to PROGRAM participants for customer’s portion of project costs. EAAS Financing processes shall be subject to review and approval by CITY. Task 8.2 Customer EAAS Payment Option CONSULTANT shall provide a clear explanation of EAAS payment options to customers, including but not limited to: • Additional forms that must be completed by customer • EAAS Financing terms and conditions • Customer EAAS agreement to complete financing transaction • Copies of all forms as requested All forms shall be subject to CITY review and approval. Task 9 PROGRAM Ramp-Down and Shut-Down Task 9 PROGRAM Ramp-Down and Shut-Down CONSULTANT’s customer services will continue seamlessly through the Term of the Agreement. During the final 6 months of the PROGRAM the CONSULTANT’s program staff will contact all pending customers who have been presented a proposal but have not made a decision, inform them of the expected close date of the PROGRAM and refer them to other appropriate CITY programs if they elect not to proceed. CONSULTANT will strive to make this referral process as smooth as possible to capitalize on positive customer perception and maximize use of CITY’s portfolio services. CONSULTANT will continue to field any customer warranty calls and refer them to their appropriate Contractor and/or equipment manufacturer and/or make appropriate referrals to CITY's other energy efficiency PROGRAMs for up to 90 days after the expiration of this Agreement. CONSULTANT will deliver the final invoice and final report in formats required by CITY. DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 35 EXHIBIT “A-1” PREAPPROVED ELIGIBLE MEASURES Eligible Measure List Measure Description Tech Type Anti Sweat Heater Controller for cooler Refrigeration Anti Sweat Heater Micro Controller for cooler, Refrigeration Anti Sweat Heater Controller for freezer Refrigeration 1/15HP 120V CCW Electronically Commutated Motor, Solid Flat Refrigeration 1/15HP 230V CCW Electronically Commutated Motor, Solid Flat Refrigeration 1/15HP 120V CW Electronically Commutated Motor, Solid Flat Refrigeration 1/15HP 230V CW Electronically Commutated Motor, Solid Flat Refrigeration 1/20HP 120V CCW Electronically Commutated Motor, Solid Flat Refrigeration 1/20HP 230V CCW Electronically Commutated Motor, Solid Flat Refrigeration 1/20HP 120V CW Electronically Commutated Motor, Solid Flat Refrigeration 1/20HP 230V CW Electronically Commutated Motor, Solid Flat Refrigeration 1/2HP 230V CCW Electronically Commutated Motor, Solid Flat Refrigeration 1/2HP 230V CW Electronically Commutated Motor, Solid Flat Refrigeration 1/3HP 120V CCW Electronically Commutated Motor, Solid Flat Refrigeration 1/3HP 230V CCW Electronically Commutated Motor, Solid Flat Refrigeration 1/3HP 120V CW Electronically Commutated Motor, Solid Flat Refrigeration 1/3HP 230V CW Electronically Commutated Motor, Solid Flat Refrigeration 1/47HP 120V CCW Electronically Commutated Motor, Screw Refrigeration 1/47HP 230V CCW Electronically Commutated Motor, Screw Refrigeration 1/47HP 120V CW Electronically Commutated Motor, Screw Refrigeration 1/47HP 230V CW Electronically Commutated Motor, Screw Refrigeration 1/83HP 120V CCW Electronically Commutated Motor, Screw Refrigeration 1/83HP 230V CCW Electronically Commutated Motor, Screw Refrigeration 1/83HP 120V CW Electronically Commutated Motor, Screw Refrigeration 1/83HP 230V CW Electronically Commutated Motor, Screw Refrigeration 3/4HP 230V CCW Electronically Commutated Motor, Solid Flat Refrigeration 3/4HP 230V CW Electronically Commutated Motor, Solid Flat Refrigeration 1/47HP 120V CCW Electronically Commutated Motor, Screw Refrigeration 1/47HP 230V CCW Electronically Commutated Motor, Screw Refrigeration 1/47HP 120V CW Electronically Commutated Motor, Screw Refrigeration 1/47HP 230V CW Electronically Commutated Motor, Screw Refrigeration 1/83HP 120V CCW Electronically Commutated Motor, Screw Refrigeration 1/83HP 230V CCW Electronically Commutated Motor, Screw Refrigeration 1/83HP 120V CW Electronically Commutated Motor, Screw Refrigeration DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 36 1/83HP 230V CW Electronically Commutated Motor, Screw Refrigeration New LED 48" Fixture 10 Door Cooler Kit Refrigeration New LED 48" Fixture 11 Door Cooler Kit Refrigeration New LED 48" Fixture 12 Door Cooler Kit Refrigeration New LED 48" Fixture 1 Door Cooler Kit Refrigeration New LED 48" Fixture 2 Door Cooler Kit Refrigeration New LED 48" Fixture 3 Door Cooler Kit Refrigeration New LED 48" Fixture 4 Door Cooler Kit Refrigeration New LED 48" Fixture 5 Door Cooler Kit Refrigeration New LED 48" Fixture 6 Door Cooler Kit Refrigeration New LED 48" Fixture 7 Door Cooler Kit Refrigeration New LED 48" Fixture 8 Door Cooler Kit Refrigeration New LED 48" Fixture 9 Door Cooler Kit Refrigeration New LED 60" Fixture 10 Door Cooler Kit Refrigeration New LED 60" Fixture 11 Door Cooler Kit Refrigeration New LED 60" Fixture 12 Door Cooler Kit Refrigeration New LED 60" Fixture 13 Door Cooler Kit Refrigeration New LED 60" Fixture 14 Door Cooler Kit Refrigeration New LED 60" Fixture 15 Door Cooler Kit Refrigeration New LED 60" Fixture 16 Door Cooler Kit Refrigeration New LED 60" Fixture 17 Door Cooler Kit Refrigeration New LED 60" Fixture 18 Door Cooler Kit Refrigeration New LED 60" Fixture 19 Door Cooler Kit Refrigeration New LED 60" Fixture 1 Door Cooler Kit Refrigeration New LED 60" Fixture 20 Door Cooler Kit Refrigeration New LED 60" Fixture 2 Door Cooler Kit Refrigeration New LED 60" Fixture 3 Door Cooler Kit Refrigeration New LED 60" Fixture 4 Door Cooler Kit Refrigeration New LED 60" Fixture 5 Door Cooler Kit Refrigeration New LED 60" Fixture 6 Door Cooler Kit Refrigeration New LED 60" Fixture 7 Door Cooler Kit Refrigeration New LED 60" Fixture 8 Door Cooler Kit Refrigeration New LED 60" Fixture 9 Door Cooler Kit Refrigeration New LED 67" Fixture 10 Door Cooler Kit Refrigeration New LED 67" Fixture 11 Door Cooler Kit Refrigeration New LED 67" Fixture 12 Door Cooler Kit Refrigeration New LED 67" Fixture 13 Door Cooler Kit Refrigeration New LED 67" Fixture 14 Door Cooler Kit Refrigeration New LED 67" Fixture 15 Door Cooler Kit Refrigeration New LED 67" Fixture 16 Door Cooler Kit Refrigeration DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 37 New LED 67" Fixture 17 Door Cooler Kit Refrigeration New LED 67" Fixture 18 Door Cooler Kit Refrigeration New LED 67" Fixture 19 Door Cooler Kit Refrigeration New LED 67" Fixture 1 Door Cooler Kit Refrigeration New LED 67" Fixture 20 Door Cooler Kit Refrigeration New LED 67" Fixture 2 Door Cooler Kit Refrigeration New LED 67" Fixture 3 Door Cooler Kit Refrigeration New LED 67" Fixture 4 Door Cooler Kit Refrigeration New LED 67" Fixture 5 Door Cooler Kit Refrigeration New LED 67" Fixture 6 Door Cooler Kit Refrigeration New LED 67" Fixture 7 Door Cooler Kit Refrigeration New LED 67" Fixture 8 Door Cooler Kit Refrigeration New LED 67" Fixture 9 Door Cooler Kit Refrigeration SkyCool 1-100 Panel - Self-Contained Refrigeration*1 Refrigeration SkyCool 1 -100 Panel - Split Refrigeration*1 Refrigeration New 1x4 St w/ NPIS Bal. & (1) 4' T8 LED Lighting New 1x4 Wrap w/ NPIS Bal. & (1) 4' T8 LED Lighting New 1x4 St w/ NPIS Bal. & (2) 4' T8 LED's Lighting New 1x4 Wrap w/ NPIS Bal. & (2) 4' T8 LED's Lighting New 1x4 Wrap w/ NPIS Bal. & (3) 4' T8 LED's Lighting New 1x8 St w/ NPIS Bal. & (2) 4' T8 LED's Lighting New 1x8 Wrap w/ NPIS Bal. & (2) 4' T8 LED's Lighting New 1x8 St w/ NPIS Bal. & (4) 4' T8 LED's Lighting New 1x8 Wrap w/ NPIS Bal. & (4) 4' T8 LED's Lighting Elect. HP Bal. & (1) 2' T8 LED Lighting Elect. HP Bal. & (1) 4' T8 LED, 4' Pan Retrofit Kit Lighting Elect. HP Bal. & (1) 4' T8 LED Lighting Elect. HP Bal. & (2) 2' T8 LED's Lighting Elect. HP Bal. & (2) 2' T8 LED's, Refl Lighting Elect. HP Bal. & (2) 4' T8 LED's, 4' Pan Retrofit Kit Lighting Elect. HP Bal. & (2) 4' T8 LED's, 8ft Pan Retrofit Kit Lighting Elect. HP Bal. & (2) 4' T8 LED's Lighting Elect. HP Bal. & (2) 4' T8 LED's, Refl Lighting Elect. HP Bal. & (2) 4' T8 LED's, Refl Lighting Elect. HP Bal. & (3) 2' T8 LED's Lighting Elect. HP Bal. & (3) 2' T8 LED's, Refl Lighting Elect. HP Bal. & (3) 4' T8 LED's Lighting Elect. HP Bal. & (3) 4' T8 LED's, Refl Lighting Elect. HP Bal. & (4) 4' T8 LEDs, 8ft Pan Retrofit Kit Lighting Elect. HP Bal. & (6) 4' T8 LED's Lighting DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 38 Exit Sign - New Universal LED w/ BB Lighting Exit/EM Combo Sign - New Universal LED w/ BB Lighting LED 10w Can Retrofit Kit, DIM Lighting LED 10w Par30 Lamp, DIM Lighting LED 13w Par38 Lamp, DIM Lighting LED 14w A-Lamp, DIM Lighting LED 18w A-Lamp, DIM Lighting LED 4.5w Flame Tip Lamp, Cand. Dim Lighting LED 4.5w Torpedo Lamp Lighting LED 4.5w Torpedo Lamp, Cand, Dim Lighting LED 5.5w G25 Lamp Lighting LED 6.5w A-Lamp, DIM Lighting LED 6.5w Torpedo Lamp Lighting LED 6w MR16 Lamp, GU5.3 Lighting LED 6w MR16 Lamp, GU10 Lighting LED 6w Par20 Lamp, DIM Lighting LED 8.5w MR16 Lamp, GU5.3 Lighting LED 9.5w A-Lamp, DIM Lighting LED 9w BR30 Lamp, DIM Lighting LED 9w BR40 Lamp, DIM Lighting LED AREA, FLOOD, 50W Lighting LED AREA, FLOOD, 50W, 480V Lighting LED AREA, TYPE 3, 50W Lighting LED AREA, TYPE 3, 50W, 480V Lighting LED AREA, TYPE 5, 50W Lighting LED AREA, TYPE 5, 50W, 480V Lighting LED AREA, FLOOD, 60W Lighting LED AREA, FLOOD, 60W, 480V Lighting LED AREA, TYPE 3, 60W Lighting LED AREA, TYPE 3, 60W, 480V Lighting LED AREA, TYPE 5, 60W Lighting LED AREA, TYPE 5, 60W, 480V Lighting LED AREA, FLOOD, 90W Lighting LED AREA, FLOOD, 90W, 480V Lighting LED AREA, TYPE 3, 90W Lighting LED AREA, TYPE 3, 90W, 480V Lighting LED AREA, TYPE 5, 90W Lighting LED AREA, TYPE 5, 90W, 480V Lighting LED AREA, FLOOD, 110W Lighting LED AREA, FLOOD, 110W, 480V Lighting DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 30 LED AREA, TYPE 3, 110W Lighting LED AREA, TYPE 3, 110W, 480V Lighting LED AREA, TYPE 5, 110W Lighting LED AREA, TYPE 5, 110W, 480V Lighting New LED VAPORTITE HIBAY, 14,210 LUMEN Lighting LED 135W Susp Highbay Lighting LED 135W Susp Highbay, High Voltage Lighting LED 135W Susp Highbay, High Voltage, Wire Guard Lighting LED 135W Susp Highbay, Wire Guard Lighting New LED VAPORTITE HIBAY, 17,580 LUMEN Lighting LED 10W WP, 5000k, Carbon Bronze, Ph Lighting LED 155W 18000L Susp Highbay Lighting LED 155W 18000L Susp Highbay, Wireguard Lighting LED 155W 18000L Susp Lowbay Lighting LED 155W 18000L Susp Lowbay, Lens Lighting LED 155W 18000L Susp Lowbay, Wireguard Lighting New LED VAPORTITE HIBAY, 19,990 LUMEN Lighting LED AREA, FLOOD, 160W Lighting LED AREA, FLOOD, 160W, 480V Lighting LED AREA, TYPE 3, 160W Lighting LED AREA, TYPE 3, 160W, 480V Lighting LED AREA, TYPE 5, 160W Lighting LED AREA, TYPE 5, 160W, 480V Lighting LED 178W Susp Highbay Lighting LED 178W Susp Highbay, High Voltage Lighting LED 178W Susp Highbay, High Voltage, Wire Guard Lighting LED 178W Susp Highbay, Wire Guard Lighting New LED VAPORTITE HIBAY, 22,750 LUMEN Lighting LED 180W 4" Sq Pole Mount Area Light, 3T, Bronze Lighting LED 180W 4" Sq Pole Mount Area Light, 3T, Bronze, 480 Volt Lighting LED 18W Flood Lighting 2X2 20W LED EVO Troffer Retrofit Kit Lighting LED 20W WP, 5000k, Carbon Bronze, Ph Lighting LED AREA, FLOOD, 215W Lighting LED AREA, FLOOD, 215W, 480V Lighting LED AREA, TYPE 3, 215W Lighting LED AREA, TYPE 3, 215W, 480V Lighting LED AREA, TYPE 5, 215W Lighting LED AREA, TYPE 5, 215W, 480V Lighting LED 230W 24000L Susp Highbay Lighting DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 31 LED 230W 24000L Susp Highbay, Wireguard Lighting LED 230W 24000L Susp Lowbay Lighting LED 230W 24000L Susp Lowbay, Lens Lighting LED 230W 24000L Susp Lowbay, Wireguard Lighting LED 4' Strip w/Lens <=23W Lighting LED 1x4 Pan Retrofit Kit w/Lens <=23W Lighting 2X2 24W LED Troffer Retrofit Kit, w/Sensor Lighting LED 265W Susp Highbay Lighting LED 265W Susp Highbay, High Voltage Lighting LED 265W Susp Highbay, High Voltage, Wire Guard Lighting LED 265W Susp Highbay, Wire Guard Lighting LED 26W 4" Sq Pole Mount Area Light, Bronze Lighting New 2FT VAPORTITE LED, 3,250 LUMEN Lighting 2X4 29W LED EVO Troffer Retrofit Kit Lighting New LED 4' WRAP 3,730 LUMENS Lighting LED 30W LED 1x4 Pris Troffer Lighting LED 30W LED 2x2 Pris Troffer Lighting LED 30W LED 2x4 Pris Troffer Lighting LED 30W WP, 5000k, Carbon Bronze, Ph Lighting New 2FT VAPORTITE LED, 3,310 LUMEN Lighting 2X4 32W LED Troffer Retrofit Kit, w/Sensor Lighting New LED 4' WRAP 4,310 LUMENS Lighting LED 4' Strip w/Lens <=35W Lighting LED 1x4 Pan Retrofit Kit w/Lens <=35W Lighting LED 368W Susp Highbay, Wide Dist. Lighting New 4FT VAPORTITE LED, 4,260 LUMEN Lighting LED 39W Flood Lighting LED 40W LED 2x4 Pris Troffer Lighting LED 40W Garage Fixture, 5000k, Carbon Bronze Lighting LED 40W Wall Pack, 5000k, Carbon Bronze Lighting New LED 4' WRAP 4,990 LUMENS Lighting New 2FT VAPORTITE LED, 4,530 LUMEN Lighting LED 8' Strip w/Lens <=46W Lighting LED 1x8 Pan Retrofit Kit w/Lens <=46W Lighting New 4FT VAPORTITE LED, 5,370 LUMEN Lighting New LED 4' WRAP 6,060 LUMENS Lighting LED 29W Barn Light Lighting New 8FT VAPORTITE LED, 7,340 LUMEN Lighting New 4FT VAPORTITE LED, 6,470 LUMEN Lighting LED 60W Garage Fixture, 5000k, Carbon Bronze Lighting DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 32 LED 60W Wall Pack, 5000k, Carbon Bronze Lighting LED 8' Strip w/Lens <=65W Lighting LED 65W Susp Highbay Lighting LED 65W Susp Highbay, High Voltage Lighting LED 65W Susp Highbay, High Voltage, Wire Guard Lighting LED 65W Susp Highbay, Wire Guard Lighting LED 1x8 Pan Retrofit Kit w/Lens <=65W Lighting A 78W LED WP Lighting LED 78W 3T Wall Pack, 5000k, Carbon Bronze Lighting New 8FT VAPORTITE LED, 9,030 LUMEN Lighting New LED VAPORTITE HIBAY, 9,930 LUMEN Lighting LED 90W Susp Highbay Lighting LED 90W Susp Highbay, High Voltage Lighting LED 90W Susp Highbay, High Voltage, Wire Guard Lighting LED 90W Susp Highbay, Wire Guard Lighting New 8FT VAPORTITE LED, 10,540 LUMEN Lighting New LED VAPORTITE HIBAY, 11,260 LUMEN Lighting Elect. LP Bal. & (1) 2' T8 LED Lighting Elect. LP Bal. & (1) 4' T8 LED, 4' Pan Retrofit Kit Lighting Elect. LP Bal. & (1) 4' T8 LED Lighting Elect. LP Bal. & (2) 2' T8 LED's Lighting Elect. LP Bal. & (2) 2' T8 LED's, Refl Lighting Elect. LP Bal. & (2) 4' T8 LED's, 4' Pan Retrofit Kit Lighting Elect. LP Bal. & (2) 4' T8 LED's, 8ft Pan Retrofit Kit Lighting Elect. LP Bal. & (2) 4' T8 LED's Lighting Elect. LP Bal. & (2) 4' T8 LED's, Refl Lighting Elect. LP Bal. & (3) 2' T8 LED's Lighting Elect. LP Bal. & (3) 2' T8 LED's, Refl Lighting Elect. LP Bal. & (3) 4' T8 LED's Lighting Elect. LP Bal. & (3) 4' T8 LED's, Refl Lighting Elect. LP Bal. & (4) 2' T8 LED's Lighting Elect. LP Bal. & (4) 4' T8 LEDs, 8ft Pan Retrofit Kit Lighting Elect. LP Bal. & (4) 4' T8 LEDs, 8ft Pan Retrofit Kit Lighting Elect. LP Bal. & (4) 4' T8 LED's Lighting LED (6) T8 LED Lamp, LP Ballast Lighting Elect. NP Bal. & (1) 2' T8 LED Lighting Elect. NP Bal. & (1) 4' T8 LED, 4' Pan Retrofit Kit Lighting Elect. NP Bal. & (1) 4' T8 LED Lighting Elect. NP Bal. & (2) 2' T8 LED's Lighting Elect. NP Bal. & (2) 2' T8 LEDs, Refl Lighting DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 33 Elect. NP Bal. & (2) 4' T8 LED, 4' Pan Retrofit Kit Lighting Elect. NP Bal. & (2) 4' T8 LED's, 8ft Pan Retrofit Kit Lighting Elect. NP Bal. & (2) 4' T8 LED's Lighting Elect. NP Bal. & (2) 4' T8 LED's, Refl Lighting Elect. NP Bal. & (3) 2' T8 LED's Lighting Elect. NP Bal. & (3) 2' T8 LED's, Refl Lighting Elect. NP Bal. & (3) 4' T8 LED's Lighting Elect. NP Bal. & (3) 4' T8 LED's Lighting Elect. NP Bal. & (4) 2' T8 LED's Lighting Elect. NP Bal. & (4) 4' T8 LED's, 8ft Pan Retrofit Kit Lighting Elect. NP Bal. & (4) 4' T8 LED's Lighting Elect. NP Bal. & (6) 4' T8 LED's Lighting PCSTAT with Graphical User Interface (AC/GASHeat), 1.5 Tons - 25 Tons *2 HVAC Optimization TSTAT PCSTAT with Graphical User Interface (Heat Pump), 1.5 Tons - 25 Tons*2 HVAC Optimization TSTAT TSTAT Wiresaver Wiring Module HVAC Optimization TSTAT NexRev 1.5hp - 20hp Fan Motor VSD and Controller (Auto) 3Kophrs HVAC Optimization NexRev NexRev 1.5hp - 20hp Fan Motor VSD and Controller (Auto) 4Kophrs HVAC Optimization NexRev NexRev 1.5hp - 20hp Fan Motor VSD and Controller (Auto) 5Kophrs HVAC Optimization NexRev NexRev 1.5hp - 20hp Fan Motor VSD and Controller (Continuous) 3Kophrs HVAC Optimization NexRev NexRev 1.5hp - 20hp Fan Motor VSD and Controller (Continuous) 4Kophrs HVAC Optimization NexRev NexRev 1.5hp - 20hp Fan Motor VSD and Controller (Continuous) 5Kophrs HVAC Optimization NexRev *1 Sky Cool Panel Sizing Estimates Low Temp Ref, 1.2 Panels per ton Med Temp Ref, 1.4 Panels per ton DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 34 *2 Programmable Communicating Thermostats Available Honeywell WiFi Vision Pro 8000 Thermostat Hubbell iDevices Thermostat DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 35 EXHIBIT “A2” Approved Sub-Contractors Contractors Name Trade Business Address Redwood EnergyServices Refrigeration PO Box 7072, Menlo Park, CA 94026 Advanced Energy Services Lighting 2491 Alluvial Ave, Suite 480, Clovis, CA 93611 Lighting Right LLC Lighting 148 Julian Ave, San Francisco, CA 94103 FSG Lighting 5130 Fulton Drive, Suite G, Fairfield, CA 94534 Horizon Lighting Lighting 2351 McGaw Ave, Irvine, CA 92614 Avail Services Refrigeration 1143 N Market Blvd, Suite 4, Sacramento, CA 95834 Clima-Tech Refrigeration 1820 Town and Country Dr, Norco, CA 92860 GridPoint HVAC 1855 First Avenue, Suite 102, San Diego, CA 92101 DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 36 EXHIBIT “B” SCHEDULE OF PERFORMANCE CONSULTANT shall perform the Services set forth in Exhibit “A” so as to complete each milestone within the number of days/weeks specified below. The time to complete each milestone may be increased or decreased by mutual written agreement of the project managers for CONSULTANT and CITY so long as all work is completed within the term of the Agreement. CONSULTANT shall provide a detailed schedule of work consistent with the schedule below within 2 weeks of execution of the Agreement, and shall update such schedule as reasonably requested by CITY. Task Timing (Due Date) Task 1 - Program Kick Off Meeting (Program Development) Task 1.1 Agenda within 15 days of contract execution, with additional planning and staging as needed or requested by CITY. Task 1.2 Within 60 days of contract execution and as needed and requested by CITY during contract term. Task 1.3 Ongoing during contract term. Task 2 – Program Design and Launch Task 2.1 Within 60 days of contract execution and ongoing during contract term. Task 2.2 Within 60 days of contract execution and ongoing during contract term. Task 2.3 Within 60 days of contract execution and ongoing during contract term. Task 2.4 Within 60 days of contract execution and ongoing during contract term. Task 2.5 Within 60 days of contract execution and ongoing during contract term. Task 3 – Marketing and Outreach Task 3 Within 60 days of contract execution and ongoing during contract term. Task 3.1 Within 60 days of contract execution and ongoing during contract term. Task 3.2 Within 60 days of contract execution and ongoing during contract term. Task 3.3 Within 60 days of contract execution and ongoing during contract term. Task 3.4 Within 60 days of contract execution and ongoing during contract term. Task 4 – Program Reporting and Data Management Task 4.1 Ongoing during contract term on monthly basis or as otherwise agreed in writing with CITY’s Project Manager Task 4.2 Ongoing during contract term. DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 37 Task 4.3 Ongoing during contract term on monthly basis or as otherwise agreed in writing with CITY’s Project Manager. Task 4.4 Ongoing during contract term. Task 4.5 Ongoing during contract term. Task 5 – Facility Audits and Customer Enrollments Task 5.1 Ongoing during contract term. Task 5.2 Ongoing during contract term. Task 5.3 Ongoing during contract term. Task 5.4 Ongoing during contract term. Task 5.4 Ongoing during contract term. Task 6 – Work Flow Management and Contractor Management Task 6.1 Ongoing during contract term. Task 6.2 Ongoing during contract term. Task 7 – Quality Assurance/Quality Control and Customer Service Task 7.1 Ongoing during contract term. Task 7.2 Ongoing during contract term. Task 7.3 Ongoing during contract term. Task 7.4 Ongoing during contract term. Task 7.5 Ongoing during contract term. Task 7.6 Ongoing during contract term. Task 7.7 Ongoing during contract term. Task 8 – Financing Task 8.1 Ongoing during contract term. Task 8.2 Ongoing during contract term. Task 9 –Program Ramp Down and Shut Down Task 9 Ramp-Down 6 months prior to the end of contract term. Shut-Down 90 days post contract term. DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 38 EXHIBIT “C” COMPENSATION The CITY agrees to compensate the CONSULTANT for professional services performed in accordance with the terms and conditions of this Agreement. All payments to CONSULTANT under this Agreement are based exclusively on CONSULTANT performance, available at the completion of a project based on reportable and verifiable kWh saved. CITY’s performance-based compensation for properly performed and documented CONSULTANT services will be in the form of CONSULTANT Performance Payments, paid at $0.09 cents/kWh and $0.40 cents/therm gross lifetime energy savings. In order to receive compensation, CONSULTANT performance must satisfy all requirements set forth in the Agreement and Exhibit “A” attached hereto. CONSULTANT is not entitled to any flat- fee, lump sum or time and materials-based payments or compensation. The compensation to be paid to CONSULTANT under this Agreement for all services described in Exhibit “A” (“Services”) is subject to the “NOT TO EXCEED” limits set forth in Table C-1. CITY does not authorize any additional services under this Agreement. Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth herein shall be at no cost to the CITY unless CITY has expressly authorized an increase in writing. CONSULTANT shall perform the tasks and categories of work as outlined in this Agreement and as budgeted below. The total compensation for Consultant services under the Agreement shall not exceed One Million Eight Hundred Twenty Thousand Dollars ($1,820,000.00) during the Initial Term, and shall not exceed Six Hundred Thirteen Thousand Dollars ($613,000) per year during the Extended Term, if the option to extend is exercised. In no event shall compensation over the maximum five-year term exceed Three Million, Forty-Six Thousand Dollars ($3,046,000). Table C-1. Energy Savings Targets and CONSULTANT Performance Payments TERM ENERGY SAVINGS TARGETS CONSULTANT Performance Payment NOT TO EXCEED kWh (at $0.09/kWh) Therms (at $0.40/Therm) Through end of Initial Term 20,000,000 (estimated lifetime savings) 50,000 (estimated lifetime savings) $1,820,000 Each additional year extended (up to two, at City’s option) 6,740,000 (estimated lifetime savings) 16,000 (estimated lifetime savings) $613,000 Contract maximum (with two optional additional extensions) $3,046,000 DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 39 EXHIBIT “D” INSURANCE REQUIREMENTS CONTRACTORS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, SHALL FOR THE TERM OF THE CONTRACT OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW, AFFORDED BY COMPANIES WITH AM BEST’S KEY RATING OF A-:VII, OR HIGHER, LICENSED OR AUTHORIZED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF CALIFORNIA. AWARD IS CONTINGENT ON COMPLIANCE WITH CITY’S INSURANCE REQUIREMENTS, AS SPECIFIED, BELOW: REQUIRED TYPE OF COVERAGE REQUIREMENT MINIMUM LIMITS EACH OCCURRENCE AGGREGATE YES WORKER’S COMPENSATION YES EMPLOYER’S LIABILITY STATUTORY STATUTORY YES GENERAL LIABILITY, INCLUDING PERSONAL INJURY, BROAD FORM PROPERTY DAMAGE BLANKET CONTRACTUAL, AND FIRE LEGAL LIABILITY BODILY INJURY PROPERTY DAMAGE BODILY INJURY & PROPERTY DAMAGE COMBINED. $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 YES AUTOMOBILE LIABILITY, INCLUDING ALL OWNED, HIRED, NON-OWNED BODILY INJURY - EACH PERSON - EACH OCCURRENCE PROPERTY DAMAGE BODILY INJURY AND PROPERTY DAMAGE, COMBINED $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 YES PROFESSIONAL LIABILITY, INCLUDING, ERRORS AND OMISSIONS, MALPRACTICE (WHEN APPLICABLE), AND NEGLIGENT PERFORMANCE ALL DAMAGES $1,000,000 YES THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: CONTRACTOR, AT ITS SOLE COST AND EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE AND EFFECT THROUGHOUT THE ENTIRE TERM OF ANY RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED, INSURING NOT ONLY CONTRACTOR AND ITS SUBCONSULTANTS, IF ANY, BUT ALSO, WITH THE EXCEPTION OF WORKERS’ COMPENSATION, EMPLOYER’S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS ADDITIONAL INSUREDS CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES. I. INSURANCE COVERAGE MUST INCLUDE: A. A PROVISION FOR A WRITTEN THIRTY (30) DAY ADVANCE NOTICE TO CITY OF CHANGE IN COVERAGE OR OF COVERAGE CANCELLATION; AND B. A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR CONTRACTOR’S AGREEMENT TO INDEMNIFY CITY. C. DEDUCTIBLE AMOUNTS IN EXCESS OF $5,000 REQUIRE CITY’S PRIOR APPROVAL. II. CONTACTOR MUST SUBMIT CERTIFICATES(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE AT THE FOLLOWING URL: https://www.planetbids.com/portal/portal.cfm?CompanyID=25569. III. ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO “ADDITIONAL INSUREDS” A. PRIMARY COVERAGE WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED, INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR CONTRIBUTING WITH ANY OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE ADDITIONAL INSUREDS. DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 40 B. CROSS LIABILITY THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS POLICY. C. NOTICE OF CANCELLATION 1. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, THE CONSULTANT SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. 2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON-PAYMENT OF PREMIUM, THE CONSULTANT SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. VENDORS ARE REQUIRED TO FILE THEIR EVIDENCE OF INSURANCE AND ANY OTHER RELATED NOTICES WITH THE CITY OF PALO ALTO AT THE FOLLOWING URL: HTTPS://WWW.PLANETBIDS.COM/PORTAL/PORTAL.CFM?COMPANYID=25569 OR HTTP://WWW.CITYOFPALOALTO.ORG/GOV/DEPTS/ASD/PLANET_BIDS_HOW_TO.ASP DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 41 EXHIBIT “E” In order to assure the privacy and security of the personal information of the City’s customers and people who do business with the City, including, without limitation, vendors, utility customers, library patrons and other individuals and businesses, who are required to share such information with the City, as a condition of receiving services from the City or selling goods and services to the City, including, without limitation, the Software as a Service services provider (the “Consultant”) and its subcontractors, if any, including, without limitation, any Information Technology (“IT”) infrastructure services provider, shall design, install, provide, and maintain a secure IT environment, described below, while it renders and performs the Services and furnishes goods, if any, described in the Statement of Work, Exhibit B, to the extent any scope of work implicates the confidentiality and privacy of the personal information of the City’s customers. The Consultant shall fulfill the data and information security requirements (the “Requirements”) set forth in Part A below. A “secure IT environment” includes: (a) the IT infrastructure, by which the Services are provided to the City, including connection to the City's IT systems; (b) the Consultant’s operations and maintenance processes needed to support the environment, including disaster recovery and business continuity planning; and (c) the IT infrastructure performance monitoring services to ensure a secure and reliable environment and service availability to the City. “IT infrastructure” refers to the integrated framework, including, without limitation, data centers, computers, and database management devices, upon which digital networks operate. In the event that, after the Effective Date, the Consultant reasonably determines that it cannot fulfill the Requirements, the Consultant shall promptly inform the City of its determination and submit, in writing, one or more alternate countermeasure options to the Requirements (the “Alternate Requirements” as set forth in Part B), which may be accepted or rejected in the reasonable satisfaction of the Information Security Manager (the “ISM”). Part A. Requirements: The Consultant shall at all times during the term of any contract between the City and the Consultant: (a) Appoint or designate an employee, preferably an executive officer, as the security liaison to the City with respect to the Services to be performed under this Agreement. (b) Comply with the City’s Information Privacy Policy: VENDOR CYBERSECURITY TERMS AND CONDITIONS This Exhibit shall be made a part of the City of Palo Alto’s Professional Services Agreement or any other contract entered into by and between the City of Palo Alto (the “City”) and Lime Energy Services Co. (the “Consultant”) for the provision of Software as a Service services to the City (the “Agreement”). DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 42 (c) Have adopted and implemented information security and privacy policies that are documented, are accessible to the City and conform to ISO 27001/2 – Information Security Management Systems (ISMS) Standards. See the following: http://www.iso.org/iso/home/store/catalogue_tc/catalogue_detail.htm?csnumber=421 03 http://www.iso.org/iso/iso_catalogue/catalogue_tc/catalogue_detail.htm?csnumber=5 0297 (d) Conduct routine data and information security compliance training of its personnel that is appropriate to their role. (e) Develop and maintain detailed documentation of the IT infrastructure, including software versions and patch levels. (f) Develop an independently verifiable process, consistent with industry standards, for performing professional and criminal background checks of its employees that (1) would permit verification of employees’ personal identity and employment status, and (2) would enable the immediate denial of access to the City's confidential data and information by any of its employees who no longer would require access to that information or who are terminated. (g) Provide a list of IT infrastructure components in order to verify whether the Consultant has met or has failed to meet any objective terms and conditions. (h) Implement access accountability (identification and authentication) architecture and support role-based access control (“RBAC”) and segregation of duties (“SoD”) mechanisms for all personnel, systems, and software used to provide the Services. “RBAC” refers to a computer systems security approach to restricting access only to authorized users. “SoD” is an approach that would require more than one individual to complete a security task in order to promote the detection and prevention of fraud and errors. (i) Assist the City in undertaking annually an assessment to assure that: (1) all elements of the Services’ environment design and deployment are known to the City, and (2) it has implemented measures in accordance with industry best practices applicable to secure coding and secure IT architecture. (j) Provide and maintain secure intersystem communication paths that would ensure the confidentiality, integrity, and availability of the City's information. (k) Deploy and maintain IT system upgrades, patches and configurations conforming to current patch and/or release levels by not later than one (1) week after its date of release. Emergency security patches must be installed within 24 hours after its date of release. (l) Provide for the timely detection of, response to, and the reporting of security incidents, including on-going incident monitoring with logging. (m) Notify the City within one (1) hour of detecting a security incident that results in the unauthorized access to or the misuse of the City's confidential data and information. (n) Inform the City that any third-party service provider(s) meet(s) all of the Requirements. (o) Perform security self-audits on a regular basis and not less frequently than on a quarterly basis, and provide the required summary reports of those self-audits to the ISM on the annual anniversary date or any other date agreed to by the Parties. (p) Accommodate, as practicable, and upon reasonable prior notice by the City, the City’s performance of random site security audits at the Consultant’s site(s), including the site(s) DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 Professional Services Rev. April 27, 2018 43 of a third party service provider(s), as applicable. The scope of these audits will extend to the Consultant’s and its third party service provider(s)’ awareness of security policies and practices, systems configurations, access authentication and authorization, and incident detection and response. (q) Cooperate with the City to ensure that to the extent required by applicable laws, rules and regulations, the Confidential Information will be accessible only by the Consultant and any authorized third-party service provider’s personnel. (r) Perform regular, reliable secured backups of all data needed to maximize the availability of the Services. (s) Maintain records relating to the Services for a period of three (3) years after the expiration or earlier termination of this Agreement and in a mutually agreeable storage medium. Within thirty (30) days after the effective date of expiration or earlier termination of this Agreement, all of those records relating to the performance of the Services shall be provided to the ISM. (t) Maintain the Confidential Information in accordance with applicable federal, state and local data and information privacy laws, rules, and regulations. (u) Encrypt the Confidential Information before delivering the same by electronic mail to the City and or any authorized recipient. (v) Unless otherwise addressed in the Agreement, shall not hold the City liable for any direct, indirect or punitive damages whatsoever including, without limitation, damages for loss of use, data or profits, arising out of or in any way connected with the City’s IT environment, including, without limitation, IT infrastructure communications. Part B. Alternate Requirements: 1. Any data transfer between the City of Palo Alto and the Vendor's environment shall be securely transferred using HTTPS/SFTP/FTPS/VPN communication. 2. City's of Palo Alto's data hosted (at rest and at the backup stage) at the Vendor environment shall be encrypted. 3. The Vendor shall develop disaster recovery and business continuity document for the systems the Vendor has developed for the City of Palo Alto. DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 City of Palo Alto Information SecurityDocument Version: v2.3Form: InfoSec 100 EXHIBIT "F" Vendor Information Security Assessment (VISA) Questionnaire Purpose: This Vendor Information Security Assessment (VISA) Questionnaire requests information concerning a Cloud Service Provider (the Vendor), which intends to provide to the City of Palo Alto (the City) any or all of the following services: Software as a Service (SaaS); Platform as a Service (PaaS); and Infrastructure as a Service (IaaS). Note/Instructions: • SaaS, PaaS and IaaS are each a ‘cloud’ servicing model, in which software and database applications, computer network infrastructure and/or computer hardware/software platforms is/are hosted by the Vendor and made available to customers interconnected to a network, typically to the Internet. • This Questionnaire is for the sole use of the intended Vendor and may contain confidential information of individuals and businesses collected, stored, and used the City. Any unauthorized collection, storage, use, review or distribution may be prohibited by California and/or Federal laws. If you are not the intended recipient of this Questionnaire, please contact the sender by e-mail and destroy all copies of the Questionnaire. • The Vendor shall provide answers to the questions or information to the requests provided below. • In the event that the Vendor determines that it cannot meet the City’s security and or privacy requirements, the Vendor may submit a request for an exception to the City’s requirements and propose alternative countermeasures to address the risks addressed in this Questionnaire. The City’s Information Security Manager (ISM) may approve or reject the exception request, depending on the risks associated with the exception request. • Upon receipt of the Vendor’s response, the ISM will conduct a security risk assessment, using the following scoring methodology: A = Meets completely. B = Partially meets. The Vendor may be required to provide additional requested information. C = Doesn’t meet. The Vendor may be required to provide missing/additional detail. Vendor Information: Vendor Organization Name Lime Energy Services Co. Address 1758 Orange Tree Lane, Redlands, CA 92374 Information Security Contact Person Name Alex Telford Email atelford@lime-energy.com Phone 704-237-5536 Date this Questionnaire Completed 1/22/2019 VISA Questionnaire Page 1 of 16 Version 2.0 22 February 2017 DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 City of Palo Alto Information SecurityDocument Version: v2.3Form: InfoSec 100 1.0 BUSINESS PROCESS AND DATA EXCHANGE REQUIREMENTS # Question Response from the Vendor Score Additional Information/Clarification Required from the Vendor 1.1 Please provide a detailed description of the Vendor’s business process that will be supported by it, as this relates to the proposed requirements of the City’s RFP or other Business Requirements Document (BRD) Lime proposes a shared savings structure that includes refrigeration, HVAC optimization, building envelope, lighting, water, natural gas and other upgrades through a low-risk, guaranteed financing model. We will target all non- residential customers served by CPAU. 1.2 Has the Vendor adopted and implemented information security and privacy policies that are documented, are accessible to the City, and conform to ISO 27001/2 – Information Security Management Systems (ISMS) Standards? We have adopted and implemented information security policies. These policies are not public and do not conform to ISO 27001/2. A copy of the security policy is attached in file Lime-Energy.IT and Data Security Policy.pdf VISA Questionnaire Page 2 of 16 Version 2.0 22 February 2017 DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 City of Palo Alto Information SecurityDocument Version: v2.3Form: InfoSec 100 1.3 What data exchange will occur between the City and the Vendor? What data will be stored at the Vendor’s or other third party’s data storage location? (Provide data attributes with examples) Example: (Payment Card Information, Social Security Number, Driving License number Patrons Name, Address, telephone etc.), which are examples of personal information, the privacy of which are protected by California constitutional and statutory law. The results of energy efficiency projects for participating small businesses in the City of Palo Alto will be exchanged. Examples of data attributes are • Customer Name (DBA) • Service Address • Billing Address • Customer Phone • Customer Email • Utility Account Number • Estimated Annual kWhSaved • Estimated kW Reduction • Measures Installed Payment information such as credit card numbers or ACH information is never electronically stored on our system. We use an appropriate outside PCI compliant payment processing provider. 1.4 In the event that the Vendor is required to store Private Information (PI), Personally Identifiable Information (PII), or Sensitive Information (SI) (collectively, the Information) about individuals in the service provider’s business systems, how does the Vendor maintain the confidentiality of the Information in accordance with applicable federal, state and local data and information privacy laws, rules and regulations? All data collected is stored in our highly secure data center in Charlotte, NC USA. Our data center provider Tierpoint is SOC 2 compliant. Under our IT security policy, which is attached, we designate data to be confidential and as such it is handled per our policy by all employees associated with the execution of the contract. Data is maintained at all times in our program databases. Identifiers are assigned to represent transactions with the customer and this ID is used on all paperwork. This is a proxy for PII for this customer, such as an account number. VISA Questionnaire Page 3 of 16 Version 2.0 22 February 2017 DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 City of Palo Alto Information SecurityDocument Version: v2.3Form: InfoSec 100 1.5 What mechanism and/or what types of tool(s) will be used to exchange data between the City and The Vendor? Example: (VPN, Data Link, Frame Relay, HTTP, HTTPS, FTP, FTPS, etc.) Normally data is transmitted by HTTPS or Secure FTP depending upon the choice of the client. 1.6 What types of data storage (work in progress storage and backup storage) are present or will be required at the Vendor’s site? Example: (PCI Credit Card Info, SSN, DLN, Patrons Name, Address, telephone etc.) Examples of data attributes are • Customer Name (DBA) • Service Address • Billing Address • Customer Phone • Customer Email • Utility Account Number • Estimated Annual kWhSaved • Estimated kW Reduction • Measures Installed 1.7 Is e-mail integration required between the City and the Vendor? Example: The provision of services may require the City to provide the Vendor with an e-mail account on the City’s e–mail server. Email integration is not required 1.8 Has the Vendor ever been subjected to either an electronic or physical security breach? Please describe the event(s) and the steps taken to mitigate the breach(es). What damages or exposure resulted? Are records of breaches and issues maintained and will these records be available for inspection by the City? Lime Energy has previously had a socially engineered electronic breach which exposed the W2 tax documents for the majority of the employees to a third party. Since the breach Lime deployed an enhanced phishing education program to all employees. Employees are required to review and sign a security policy which included content on phishing and attend a training annually on the hazards of phishing emails and how to spot them Lime has deployed an anti-phishing email service from Avanan, https://www.avanan.com/anti-phishing. This service scans all incoming emails and quarantines emails that are considered to be a phishing email. The software allows us to VISA Questionnaire Page 4 of 16 Version 2.0 22 February 2017 DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 City of Palo Alto Information SecurityDocument Version: v2.3Form: InfoSec 100 screen emails from suspicious geographic locations, log events and track any activity. Records from Avanan can be made available as requested. 1.9 Does the Vendor maintain formal security policies and procedures to comply with applicable statutory or industry practice requirements/standards? Are records maintained to demonstrate compliance or certification? Does the Vendor allow client audit of these records? NOTE: PLEASE PROVIDE SUPPORTING DOCUMENTATION. Tierpoint is our hosting provider. TierPoint offers a full suite of security services to address each of these key areas. We have in-house expertise that can help you choose services that meet your current requirements and help you anticipate your future needs. These include: • Managed Firewalls • Intrusion Detection • Log Management • Threat Management • Monitoring • Multi-factor Authentication • Anti-virus/Anti-malware TPT_1265 • Operating System Hardening • DDoS Mitigation • Web Application Firewall • Vulnerability Scanning • VPN Services • Physical Data Center Security • Access Control Lists • Email Security • Global Load Balancing • Data Encryption TierPoint maintains a number of specific compliance designations, including: • SSAE I6, SOC I and SOC 2 • HIPAA/HITECH • GLBA • PCI DSS v3.2 • ITAR VISA Questionnaire Page 5 of 16 Version 2.0 22 February 2017 DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 City of Palo Alto Information SecurityDocument Version: v2.3Form: InfoSec 100 2.0 What are the internet and the browser security configurations for the cloud application? What security standards and requirements does the Vendor maintain to ensure application security at the user interface? (A set of detailed documentation should be provided to support the compliance. Chrome, Safari, Edge 2.0 APPLICATION/SOLUTION CONFIGURATION # Question Response from The Vendor Score Additional Information/Clarification Required from The Vendor 2.1 What is the name of the application(s) that the Vendor will host in order to provide services to the City? (List all) Lime Energy – Direct Install 2.2 What functionality will be provided to the City’s employees or the City’s customers or other recipient of City services through the application? The platform will primarily be used by Lime Energy and its subcontractors. City employees will access data through reports. Customers will not directly access the platform. VISA Questionnaire Page 6 of 16 Version 2.0 22 February 2017 DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 City of Palo Alto Information SecurityDocument Version: v2.3Form: InfoSec 100 2.3 Will the Vendor use a subcontractor and/or a third-party service provider? (List all). If yes, then what data privacy and information security agreements are in place between the Vendor and any subcontractor/third party to ensure appropriate and accountable treatment of information? Note the City requires each subcontractor and/or third party to complete this Questionnaire. The configuration of the platform and the management of the data will be performed by Lime Energy employees. 2.4 What is the Vendor's application(s) hosting hardware and software platform? Provide a detailed description, including SP [what’s this, Raj?] and a patch or security applications in use. Example: Windows or Unix Operating System (OS) and other detail. Tierpoint COLO - VMWARE ESXI 6.5 HOST Operating System Varies from Windows 2008 Server R2 Standard to Windows 2016 Standard. SQL – Varies SQL 2008 to 2017 2.5 How does the Vendor’s application and database architecture manage or promote segregation of the City's data (related to its function as a local government agency) from the data of individuals providing services to or receiving services from the City? The database architecture is a multi-tenant architecture in SQL Server 2018. The data stored as part of this engagement is physically separated at the data file level in a separate database from any other data. VISA Questionnaire Page 7 of 16 Version 2.0 22 February 2017 DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 City of Palo Alto Information SecurityDocument Version: v2.3Form: InfoSec 100 2.6 Describe the Vendor’s server and network infrastructure. Please provide server and network infrastructure deployment topology, including data flow architecture including but not limited to security management applications, firewalls, etc. Network: The following sites have MPLS that is originating from Charlotte COLO via Windstream ISP which provides interconnectivity to the following offices and datacenters: 1. Newark, NJ 2. Huntersville, NC 3. Redlands, CA 4. Charlotte, NC COLO Remote End Users are able to also connect via encrypted SSL VPN which is linked to MPLS Server: VMWare ESXI (Host) and Windows Server (2008 – 2016) 2.7 Please provide a detail proposed solution that will be developed as a part of the Vendor’s implementation to support this project. (For example detailed solution architecture, secured data flow to support business processes, etc.). This project will be implemented using our Direct Install platform to manage the contract from customers, audits and projects. Data will be delivered to The City as required in an agreed upon secured transport such as Secure FTP or HTTPS. 3.0 DATA PROTECTION # Question Response from the Vendor Score Additional Information/Clarification Required the Vendor 3.1 What will be the medium of data exchange between the City and Vendor? The data will be transferred electronically in a format of the choosing of the City. It could be Excel, CSV or JSON as example. VISA Questionnaire Page 8 of 16 Version 2.0 22 February 2017 DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 City of Palo Alto Information SecurityDocument Version: v2.3Form: InfoSec 100 3.2 . How will the data be kept secure during the data exchange process? Example: (VPN, Data Link, Frame Relay, HTTP, HTTPS, FTP, FTPS, etc.) The data will be sent securely by HTTPS or Secure FTP. 3.3 How will the City’s data be kept physically and logically secure at the Vendor’s preferred storage location? Example: Locked storage, Digitally, Encrypted etc. The data provided by the city will be imported into a secure SQL Server database that is hosted in our secure data center and is behind a fully managed firewall. Access to the data is managed through a system of roles and user accounts with a least privilege approach to ensure that users only have access to what they need. Backup data is encrypted at rest and stored on disk or tape in secure locked storage facilities. 3.4 What application level protections are in place to prevent the Vendor’s or a subcontractor/third party’s staff member from viewing unauthorized confidential information? For example, encryption, masking, etc. Access to data is managed through roles and user accounts. Permissions to the data point, hidden, read-only, editable, edit/delete is configurable per role. Sensitive information such as account numbers are not used in batch reports. The platform generates a human readable ID to represent each account for the purpose of display and tracking. 3.5 What controls does the Vendor exercise over the qualification and performance of its team? Of their subcontractor/third party’s team(s)? (For example, criminal background verification prior to employment, providing security training after employment and managing Role Based Access Control (RBAC) during employment and network and application access termination upon employment termination. Every employee and contractor is required to have a background check. VISA Questionnaire Page 9 of 16 Version 2.0 22 February 2017 DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 City of Palo Alto Information SecurityDocument Version: v2.3Form: InfoSec 100 4.0 D ATA BACK-UP # Question Response Score COPA’s Security Assessment 4.1 What are the vendor’s method(s) used to keep data secured during the data backup process? Tierpoint uses Proprietary backup which is sent to a NAS. Mission Critical servers like DISQL02, DIBISQL02 and SLSQL01 are using Tierpoint agent backup that is sent to network storage. The backup is encrypted. 4.2 . Is the Vendor’s encryption technology used to encrypt whole or selective data? Whole 4.3 What types of storage media will the Vendor use for data backup purposes? For example, Tape, Hard Disk Drive or any other devices. Hard Disk (Network Storage) 4.4 Are the Vendor’s backup storage devices encrypted? If ‘yes,’ please provide encryption specification, with type of encryption algorithm and detail process of encryption handling. If ‘no,’ provide a detailed description (with process, tools and technology) to keep data secured during the back-up process. Yes Veeam Backup & Replication uses the 256-bit AES with a 256-bit key length in the CBC-mode. To generate a key based on a password, Veeam Backup & Replication uses the Password-Based Key Derivation Function, PKCS #5 version 2.0. Veeam Backup & Replication uses 10,000 HMAC- SHA1 iterations and a 512-bit salt VISA Questionnaire Page 10 of 16 Version 2.0 22 February 2017 DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 5.0 DATA RETENTION Information/Clarification Required from the Vendor 5.1 What is the Vendor’s retention period of the backed-up data? The data retention process shall comply with the City’s data retention policy. [does the Vendor know what this is?] 30 days. 5.2 Are the data back-up storage media at the Vendor’s location or other third-party location? Vendor’s location (Vendor’s NAS). 5.3 If the Vendor’s backup storage devices are stored with another company, please provide: a. Company Name: b. Address: c. Contact person detail (Phone and Email): d. What contractual commitments are in place to guarantee security performance from these vendors n/a 5.5 What is the media transfer process (I.e. The lock box process used to send tapes off-site)? n/a VISA Questionnaire Page 11 of 16 Version 2.0 22 February 2017 City of Palo Alto Information SecurityDocument Version: v2.3Form: InfoSec 100 DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 City of Palo Alto Information SecurityDocument Version: v2.3Form: InfoSec 100 5.6 Who has access to the data storage media lockbox(es)? (Provide Name and Role) n/a 5.7 Who on the Vendor’s staff or subcontractor/third party’s staff is/are authorized to access backup data storage media? (Provide Name and Role) n/a 5.8 What is the backup data storage media receipt and release authorization process(es)? (Please submit a soft copy of the process) n/a 6.0 ACCOUNT PROVISIONING AND DE-PROVISIONING (The Vendor must receive formal pre-authorization from the City’s Information Security Manager prior to provisioning and de-provisioning of application access account). # Question Response from the Vendor Score Additional Information/Clarification Required from the Vendor 6.1 What is the account provisioning/removal process? Example: how are users accounts created and managed?) User accounts are created by request from an appropriate manager. Users must be assigned a role which limits their ability to perform functions and work with data. The request takes the form of an email and/or form submitted to IT. The sender is checked and verified to ensure the request is legitimate. The User account is created and a temporary password is setup. The user must change their password in compliance with the password rules. VISA Questionnaire Page 12 of 16 Version 2.0 22 February 2017 DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 City of Palo Alto Information SecurityDocument Version: v2.3Form: InfoSec 100 6.2 . What is the account deprovisioning/removal process? Example: how are users accounts created and managed?) Accounts are deprovisioned as part of an employee offboarding process. IT is informed in a workflow process during off boarding and has a checklist to execute which includes deprovisioning account Twice a year IT performs a reconciliation of employee rooster to accounts and removes all unneeded deprovisioned accounts. 6.3 How will the City’s employees gain access to required application(s)? City employees can be provided report-level access if needed and/or data will be delivered to the City over a secure connection. 6.4 Does the application(s) have the capability to restrict access only from the City’s WAN (Wide Area Network)? Not without making special provisions and settings up separate servers for access 7.1 PASSWORD MANAGEMENT # Question Response from the Vendor Score Additional Information/Clarification Required from the Vendor 7.1 What will be the policy and/or procedures for the logging, authentication, authorization and password management scheme? (Please provide a soft copy of the process) Initial local admin password provided to the portal but can be changed upon initial configuration of the server. Domain credentials are authenticated via Domain Controllers VISA Questionnaire Page 13 of 16 Version 2.0 22 February 2017 DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 City of Palo Alto Information SecurityDocument Version: v2.3Form: InfoSec 100 7.2 . Where will the login and password credentials be stored? Tierpoint portal for the local initial admin password 7.3 Are the password credentials stored with encryption? If ‘yes,’ please provide encryption scheme detail. n/a DC provides password encryption for domain credentials VISA Questionnaire Page 14 of 16 Version 2.0 22 February 2017 DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 City of Palo Alto Information SecurityDocument Version: v2.3Form: InfoSec 100 7.4 The Vendor’s application must comply with the following password requirements. Does the Vendor’s application meet these requirements? 1. First time password must be unique to an individual and require the user to change it upon initial login. 2. If the password is sent via plain text e-mail to the City employee to mitigate security exposure. 3. The City requires first time password to have a time-out capability of no more than 7 days. 4. The e-mail notification must not be copied to anyone except the user. 5. The permanent/long term password must be changed frequently (at least TWICE a year) 6. E-mail notification must be sent to the user whenever the password has been Yes, Lime adheres to the list of requirements VISA Questionnaire Page 15 of 16 Version 2.0 22 February 2017 DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 updated. 7. User should not be able to view data or conduct business unless an initial password has been updated with a different password. 8. The Vendor shall inform the City’s users that, when a new password is created, the user shall not use the City’s LDAP password. [what’s LDP? Spell out, don’t use acronyms] 9. The password must have 8 or more alphanumeric (/) characters and it must contain at least one character from each of the bullets noted below (i.e. each line shall contribute at least one character): • abcdefghijklmnopqrstu vwxyz • ABCDEFGHIJKLMNO PQRSTUVWXYZ • 0123456789 • !@#$%^&*()- +=`~,></\"'?;:{[}] City of Palo Alto Information Security Document Version: v2.3 Form: InfoSec 100 --------------------------------------------------- End Of Document -------------------------------------------------- VISA Questionnaire Page 16 of 16 Version 2.0 22 February 2017 DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0   POLICY S The City  persons i consisten §§ 6250  personal ordinary  These m federal a including 1798.79. of these  business  federal a goals and Identifiab Informat third par “Protecte “Persona California reference PURPOSE The City pertainin collected services  other in contracto collected regulatio Informat TATEMENT  of Palo Alto in Palo Alto. nt with the p – 6270, to  (including,  course and easures are  and Californ g, without l 8(b), 1798.8 provisions d in a mann and Californ d objectives ble Informat tion of perso rty under co ed Critical  ally Identify a Civil Code e.   E  y, acting in  ng to person d by a variet provided by nformation  ors. The City d by the Ci ons and pro tion is collect o (the “City”  In promotin provisions of take appro without lim d scope of c generally o nia laws, th imitation, t 80(e), 1798. do not apply  er which p ia laws. The , to ensure  tion, Protect ons doing b ontract to th Infrastructu ying Informa e sections,  its govern s who do bu y of means, y the City, p portals ma y is commit ity. The Cit ocedures, a ted, stored a Pa INFORMATI ”) strives to ng the qualit f the Califor opriate meas mitation, fin conducting t bserved by  he City’s ru he provision 81.5, 1798.8 to local gov romotes the e objective o the ongoing ted Critical In usiness with he City to pr ure Informa ation” (coll referred to mental and usiness with   including, w persons acce intained by tted to prot ty acknowle and industry and utilized  age 1 of 8    ON PRIVACY o promote a ty of life of t nia Public R sures to saf nancial) info the City’s b federal, stat les and reg ns of Califo 82(e), 1798. vernment ag e privacy o of this Polic g protection  nfrastructur h the City an rovide servic ation”, “Per ectively, th o above, an d proprietar or receive s without limit essing the C y the City’ tecting the p edges feder y best pra in complian POLICY Y POLICY  and sustain  these person ecords Act,  feguard the  ormation o business as  te and local gulations, a ornia Civil C .83(e)(7), an gencies like t f personal  cy is to desc of the Pers re Informatio nd receiving ces.  The te rsonally Ide he “Informa nd are inco ry capacitie services from tation, from City’s websit s staff and privacy and  al and Cali ctices are  ce with app Y AND PROC Revised   a superior q ns, it is the p California G security an f persons,  a local gove l authorities nd industry Code §§ 179 nd 1798.92(c the City, the  information cribe the Cit sonal Inform on and Perso g services fr rms “Person entifiable In ation”) are  orporated in es, collects  m the City. T m persons ap te, and pers d/or author security of  fornia laws dedicated t licable laws. CEDURES 1‐6 : December quality of lif policy of the Government  nd privacy o collected in ernment ag s and reflect y best prac 98.3(a), 179 c). Though s City will con , as reflecte ty’s data sec mation, Perso onally Identi om the City nal Informat nformation”  defined in n this Polic the Inform he Informat pplying to re sons who a rized third‐ the Inform , policies, r to ensuring .    64/IT  2017    fe for  e City,  Code  of the  n the  ency.  ted in  tices,  98.24,  some  nduct  ed in  curity  onally  ifying  y or a  tion,”  and  n the  cy by  ation  ion is  eceive  ccess  party  ation  rules,  g the  DocuSign Envelope ID: 87E1232D-F46E-405A-95CD-91CC38106A93DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 POLICY AND PROCEDURES 1‐64/IT  Revised: December 2017      Page 2 of 8    The goals and objectives of the Policy are: (a) a safe, productive, and inoffensive work  environment for all users having access to the City’s applications and databases; (b) the  appropriate maintenance and security of database information assets owned by, or entrusted  to, the City; (c) the controlled access and security of the Information provided to the City’s staff  and third party contractors; and (d) faithful compliance with legal and regulatory requirements.   SCOPE   The Policy will guide the City’s staff and, indirectly, third party contractors, which are by  contract required to protect the confidentiality and privacy of the Information of the persons  whose personal information data are intended to be covered by the Policy and which will be  advised by City staff to conform their performances to the Policy should they enjoy conditional  access to that information.   CONSEQUENCES   The City’s employees shall comply with the Policy in the execution of their official duties to the  extent their work implicates access to the Information referred to in this Policy.  A failure to  comply may result in employment and/or legal consequences.   EXCEPTIONS   In the event that a City employee cannot fully comply with one or more element(s) described in  this Policy, the employee may request an exception by submitting Security Exception Request.  The exception request will be reviewed and administered by the City’s Information Security  Manager (the “ISM”).  The employee, with the approval of his or her supervisor, will provide  any additional information as may be requested by the ISM. The ISM will conduct a risk  assessment of the requested exception in accordance with guidelines approved by the City’s  Chief Information Officer (“CIO”) and approved as to form by the City Attorney. The Policy’s  guidelines will include at a minimum: purpose, source, collection, storage, access, retention,  usage, and protection of the Information identified in the request. The ISM will consult with the  CIO to approve or deny the exception request.  After due consideration is given to the request,  the exception request disposition will be communicated, in writing, to the City employee and  his or her supervisor. The approval of any request may be subject to countermeasures  established by the CIO, acting by the ISM.   MUNICIPAL ORDINANCE   This Policy will supersede any City policy, rule, regulation or procedure regarding information  privacy.   RESPONSIBILITIES OF CITY STAFF   DocuSign Envelope ID: 87E1232D-F46E-405A-95CD-91CC38106A93DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 POLICY AND PROCEDURES 1‐64/IT  Revised: December 2017      Page 3 of 8    A. RESPONSIBILITY OF CIO AND ISM   The CIO, acting by the ISM, will establish an information security management framework  to initiate and coordinate the implementation of information security measures by the  City’s government.    The City’s employees, in particular, software application users and database users, and,  indirectly, third party contractors under contract to the City to provide services, shall by  guided by this Policy in the performance of their job responsibilities.    The ISM will be responsible for: (a) developing and updating the Policy, (b) enforcing  compliance with and the effectiveness of the Policy; (c) the development of privacy  standards that will manifest the Policy in detailed, auditable technical requirements, which  will be designed and maintained by the persons responsible for the City’s IT environments;  (d) assisting the City’s staff in evaluating security and privacy incidents that arise in regard  to potential violations of the Policy; (e) reviewing and approving department‐specific  policies and procedures which fall under the purview of this Policy; and (f) reviewing Non‐ Disclosure Agreements (NDAs) signed by third party contractors, which will provide services,  including, without limitation, local or ‘cloud‐based’ software services to the City.    B. RESPONSIBILITY OF INFORMATION SECURITY STEERING COMMITTEE   The Information Security Steering Committee (the “ISSC”), which is comprised of the City’s  employees, drawn from the various City departments, will provide the primary direction,  prioritization and approval for all information security efforts, including key information  security and privacy risks, programs, initiatives and activities. The ISSC will provide input to  the information security and privacy strategic planning processes to ensure that information  security risks are adequately considered, assessed and addressed at the appropriate City  department level.   C. RESPONSIBILITY OF USERS   All authorized users of the Information will be responsible for complying with information  privacy processes and technologies within the scope of responsibility of each user.   D. RESPONSIBILITY OF INFORMATION TECHNOLOGY (IT) MANAGERS   The City’s IT Managers, who are responsible for internal, external, direct and indirect  connections to the City’s networks, will be responsible for configuring, maintaining and  securing the City’s IT networks in compliance with the City’s information security and  privacy policies. They are also responsible for timely internal reporting of events that may  have compromised network, system or data security.   DocuSign Envelope ID: 87E1232D-F46E-405A-95CD-91CC38106A93DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 POLICY AND PROCEDURES 1‐64/IT  Revised: December 2017      Page 4 of 8    E. RESPONSIBILITY OF AUTHORIZATION COORDINATION   The ISM will ensure that the City’s employees secure the execution of Non‐Disclosure  Agreements (NDA), whenever access to the Information will be granted to third party  contractors, in conjunction with the Software as a Service (SaaS) Security and Privacy Terms  and Conditions.  An NDA must be executed prior to the sharing of the Information of  persons covered by this Policy with third party contractors. The City’s approach to managing  information security and its implementation (i.e. objectives, policies, processes, and  procedures for information security) will be reviewed independently by the ISM at planned  intervals, or whenever significant changes to security implementation have occurred.   The CIO, acting by the ISM, will review and recommend changes to the Policy annually, or as  appropriate, commencing from the date of its adoption.   GENERAL PROCEDURE FOR INFORMATION PRIVACY   A. OVERVIEW   The Policy applies to activities that involve the use of the City’s information assets, namely,  the Information of persons doing business with the City or receiving services from the City,  which are owned by, or entrusted to, the City and will be made available to the City’s  employees and third party contractors under contract to the City to provide Software as a  Service consulting services. These activities include, without limitation, accessing the  Internet, using e‐mail, accessing the City’s intranet or other networks, systems, or devices.   The term “information assets” also includes the personal information of the City’s  employees and any other related organizations while those assets are under the City’s  control.  Security measures will be designed, implemented, and maintained to ensure that  only authorized persons will enjoy access to the information assets. The City’s staff will act  to protect its information assets from theft, damage, loss, compromise, and inappropriate  disclosure or alteration. The City will plan, design, implement and maintain information  management systems, networks and processes in order to assure the appropriate  confidentiality, integrity, and availability of its information assets to the City’s employees  and authorized third parties.   B. PERSONAL INFORMATION AND CHOICE   Except as permitted or provided by applicable laws, the City will not share the Information  of any person doing business with the City, or receiving services from the City, in violation of  this Policy, unless that person has consented to the City’s sharing of such information  during the conduct of the City’s business as a local government agency with third parties  under contract to the City to provide services.   DocuSign Envelope ID: 87E1232D-F46E-405A-95CD-91CC38106A93DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 POLICY AND PROCEDURES 1‐64/IT  Revised: December 2017      Page 5 of 8    C. METHODS OF COLLECTION OF PERSONAL INFORMATION   The City may gather the Information from a variety of sources and resources, provided that  the collection of such information is both necessary and appropriate in order for the City to  conduct business as a local government agency in its governmental and proprietary  capacities.  That information may be gathered at service windows and contact centers as  well as at web sites, by mobile applications, and with other technologies, wherever the City  may interact with persons who need to share such formation in order to secure the City’s  services.   The City’s staff will inform the persons whose Information are covered by this Policy that  the City’s web site may use “cookies” to customize the browsing experience with the City of  Palo Alto web site.  The City will note that a cookie contains unique information that a web  site can use to track, among others, the Internet Protocol address of the computer used to  access the City’s web sites, the identification of the browser software and operating  systems used, the date and time a user accessed the site, and the Internet address of the  website from which the user linked to the City’s web sites. Cookies created on the user’s  computer by using the City’s web site do not contain the Information, and thus do not  compromise the user’s privacy or security. Users can refuse the cookies or delete the cookie  files from their computers by using any of the widely available methods. If the user chooses  not to accept a cookie on his or her computer, it will not prevent or prohibit the user from  gaining access to or using the City’s sites.    D. UTILITIES SERVICE   In the provision of utility services to persons located within Palo Alto, the City of Palo Alto  Utilities Department (“CPAU”) will collect the Information in order to initiate and manage  utility services to customers.  To the extent the management of that information is not  specifically addressed in the Utilities Rules and Regulations or other ordinances, rules,  regulations or procedures, this Policy will apply; provided, however, any such Rules and  Regulations must conform to this Policy, unless otherwise directed or approved by the  Council. This includes the sharing of CPAU‐collected Information with other City  departments except as may be required by law.   Businesses and residents with standard utility meters and/or having non‐metered monthly  services will have secure access through a CPAU website to their Information, including,  without limitation, their monthly utility usage and billing data. In addition to their regular  monthly utilities billing, businesses and residents with non‐standard or experimental  electric, water or natural gas meters may have their usage and/or billing data provided to  them through non‐City electronic portals at different intervals than with the standard  monthly billing.    DocuSign Envelope ID: 87E1232D-F46E-405A-95CD-91CC38106A93DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 POLICY AND PROCEDURES 1‐64/IT  Revised: December 2017      Page 6 of 8    Businesses and residents with such non‐standard or experimental metering will have their  Information covered by the same privacy protections and personal information exchange  rules applicable to Information under applicable federal and California laws.   E. PUBLIC DISCLOSURE   The Information that is collected by the City in the ordinary course and scope of conducting  its business could be incorporated in a public record that may be subject to inspection and  copying by the public, unless such information is exempt from disclosure to the public by  California law.   F. ACCESS TO PERSONAL INFORMATION   The City will take reasonable steps to verify a person’s identity before the City will grant  anyone online access to that person’s Information. Each City department that collects  Information will afford access to affected persons who can review and update that  information at reasonable times.   G. SECURITY, CONFIDENTIALITY AND NON‐DISCLOSURE   Except as otherwise provided by applicable law or this Policy, the City will treat the  Information of persons covered by this Policy as confidential and will not disclose it, or  permit it to be disclosed, to third parties without the express written consent of the person  affected. The City will develop and maintain reasonable controls that are designed to  protect the confidentiality and security of the Information of persons covered by this Policy.   The City may authorize the City’s employee and or third party contractors to access and/or  use the Information of persons who do business with the City or receive services from the  City. In those instances, the City will require the City’s employee and/or the third party  contractors to agree to use such Information only in furtherance of City‐related business  and in accordance with the Policy.    If the City becomes aware of a breach, or has reasonable grounds to believe that a security  breach has occurred, with respect to the Information of a person, the City will notify the  affected person of such breach in accordance with applicable laws. The notice of breach will  include the date(s) or estimated date(s) of the known or suspected breach, the nature of  the Information that is the subject of the breach, and the proposed action to be taken or  the responsive action taken by the City.   H. DATA RETENTION / INFORMATION RETENTION   DocuSign Envelope ID: 87E1232D-F46E-405A-95CD-91CC38106A93DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 POLICY AND PROCEDURES 1‐64/IT  Revised: December 2017      Page 7 of 8    The City will store and secure all Information for a period of time as may be required by law,  or if no period is established by law, for seven (7) years, and thereafter such information  will be scheduled for destruction.   I. SOFTWARE AS A SERVICE (SAAS) OVERSIGHT   The City may engage third party contractors and vendors to provide software application  and database services, commonly known as Software‐as‐a‐Service (SaaS).    In order to assure the privacy and security of the Information of those who do business with  the City and those who received services from the City, as a condition of selling goods  and/or services to the City, the SaaS services provider and its subcontractors, if any,  including any IT infrastructure services provider, shall design, install, provide, and maintain  a secure IT environment, while it performs such services and/or furnishes goods to the City,  to the extent any scope of work or services implicates the confidentiality and privacy of the  Information.    These requirements include information security directives pertaining to: (a) the IT  infrastructure, by which the services are provided to the City, including connection to the  City's IT systems; (b) the SaaS services provider’s operations and maintenance processes  needed to support the IT environment, including disaster recovery and business continuity  planning; and (c) the IT infrastructure performance monitoring services to ensure a secure  and reliable environment and service availability to the City. The term “IT infrastructure”  refers to the integrated framework, including, without limitation, data centers, computers,  and database management devices, upon which digital networks operate.    Prior to entering into an agreement to provide services to the City, the City’s staff will  require the SaaS services provider to complete and submit an Information Security and  Privacy Questionnaire. In the event that the SaaS services provider reasonably determines  that it cannot fulfill the information security requirements during the course of providing  services, the City will require the SaaS services provider to promptly inform the ISM.   J. FAIR AND ACCURATE CREDIT TRANSACTION ACT OF 2003   CPAU will require utility customers to provide their Information in order for the City to  initiate and manage utility services to them.     Federal regulations, implementing the Fair and Accurate Credit Transactions Act of 2003  (Public Law 108‐159), including the Red Flag Rules, require that CPAU, as a “covered  financial institution or creditor” which provides services in advance of payment and which  can affect consumer credit, develop and implement procedures for an identity theft  program for new and existing accounts to detect, prevent, respond and mitigate potential  identity theft of its customers’ Information.   DocuSign Envelope ID: 87E1232D-F46E-405A-95CD-91CC38106A93DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 POLICY AND PROCEDURES 1‐64/IT  Revised: December 2017      Page 8 of 8    CPAU procedures for potential identity theft will be reviewed independently by the ISM  annually or whenever significant changes to security implementation have occurred. The  ISM will recommend changes to CPAU identity theft procedures, or as appropriate, so as to  conform to this Policy.   There are California laws which are applicable to identity theft; they are set forth in  California Civil Code § 1798.92.   NOTE: Questions regarding this policy should be referred to the Information Technology  Department, as appropriate.    Recommended:     __________________________________ ________________  Director Information Technology/CIO  Date      Approved:        ___________________________________ _________________    City Manager      Date    DocuSign Envelope ID: 87E1232D-F46E-405A-95CD-91CC38106A93 12/5/2017 12/13/2017 DocuSign Envelope ID: C2FAAF18-E5E5-4DD9-9DDC-1BC58A1964E0 City of Palo Alto (ID # 10876) City Council Staff Report Report Type: Consent Calendar Meeting Date: 2/3/2020 City of Palo Alto Page 1 Summary Title: Fire Station 3 Design Contract Amendment No. 3 Title: Approval of Amendment Number 3 to Contract Number C16161210 with Shah Kawasaki Architects, Inc., to add an Amount Not-to-Exceed $102,141 to Provide Continued Construction Administration and LEED Certification Services for the Fire Station 3 Replacement Project (PE-15003), for a New Total Not-To-Exceed Amount of $916,383 From: City Manager Lead Department: Public Works Recommendation Staff recommends that Council approve and authorize the City Manager or his designee to execute Contract Amendment No. 3 to Contract No. C16161210 with Shah Kawasaki Architects, Inc., (Attachment A) to increase compensation by a not-to-exceed amount of $102,141 to provide continued construction administration and LEED certification services for the Fire Station No. 3 Replacement Project (CIP PE-15003). The added amount includes $92,841 for basic services and $9,300 for additional services. The revised total contract amount is not to exceed $916,383, including $833,824 for basic services and $82,559 for additional services. Background The Fire Station No. 3 Replacement Project is part of the 2014 Council Infrastructure Plan. The Project will provide a new facility built to meet essential services standards. The new fire station is being built at the existing location of Fire Station No. 3 at 799 Embarcadero Road in Palo Alto. On December 14, 2015, Council approved a contract with Shah Kawasaki Architects, Inc. (SKA) to provide architectural design services for the Fire Station No. 3 Replacement Project, as well as construction administration and LEED certification services during construction, with a contract end date of September 10, 2018 (Staff Report ID#6299). Council awarded a construction contract to the lowest responsible bidder, Strawn Construction, Inc. (Staff Report ID#8561) on November 27, 2017. Construction on the Fire Station No. 3 Project began in January 2018 with an anticipated completion in early 2019. CITY OF PALO ALTO City of Palo Alto Page 2 On October 18, 2018, Council approved Amendment No. 1 to extend SKA’s construction administration services contract (Staff Report ID#9511) to add additional time and budget primarily due to the extended design review process prior to the start of construction. On June 3, 2019, Council approved Amendment No. 2 to extend SKA’s construction administration services contract (Staff Report ID#10193) to add additional time and budget to cover the expected Project construction delay to August 2019. Discussion Construction on the Fire Station No 3 Project was contracted for completion by January 8, 2019, with minor change orders extending the completion date to March 10, 2019. The contractor failed to meet the contracted schedule and has been notified of the City’s intent to assess liquidated damages under the contract in the amount of $1,500 per day, intended to cover all costs associated with delay, including costs such as added construction administration costs. Currently, substantial completion is expected in January 2020. SKA Contract Amendment No. 3 is necessary to provide the additional funding needed for the extended construction administration services resulting from the contractor’s delay in completing the Project. Timeline Construction of the Fire Station No. 3 Project is now expected to be substantially complete in January 2020. Resource Impact Funding for this contract amendment is available in the Fire Station No. 3 Replacement Capital Improvement Project (PE-15003). The cost for these extended construction administration services is expected to be offset by the assessment of liquidated damages. Policy Implications The proposed action is consistent with City policy. Stakeholder Engagement Stakeholder engagement is not applicable to this contract amendment. Environmental Review This project is categorically exempt from the provisions of the California Environmental Quality Act (CEQA) under Section 15302 of the CEQA Guidelines as “Replacement or Reconstruction of Existing Structures” and no further Environmental review is necessary. A notice of CEQA exemption was filed in early March 2017. Attachments: C16161210 Amendment #3 Vers.: Aug. 5, 2019 Page 1 of 7 AMENDMENT NO. 3 TO CONTRACT NO. C16161210 BETWEEN THE CITY OF PALO ALTO AND SHAH KAWASAKI ARCHITECTS, INC. This Amendment No. 3 (this “Amendment”) to Contract No. C16161210 (the “Contract” as defined below) is entered into as of February 3, 2020, by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and SHAH KAWASAKI ARCHITECTS, INC., a California corporation, located at 570 10th Street, Suite 201, Oakland, CA 94607 (“CONSULTANT”). CITY and CONSULTANT are referred to collectively as the “Parties” in this Amendment. R E C I T A L S A.The Contract (as defined below) was entered into by and between the Parties hereto for the provision of professional services in connection with the new construction of Fire Station No.3 located at Embarcadero and Newell (the “Project”), as detailed therein. B.The Contract was amended by Amendment No.1 to extend the term of the Contract through December 31, 2020, to add continued construction administration services and to increase the total not- to- exceed amount of compensation by an amount not to exceed Ninety Seven Thousand Six Hundred Twenty Six Dollars ($97,626), from Five Hundred Ninety Nine Thousand Fifty Two Dollars ($599,052.00), to a new total not-to-exceed amount of Six Hundred Ninety Six Thousand Seventy Eight Dollars ($696,678.00). C.The Contract was amended by Amendment No. 2 to amend Exhibit “B” (“Schedule of Performance”) to add continued construction administrative services; and to increase the total not- to- exceed amount of compensation by an amount not to exceed One Hundred Seventeen thousand Five Hundred Sixty Four ($117,564.00), from Six Hundred Ninety Six Thousand Six Hundred Seventy Eight Dollars ($696,678.00) to a new total not-to-exceed amount of Eight Hundred Fourteen Thousand Two Hundred Forty Two Dollars ($814,242.00). D. The Parties now wish to amend the Contract to amend Exhibit “B” (“Schedule of Performance”) to add continued construction administrative services; and to increase the total not- to- exceed amount of compensation by an amount not- to- exceed One Hundred Two Thousand One Hundred Forty One Dollars ($102,141), from Eight Hundred Fourteen Thousand Two Hundred Forty Two Dollars ($814,242) to a new total not-to-exceed amount of Nine Hundred Sixteen Thousand Three Hundred Eighty Three Dollars ($916,383) due to the delayed finish of construction by others. NOW, THEREFORE, in consideration of the covenants, terms, conditions, and provisions of this Amendment, the Parties agree: SECTION 1. Definitions. The following definitions shall apply to this Amendment: DocuSign Envelope ID: BB15FAC3-F3BC-47A4-8136-C6668F95898B Attachment A Vers.: Aug. 5, 2019 Page 2 of 7 a.Contract. The term “Contract” shall mean Contract No. C16161210 between CONSULTANT and CITY, dated December 14, 2015, as amended by: Amendment No.1, dated September 12, 2018, and Amendment No.2, dated June 3, 2019. b.Other Terms. Capitalized terms used and not defined in this Amendment shall have the meanings assigned to such terms in the Contract. SECTION 2. Section 4, entitled “Not To Exceed Compensation,” of the Contract is hereby amended to read as follows: “The compensation to be paid to CONSULTANT for performance of the Services described in Exhibit “A”, including both payment for professional services and reimbursable expenses, shall not exceed Eight Hundred Thirty Three Thousand Eight Hundred Twenty Four Dollars ($833,824). In the event Additional Services are authorized, the total compensation for Services, Additional Services and reimbursable expenses shall not exceed Nine Hundred Sixteen Thousand Three Hundred Eighty Three Dollars ($916,383). The applicable rates and schedule of payment are set out at Exhibit “C-1”, entitled “HOURLY RATE SCHEDULE,” which is attached to and made a part of this Agreement. Additional Services (defined below), if any, shall be authorized in accordance with and subject to the provisions of Exhibit “C”. CONSULTANT shall not receive any compensation for Additional Services performed without the prior written authorization of CITY. “Additional Services” shall mean any work that is determined by CITY to be necessary for the proper completion of the Project, but which is not included within the Scope of Services described at Exhibit “A”.” SECTION 3. The following exhibits to the Contract are hereby deleted and replaced in the entirety , as indicated below, to read as set forth in the attachments to this Amendment, which are hereby incorporated in full into this Amendment and into the Contract by this reference: a.Exhibit “B” entitled “SCHEDULE OF PERFORMANCE, AMENDMENT 2” of the Contract is hereby deleted and replaced in its entirety to read as provided in the attached Exhibit “B”, entitled “SCHEDULE OF PERFORMANCE, AMENDMENT No. 3”. b.Exhibit “C” entitled “COMPENSATION, AMENDMENT No.2” of the Contract is hereby deleted and replaced in its entirety to read as provided in the attached Exhibit “C”, entitled “COMPENSATION, AMENDMENT No. 3”. DocuSign Envelope ID: BB15FAC3-F3BC-47A4-8136-C6668F95898B Attachment A Vers.: Aug. 5, 2019 Page 3 of 7 SECTION 5. Legal Effect. Except as modified by this Amendment, all other provisions of the Contract, including any exhibits thereto, shall remain in full force and effect. SECTION 6. Incorporation of Recitals. The recitals set forth above are terms of this Amendment and are fully incorporated herein by this reference. (SIGNATURE BLOCK FOLLOWS ON THE NEXT PAGE.) DocuSign Envelope ID: BB15FAC3-F3BC-47A4-8136-C6668F95898B Attachment A Vers.: Aug. 5, 2019 Page 4 of 7 SIGNATURES OF THE PARTIES IN WITNESS WHEREOF, the Parties have by their duly authorized representatives executed this Amendment effective as of the date first above written. CITY OF PALO ALTO City Manager (Contract over $85k) APPROVED AS TO FORM: City Attorney or designee (Contract over $25k) SHAH KAWASAKI ARCHITECTS, INC. Officer 1 By: Name: Title: Officer 2 (Required for Corp. or LLC) By: Name: Title: Attachments: Exhibit “B” entitled “SCHEDULE OF PERFORMANCE, AMENDMENT No. 3” (AMENDED-REPLACES PREVIOUS) Exhibit “C” entitled “COMPENSATION, AMENDMENT No. 3” (AMENDED-REPLACES PREVIOUS) DocuSign Envelope ID: BB15FAC3-F3BC-47A4-8136-C6668F95898B Alan Kawasaki President Secretary Philip Luo Attachment A - ~DocuSigned by: L::;D~= r-:DocuSigned by: LC~~f j~F4C5 Vers.: Aug. 5, 2019 Page 5 of 7 EXHIBIT “B” SCHEDULE OF PERFORMANCE, AMENDMENT NO. 3 (AMENDED- REPLACES PREVIOUS) CONSULTANT shall perform the Services so as to complete each milestone within the number of days specified below. The time to complete each milestone may be increased or decreased by mutual written agreement of the project managers for CONSULTANT and CITY so long as all work is completed within the term of the Agreement. CONSULTANT shall provide a detailed schedule of work consistent with the schedule below within 2 weeks of receipt of the notice to proceed (NTP). Milestones Completion No. of Days from NTP Task 1, Schematic Design 91 days Task 2, Design Development 182 days Task 3, Construction Documents 365 days Task 4, Construction Administration 1,460 days (to Dec. 31, 2019) Task 5, LEED Certification 1,538 days (to April 5, 2020) DocuSign Envelope ID: BB15FAC3-F3BC-47A4-8136-C6668F95898B Attachment A Vers.: Aug. 5, 2019 Page 6 of 7 EXHIBIT “C” COMPENSATION, AMENDMENT NO. 3 (AMENDED- REPLACES PREVIOUS) The CITY agrees to compensate the CONSULTANT for professional services performed in accordance with the terms and conditions of this Agreement, and as set forth in the budget schedule below. Compensation shall be calculated based on the hourly rate schedule attached as exhibit C-1 up to the not to exceed budget amount for each task set forth below. CONSULTANT shall perform the tasks and categories of work as outlined and budgeted below. The CITY’s Project Manager may approve in writing the transfer of budget amounts between any of the tasks or categories listed below provided the total compensation for Basic Services, including reimbursable expenses, and the total compensation for Additional Services do not exceed the amounts set forth in Section 4 of this Agreement. BUDGET SCHEDULE NOT TO EXCEED AMOUNT Task 1 $89,785 (Schematic Design) Task 2 $115,010 (Design Development) Task 3 $181,609 (Construction Document) Task 4 & Task 5 $419,964 (Construction Administration & LEED Certification) Sub-total Basic Services $806,368 Reimbursable Expenses $27,456 Total Basic Services and Reimbursable expenses $833,824 Additional Services, if authorized (Not to Exceed) $82,559 Maximum Total Compensation $916,383 REIMBURSABLE EXPENSES The administrative, overhead, secretarial time or secretarial overtime, word processing, photocopying, in-house printing, insurance and other ordinary business expenses are included within the scope of payment for services and are not reimbursable expenses. CITY DocuSign Envelope ID: BB15FAC3-F3BC-47A4-8136-C6668F95898B Attachment A Vers.: Aug. 5, 2019 Page 7 of 7 shall reimburse CONSULTANT for the following reimbursable expenses at cost. Expenses for which CONSULTANT shall be reimbursed are: A. Travel outside the San Francisco Bay area, including transportation and meals, will be reimbursed at actual cost subject to the City of Palo Alto’s policy for reimbursement of travel and meal expenses for City of Palo Alto employees. B. Long distance telephone service charges, cellular phone service charges, facsimile transmission and postage charges are reimbursable at actual cost. All requests for payment of expenses shall be accompanied by appropriate backup information. Any expense anticipated to be more than $1,320.00 shall be approved in advance by the CITY’s project manager. ADDITIONAL SERVICES The CONSULTANT shall provide Additional Services (as defined in Section 4) only by advanced, written authorization from the CITY. The CONSULTANT, at the CITY’s project manager’s request, shall submit a detailed written proposal including a description of the scope of services, schedule, level of effort, and CONSULTANT’s proposed maximum compensation, including reimbursable expense, for such services based on the rates set forth in Exhibit C-1. The Additional Services scope, schedule and maximum compensation shall be negotiated and agreed to in writing by the CITY’s Project Manager and CONSULTANT prior to commencement of the services. Payment for Additional Services is subject to all requirements and restrictions in this Agreement. Work required because the following conditions are not satisfied or are exceeded shall be considered as Additional Services: 1. Geotechnical Report is not received from City prior to commencement of structural engineering services 2. Geotechnical Report recommends special (not spread footings) foundations systems such as mat, piers or piles. 3. Survey including topographic, boundary and utilities is not received from City prior to commencement of civil engineering. 4. Design services to incorporate Public Art. 5. CEQA documents other than negative declaration. 6. Alert System design 7. IT/Telecommunications Equipment design including routers, servers, PBX 8. Cell tower and equipment design other than coordination 9. As-Built documentation DocuSign Envelope ID: BB15FAC3-F3BC-47A4-8136-C6668F95898B Attachment A City of Palo Alto (ID # 10966) City Council Staff Report Report Type: Consent Calendar Meeting Date: 2/3/2020 City of Palo Alto Page 1 Council Priority: Transportation and Traffic Summary Title: Approval of Contract for On-Call Traffic Signal and Electrical Services Title: Approval of Contract Number C20177344 With Bear Electrical Services for Provision of On-call Traffic Signal and Electrical Services for a Term of 36 Months With a Maximum Total Compensation Not-to-Exceed Amount of $375,000 From: City Manager Lead Department: Transportation Recommended Motion: Staff recommends that Council authorize the City Manager to execute Contract C20177344 with Bear Electrical Services for provision of On-Call Traffic Signal and Electrical Services for a term three years through March 1, 2023 with a maximum compensation total not-to-exceed amount of $375,000. Background: In 2019, City Staff conducted a formal Invitation for Bids (IFB) for the On-Call Traffic Signal and Electrical Services. The City of Palo Alto has an existing contract for on-call services that expired on 12/30/2019. This new contract will supersede the previous contract. A new IFB process and contract is generally conducted approximately every three years. The contract presented in this report is a result of the IFB process conducted in late 2019. This contract supports traffic signal and other electrical service work related to the traffic signal and transportation system within Palo Alto. The services supplement implementation, maintenance, and/or repair efforts that cannot be completed by Electric Utilities Department staff and is generally used for implementation of services and/or technologies that current City Staff has limited capabilities or capacity to conduct. Discussion: The contract for the On-Call Traffic Signal and Electrical Services provides for implementation, City of Palo Alto Page 2 inspection, and maintenance of various traffic signals and other electrical work related to transportation such as electronic speed feedback signs and pedestrian crossing flashing beacons. The work generally expected within this contract includes on-going maintenance of speed feedback signs and pedestrian warning beacons. It also includes implementation of new requests for specific changes or upgrades such as new pedestrian crossing beacons, upgrades of traffic signal detection or accessible pedestrian buttons, or other repairs that may require services to supplement the capabilities of current City Staff. The on-call contractor will be working in close coordination with current City Staff from the Department of Transportation and from the Utilities - Electrical Services department. In order to provide continuity in electrical service, maintenance, and to allow Staff to proceed with work on priority transportation projects with near-term electrical services, Staff is requesting that Council approve the attached contract for three years, not to exceed $375,000 (approximately $125,000 annually) for the provision of on-call traffic signal and electrical services until March 1, 2023. The IFB process (IFB No. 177344) was opened to the public on October 25th, 2019, and closed on November 20, 2019. The City received proposals from two bidding firms with Bear Electrical Services being the lowest bidder. A solicitation summary matrix is included in Attachment B. Bear Electrical was also the previous on-call contractor between 2016 and 2019. Policy Implications: The City's Comprehensive Plan recommends that traffic safety be among the City's top priorities. This contract is consistent with the following Comprehensive Plan goals: • T-4: An Efficient Roadway Network for All Users and Goal • T-6: A High Level of Safety for Motorists, Pedestrians, and Bicyclists on Palo Alto Streets. Resource Impact: On-call services are used only when there is sufficient budget to cover the costs. The majority of these efforts are funded by a combination of the existing operating budget and the Traffic Signal and Intelligent Transportation Systems (PL-05030) CIP project. There are sufficient funds in the Fiscal Year 2020 Adopted Operating Budget and in the Fiscal Year 2020 Adopted CIP Budget to cover the on-call traffic signal and electrical services work. Any work related to other specific CIP projects will be charged to those projects. No additional resources are required at this time. Timeline: On-Call services efforts are ongoing on a continual and on an as-needed basis. Staff will continue to issue task orders to Bear Electrical Services as required. As of January 1, 2020, no contract is in place and new task orders are currently on hold until this contract can be fully executed. Environmental Review: City of Palo Alto Page 3 Approving this Contract and work done under it are exempt from the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Sections 15301 (Existing Facilities) and 15302 (Replacement or Reconstruction). Stakeholder Engagement Stakeholder Engagement beyond City Staff was not included as this contract will supplement current staff efforts. Project specific stakeholder engagement will occur separately as part of specific projects. Attachments: • C20177344 Bear Electrical - Council Ready • BidderInfoExport - Solicitation Summary Matrix Invitation for Bid (IFB) Package 1 Rev. March 17, 2017 CONSTRUCTION CONTRACT CONSTRUCTION CONTRACT Contract No. C20177344 City of Palo Alto On-Call Traffic Signal and Electrical Support Project DocuSign Envelope ID: E5809286-65B9-483F-80A8-F975AA185F36 Invitation for Bid (IFB) Package 2 Rev. March 17, 2017 CONSTRUCTION CONTRACT CONSTRUCTION CONTRACT TABLE OF CONTENTS SECTION 1 INCORPORATION OF RECITALS AND DEFINITIONS…………………………………….…………..6 1.1 Recitals…………………………………………………………………………………………………………………….6 1.2 Definitions……………………………………………………………………………………………………………….6 SECTION 2 THE PROJECT………………………………………………………………………………………………………...6 SECTION 3 THE CONTRACT DOCUMENTS………………………………………………………………………………..7 3.1 List of Documents…………………………………………………………………………………………….........7 3.2 Order of Precedence……………………………………………………………………………………………......7 SECTION 4 CONTRACTOR’S DUTY…………………………………………………………………………………………..8 4.1 Contractor's Duties…………………………………………………………………………………………………..8 SECTION 5 PROJECT TEAM……………………………………………………………………………………………………..8 5.1 Contractor's Co-operation………………………………………………………………………………………..8 SECTION 6 TIME OF COMPLETION…………………………………………………………………………………….......8 6.1 Time Is of Essence…………………………………………………………………………………………………….8 6.2 Commencement of Work…………………………………………………………………………………………8 6.3 Contract Time…………………………………………………………………………………………………………..8 6.4 Liquidated Damages…………………………………………………………………………………………………8 6.4.1 Other Remedies……………………………………………………………………………………………………..9 6.5 Adjustments to Contract Time………………………………………………………………………………….9 SECTION 7 COMPENSATION TO CONTRACTOR……………………………………………………………………….9 7.1 Contract Sum……………………………………………………………………………………………………………9 7.2 Full Compensation……………………………………………………………………………………………………9 SECTION 8 STANDARD OF CARE……………………………………………………………………………………………..9 8.1 Standard of Care…………………………………………………………………………………..…………………9 SECTION 9 INDEMNIFICATION…………………………………………………………………………………………..…10 9.1 Hold Harmless……………………………………………………………………………………………………….10 9.2 Survival…………………………………………………………………………………………………………………10 SECTION 10 NON-DISCRIMINATION……..………………………………………………………………………………10 10.1 Municipal Code Requirement…………….………………………………..……………………………….10 SECTION 11 INSURANCE AND BONDS.…………………………………………………………………………………10 DocuSign Envelope ID: E5809286-65B9-483F-80A8-F975AA185F36 Invitation for Bid (IFB) Package 3 Rev. March 17, 2017 CONSTRUCTION CONTRACT 11.1 Evidence of Coverage…………………………………………………………………………………………..10 SECTION 12 PROHIBITION AGAINST TRANSFERS…………………………………………………………….…11 12.1 Assignment………………………………………………………………………………………………………….11 12.2 Assignment by Law.………………………………………………………………………………………………11 SECTION 13 NOTICES …………………………………………………………………………………………………………….11 13.1 Method of Notice …………………………………………………………………………………………………11 13.2 Notice Recipents ………………………………………………………………………………………………….11 13.3 Change of Address……………………………………………………………………………………………….12 SECTION 14 DEFAULT…………………………………………………………………………………………………………...12 14.1 Notice of Default………………………………………………………………………………………………….12 14.2 Opportunity to Cure Default…………………………………………………………………………………12 SECTION 15 CITY'S RIGHTS AND REMEDIES…………………………………………………………………………..12 15.1 Remedies Upon Default……………………………………………………………………………………….12 15.1.1 Delete Certain Services…………………………………………………………………………………….13 15.1.2 Perform and Withhold……………………………………………………………………………………..13 15.1.3 Suspend The Construction Contract…………………………………………………………………13 15.1.4 Terminate the Construction Contract for Default………………………………………………13 15.1.5 Invoke the Performance Bond………………………………………………………………………….13 15.1.6 Additional Provisions……………………………………………………………………………………….13 15.2 Delays by Sureties……………………………………………………………………………………………….13 15.3 Damages to City…………………………………………………………………………………………………..14 15.3.1 For Contractor's Default…………………………………………………………………………………..14 15.3.2 Compensation for Losses…………………………………………………………………………………14 15.4 Suspension by City……………………………………………………………………………………………….14 15.4.1 Suspension for Convenience……………………………………………………………………………..14 15.4.2 Suspension for Cause………………………………………………………………………………………..14 15.5 Termination Without Cause…………………………………………………………………………………14 15.5.1 Compensation………………………………………………………………………………………………….14 15.5.2 Subcontractors………………………………………………………………………………………………..15 15.6 Contractor’s Duties Upon Termination………………………………………………………………...15 SECTION 16 CONTRACTOR'S RIGHTS AND REMEDIES……………………………………………………………16 16.1 Contractor’s Remedies……………………………………..………………………………..………………….16 DocuSign Envelope ID: E5809286-65B9-483F-80A8-F975AA185F36 Invitation for Bid (IFB) Package 4 Rev. March 17, 2017 CONSTRUCTION CONTRACT 16.1.1 For Work Stoppage……………………………………………………………………………………………16 16.1.2 For City's Non-Payment…………………………………………………………………………………….16 16.2 Damages to Contractor………………………………………………………………………………………..16 SECTION 17 ACCOUNTING RECORDS………………………………………………………………………………….…16 17.1 Financial Management and City Access………………………………………………………………..16 17.2 Compliance with City Requests…………………………………………………………………………….17 SECTION 18 INDEPENDENT PARTIES……………………………………………………………………………………..17 18.1 Status of Parties……………………………………………………………………………………………………17 SECTION 19 NUISANCE……………………………………………………………………………………………………….…17 19.1 Nuisance Prohibited……………………………………………………………………………………………..17 SECTION 20 PERMITS AND LICENSES…………………………………………………………………………………….17 20.1 Payment of Fees…………………………………………………………………………………………………..17 SECTION 21 WAIVER…………………………………………………………………………………………………………….17 21.1 Waiver………………………………………………………………………………………………………………….17 SECTION 22 GOVERNING LAW AND VENUE; COMPLIANCE WITH LAWS……………………………….18 22.1 Governing Law…………………………………………………………………………………………………….18 22.2 Compliance with Laws…………………………………………………………………………………………18 22.2.1 Palo Alto Minimum Wage Ordinance…………….………………………………………………….18 SECTION 23 COMPLETE AGREEMENT……………………………………………………………………………………18 23.1 Integration………………………………………………………………………………………………………….18 SECTION 24 SURVIVAL OF CONTRACT…………………………………………………………………………………..18 24.1 Survival of Provisions……………………………………………………………………………………………18 SECTION 25 PREVAILING WAGES………………………………………………………………………………………….18 SECTION 26 NON-APPROPRIATION……………………………………………………………………………………….19 26.1 Appropriation………………………………………………………………………………………………………19 SECTION 27 AUTHORITY……………………………………………………………………………………………………….19 27.1 Representation of Parties…………………………………………………………………………………….19 SECTION 28 COUNTERPARTS………………………………………………………………………………………………..19 28.1 Multiple Counterparts………………………………………………………………………………………….19 SECTION 29 SEVERABILITY……………………………………………………………………………………………………19 29.1 Severability………………………………………………………………………………………………………….19 SECTION 30 STATUTORY AND REGULATORY REFERENCES …………………………………………………..19 DocuSign Envelope ID: E5809286-65B9-483F-80A8-F975AA185F36 Invitation for Bid (IFB) Package 5 Rev. March 17, 2017 CONSTRUCTION CONTRACT 30.1 Amendments of Laws…………………………………………………………………………………………..19 SECTION 31 WORKERS’ COMPENSATION CERTIFICATION………………………………………………….….19 31.1 Workers Compensation…………………………………………………………………………………….19 SECTION 32 DIR REGISTRATION AND OTHER SB 854 REQUIREMENTS………………………………..…20 32.1 General Notice to Contractor…………………………………………………………………………….20 32.2 Labor Code section 1771.1(a)…………………………………………………………………………….20 32.3 DIR Registration Required…………………………………………………………………………………20 32.4 Posting of Job Site Notices…………………………………………………………………………………20 32.5 Payroll Records…………………………………………………………………………………………………20 DocuSign Envelope ID: E5809286-65B9-483F-80A8-F975AA185F36 Invitation for Bid (IFB) Package 6 Rev. March 17, 2017 CONSTRUCTION CONTRACT CONSTRUCTION CONTRACT THIS CONSTRUCTION CONTRACT entered into on January 27th, 2020 (“Execution Date”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation ("City"), and BEAR ELECTRICAL SOLUTIONS, INC. a California corporation ("Contractor"), is made with reference to the following: R E C I T A L S: A. City is a municipal corporation duly organized and validly existing under the laws of the State of California with the power to carry on its business as it is now being conducted under the statutes of the State of California and the Charter of City. B. Contractor is a corporation duly organized and in good standing in the State of California, Contractor’s License Number 982079 and Department of Industrial Relations Registration Number 1000002158. Contractor represents that it is duly licensed by the State of California and has the background, knowledge, experience and expertise to perform the obligations set forth in this Construction Contract. C. On October 25, 2019, City issued an Invitation for Bids (IFB) to contractors for the On-Call Traffic Signal and Electrical Services (“Project”). In response to the IFB, Contractor submitted a Bid. D. City and Contractor desire to enter into this Construction Contract for the Project, and other services as identified in the Contract Documents for the Project upon the following terms and conditions. NOW THEREFORE, in consideration of the mutual promises and undertakings hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is mutually agreed by and between the undersigned parties as follows: SECTION 1 INCORPORATION OF RECITALS AND DEFINITIONS. 1.1 Recitals. All of the recitals are incorporated herein by reference. 1.2 Definitions. Capitalized terms shall have the meanings set forth in this Construction Contract and/or in the General Conditions. If there is a conflict between the definitions in this Construction Contract and in the General Conditions, the definitions in this Construction Contract shall prevail. SECTION 2 THE PROJECT. The Project is the On-Call Traffic Signal and Electrical Services Project, located at various locations to be determined in Palo Alto, CA. ("Project"). DocuSign Envelope ID: E5809286-65B9-483F-80A8-F975AA185F36 Invitation for Bid (IFB) Package 7 Rev. March 17, 2017 CONSTRUCTION CONTRACT SECTION 3 THE CONTRACT DOCUMENTS. 3.1 List of Documents. The Contract Documents (sometimes collectively referred to as “Agreement” or “Bid Documents”) consist of the following documents which are on file with the Purchasing Division and are hereby incorporated by reference. 1) Change Orders 2) Field Orders 3) Contract 4) Bidding Addenda 5) Special Provisions 6) General Conditions 7) Project Plans and Drawings 8) Technical Specifications 9) Instructions to Bidders 10) Invitation for Bids 11) Contractor's Bid/Non-Collusion Declaration 12) Reports listed in the Contract Documents 13) Public Works Department’s Standard Drawings and Specifications (most current version at time of Bid) 14) Utilities Department’s Water, Gas, Wastewater, Electric Utilities Standards (most current version at time of Bid) 15) City of Palo Alto Traffic Control Requirements 16) City of Palo Alto Truck Route Map and Regulations 17) Notice Inviting Pre-Qualification Statements, Pre-Qualification Statement, and Pre- Qualification Checklist (if applicable) 18) Performance and Payment Bonds 3.2 Order of Precedence. For the purposes of construing, interpreting and resolving inconsistencies between and among the provisions of this Contract, the Contract Documents shall have the order of precedence as set forth in the preceding section. If a claimed inconsistency cannot be resolved through the order of precedence, the City shall have the sole power to decide which document or provision shall govern as may be in the best interests of the City. DocuSign Envelope ID: E5809286-65B9-483F-80A8-F975AA185F36 Invitation for Bid (IFB) Package 8 Rev. March 17, 2017 CONSTRUCTION CONTRACT SECTION 4 CONTRACTOR’S DUTY. 4.1 Contractor’s Duties Contractor agrees to perform all of the Work required for the Project, as specified in the Contract Documents, all of which are fully incorporated herein. Contractor shall provide, furnish, and supply all things necessary and incidental for the timely performance and completion of the Work, including, but not limited to, provision of all necessary labor, materials, equipment, transportation, and utilities, unless otherwise specified in the Contract Documents. Contractor also agrees to use its best efforts to complete the Work in a professional and expeditious manner and to meet or exceed the performance standards required by the Contract Documents. SECTION 5 PROJECT TEAM. 5.1 Contractor’s Co-operation. In addition to Contractor, City has retained, or may retain, consultants and contractors to provide professional and technical consultation for the design and construction of the Project. The Contract requires that Contractor operate efficiently, effectively and cooperatively with City as well as all other members of the Project Team and other contractors retained by City to construct other portions of the Project. SECTION 6 TIME OF COMPLETION. 6.1 Time Is of Essence. Time is of the essence with respect to all time limits set forth in the Contract Documents. 6.2 Commencement of Work. Contractor shall commence the Work on the date specified in City’s Notice to Proceed. 6.3 Contract Time. Work hereunder shall begin on the date specified on the City’s Notice to Proceed and shall be completed within 36 months after the commencement date specified in City’s Notice to Proceed. By executing this Construction Contract, Contractor expressly waives any claim for delayed early completion. 6.4 Liquidated Damages. Pursuant to Government Code Section 53069.85, if Contractor fails to achieve Substantial Completion of the entire Work within the Contract Time, including any approved extensions thereto, City may assess liquidated damages on a daily basis for each day of Unexcused Delay in achieving Substantial Completion, based on the amount of Five Hundred Fifty dollars ($550.00) per day, or as otherwise specified in the Special Provisions. Liquidated damages may also be separately assessed for failure to meet milestones specified elsewhere in the Contract Documents, regardless of impact on the time for achieving Substantial Completion. The assessment of liquidated damages is not a penalty but considered to be a reasonable estimate of the amount of damages City will suffer by delay in completion of the Work. The City is entitled to setoff the amount of liquidated damages assessed against any payments otherwise due to Contractor, including, but not limited to, setoff against release of retention. If the total amount of liquidated damages assessed exceeds the amount of unreleased retention, City is entitled to recover the balance from DocuSign Envelope ID: E5809286-65B9-483F-80A8-F975AA185F36 Invitation for Bid (IFB) Package 9 Rev. March 17, 2017 CONSTRUCTION CONTRACT Contractor or its sureties. Occupancy or use of the Project in whole or in part prior to Substantial Completion, shall not operate as a waiver of City’s right to assess liquidated damages. 6.4.1 Other Remedies. City is entitled to any and all available legal and equitable remedies City may have where City’s Losses are caused by any reason other than Contractor’s failure to achieve Substantial Completion of the entire Work within the Contract Time. 6.5 Adjustments to Contract Time. The Contract Time may only be adjusted for time extensions approved by City and memorialized in a Change Order approved in accordance with the requirements of the Contract Documents. SECTION 7 COMPENSATION TO CONTRACTOR. 7.1 Contract Sum. Contractor shall be compensated for satisfactory completion of the Work in compliance with the Contract Documents the Contract Sum of Three Hundred Seventy Five Thousand Dollars ($375,000.00). Bonds are required in the amount of $375,00.00. 7.2 Full Compensation. The Contract Sum shall be full compensation to Contractor for all Work provided by Contractor and, except as otherwise expressly permitted by the terms of the Contract Documents, shall cover all Losses arising out of the nature of the Work or from the acts of the elements or any unforeseen difficulties or obstructions which may arise or be encountered in performance of the Work until its Acceptance by City, all risks connected with the Work, and any and all expenses incurred due to suspension or discontinuance of the Work, except as expressly provided herein. The Contract Sum may only be adjusted for Change Orders approved in accordance with the requirements of the Contract Documents. SECTION 8 STANDARD OF CARE. 8.1 Standard of Care. Contractor agrees that the Work shall be performed by qualified, experienced and well-supervised personnel. All services performed in connection with this Construction Contract shall be performed in a manner consistent with the standard of care under California law applicable to those who specialize in providing such services for projects of the type, scope and complexity of the Project. DocuSign Envelope ID: E5809286-65B9-483F-80A8-F975AA185F36 Invitation for Bid (IFB) Package 10 Rev. March 17, 2017 CONSTRUCTION CONTRACT SECTION 9 INDEMNIFICATION. 9.1 Hold Harmless. To the fullest extent allowed by law, Contractor will defend, indemnify, and hold harmless City, its City Council, boards and commissions, officers, agents, employees, representatives and volunteers (hereinafter individually referred to as an “Indemnitee” and collectively referred to as "Indemnitees"), through legal counsel acceptable to City, from and against any and liability, loss, damage, claims, expenses (including, without limitation, attorney fees, expert witness fees, paralegal fees, and fees and costs of litigation or arbitration) (collectively, “Liability”) of every nature arising out of or in connection with the acts or omissions of Contractor, its employees, Subcontractors, representatives, or agents, in performing the Work or its failure to comply with any of its obligations under the Contract, except such Liability caused by the active negligence, sole negligence, or willful misconduct of an Indemnitee. Contractor shall pay City for any costs City incurs to enforce this provision. Except as provided in Section 9.2 below, nothing in the Contract Documents shall be construed to give rise to any implied right of indemnity in favor of Contractor against City or any other Indemnitee. Pursuant to Public Contract Code Section 9201, City shall timely notify Contractor upon receipt of any third-party claim relating to the Contract. 9.2 Survival. The provisions of Section 9 shall survive the termination of this Construction Contract. SECTION 10 NON-DISCRIMINATION. 10.1 Municipal Code Requirement. As set forth in Palo Alto Municipal Code section 2.30.510, Contractor certifies that in the performance of this Agreement, it shall not discriminate in the employment of any person because of the race, skin color, gender, age, religion, disability, national origin, ancestry, sexual orientation, housing status, marital status, familial status, weight or height of such person. Contractor acknowledges that it has read and understands the provisions of Section 2.30.510 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and will comply with all requirements of Section 2.30.510 pertaining to nondiscrimination in employment. SECTION 11 INSURANCE AND BONDS. 11.1 Evidence of coverage. Within ten (10) business days following issuance of the Notice of Award, Contractor shall provide City with evidence that it has obtained insurance and shall submit Performance and Payment Bonds satisfying all requirements in Article 11 of the General Conditions. DocuSign Envelope ID: E5809286-65B9-483F-80A8-F975AA185F36 Invitation for Bid (IFB) Package 11 Rev. March 17, 2017 CONSTRUCTION CONTRACT SECTION 12 PROHIBITION AGAINST TRANSFERS. 12.1 Assignment. City is entering into this Construction Contract in reliance upon the stated experience and qualifications of the Contractor and its Subcontractors set forth in Contractor’s Bid. Accordingly, Contractor shall not assign, hypothecate or transfer this Construction Contract or any interest therein directly or indirectly, by operation of law or otherwise without the prior written consent of City. Any assignment, hypothecation or transfer without said consent shall be null and void, and shall be deemed a substantial breach of contract and grounds for default in addition to any other legal or equitable remedy available to the City. 12.2 Assignment by Law. The sale, assignment, transfer or other disposition of any of the issued and outstanding capital stock of Contractor or of any general partner or joint venturer or syndicate member of Contractor, if the Contractor is a partnership or joint venture or syndicate or co-tenancy shall result in changing the control of Contractor, shall be construed as an assignment of this Construction Contract. Control means more than fifty percent (50%) of the voting power of the corporation or other entity. SECTION 13 NOTICES. 13.1 Method of Notice. All notices, demands, requests or approvals to be given under this Construction Contract shall be given in writing and shall be deemed served on the earlier of the following: (i) On the date delivered if delivered personally; (ii) On the third business day after the deposit thereof in the United States mail, postage prepaid, and addressed as hereinafter provided; (iii) On the date sent if sent by facsimile transmission; (iv) On the date sent if delivered by electronic mail; or (v) On the date it is accepted or rejected if sent by certified mail. 13.2 Notice to Recipients. All notices, demands or requests (including, without limitation, Change Order Requests and Claims) from Contractor to City shall include the Project name and the number of this Construction Contract and shall be addressed to City at: To City: City of Palo Alto City Clerk 250 Hamilton Avenue P.O. Box 10250 Palo Alto, CA 94303 Copy to: City of Palo Alto Office of Transportation 250 Hamilton Avenue Palo Alto, CA 94301 Attn: Rafael Rius DocuSign Envelope ID: E5809286-65B9-483F-80A8-F975AA185F36 Invitation for Bid (IFB) Package 12 Rev. March 17, 2017 CONSTRUCTION CONTRACT In addition, copies of all Claims by Contractor under this Construction Contract shall be provided to the following: Palo Alto City Attorney’s Office 250 Hamilton Avenue P.O. Box 10250 Palo Alto, California 94303 All Claims shall be sent by registered mail or certified mail with return receipt requested. All notices, demands, requests or approvals from City to Contractor shall be addressed to: Bear Electrical Solutions, Inc. 1341 Archer Street, Alviso, CA 95002 Attn: Robert Asuncion 13.3 Change of Address. In advance of any change of address, Contractor shall notify City of the change of address in writing. Each party may, by written notice only, add, delete or replace any individuals to whom and addresses to which notice shall be provided. SECTION 14 DEFAULT. 14.1 Notice of Default. In the event that City determines, in its sole discretion, that Contractor has failed or refused to perform any of the obligations set forth in the Contract Documents, or is in breach of any provision of the Contract Documents, City may give written notice of default to Contractor in the manner specified for the giving of notices in the Construction Contract, with a copy to Contractor’s performance bond surety. 14.2 Opportunity to Cure Default. Except for emergencies, Contractor shall cure any default in performance of its obligations under the Contract Documents within two (2) Days (or such shorter time as City may reasonably require) after receipt of written notice. However, if the breach cannot be reasonably cured within such time, Contractor will commence to cure the breach within two (2) Days (or such shorter time as City may reasonably require) and will diligently and continuously prosecute such cure to completion within a reasonable time, which shall in no event be later than ten (10) Days after receipt of such written notice. SECTION 15 CITY'S RIGHTS AND REMEDIES. 15.1 Remedies Upon Default. If Contractor fails to cure any default of this Construction Contract within the time period set forth above in Section 14, then City may pursue any remedies available under law or equity, including, without limitation, the following: DocuSign Envelope ID: E5809286-65B9-483F-80A8-F975AA185F36 Invitation for Bid (IFB) Package 13 Rev. March 17, 2017 CONSTRUCTION CONTRACT 15.1.1 Delete Certain Services. City may, without terminating the Construction Contract, delete certain portions of the Work, reserving to itself all rights to Losses related thereto. 15.1.2 Perform and Withhold. City may, without terminating the Construction Contract, engage others to perform the Work or portion of the Work that has not been adequately performed by Contractor and withhold the cost thereof to City from future payments to Contractor, reserving to itself all rights to Losses related thereto. 15.1.3 Suspend The Construction Contract. City may, without terminating the Construction Contract and reserving to itself all rights to Losses related thereto, suspend all or any portion of this Construction Contract for as long a period of time as City determines, in its sole discretion, appropriate, in which event City shall have no obligation to adjust the Contract Sum or Contract Time, and shall have no liability to Contractor for damages if City directs Contractor to resume Work. 15.1.4 Terminate the Construction Contract for Default. City shall have the right to terminate this Construction Contract, in whole or in part, upon the failure of Contractor to promptly cure any default as required by Section 14. City’s election to terminate the Construction Contract for default shall be communicated by giving Contractor a written notice of termination in the manner specified for the giving of notices in the Construction Contract. Any notice of termination given to Contractor by City shall be effective immediately, unless otherwise provided therein. 15.1.5 Invoke the Performance Bond. City may, with or without terminating the Construction Contract and reserving to itself all rights to Losses related thereto, exercise its rights under the Performance Bond. 15.1.6 Additional Provisions. All of City’s rights and remedies under this Construction Contract are cumulative, and shall be in addition to those rights and remedies available in law or in equity. Designation in the Contract Documents of certain breaches as material shall not waive the City’s authority to designate other breaches as material nor limit City’s right to terminate the Construction Contract, or prevent the City from terminating the Agreement for breaches that are not material. City’s determination of whether there has been noncompliance with the Construction Contract so as to warrant exercise by City of its rights and remedies for default under the Construction Contract, shall be binding on all parties. No termination or action taken by City after such termination shall prejudice any other rights or remedies of City provided by law or equity or by the Contract Documents upon such termination; and City may proceed against Contractor to recover all liquidated damages and Losses suffered by City. 15.2 Delays by Sureties. Time being of the essence in the performance of the Work, if Contractor’s surety fails to arrange for completion of the Work in accordance with the Performance Bond, within seven (7) calendar days from the date of the notice of termination, Contractor’s surety shall be deemed to have waived its right to complete the Work under the Contract, and City may immediately make arrangements for the completion of the Work through use of its own forces, by hiring a replacement contractor, or by any other means that City determines advisable under the circumstances. Contractor and its surety shall be jointly and severally liable for any additional cost incurred by City to complete the Work following termination. In addition, City shall have the right to use any materials, supplies, and equipment belonging to Contractor and located at the Worksite for the purposes of completing the remaining Work. DocuSign Envelope ID: E5809286-65B9-483F-80A8-F975AA185F36 Invitation for Bid (IFB) Package 14 Rev. March 17, 2017 CONSTRUCTION CONTRACT 15.3 Damages to City. 15.3.1 For Contractor's Default. City will be entitled to recovery of all Losses under law or equity in the event of Contractor’s default under the Contract Documents. 15.3.2 Compensation for Losses. In the event that City's Losses arise from Contractor’s default under the Contract Documents, City shall be entitled to deduct the cost of such Losses from monies otherwise payable to Contractor. If the Losses incurred by City exceed the amount payable, Contractor shall be liable to City for the difference and shall promptly remit same to City. 15.4 Suspension by City 15.4.1 Suspension for Convenience. City may, at any time and from time to time, without cause, order Contractor, in writing, to suspend, delay, or interrupt the Work in whole or in part for such period of time, up to an aggregate of fifty percent (50%) of the Contract Time. The order shall be specifically identified as a Suspension Order by City. Upon receipt of a Suspension Order, Contractor shall, at City’s expense, comply with the order and take all reasonable steps to minimize costs allocable to the Work covered by the Suspension Order. During the Suspension or extension of the Suspension, if any, City shall either cancel the Suspension Order or, by Change Order, delete the Work covered by the Suspension Order. If a Suspension Order is canceled or expires, Contractor shall resume and continue with the Work. A Change Order will be issued to cover any adjustments of the Contract Sum or the Contract Time necessarily caused by such suspension. A Suspension Order shall not be the exclusive method for City to stop the Work. 15.4.2 Suspension for Cause. In addition to all other remedies available to City, if Contractor fails to perform or correct work in accordance with the Contract Documents, City may immediately order the Work, or any portion thereof, suspended until the cause for the suspension has been eliminated to City’s satisfaction. Contractor shall not be entitled to an increase in Contract Time or Contract Price for a suspension occasioned by Contractor’s failure to comply with the Contract Documents. City’s right to suspend the Work shall not give rise to a duty to suspend the Work, and City’s failure to suspend the Work shall not constitute a defense to Contractor’s failure to comply with the requirements of the Contract Documents. 15.5 Termination Without Cause. City may, at its sole discretion and without cause, terminate this Construction Contract in part or in whole upon written notice to Contractor. Upon receipt of such notice, Contractor shall, at City’s expense, comply with the notice and take all reasonable steps to minimize costs to close out and demobilize. The compensation allowed under this Paragraph 15.5 shall be the Contractor’s sole and exclusive compensation for such termination and Contractor waives any claim for other compensation or Losses, including, but not limited to, loss of anticipated profits, loss of revenue, lost opportunity, or other consequential, direct, indirect or incidental damages of any kind resulting from termination without cause. Termination pursuant to this provision does not relieve Contractor or its sureties from any of their obligations for Losses arising from or related to the Work performed by Contractor. 15.5.1 Compensation. Following such termination and within forty-five (45) Days after receipt of a billing from Contractor seeking payment of sums authorized by this Paragraph 15.5.1, City shall pay the following to Contractor as Contractor’s sole compensation for performance of the Work : .1 For Work Performed. The amount of the Contract Sum allocable to the portion of the Work properly performed by Contractor as of the date of termination, less sums previously paid to Contractor. .2 For Close-out Costs. Reasonable costs of Contractor and its Subcontractors: DocuSign Envelope ID: E5809286-65B9-483F-80A8-F975AA185F36 Invitation for Bid (IFB) Package 15 Rev. March 17, 2017 CONSTRUCTION CONTRACT (i) Demobilizing and (ii) Administering the close-out of its participation in the Project (including, without limitation, all billing and accounting functions, not including attorney or expert fees) for a period of no longer than thirty (30) Days after receipt of the notice of termination. .3 For Fabricated Items. Previously unpaid cost of any items delivered to the Project Site which were fabricated for subsequent incorporation in the Work. .4 Profit Allowance. An allowance for profit calculated as four percent (4%) of the sum of the above items, provided Contractor can prove a likelihood that it would have made a profit if the Construction Contract had not been terminated. 15.5.2 Subcontractors. Contractor shall include provisions in all of its subcontracts, purchase orders and other contracts permitting termination for convenience by Contractor on terms that are consistent with this Construction Contract and that afford no greater rights of recovery against Contractor than are afforded to Contractor against City under this Section. 15.6 Contractor’s Duties Upon Termination. Upon receipt of a notice of termination for default or for convenience, Contractor shall, unless the notice directs otherwise, do the following: (i) Immediately discontinue the Work to the extent specified in the notice; (ii) Place no further orders or subcontracts for materials, equipment, services or facilities, except as may be necessary for completion of such portion of the Work that is not discontinued; (iii) Provide to City a description in writing, no later than fifteen (15) days after receipt of the notice of termination, of all subcontracts, purchase orders and contracts that are outstanding, including, without limitation, the terms of the original price, any changes, payments, balance owing, the status of the portion of the Work covered and a copy of the subcontract, purchase order or contract and any written changes, amendments or modifications thereto, together with such other information as City may determine necessary in order to decide whether to accept assignment of or request Contractor to terminate the subcontract, purchase order or contract; (iv) Promptly assign to City those subcontracts, purchase orders or contracts, or portions thereof, that City elects to accept by assignment and cancel, on the most favorable terms reasonably possible, all subcontracts, purchase orders or contracts, or portions thereof, that City does not elect to accept by assignment; and (v) Thereafter do only such Work as may be necessary to preserve and protect Work already in progress and to protect materials, plants, and equipment on the Project Site or in transit thereto. Upon termination, whether for cause or for convenience, the provisions of the Contract Documents remain in effect as to any Claim, indemnity obligation, warranties, guarantees, submittals of as-built drawings, instructions, or manuals, or other such rights and obligations arising prior to the termination date. DocuSign Envelope ID: E5809286-65B9-483F-80A8-F975AA185F36 Invitation for Bid (IFB) Package 16 Rev. March 17, 2017 CONSTRUCTION CONTRACT SECTION 16 CONTRACTOR'S RIGHTS AND REMEDIES. 16.1 Contractor’s Remedies. Contractor may terminate this Construction Contract only upon the occurrence of one of the following: 16.1.1 For Work Stoppage. The Work is stopped for sixty (60) consecutive Days, through no act or fault of Contractor, any Subcontractor, or any employee or agent of Contractor or any Subcontractor, due to issuance of an order of a court or other public authority other than City having jurisdiction or due to an act of government, such as a declaration of a national emergency making material unavailable. This provision shall not apply to any work stoppage resulting from the City’s issuance of a suspension notice issued either for cause or for convenience. 16.1.2 For City's Non-Payment. If City does not make pay Contractor undisputed sums within ninety (90) Days after receipt of notice from Contractor, Contractor may terminate the Construction Contract (30) days following a second notice to City of Contractor’s intention to terminate the Construction Contract. 16.2 Damages to Contractor. In the event of termination for cause by Contractor, City shall pay Contractor the sums provided for in Paragraph 15.5.1 above. Contractor agrees to accept such sums as its sole and exclusive compensation and agrees to waive any claim for other compensation or Losses, including, but not limited to, loss of anticipated profits, loss of revenue, lost opportunity, or other consequential, direct, indirect and incidental damages, of any kind. SECTION 17 ACCOUNTING RECORDS. 17.1 Financial Management and City Access. Contractor shall keep full and detailed accounts and exercise such controls as may be necessary for proper financial management under this Construction Contract in accordance with generally accepted accounting principles and practices. City and City's accountants during normal business hours, may inspect, audit and copy Contractor's records, books, estimates, take-offs, cost reports, ledgers, schedules, correspondence, instructions, drawings, receipts, subcontracts, purchase orders, vouchers, memoranda and other data relating to this Project. Contractor shall retain these documents for a period of three (3) years after the later of (i) Final Payment or (ii) final resolution of all Contract Disputes and other disputes, or (iii) for such longer period as may be required by law. DocuSign Envelope ID: E5809286-65B9-483F-80A8-F975AA185F36 Invitation for Bid (IFB) Package 17 Rev. March 17, 2017 CONSTRUCTION CONTRACT 17.2 Compliance with City Requests. Contractor's compliance with any request by City pursuant to this Section 17 shall be a condition precedent to filing or maintenance of any legal action or proceeding by Contractor against City and to Contractor's right to receive further payments under the Contract Documents. City many enforce Contractor’s obligation to provide access to City of its business and other records referred to in Section 17.1 for inspection or copying by issuance of a writ or a provisional or permanent mandatory injunction by a court of competent jurisdiction based on affidavits submitted to such court, without the necessity of oral testimony. SECTION 18 INDEPENDENT PARTIES. 18.1 Status of parties. Each party is acting in its independent capacity and not as agents, employees, partners, or joint ventures’ of the other party. City, its officers or employees shall have no control over the conduct of Contractor or its respective agents, employees, subconsultants, or subcontractors, except as herein set forth. SECTION 19 NUISANCE. 19.1 Nuisance Prohibited. Contractor shall not maintain, commit, nor permit the maintenance or commission of any nuisance in connection in the performance of services under this Construction Contract. SECTION 20 PERMITS AND LICENSES. 20.1 Payment of Fees. Except as otherwise provided in the Special Provisions and Technical Specifications, The Contractor shall provide, procure and pay for all licenses, permits, and fees, required by the City or other government jurisdictions or agencies necessary to carry out and complete the Work. Payment of all costs and expenses for such licenses, permits, and fees shall be included in one or more Bid items. No other compensation shall be paid to the Contractor for these items or for delays caused by non-City inspectors or conditions set forth in the licenses or permits issued by other agencies. SECTION 21 WAIVER. 21.1 Waiver. A waiver by either party of any breach of any term, covenant, or condition contained herein shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant, or condition contained herein, whether of the same or a different character. DocuSign Envelope ID: E5809286-65B9-483F-80A8-F975AA185F36 Invitation for Bid (IFB) Package 18 Rev. March 17, 2017 CONSTRUCTION CONTRACT SECTION 22 GOVERNING LAW AND VENUE; COMPLIANCE WITH LAWS. 22.1 Governing Law. This Construction Contract shall be construed in accordance with and governed by the laws of the State of California, and venue shall be in a court of competent jurisdiction in the County of Santa Clara, and no other place. 22.2 Compliance with Laws. Contractor shall comply with all applicable federal and California laws and city laws, including, without limitation, ordinances and resolutions, in the performance of work under this Construction Contract. 22.2.1 Palo Alto Minimum Wage Ordinance. Contractor shall comply with all requirements of the Palo Alto Municipal Code Chapter 4.62 (Citywide Minimum Wage), as it may be amended from time to time. In particular, for any employee otherwise entitled to the State minimum wage, who performs at least two (2) hours of work in a calendar week within the geographic boundaries of the City, Contractor shall pay such employees no less than the minimum wage set forth in Palo Alto Municipal Code section 4.62.030 for each hour worked within the geographic boundaries of the City of Palo Alto. In addition, Contractor shall post notices regarding the Palo Alto Minimum Wage Ordinance in accordance with Palo Alto Municipal Code section 4.62.060. SECTION 23 COMPLETE AGREEMENT. 23.1 Integration. This Agreement represents the entire and integrated agreement between the parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This Agreement may be amended only by a written instrument, which is signed by the parties. SECTION 24 SURVIVAL OF CONTRACT. 24.1 Survival of Provisions. The provisions of the Construction Contract which by their nature survive termination of the Construction Contract or Final Completion, including, without limitation, all warranties, indemnities, payment obligations, and City’s right to audit Contractor’s books and records, shall remain in full force and effect after Final Completion or any termination of the Construction Contract. SECTION 25 PREVAILING WAGES. This Project is not subject to prevailing wages. Contractor is not required to pay prevailing wages in the performance and implementation of the Project in accordance with SB 7, if the public works contract does not include a project of $25,000 or less, when the project is for construction work, or the contract does not include a project of $15,000 or less, when the project is for alteration, demolition, repair, or maintenance (collectively, ‘improvement’) work. Or Contractor is required to pay general prevailing wages as defined in Subchapter 3, Title 8 of the California Code of Regulations and Section 16000 et seq. and Section 1773.1 of the California Labor Code. Pursuant to the provisions of Section 1773 of the Labor Code of the State of California, the City Council has obtained the general prevailing rate of per diem wages and the general rate for holiday and overtime work in this locality DocuSign Envelope ID: E5809286-65B9-483F-80A8-F975AA185F36 Invitation for Bid (IFB) Package 19 Rev. March 17, 2017 CONSTRUCTION CONTRACT for each craft, classification, or type of worker needed to execute the contract for this Project from the Director of the Department of Industrial Relations (“DIR”). Copies of these rates may be obtained at the Purchasing Division’s office of the City of Palo Alto. Contractor shall provide a copy of prevailing wage rates to any staff or subcontractor hired, and shall pay the adopted prevailing wage rates as a minimum. Contractor shall comply with the provisions of all sections, including, but not limited to, Sections 1775, 1776, 1777.5, 1782, 1810, and 1813, of the Labor Code pertaining to prevailing wages. SECTION 26 NON-APPROPRIATION. 26.1 Appropriations. This Agreement is subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that the City does not appropriate funds for the following fiscal year for this event, or (b) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal year and funds for this Construction Contract are no longer available. This section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Agreement. SECTION 27 AUTHORITY. 27.1 Representation of Parties. The individuals executing this Agreement represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities. SECTION 28 COUNTERPARTS 28.1 Multiple Counterparts. This Agreement may be signed in multiple counterparts, which shall, when executed by all the parties, constitute a single binding agreement. SECTION 29 SEVERABILITY. 29.1 Severability. In case a provision of this Construction Contract is held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not be affected. SECTION 30 STATUTORY AND REGULATORY REFERENCES. 30.1 Amendments to Laws. With respect to any amendments to any statutes or regulations referenced in these Contract Documents, the reference is deemed to be the version in effect on the date that the Contract was awarded by City, unless otherwise required by law. SECTION 31 WORKERS’ COMPENSATION CERTIFICATION. 31.1 Workers Compensation. Pursuant to Labor Code Section 1861, by signing this Contract, Contractor certifies as follows: DocuSign Envelope ID: E5809286-65B9-483F-80A8-F975AA185F36 Invitation for Bid (IFB) Package 20 Rev. March 17, 2017 CONSTRUCTION CONTRACT “I am aware of the provisions of Section 3700 of the Labor Code which require every employer to be insured against liability for workers’ compensation or to undertake self-insurance in accordance with the provisions of that code, and I will comply with such provisions before commencing the performance of the Work on this Contract.” SECTION 32 DIR REGISTRATION AND OTHER SB 854 REQUIREMENTS. 32.1 General Notice to Contractor. City requires Contractor and its listed subcontractors to comply with the requirements of SB 854. 32.2 Labor Code section 1771.1(a) City provides notice to Contractor of the requirements of California Labor Code section 1771.1(a), which reads: “A contractor or subcontractor shall not be qualified to bid on, be listed in a bid proposal, subject to the requirements of Section 4104 of the Public Contract Code, or engage in the performance of any contract for public work, as defined in this chapter, unless currently registered and qualified to perform public work pursuant to Section 1725.5. It is not a violation of this section for an unregistered contractor to submit a bid that is authorized by Section 7029.1 of the Business and Professions Code or Section 10164 or 20103.5 of the Public Contract Code, provided the contactor is registered to perform public work pursuant to Section 1725.5 at the time the contract is awarded.” 32.3 DIR Registration Required. City will not accept a bid proposal from or enter into this Construction Contract with Contractor without proof that Contractor and its listed subcontractors are registered with the California Department of Industrial Relations (“DIR”) to perform public work, subject to limited exceptions. 32.4 Posting of Job Site Notices. City gives notice to Contractor and its listed subcontractors that Contractor is required to post all job site notices prescribed by law or regulation and Contractor is subject to SB 854-compliance monitoring and enforcement by DIR. 32.5 Payroll Records. City requires Contractor and its listed subcontractors to comply with the requirements of Labor Code section 1776, including: (i) Keep accurate payroll records, showing the name, address, social security number, work classification, straight time and overtime hours worked each day and week, and the actual per diem wages paid to each journeyman, apprentice, worker, or other employee employed by, respectively, Contractor and its listed subcontractors, in connection with the Project. (ii) The payroll records shall be verified as true and correct and shall be certified and made available for inspection at all reasonable hours at the principal office of Contractor and its listed subcontractors, respectively. DocuSign Envelope ID: E5809286-65B9-483F-80A8-F975AA185F36 Invitation for Bid (IFB) Package 21 Rev. March 17, 2017 CONSTRUCTION CONTRACT (iii) At the request of City, acting by its project manager, Contractor and its listed subcontractors shall make the certified payroll records available for inspection or furnished upon request to the project manager within ten (10) days of receipt of City’s request. City requests Contractor and its listed subcontractors to submit the certified payroll records to the project manager at the end of each week during the Project. (iv) If the certified payroll records are not produced to the project manager within the 10-day period, then Contractor and its listed subcontractors shall be subject to a penalty of one hundred dollars ($100.00) per calendar day, or portion thereof, for each worker, and City shall withhold the sum total of penalties from the progress payment(s) then due and payable to Contractor. This provision supplements the provisions of Section 15 hereof. (v) Inform the project manager of the location of contractor’s and its listed subcontractors’ payroll records (street address, city and county) at the commencement of the Project, and also provide notice to the project manager within five (5) business days of any change of location of those payroll records. IN WITNESS WHEREOF, the parties have caused this Construction Contract to be executed the date and year first above written. CITY OF PALO ALTO City Manager APPROVED AS TO FORM: City Attorney or designee BEAR ELECTRICAL SOLUTIONS, INC. DocuSign Envelope ID: E5809286-65B9-483F-80A8-F975AA185F36 Vice President Robert Asuncion Certificate Of Completion Envelope Id: E580928665B9483F80A8F975AA185F36 Status: Completed Subject: Please DocuSign: C20177344 Bear Electrical .pdf Source Envelope: Document Pages: 21 Signatures: 1 Envelope Originator: Certificate Pages: 2 Initials: 0 Terry Loo AutoNav: Enabled EnvelopeId Stamping: Enabled Time Zone: (UTC-08:00) Pacific Time (US & Canada) 250 Hamilton Ave Palo Alto , CA 94301 Terry.Loo@CityofPaloAlto.org IP Address: 199.33.32.254 Record Tracking Status: Original 1/6/2020 2:30:54 PM Holder: Terry Loo Terry.Loo@CityofPaloAlto.org Location: DocuSign Security Appliance Status: Connected Pool: StateLocal Storage Appliance Status: Connected Pool: City of Palo Alto Location: DocuSign Signer Events Signature Timestamp Robert Asuncion robert@bear-electrical.com Vice President Bear Electrical Solutions, Inc. Security Level: Email, Account Authentication (None) Signature Adoption: Pre-selected Style Using IP Address: 98.207.149.133 Signed using mobile Sent: 1/6/2020 2:35:33 PM Viewed: 1/6/2020 7:25:09 PM Signed: 1/7/2020 9:24:14 AM Electronic Record and Signature Disclosure: Not Offered via DocuSign In Person Signer Events Signature Timestamp Editor Delivery Events Status Timestamp Agent Delivery Events Status Timestamp Intermediary Delivery Events Status Timestamp Certified Delivery Events Status Timestamp Carbon Copy Events Status Timestamp Elizabeth Egli elizabeth.egli@cityofpaloalto.org Managment Analyst City of Palo Alto Security Level: Email, Account Authentication (None) Sent: 1/7/2020 9:24:16 AM Electronic Record and Signature Disclosure: Not Offered via DocuSign Rafael Rius Rafael.Rius@CityofPaloAlto.org Traffic Engineering Lead Security Level: Email, Account Authentication (None) Sent: 1/7/2020 9:24:17 AM Electronic Record and Signature Disclosure: Not Offered via DocuSign Witness Events Signature Timestamp Notary Events Signature Timestamp Envelope Summary Events Status Timestamps Envelope Sent Hashed/Encrypted 1/7/2020 9:24:17 AM Certified Delivered Security Checked 1/7/2020 9:24:17 AM Signing Complete Security Checked 1/7/2020 9:24:17 AM Completed Security Checked 1/7/2020 9:24:17 AM Payment Events Status Timestamps Bid Results for Project On‐Call Traffic Signal and Electrical Services (IFB 177344) Issued on 10/25/2019 Bid Due on November 20, 2019  3:00 PM (Pacific)  Exported on 11/22/2019 Bidder Info VendorID Vendor Name Address City State ZipCode Country Vendor Type Bid Amount Format Bid Submit Date Bid Status Responsive 438664 Bear Electrical Solutions, Inc 1341 Archer Street Alviso CA 95002‐0924 United States DGS $58,550.00 Electronic 11/19/2019 10:01 Submitted Yes 425920 St Francis Electric 975 Carden Street San Leandro CA 94577 United States CADIR $93,840.00 Electronic 11/20/2019 12:05 Submitted Yes CITY OF PALO ALTO OFFICE OF THE CITY CLERK February 3, 2020 The Honorable City Council Palo Alto, California Appointment of 2020 Emergency Standby Council Staff recommends that the City Council approve the selection of the following former Council Members to serve as the 2020 Emergency Standby Council: -Bern Beecham -Pat Burt -Peter Drekmeier -Gail Price -Greg Scharff -Greg Schmid -Nancy Shepherd BACKGROUND The Charter of the City of Palo Alto provides that, "the Council may, by Ordinance or Resolution, provide for the preservation and continuation of government in the event of disaster which renders unavailable a majority of the Council." On August 7, 2006, the City Council adopted amendments to Section 2.12.090 of the Palo Alto Municipal Code regarding the selection procedure for the City's Emergency Standby Council. The adopted policy states that the Council shall consider the following criteria for appointments to the Emergency Standby Council: residency in the City of Palo Alto, availability, interest in serving and a lack of conflicts of interest. Seven members serve on the Emergency Standby Council. Members of the Standby Council have the authority delegated to them under Chapter 2.12 of the Palo Alto Municipal Code. The members of the Emergency Standby Council continue to serve until the Council appoints or reappoints the members at the beginning of each year. Department Head: Beth Minor, City Clerk Page 2 City of Palo Alto (ID # 11038) City Council Staff Report Report Type: Action Items Meeting Date: 2/3/2020 City of Palo Alto Page 1 Summary Title: Housing Work Plan Update Title: Update and Discussion of the Planning and Development Services Housing Work Plan and Direction to Modify or Direct new Assignments Related to Housing and Other Department Assignments(Continued From January 21, 2010) From: City Manager Lead Department: Planning and Development Services RECOMMENDATION Staff recommends that the City Council review the Planning and Development Services (PDS) Department’s status report on the 2018-2019 housing work plan and Council-directed assignments and provide direction as appropriate. EXECUTIVE SUMMARY This report provides a status update on the City’s housing work plan and other initiatives directed by the City Council. A list of in-progress and pending assignments with task descriptions, relevant updates and notes are provided. The housing work plan includes a number of assignments that balance housing unit preservation, protection and production. Despite the importance of the assigned work, staff is concerned it may not result in near-term housing production without more focused attention on the factors that motivate commercial property owners to file applications for housing developments. Mid- and long-term housing unit production is more encouraging through efforts related to the North Ventura Coordinated Area Plan and other discrete zoning amendments, but these initiatives are only part of the solution needed to produce more housing. BACKGROUND Two years ago, the City Council adopted a housing work plan1 that was prepared in response to a City Council Colleagues’ Memo.2 The Colleagues’ Memo stated the desire for zoning updates to encourage 1 City Council adopted housing work plan: https://www.cityofpaloalto.org/civicax/filebank/documents/63027 2 Colleagues Memo dated November 6, 2017: https://www.cityofpaloalto.org/civicax/filebank/documents/61770 City of Palo Alto Page 2 diverse housing near jobs, transit and services, and discussed a number of specific concepts, many of which were also identified in the City’s Housing Element (adopted November 2014) and the updated Comprehensive Plan (adopted November 13, 2017). This report provides an update on the housing work plan and other housing-related Council-directed initiatives. Council will have an opportunity to make refinements based on any updated priorities and available resources to achieve the City’s housing goals. Many of the conditions that precipitated the Colleagues’ Memo, and which are articulated in the housing work plan, continue. The median sales price for all homes in Palo Alto since the work plan was prepared has increased from $2.24M in November 2017 to $2.72M through November 2019. The sales price of a single family home over the same period increased from $2.77M to $3.01M, though condominium prices fell from $1.53M to $1.37M. Rental housing listings increased from $3,500/month for a two-bedroom unit to $4,280/month.3 The lack of affordable housing at all income levels contributes to other impacts experienced in Palo Alto related to traffic congestion, increased motorist travel time, higher vehicle miles traveled and greater greenhouse gas emissions, among other quality of life issues. Employers have expressed concerns about the challenges of hiring and retaining low wage workers due to the high transportation costs and commute travel times. And, while Palo Alto has taken measures to curb office development in favor of housing production in recent years, the City continues to have a high jobs to housing ratio, and office development continues in other nearby jurisdictions. In terms of housing production, the City has permitted 555 units since 2015. The City’s comprehensive plan has an expressed goal of producing between 3,545-4,420 new housing units from 2015 through 2030. Based on these numbers, the City would need to permit an average of 343 units each year for the remaining ten years to achieve this goal at the mid-range count of 3,982 new units. There are 144 units that have been entitled through the City’s review process, but applicants have not pulled building permits. While some of the applicants are proceeding through plan review to obtain a permit, other applicants have indicated they are not pursuing development at this time due to high construction and labor costs and a lower-than-expected return on investment. Accessory dwelling unit (ADU) building permit activity remains strong with 12, 36, and 62 permits issued in 2017, 2018, and 2019 respectively. The state legislature and Governor recently made additional changes to ADU regulations that became effective on January 1st, which is expected to further incentivize homeowners to increase ADU production.4 Other recent state law changes include statewide renter protections, updates to the state density bonus law, SB 35, among other measures. The more HOMES Act of 2020 (SB 50) has been revised, including a delayed implementation date to allow local jurisdictions time to develop land use policies that reflect a jurisdiction’s interests and that achieve the bill’s goals related to housing density, reduced vehicle miles traveled and fair housing. For SB 50 to advance in the legislature, the measure must move out of the Senate Appropriations Committee by January 24, 2020, where it would go to the Senate floor and must be approved by January 3 Zillow Home Prices and Values for Palo Alto: https://www.zillow.com/palo-alto-ca/home-values/ 4 On January 13, 2020, City Council adopted an urgency ordinance making changes to the local ordinance to align with state law; the Council staff report is available online: https://www.cityofpaloalto.org/civicax/filebank/documents/74731 City of Palo Alto Page 3 31, 2020. If it advances, it would be subject to the typical bill deadlines for the 2020 session; it is anticipated further amendments will likely to occur as this bill is reviewed in committee. Lastly, at the state level, the Housing and Community Development Department (HCD) has signaled that the upcoming housing element cycle (2022-2030) will result in a higher regional housing needs assessment as it accounts for the region’s percentage of rent-burdened households and overcrowding. HCD is also expected to impose new restrictions on housing opportunity sites, including limits on reusing an opportunity site to account for future housing production if it had previously been identified in two prior housing elements. Palo Alto, like many jurisdictions, has had mixed success meeting its RHNA numbers over the last several housing cycles. The City’s ability to meet its above-moderate housing targets influences the level of affordability required for streamlined review, as mandated by the passage of SB 35 in 2017. Currently, qualifying housing projects that propose 50% of the units at low-income housing levels qualify for streamlined review, as opposed to 10% on-site affordability requirement if the City does not meet its above-moderate numbers. Housing Work Plan The 2018-2019 housing work plan identified a number of near-term actions desired by the Council to advance the City’s housing policies. The tasks were divided into five categories: 1) Ongoing Projects and Initiatives; 2) Comprehensive Plan Implementation and Housing Production Ordinances; 3) 2019 Proposed Ordinance; 4) Economic Analysis to Support BMR Housing; and, 5) Partnerships with Agencies and Organizations. Attachment A includes a summary of the progress made on the Housing Work Plan over the past two years. Much has been completed, including changes to the City’s development standards to encourage more housing development downtown, near California Avenue, and along the El Camino Real commercial corridor. These changes convey greater development potential to a property owner than can be achieved under SB 35 or the state density bonus. Some of these recent changes include the following: City of Palo Alto Page 4 • Streamlined Review. Eliminated the discretionary site and design review application process for housing projects to reduce application processing times, application costs; no longer requires public hearings before the PTC and City Council, unless a project is appealed. • Reduced Parking. On-site parking requirements were reduced greater than 10% and lowered parking-spaces-per-bedroom requirements across all housing types; 100% affordable housing projects are eligible for a 100% reduction in parking based on maximum anticipated demand. A parking exemption was also established for mixed-use housing projects with up to 1,500 square feet of retail. • 100% Affordable Housing Incentives. Further streamlined review by making discretionary development incentives allowable by right for qualifying projects, eliminated the need for legislative action to approve the affordable housing overlay, and exempted projects from the retail preservation ordinance. • Housing Incentive Program. This alternative to SB 35 and the state density bonus law increases residential floor area downtown, in the California Avenue area, and most property along El Camino Real; waives lot coverage restrictions. • Housing Density in Commercial Zones. Residential density restrictions have been eliminated in most commercial zones. • Multi-Family Up-Zoning. RM-15 zoning was increased to RM-20, allowing for greater housing density in these neighborhoods. • Minimum Housing Density. The City now requires a minimum amount of housing units to be built in multi-family residential districts. • Redevelopment of Non-Complaint Housing Sites. Residential properties that exceed permitted unit densities may be redeveloped at the same density. • Rooftop Gardens/Landscaping. Established a uniform requirement for outdoor landscaping and now allow rooftop gardens to count toward a portion of required open space. This allows for a more efficient floor plan design and increased unit density while advancing other sustainability- related interests achieved by greening more rooftops. In addition, the City Council established two combining districts - an affordable housing and workforce housing overlay zones, made changes to the City’s ADU regulations, reserved or dedicated over $23M of affordable housing funds toward a future teacher housing project and Palo Alto Housing’s 100% affordable housing project. Progress has also been made on the North Ventura Coordinated Area Plan. There are other tasks that were scheduled to be to be accomplished last year that remain outstanding. Progress is underway, but not complete, on a review of the City’s inclusionary housing standards and opportunities to possibly expand this program to include more on-site affordability and to extend these requirements to rental housing. This report and recommendation are expected to be transmitted to the PTC in March/April and then forwarded to the City Council. Other work efforts that have not been started and remain outstanding include establishing protections for cottage clusters, exploring a no net- housing loss policy, changes to the City’s pedestrian and transportation-oriented development (PTOD) overlay, residential village zoning, and clearly defining objective development standards related to SB 35, among some other discrete tasks. Comprehensive Plan & Housing Element City of Palo Alto Page 5 In addition to the 2018-2019 Housing Work Plan, the City Council has adopted a number of policy documents that require implementation. The 2017 Comprehensive Plan includes nearly 60 pages of implementation initiatives to be carried out by various City departments. Some of this work is time sensitive. The 2014 Housing Element also has a significant number of implementation policies that must be completed prior to the end of the current housing cycle. The City reports on its progress each year to HCD; the last report is available online5. The next report is scheduled to be presented to Council in March. Colleagues’ Memos On September 10, 2018, the City Council considered a Colleagues’ Memo6 and directed staff work related to a renter protection ordinance to establish relocation standards for tenants facing eviction. This work was completed, but Council also directed staff to present the Colleagues’ Memo to the Policy and Services Committee for review and further consideration of the following: • Review of the City’s existing renter protection ordinance and comparable ordinances in the San Francisco Bay Area; • Evaluate reasonable relocation assistance to be provided for tenants of properties with 2 or more units displaced due to a change of use, sizable rental increases, or eviction without just cause, while protecting the fair rights of property owners; • Strengthen enforcement measures to ensure compliance with and penalties for violations of Palo Alto’s existing requirement to offer an annual lease to tenants; and • Consider other updates to existing renter protection and mediation programs as needed to continue a healthy and diverse community. Another Colleagues’ Memo7 was discussed by the City Council on September 23, 2019, regarding affordable housing and goals to address socio-economic diversity and affordability. At that meeting, Council directed staff to prioritize the following assignments, some of which were previously identified in the Housing Work Plan and others that were new assignments: • Continue prioritizing the City’s work on the Palmer Fix; • Direct staff to do a nexus study for commercial projects; • Direct staff to transmit to Council an informational report on the state and local density bonus Ordinance; • Explore feasibility of in-lieu fees or off-site replacement if existing residential units are removed from the housing stock; • Focus on the Housing Work Plan and Comprehensive Plan language related to low-density zoning such as cottage cluster developments and existing duplexes in the R-1, R-2 RMD and commercial districts; and 5 2018 Annual Comprehensive Plan and Housing Element Report: https://www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?t=60751.24&BlobID=69492 6 Colleagues memo dated September 10, 2018: https://www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?t=65189.46&BlobID=66602 7 Colleagues’ Memo dated September 23, 2019: https://www.cityofpaloalto.org/civicax/filebank/documents/73361 City of Palo Alto Page 6 • Explore citywide protections and regulations to prevent existing housing to be converted to commercial/hotel use. DISCUSSION The following is a list of Council-directed assignments for PDS that are actively being worked on or pending. Each task is sourced to the Council action directing the work, if applicable. The numbered order generally reflects a possible prioritization. Where appropriate, comments are made and/or requests for clarification or direction is needed. Assignments – Currently Resourced and Active 1. North Ventura Coordinated Area Plan (NVCAP) Date Assigned: November 6, 2017 Description: Data-driven public process to develop policies and development standards that reflect Council adopted goals of a mixed-use neighborhood with interconnected, multi-modal connections and which balances diverse community interests. Status: The project publicly started in October 2018 with an initial meeting with the Council- appointed working group members. There have been several working group meetings since then, a community meeting and a joint session with the City Council. Previously directed work by Council and the need to adjust the project scope and costs were supported by Council with an updated and approved scope of services, but Council did not support needed funding to implement these changes. The limited budget has forced staff and the consultants to seek ways to eliminate activities without jeopardizing the core activities of the project. Due to this, some responsibilities have been shifted to the PDS’ on-call planning firms, and some activities (such as studies the City Council requested in April 2019) have been eliminated. The consultant team has prepared three draft plan alternatives. These drafts will be modified with feedback from the community, the PTC, the Architectural Review Board, and other boards and commissions as appropriate. Staff anticipates providing City Council with a preferred plan alternative by May 2020. At that time, the City Council can consider the plan, provide feedback, and identify the preferred plan. The plan documents would then be refined, evaluated for environmental impacts, and return to City Council for adoption in late 2020. Other Considerations: Some members in the working group have signaled their concern that development activity can continue in the plan area before the coordinated area plan is finished; some members have expressed their desire for a moratorium in the project area. Council may want to consider whether such action is warranted at this stage of the planning effort. The City Council is also aware that one of the largest landowners in the area has indicated their interest in retaining the building at 340 Portage (formally Fry’s and other present day uses, such as Global Playground). This building has been identified as an historic resource by the City’s consultant and some community members have expressed their interests in the building’s preservation. Another reason the owner may be interested in retaining the building is due to the existing office space located within the building. Despite being zoned RM-30, the zoning code permits the continued operation of office and other commercial uses at this location. However, City of Palo Alto Page 7 revenue generated from the office use in this building means there is less motivation or interest in providing housing units in the numbers contemplated in the housing element, which is approximately 215 units. While it is envisioned that redevelopment of this area will include commercial uses, and, notwithstanding future consideration of the historic status of the existing structures, the City Council may want to explore whether an amortization study of the 340 Portage Avenue property is warranted to preserve opportunities that maximize housing development at this location. Either a moratorium or amortization of the structure at 340 Portage would require significant additional analysis in coordination with the City Attorney’s Office. 2. Inclusionary Housing Program Changes Date Assigned: February 5, 2018 (Housing Work Plan Tasks 3.10 & 3.11; Colleagues’ Memo 9.23.19) Description: Explore increasing below-market-rate percentage requirements in market-rate development up to 20% and implementing inclusionary housing requirements for rental housing. Status: Staff has hired a consultant and work continues to determine the extent inclusionary requirements can be increased and whether it can be extended to rental housing. Initial findings are expected to be presented to the PTC in March. 3. ADU Regulations Date Assigned: N/A Description: Update the City’s ADU regulations to respond to recent state law changes; revise ADU regulations to streamline and simplify regulations; evaluate other regulations and fees that may present a barrier to ADU production; and, use SB 2 grant funding to develop ADU prototypes and application packages that facilitate over-the-counter approvals. Status: The City Council approved an urgency ordinance on January 13, 2020 to codify state law changes. Work continues on another ordinance to revise the ADU and JADU regulations consistent with the above description. Hearings will be scheduled before the PTC and anticipated to be presented to the City Council before the summer recess. 4. Downtown In-Lieu Parking Study Date Assigned: December 3, 2018 Description: Prepare a detailed study and recommendation regarding whether to continue a one-year ban on allowing commercial office above the ground floor from participating in the downtown parking in-lieu program. Status: Not started. Notes: When reviewing the 2018 housing ordinance, Council debated whether to continue allowing office floor area above the ground floor to participate in the in-lieu parking program. Eliminating this opportunity would be a departure for a long-standing policy, but it is also seen as one of many levers to begin to shift the incentive for housing development downtown over new office growth. In its final action, the City Council concluded that it would suspend the provision for one year and directed the PTC to further evaluate this issue and forward its recommendation to Council prior to April 1, 2020. City of Palo Alto Page 8 Staff has not been able to advance this policy direction due to competing priorities and there is insufficient time to have any significant policy analysis on this topic before the deadline. Staff will present the discussion topic to PTC and hold at least one public hearing to receive public input before returning to the Council with a recommendation to extend or lift the ban before April 1st. 5. EV Chargers & Related Amendments Date Assigned: N/A Description: Existing City parking requirements limit placement of electric vehicle charging stations in commercial and residential areas. This ordinance would align the City’s parking regulations with recently-enacted state legislation and make further refinements that would allow property owners to reduce code-required parking or parking dimensions to the minimum extent necessary to accommodate state-mandated stall dimensions for electric vehicle chargers parking spaces. A variety of other parking-related changes are proposed to address compliance with the American with Disabilities Act and routine repaving of existing parking lots. Status: A public hearing is anticipated before the PTC on January 29th followed by review and possible action by the City Council in March. 6. Safe Parking Pilot Program (Tier 1) Date Assigned: June 10, 2019 (Colleagues Memo) Description: Council assigned this to staff and referred the topic to the Policy and Services Committee: to identify and determine interest in expanding vehicle dwelling management and transition services with local area nonprofits; to identify large commercial lots that could be used for a managed overnight program and possibly seed a program using city-owned land located on Geng Road; and to engage the County of Santa Clara to explore funding assistance and for additional program to support enabling individuals to find employment and housing. Status: The City Council adopted the first reading of an ordinance on January 13, 2020 to establish a Tier 1 pilot program authorizing religious institutions to establish a safe parking program for up to four vehicles per location, in compliance with specific regulations. Remaining staff work includes preparing the second reading of the ordinance, staff training, updating the City’s website, holding a forum with interested properties to explain the pilot program and application requirements, creating a new application, and working with the Chief Communications Officer to publicize the pilot program. 7. PDA / PCAs Applications Date Assigned: January 13, 2019 Description: The City Council directed staff to submit applications to establish a priority development area downtown and two priority conservation areas, one in the Foothills and another in the Baylands. Status: Council approved the filing of PDA and PCA applications to MTC/ABAG on January 13th. Limited additional staff work is anticipated on this item. 8. Wireless Ordinance Date Assigned: April 15, 2019 (Council Motion) City of Palo Alto Page 9 Description: Return to City Council within one year with an updated ordinance that considers hierarchies of preferred locations and antenna types based zoning, local context, and installation type; clearly define the term “infeasibility,” as used in the ordinance; create a list of City-owned buildings that would serve as appropriate antenna sites; recommend distances from homes and schools and between installations to preserve aesthetics; recommend best practices for post-construction wireless communication facilities; conduct federal legislative advocacy related to wireless facilities regulations; and review ordinance effectiveness after one year. Status: Following adoption of the ordinance and accompanying resolution, staff returned on June 17, 2019 to correct an administrative error on the resolution and establish a 300-foot distance of wireless facilities from schools. Another amendment to the resolution was made on August 12, 2019 to address a conflict with street light pole replacement requirements. On December 16, 2019, staff returned with a comprehensive revision to the administrative standards that address a significant component of the above direction to staff. In April, staff will return to Council to present updates to the City’s wireless ordinance that address the balance of items from Council’s direction. 9. Reach Code Follow Up / Substantial Remodel Amendment Date Assigned: September 23, 2019 (Colleagues’ Memo) Description: Direction to return with ordinances that mandate an all-electric service for new construction before the end of 2020, including a plan for electrification of accessory dwelling units. Amend the city’s zoning and building codes as appropriate to define the term “substantial remodel” to specify when a remodeled residential or commercial building becomes new construction and therefore subject to current zoning and building codes, including electrification requirements. Status: Initial staff work is underway; public engagement expected to begin at the start of the second quarter of 2020 (April), with ordinance recommendations to Council near the beginning of the fourth quarter (Sept/Oct). 10. SB 35 Objective Standards Date Assigned: February 5, 2018 (Housing Work Plan Tasks 2.2, 2.3) Description: Develop objective standards based on the City’s existing discretionary review findings and other subjective criteria in the code that would be applied to qualifying SB 35 housing projects and other development as appropriate; use available SB 2 grant funding to help resource consultant services. Status: Staff has hired a consultant to review the code and recommend requisite changes. An initial hearing is scheduled before the Architectural Review Board in March to describe the project and receive feedback. This effort is expected to be completed within two years. Assignments – Pending 11. Increase Commercial Housing Development Impact Fees Date Assigned: September 23, 2019 (Colleagues Memo) Description: Update the City’s nexus study and review Santa Clara County’s recent nexus study to determine the extent to which the City could increase commercial housing development impact fees and return to Council. City of Palo Alto Page 10 Status: Staff is preparing a contract to initiate this work, which is tentatively scheduled to begin in February. 12. Renter Protection Research & Ordinance Date Assigned: September 10, 2018 (Colleagues Memo) Description: Refer the 9/10/18 Colleagues’ Memo to the Policy and Services Committee for review. The review should include at least the following: i. review of the City’s existing renter protection ordinance and comparable ordinances in the San Francisco Bay Area; ii. evaluate reasonable relocation assistance to be provided for tenants of properties with 2 or more units displaced due to a change of use, sizable rental increases, or eviction without just cause, while protecting the fair rights of property owners; iii. strengthen enforcement measures to ensure compliance with and penalties for violations of Palo Alto’s existing requirement to offer an annual lease to tenants; and iv. consider other updates to existing renter protection and mediation programs as needed to continue a healthy and diverse community. Status: Staff is seeking assistance through a challenge grant (below) for supporting resources to advance this policy direction. Applications have already been filed and this work is expected to begin in spring 2020. Notes: Recent state legislation8 has provided some protections that relate to the above direction including caps on rent and requiring just cause to evict a renter. Enforcement is not addressed in the state legislation. PDS has also applied for a challenge grant from the Partnership for the Bay’s Future, which will be managed by the San Francisco Foundation. Palo Alto is one of several jurisdictions that applied for the grant and the Foundation is expected to formally award grants to qualifying applicants. Participation in this effort will supplement staff work with a mid-career fellow, provide access to technical assistance, and peer cohort support. It is expected that once the fellow begins work that it will take approximately 2 years to complete this effort through final Council action. More information about the challenge grant is available online: https://www.baysfuture.org/press-release-challenge-grants/ 13. Protections and Incentives for Cottage Clusters, Duplexes, Triplexes, Fourplexes Date Assigned: February 5, 2018 (Housing Work Plan Task 2.9) Description: Develop protections for cottages and duplexes in the R-1 and R-2 districts and consider zoning changes to allow additional cottage clusters, duplexes and fourplexes where appropriate. Status: Not started. Notes: There are limited options for preserving existing cottage clusters. Offering fee reductions and flexible development standards as noted the housing element implies some form of redevelopment of the property, which could be disruptive and counter to the cottage cluster aesthetic and character. One approach that would encourage preservation of the physical form 8 AB 1482 (Tenant Protections Act of 2019) signed into law on October 8, 2019: https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB1482 City of Palo Alto Page 11 and overall layout would be to allow these parcels to be subdivided and sold to individual owners, though further economic analysis would be required, as well as exploring other possible changes to City regulations to ensure there is sufficient incentive and a path to allow the subdivision. Additionally, concerns regarding housing displacement would be analyzed. Exploring incentives, including allowing subdivision of single-family zoned parcels, and fee reductions could be used to spur new cottage housing. 14. PTOD & Village Residential Zoning Amendments Date Assigned: February 5, 2018 (Housing Work Plan Task 2.10) Description: Review pedestrian and transit-oriented development and village residential zoning overlay process to remove constraints/complexity and expand usage. Status: Not started. 15. Safe Parking Pilot Program (Tier 2 and 3) Date Assigned: June 10, 2019 (Colleagues’ Memo) Description: Council assigned this to staff and referred the topic to the Policy and Services Committee: to identify and determine interest in expanding vehicle dwelling management and transition services with local area nonprofits; to identify large commercial lots that could be used for a managed overnight program and possibly seed a program using city-owned land located on Geng Road; and to engage the County of Santa Clara to explore funding assistance and for additional program to support enabling individuals to find employment and housing. Status: The City Council adopted Tier 1 on January 13, 2020. Only preliminary work has begun to expand the pilot program to include more than four vehicles on a private lots (Tier 2) and City- owned property (Tier 3), but resources were shifted to focus on Tier 1. A significant amount of work remains outstanding to advance this project. 16. Housing Element Update Date Assigned: N/A Description: The sixth cycle of the regional housing needs assessment is underway and covers an eight-year timeframe from 2022 through 2030. The state HCD identifies the total number of housing units across all income groups that are needed for the nine county Bay Area. The Association of Bay Area Governments (ABAG) then distributes the allocation to each city and county. Local jurisdictions must then update their housing elements in the comprehensive plan to show how the local entity has planned to meet its share of the region’s housing need. Draft housing allocations are tentatively scheduled to be released in January 2021 and final allocations published July 2021. Housing elements must be updated by December 2022. Status: Not started; staff anticipates making a funding request to secure a consultant for the upcoming housing element update during the next budget cycle in May. 17. Conversations with Stanford Date Assigned: February 5, 2018 (Housing Work Plan Tasks 5.6; 5.6.1; 5.6.2; and, 5.6.3) Description: Initiate conversations with Stanford University regarding potential residential uses at Stanford Research Park; potential residential uses near Stanford University Medical Center, potential residential uses at the Stanford Shopping Center. Status: Not started. City of Palo Alto Page 12 18. Seismic and Resiliency Ordinance Date Assigned: 11/13/2017 Description: Prepare updates to the City’s seismic ordinance Status: On September 15, 2014, the City Council referred to the Policy and Services Committee a discussion on 1) an update of the inventory of soft-story and unreinforced masonry buildings; 2) Staff alternatives regarding how to prioritize the highest risk buildings – if prioritization is feasible; 3) referral of best or strongest practices by other cities to enforce the upgrades; 4) summary of retrofit programs and incentives that exist today; and 5) discussion of any recommendation we have for state legislation to support these initiatives. On December 9, 2014, the Policy and Services Committee recommended the City Council authorize a request for proposal to prepare an update to the City’s Seismic Hazards Identification Program (Ordinance 3666) and update the inventory of structurally deficient buildings in the multi-family, commercial and industrial areas of the City, categorizing building on various typologies. On August 17, 2015, Council approved a contract with Rutherford + Chekene to prepare a study and recommendations on the City’s ordinance. The findings of this report were presented to Council on April 17, 2017. On November 13, 2017, Council authorized staff to begin the process of drafting updates to local regulations, policies, and procedures including an analysis of any potential CEQA requirements. This direction anticipated staff returning to Council for a request to enter into a new contract(s) for technical services and then work with the Policy and Services Committee and ultimately the City Council to review revised language, options, and implications associated with modifications to seismic compliance in our municipal code. Staff anticipates submitting a budget request to Council in the upcoming budget cycle for funds to support this work effort. 19. Co-Housing and Small Units (2.8) Date Assigned: February 5, 2018 (Housing Work Plan Task 2.8) Description: Review and revise allowed uses and permit requirements (i.e., by right, use permits) for small units, co-housing, etc. Status: Not started. 20. Special Needs Housing Date Assigned: February 5, 2018 (Housing Work Plan Task 2.4.7) Description: Review the code and recommend removing any constraints to special needs housing. Status: Not started. 21. No Net-Loss Housing Policy Date Assigned: February 5, 2018 (Housing Work Plan Task 3.3) Description: Explore implementing a ‘no net-loss’ policy when housing is redeveloped. Status: Not started. 22. In-lieu Payment or Off-Site Housing Replacement Date Assigned: September 23, 2019 (Colleagues Memo) City of Palo Alto Page 13 Description: Explore feasibility of in-lieu fees or off-site replacement if existing residential units are removed from the housing stock. Status: Not started. Notes: This is related to no-net loss policy analysis (#21 above). 23. Restrict Loss of Housing to Commercial Uses Date Assigned: September 23, 2019 (Colleagues Memo) Description: Explore citywide protections and regulations to prevent existing housing to be converted to commercial/hotel use. Status: Not started. 24. Incentives to Use TDRs for Residential Development. Date Assigned: February 5, 2018 (Housing Work Plan Task 2.7) Description: Consider changes to transferred development rights (TDR) ordinance to increase its use for residential FAR/density. Status: Not started. Notes: TDR transfers are presently only allowed downtown and in the south of Forest Avenue coordinated area plan. Current law allows TDRs to be used for residential projects but given the return on investment for office development, TDRs are not used for residential floor area. Some possible incentives to encourage more use of TDRs for residential development may include parking reductions or exemptions when applied to housing, or discounting TDR floor area when used for housing by 50%, for example, and possibly a combination of both. The actual reduction has not been tested and is presented for illustration purposes. However, even with these incentives, other constraints are likely to emerge, such as building height, that unless also changed, may not yield significant results. 25. In Lieu Parking Fees for Housing Downtown and California Avenue Date Assigned: February 5, 2018 (Housing Work Plan Task 2.4.5) Description: Allow parking reductions based on payment of parking in lieu fees for housing Downtown and California Avenue. Status: Not started. Notes: Downtown has an in-lieu parking program that currently does not apply to residential uses. If amended to apply, a subsidized rate would be required as the current fee of $106,171 is cost prohibitive for a housing development. A 636-space parking garage is being built in the California Avenue area, but Planning staff is unaware of any discussion that some of these spaces would be earmarked for in-lieu parking. 26. Informational Report on State and Local Density Bonus Law Date Assigned: September 23, 2019 (Colleagues Memo) Description: Direct Staff to transmit to Council an informational report on the state and local density bonus Ordinance. Status: Not started. Notes: While staff has not yet prepared a report, the following links from the League of California Cities provide background on the state law as of October 2016: https://www.cacities.org/Resources-Documents/Member-Engagement/Professional- City of Palo Alto Page 14 Departments/City-Attorneys/Library/2016/Annual-2016/10-2016- Annual_Hutchins_Tiedemann_Not-Just-Density.aspx Here is the accompanying PowerPoint presentation: https://www.cacities.org/Resources-Documents/Member-Engagement/Professional- Departments/City-Attorneys/Library/2016/Annual-2016/10-2016- Annual_Hutchins_Tiedemann_Not-Just-Density.aspx There are some changes in the law since 2016 that are not reflected above links. The City’s local implementation of the density bonus program is also available online: http://library.amlegal.com/nxt/gateway.dll/California/paloalto_ca/title18zoning*/chapter1815r esidentialdensitybonus?f=templates$fn=default.htm$3.0$vid=amlegal:paloalto_ca$anc=JD_Cha pter18.15 27. Annual Office Limit: Four Year Implementation Report Date Assigned: May 21, 2018 Description: In its review of the annual office limit ordinance, Council directed staff to return in two to four years with a report to provide data regarding business development in the areas affected by the annual office limit cap. Staff anticipates returning to Council with a report prior to May 2022. Status: Not started. 28. Request for Funding from HCD to Implement Housing Bills Date Assigned: February 5, 2018 (Housing Work Plan Task 1.6) Description: Transmittal of a request for funding to implement new housing bills to the state HCD. Status: Not started; staff requests this item be removed from the work plan. Other Assignments The above list does not include other initiatives contained in City policy documents, directed by Council, or that require attention for other reasons, including; • implementation of adopted comprehensive plan and housing element programs; • routine work, including quarterly and annual reports to Council and regional entities; • coordination with City departments on other policy initiatives, including implementation of the pedestrian and bicycle master plan, sustainability and climate action plan, green infrastructure, urban forestry master plan, and the Baylands master plan, among other policy documents; • responding to federal and state-legislation, draft bills and implementation as appropriate; • other areas of focus that staff is aware of or regards as important topics requiring study, such as: o Downtown land use and transportation coordinated area plan to address or respond direction regarding grade separation, transit center improvements, housing policy, urban design interests and mobility and parking solutions o Review of parking requirements for California Avenue commercial zones o Working with community partners to explore supportive housing opportunities9 9 As an information note to Council, the Santa Clara County Continuum of Care is in the process of updating its 5-year Community Plan to End Homelessness. The plan seeks to guide governmental actors, nonprofits, and other community members as they make decisions about funding, programs, priorities, and needs. To develop City of Palo Alto Page 15 o Revisit San Antonio Road as a place for more housing opportunities o Review City and regional land use and transportation policies for El Camino Real Department Resources Much of the work directed to staff that was accomplished above occurred despite significant organizational changes, including City Council appointment of a new City Manager and several new department heads. For the planning department, transportation-related functions were separated from planning and turned into the Office of Transportation, whose work is directed by the City Manager. The City’s development services (building permits and inspections) and planning operations were merged. For the past year, vacancies have been a critical challenge for the department. While many positions have since been filled, staff in the long-range planning program, which is principally charged with carrying out the above work, has significant vacancies. This program is resourced to include a planning manager that is supported by four other full-time employees and one hourly employee. At present, three of the five full time positions are vacant including the manager, the City’s housing specialist, and a senior-level policy planner. One new member of the long-range planning team has transitioned from the program responsible for application processing, but has other assignments not related to housing, such as advancing code changes related to wireless communication facilities. These vacancies and work related to merging city department operations has resulted in less progress being made on the Housing Work Plan and the two Colleagues’ Memos. It is anticipated it will take another four to six months to recruit and onboard these outstanding positions, which have been difficult positions to fill. Staff has consultant resources it is using to advance some of this work, but this also requires oversight. The department’s director and assistant director are also taking on some assignments, most notably related to the inclusionary housing expansion and NVCAP, but this competes with other responsibilities required of these positions. ANALYSIS / ALTERNATIVES The above work program has a significant number of assignments that exceeds available resources to complete in a timely manner. Even when fully staffed, the workload is extensive and is not static. Except as may be adjusted by Council, staff will continue to work on these assignments, generally in the order listed above, understanding that things may shift as new Council priorities or interests emerge. The housing-related work plan assignments address the need to protect, preserve and produce housing in Palo Alto, which are the cornerstones to a comprehensive housing strategy. However, the projects a draft plan, a community plan work group, comprised of staff from the County of Santa Clara Office of Supportive Housing, the County Executive's Office, Destination: Home and the City of San Jose, and other community partners, have been gathering feedback from community-based service organizations, local government, philanthropy, business, community members, and people with lived experience through a series of community meetings, surveys, and focus groups. A draft plan is expected to be shared publicly in January 2020 and the workgroup will host another community meeting to gather additional feedback before the final plan is adopted by the Continuum of Care. The Board of Supervisors and city councils will be asked to endorse the plan in early 2020. City of Palo Alto Page 16 listed above, while meaningful and important, are not likely to advance the City toward its aspirational goal of 300 or more new housing units a year. Work related to the NVCAP and possible amendments to the PTOD combining district would likely result in the greatest increase in commercial zoning housing production. However, it is anticipated that changes to parking, floor area and height may be required to encourage more housing. Moreover, these planning efforts that will take at least a year or more to complete. Following Council approval of any legislative action, there is still a considerable amount of time required for property owners and developers to propose and file projects, time to process applications, and time to build the project. Accordingly, it could take at least five years before any housing units are produced as a result of these distinct initiatives and this does not address other areas of the City where housing is desired, such as downtown. If the Council is interested in a timelier production of housing units, it may want to consider allowing for a modified version of the planned community zoning designation – one that eliminates the need for a negotiated public benefit. Staff has had several conversations with property owner representatives who have a range of housing projects they are interested in pursuing, but inevitably are challenged by one or more development standards, typically involving parking, but also floor area and modest adjustments to height. Planned community zoning has received significant criticism for a variety of reasons and Council has indefinitely placed a freeze on any further planned community applications. However, it is worth noting that over the past 20 years, the City entitled approximately 3,330 housing units with planned community zoning and development agreement applications accounting for 39% and 25%, respectively – or nearly 64% (2,120 units) of the combined units produced over this period. As an alternative to the planned community application, the City Council could establish a new housing overlay or housing combining district that could include some of the following attributes: • Allowed only for housing projects, including mixed use housing projects. • No negotiation over public benefits; housing alone, including required affordable housing, would be the public benefit. • A certain percentage of pre-determined on-site affordable units at specified income levels could be mandated based on proposed housing type (rental v. ownership). • For mixed use projects, housing units, sufficient to address any job-related housing needs generated by the project, must be provided on-site. • Cannot exceed any of the City’s office cap limits. • Developers may request to deviate from the zoning code development standards, including but not limited to, parking, floor area, height, unit density, etc. • A prescreening application would be required before the City Council, prior to application submittal and public hearings before the PTC, ARB and City Council. City Council would have final approval authority over any application. To redevelop property, there needs to be sufficient profit incentive for a property owner to build housing that overcomes revenues that can be generated by existing or proposed non-residential uses on property - and sufficient return to attract investors. City regulatory processes, fees, inclusionary requirements and zoning regulations play a key role in what it costs to build in Palo Alto. Combined with City of Palo Alto Page 17 other factors,10 projects in Palo Alto tend to result in a lower return on investment, which discourages lenders or results in an insufficient profit to offset the risk of development. In the past, the City has tried to incrementally increase development incentives to encourage housing while minimizing community impacts. This process, however, takes time. The recently adopted housing incentive program has not yielded any significant projects and it remains to be seen whether the standards were sufficient in the current economic climate. Using the housing combining district potentially creates another tool that allows the City to articulate its housing development expectations and gives property owners and developers an opportunity to present a project and show how those housing goals can be advanced on a project by project basis. POLICY IMPLICATIONS This report transmits an update on the Housing Work Plan and other priority initiatives that are balanced with available staff resources. Many of the tasks on the work plan advance important policy objectives related to housing preservation, protection and production. Concern is expressed in the report that near-term housing production is not anticipated to reach the expressed interest of 300+ units a year. This is due to the length of some of the policy initiatives, but also due to the variability among properties in terms of creating sufficient incentive to motivate an owner to redevelop a site with housing. This document is intended to serve as a status update and to receive direction from Council on updates to the work plan or other areas that require more focus and attention. RESOURCE IMPACT The recommendation in this report does not have any fiscal or budgetary impacts. COMMUNITY ENGAGEMENT The PDS work plan has been developed over time and directed by Council at several public meetings and is largely based on community planning initiatives such as the comprehensive plan and public comment received at various community meetings. ENVIRONMENTAL REVIEW The recommendation in this report is not subject to the provisions of the California Environmental Quality Act as it does not meet the definition of a ‘project’ as defined in Public Resource Code Division 13, Section 21065. Attachments: A: 2018 2019 Housing Work Plan Status Matrix (DOCX) 10 https://ternercenter.berkeley.edu/construction-costs-series Housing Work Plan 2018-2019: Summary Status Update Description Status Notes Ongoing Projects & Initiatives 1.1. Preparation and consideration of a code clean up ordinance with provisions relating to the State Density Bonus Law Completed 4/1/19i 1.2. Preparation and consideration of an ordinance making technical changes to the City’s ADU regulations to conform with new State laws effective January 1, 2018 Completed 2/26/18ii 1.3. A one-year review of the City’s ADU regulations followed by preparation and consideration of an ordinance making desired adjustments Completed 11/5/18iii 1.4. Development of an intake checklist and internal procedures related to implementation of SB 35 (the “by right” housing bill) and changes to the Housing Accountability Act Completed 7/23/19iv 1.5. Preparation and consideration of an ordinance establishing procedures for streamlined review under SB 35 Started, but not complete. Consultant hired to advance project. Relates to tasks 2.1, 2.2, and 2.3. 1.6. Transmittal of a request for funding to implement new housing bills to the State Department of Housing and Community Development (HCD) Not started. 1.7. Preparation and consideration of an ordinance to allow for “pilot” projects aimed at providing workforce housing on Public Completed 6/25/18v Facilities (PF) zoned parcels. This initiative also includes a specific proposal on the old VTA parking lot at El Camino Real and Page Mill Road 1.8. Preparation and consideration of an ordinance to create an affordable housing (AH) overlay district that could be used to support housing on Palo Alto Housing’s site at El Camino Real and Wilton Court Completed 5/7/18vi 1.9. Preparation and review of the City’s annual report regarding Housing Element implementation Completed 3/4/19vii 1.10. Adoption of goals/objectives and a schedule for the North Ventura Coordinated Area Plan process, such that a final plan can be considered for adoption at the end of 2019 Completed 3/5/18viii 1.11. Completion of a literature review and data collection regarding parking demand for different housing types/locations in Palo Alto Completed 8/29/18ix Comprehensive Plan Implementation and Housing Production Ordinances 2.1 Identify By Right Project Procedures (SB 35) 2.2. Strengthen objective standards (SB 35) 2.3. Comp Plan and SOFA plan changes to strengthen objective standards (SB 35) Started – ongoing. A consultant has been hired, Lexington Planning, to identify subjective standards in the zoning code and SOFA CAP and to suggest revisions to make these standards clear and objective. Streamlined, by-right, development in accordance with SB35 requires a housing project with at least 2/3rds of the developed dedicated toward housing with 50% of the housing units deed restricted to low income, among other criteria. These thresholds will remain in effect through the remainder of the current RHNA cycle ending in 2023. No qualifying SB35 housing project has been filed to date. This initiative is scheduled to be completed by the end of 2022. 2.4. Provide incentives and remove constraints for multifamily housing in the Downtown (CD-C), Cal Ave., (CC(2)/PTOD) and El Camino Real (CN and CS) districts Completed 4/1/19i Changes in PTOD zoning were not proposed in the 2018 housing ordinance. This district requires a specific study and analysis to review and adjust development standards that facilitate greater housing development consistent with the district’s objectives. 2.4.1. Review and revise development standards (e.g., landscaping, open space) Completed 4/1/19i 2.4.2. Consider eliminating dwelling unit densities and relying on FAR and average unit sizes Completed 4/1/19i 2.4.3. Review and revise permitted uses and use mix (e.g., allow 100% residential w/ retail) Completed 4/1/19i 2.4.4. Review and revise level of permitting and site plan review required Completed 4/1/19i 2.4.5 Allow parking reductions based on TDM plans and on payment of parking in lieu fees for housing (Downtown and Cal Ave.) Partially Completed 4/1/19i TDM plans can be used to reduced parking reductions, including a zero-parking requirement for certain qualifying affordable housing projects. California Avenue does not have an in lieu parking program and to establish one would require direction from Council and is a specific and dedicated assignment. Downtown has an in-lieu parking program that does not apply to residential uses – if amended to apply, a subsidized rate would be required as the current fee of $106,171 is cost prohibitive for a housing development. 2.4.6. Convert some non-residential FAR to residential FAR Completed 4/1/19i 2.4.7. Remove any constraints to special needs housing in particular Started, but deferred A fee waiver was considered in the housing ordinance that would further reduce development costs, but this requires further study and analysis prior to advancing a policy recommendation. Support multifamily housing in the RM districts (2.5): Completed 4/1/19i 2.5.1. Consider establishment of minimum densities in all RM zones 2.5.2. Allow redevelopment (replacement) of existing residential units on sites that are nonconforming because of the number of units or FAR Completed 4/1/19i Provide incentives and remove constraints in all zoning districts (2.6): 2.6.1. Adjust parking requirements to reduce costs (based on study in item 1.11) Completed 4/1/19i 2019 Proposed Ordinance 2.7. Consider changes to TDR Ordinance to increase its use for residential FAR/density Not started 2.8. Review and revise allowed uses and permit requirements (i.e., by right, use permits) for smaller units, co-housing, etc., in all zoning districts Started, but deferred This concept was explored in the 2018 housing ordinance with the introduction of micro units, but recommendations for reduced parking for these units was not supported. Work on co-housing was a concept anticipated to be explored in the NVCAP, but the need to streamline this work effort to align with remining funds is not expected to result in any new policy. 2.9. Develop protections for cottages and duplexes in the R-1 and R-2 districts and consider zoning changes to allow additional cottage clusters, duplexes, and fourplexes where appropriate Not started 2.10. Review PTOD and Village Residential zoning overlay process to remove constraints/complexity, and expand usage Started, but deferred As part of the housing ordinance, staff reviewed the PTOD and Village Residential zoning standards and determined the level of effort to complete this task required a significant work effort and a decision was made to defer this work in order to advance the other Council-directed initiatives. Changes to PTOD and Village Residential zoning relates to items 2.4 and 2.9, respectively. These are two discrete work assignments and should be separated. Economic Analysis to Support BMR Housing 3.1. Explore increasing BMR percentage requirements in market rate development up to 20% Ongoing These two tasks are being prepared concurrently. Initial draft analysis suggests different inclusionary standards may be appropriate for different geographic areas of the City and this is being further vetted with consultant. Early progress on this task required revisions with the passage of the (April 2019) housing ordinance. Further delays incurred due to limited staff resources. Estimated timeline for completion: Report to the PTC in March. Recommendation to Council in April. 3.2. Explore implementing inclusionary BMR program for rental units (“Palmer fix”) Ongoing 3.3 Explore implementing a “no net-loss” policy when housing is redeveloped Not started This is anticipated to be a significant policy initiative involving planning staff and the City Attorney’s office. A preliminary review of no net-loss policies in other jurisdictions did not reveal any existing standards to model. Leveraging City Funds 4.1. Issue a Notice of Funding Availability (NOFA) and solicit proposals from non-profit developers for use of the City’s Commercial and Residential Housing Funds Completedx With the City Council’s action to reserve $3M for a future teacher housing project and its funding commitments to Wilton Court, now totaling $20M, the remaining balance does not warrant issuance of a Notice of Funding Availability – though the objective of task 4.2 has been accomplished. 4.2. Select projects for funding that maximize the use of the City’s funds for development of new affordable units and preservation of existing units that are at risk Partnerships with Agencies and Organizations 5.1. Explore the opportunity for developing housing over parking on City-owned downtown parking lots by participating in the 2019 NAIOP Challenge, a competition between business school students from Stanford and Cal hosted by the Bay Area chapter of a national real estate development association (See www.naiopsfba.org/28th- annual- real-estate-challenge-winner/) Not started No resources are currently planned for or dedicated to this task. 5.2. Work with the County to explore the opportunity for developing housing at the County courthouse site near California Avenue Ongoing The City Council reserved $3 million from the City’s affordable housing fund to support this project. It is anticipated modification to the City’s Workforce Housing ordinance may require modification to accommodate this project. The County is the project lead for any future project. 5.3. Work with PAUSD representatives to explore opportunities for housing as part of the Cubberley Master Plan or at other publicly-owned sites Ongoing A draft concept plan has been released for the Cubberley Center and both the City and the school district have engaged in a discussion regarding their respective visions for the area. 5.4. Support the regional establishment of a coordinated effort to provide shared housing arrangement facilitation Ongoing While efforts to form a County subregion did not materialize, discussions continue about a possible Planning Collaborative to create a forum for regional housing discussions. 5.5. Work with the San Andreas Regional Center to implement an outreach program that informs families in Palo Alto about housing and services available for persons with developmental disabilities Not Started Initiate conversations with Stanford University regarding (5.6): 5.6.1. Potential residential uses at Stanford Research Park Not started 5.6.2. Potential residential uses near Stanford University Medical Center (SUMC) 5.6.3. Potential residential uses at the Stanford Shopping Center 5.7. Maintain an ongoing conversation with the community, regarding the need for affordable housing, the financial realities of acquiring land and building affordable housing, and the reasons that affordable housing projects need higher densities to be feasible developments Ongoing Some discussions have been held by the PTC and the City Council has similarly raised many of these issues. Staff will continue to find opportunities to advance community conversations. i Second Reading Staff Report and Ordinance dated April 1, 2019: https://www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?t=52156.04&BlobID=69992 ii Second Reading Staff Report and Ordinance dated February 26, 2018: https://www.cityofpaloalto.org/civicax/filebank/documents/63523 iii Second Reading Staff Report and Ordinance dated November 5, 2018: https://www.cityofpaloalto.org/civicax/filebank/documents/67438 iv Updated application planning application form: https://www.cityofpaloalto.org/civicax/filebank/documents/73097 v Staff Report and Ordinance, dated June 25, 2018: https://www.cityofpaloalto.org/civicax/filebank/documents/65525 vi Staff Report and Ordinance, dated May 7, 2018: https://www.cityofpaloalto.org/civicax/filebank/documents/64798 vii Staff Report, dated March 4, 2019: https://www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?t=60751.24&BlobID=69492 viii Staff Report, dated March 5, 2018: https://www.cityofpaloalto.org/civicax/filebank/documents/63646 ix Revised parking study presented to PTC; parking study begins on page 42: https://www.cityofpaloalto.org/civicax/filebank/documents/66513 x Teacher Housing Staff Report, dated June 25, 2018: https://www.cityofpaloalto.org/civicax/filebank/documents/65670; Wilton Court Housing $10 Million Commitment Staff Report, dated June 3, 2019: https://www.cityofpaloalto.org/civicax/filebank/documents/71434; an additional $10 Million request will be considered by the City Council on February 13, 2020. City of Palo Alto (ID # 10949) City Council Staff Report Report Type: Action Items Meeting Date: 2/3/2020 City of Palo Alto Page 1 Council Priority: Fiscal Sustainability Summary Title: Acceptance of FY 2021 - FY 2030 Long Range Financial Forecast Title: Finance Committee Recommends Council Accept the Fiscal Year 2021 - Fiscal Year 2030 Long Range Financial Forecast and Fiscal Year 2021 Budget Development Guidelines From: City Manager Lead Department: Administrative Services RECOMMENDATION Finance Committee and staff recommend that the City Council accept the Fiscal Year 2021 to 2030 General Fund Long Range Financial Forecast (Base Case), City Manager’s Report 10727 (Attachment A), including the Fiscal Year 2021 annual Budget Development Guiding Principles. EXECUTIVE SUMMARY The Long Range Financial Forecast (LRFF), which details the City of Palo Alto’s projected financial outlook through the Fiscal Year (FY) 2021 – FY 2030, was presented to the Finance Committee on December 3, 2019 (City Manager’s Report 10727, Attachment A). Action minutes of the Finance Committee meeting are available on the City’s website for reference. This LRFF continues to incorporate direction from the City Council to budget pension costs more conservatively than CalPERS’ projections. Detailed explanation and analysis of the LRFF and assumptions can be found in the original staff report presented to the Finance Committee. The Finance Committee accepted the LRFF and Budget Development Guiding Principles unanimously with a 3-0 vote and directed that the LRFF and Budget Development Guiding Principles be forwarded to the City Council for approval. The FY 2021 to 2030 General Fund LRFF marks the beginning of the FY 2021 annual budget process. It includes projected General Fund financials over the next ten years based on current City Council approved service levels as well as three alternative financial models. The current Base Case LRFF projects a surplus in the General Fund of $1.1 million in FY 2021, followed by annual gaps where expenses outpace forecasted revenue growth ranging from a deficit of $2.4 City of Palo Alto Page 2 million in FY 2023, to $1.1 million in FY 2025, before reaching significant surpluses in the final years of the forecast. The Base Case provides a preliminary forecast that can assist in gauging effects of major policy interventions against a likely “status quo” version of the future. It assumes that the world continues to change and unfold in line with current expectations. City staff will continue to review and refine these projections to establish the FY 2021 Base Budget through the FY 2021 budget process. Based on this Forecast, it is anticipated that guidance to prioritize spending will again be necessary to ensure continued financial stability. More detailed guidelines to inform the development of the FY 2021 Budget are available as an attachment to City Manager’s Report 10727 (Attachment A). STAKEHOLDER ENGAGEMENT The LRFF represents the beginning of the FY 2021 budget development process. As in previous years, the LRFF was discussed with the Finance Committee and is coming to the City Council. Those conversations will provide direction to staff in the budget development process. It is anticipated that conversations with City Council and the community will occur through public budget hearings in Spring 2020, according to the standard budget adoption process. RESOURCE IMPACT Financial implications from this report and input from the Finance Committee will be considered in the City Manager’s development of the FY 2021 budget. ENVIRONMENTAL IMPACT This report is not a project for the purposes of the California Environmental Quality Act. Attachments: • Attachment A: FY 2021 - FY 2030 Long Range Financial Forecast, CMR # 10727 City of Palo Alto (ID # 10727) Finance Committee Staff Report Report Type: Action Items Meeting Date: 12/3/2019 City of Palo Alto Page 1 Council Priority: Fiscal Sustainability Summary Title: FY 2021 - FY 2030 Long Range Financial Forecast Title: Review and recommend that Council Accept FY 2021 - FY 2030 Long Range Financial Forecast and FY 2021 Budget Development Guidelines From: City Manager Lead Department: Administrative Services RECOMMENDATION Staff recommends that the Finance Committee review and recommend that the City Council accept the Fiscal Year 2021 to 2030 General Fund Long Range Financial Forecast (Base Case), and the annual Budget Development Guiding Principles (Attachment C). EXECUTIVE SUMMARY The Fiscal Year (FY) 2021 to 2030 General Fund Long Range Financial Forecast (LRFF), marks the beginning of the FY 2021 annual budget process. It includes projected General Fund financials over the next ten years based on current City Council approved service levels as well as three alternative financial models. The current Base Case financial forecast projects a surplus in the General Fund of $1.1 million in FY 2021, followed by annual gaps where expenses outpace forecasted revenue growth ranging from a deficit of $2.4 million in FY 2023, that tapers to $1.1 million in FY 2025, before reaching significant surpluses in the final years of the forecast. The Base Case provides a preliminary forecast that can assist in gauging effects of major policy interventions against a likely “status quo” version of the future. It assumes that the world continues to change and unfold in line with current expectations. City staff will continue to review and refine these projections to establish the FY 2021 Base Budget and provide direction to Departments on the FY 2021 budget process. Based on this Forecast, it is anticipated that guidance to prioritize spending will again be necessary to ensure continued financial stability. More detailed guidelines to inform the development of the FY 2021 Budget are discussed at the end of this document (Attachment C). Looking forward, the City continues to face several pressures from the 2014 Council approved Infrastructure Plan (including a new public safety building) to the growing costs of pension Attachment A City of Palo Alto Page 2 benefits and labor costs due to the current labor market and cost of living around Palo Alto. The policy direction from the City Council in November 2018 regarding proactively addressing the pension obligations, including the direction to assume a lower discount rate in calculating pension costs, is contained in the Base Case forecast model. If this direction were excluded from the model, the General Fund would maintain surpluses throughout the forecast, as seen in alternative scenario A. This scenario reflects the tough choices and the hard work of the City over the past few years to structurally balance the budget. The City will continue to face critical choices in order to balance future financial challenges and any unforeseen program needs or an economic downturn, plus any addition proactive funding contributions to pension liabilities. The review of this Long Range Financial Forecast and the planning that follows it will be critical since the City is facing many requests and has identified several key programs that the community would like to fund and complete. Included in this report and subsequent documents are the following: - Discussion of the current financial climate of the United States to the local economy of the City of Palo Alto - Base Case for the Long Range Financial Forecast including Revenue and Expense modeling assumptions beginning in FY 2021 o Current financial status of the General Fund as of the FY 2020 Adopted Budget, and a brief discussion of revised FY 2020 revenue estimates by category - Three Alternative Scenarios including a) CalPERS’ Pension Rates, b) an economic downturn (modeled beginning partway through FY 2021 of the forecast), and c) the impact of an additional 1% in salary increases for salary (only beginning once bargaining units past the term of current agreements) - FY 2021 Budget Development Guidelines to inform the Budget process (Attachment C) BACKGROUND Annually the Office of Management and Budget produces a ten-year General Fund Long Range Financial Forecast (LRFF). The LRFF reflects staff’s best estimates on the projected revenues and expenditures over the next ten years based on the information that is currently available. It is important to note that the LRFF is a planning document and is separate and distinct from the development of the City’s annual Operating and Capital Budgets. There are assumptions and parameters modeled in the LRFF, but these assumptions are revised and refined as more information becomes available through the budget development process. The LRFF contains a comprehensive review of the costs to provide current City Council approved service levels, including current contracts, updates to salaries and benefits based on the current population of employees, and the current labor contracts in effect. Important to note in this LRFF is the ongoing budget adjustments that were approved in the FY 2020 Adopted Budget. Many approved budget adjustments assumed either a phase in period or the identification of the ongoing reduction later; this LRFF assumes that those adjustments materialized as planned in the FY 2020 Adopted Budget. The LRFF also reviews the status of the current economy and various economically sensitive revenues such as Sales Tax, Documentary City of Palo Alto Page 3 Transfer Tax, Property Tax, and Transient Occupancy Tax to explain key trends in those areas. This Forecast allows staff and City Council to look at both the short-term and long-term financial status of current service levels in the General Fund to inform daily policy decisions and evaluate long-term goals and ongoing challenges. Since the great recession, the City has approved many strategies to mitigate rising costs, especially the rising increase in salaries and benefits. Strategies that have been used include: a second pension tier, employees sharing in health plan cost increases, and shifting from employer-paid member contributions to employee pick-up of a portion of the employer share for pensions. Since 2016, rounds of negotiations with bargaining units have included employees not only paying their full portion of CalPERS contributions but also beginning a cost-sharing program wherein employees contribute a certain percentage of the City’s required employer pension contribution. These strategies have helped to create the financial capacity to invest proactively in the City’s Pension Trust, supporting the City’s commitments to employees while ensuring fiscal sustainability. The City Council continues to invest in the community and approved significant improvements in June 2014 with the Infrastructure Plan (IP) in the original amount of $125.8 million. However, the nine projects identified in the plan are estimated to cost substantially more due to updated designs, rising construction costs, and minimum and prevailing wage requirements. In addition, a tenth project was approved by the Council to be added to the IP in the FY 2020 Adopted Budget. These changes have led to an updated cost of approximately $280.6 million for the IP projects. Capital projects are one example of known items that are not fully included in this Forecast. Both the capital cost to build and the operating and maintenance costs once projects are completed and the new facilities are actively used, are estimated with the most current information available. These estimates will be refined during the budget process as more information becomes available and the projects are closer to award and completion. Palo Alto serves a diverse community with a broad range of unique services that adds to the significant complexity of managing a balanced budget and healthy long-range financial outlook. The demands and conflicts emerging from our vibrant economy have heightened the intensity of the “Palo Alto Process”. New analyses and data generation demands require deep dives into complex problem-solving within an engaged public process across a wide range of issues. These forecast figures present staff with the challenge of prioritizing the growing needs of the City with the long-term fiscal sustainability of these needs. The Economy National, state, regional and local economic indicators are mixed. Unemployment remains low, job growth is slowing down, and the trade war is negatively showing up in the economic data. U.S. economy’s national gross domestic product (GDP) grew by an annualized 1.9 percent in the third (calendar) quarter of 2019, with the next 12-month GDP growth outlook projected to be less than 2 percent. The national consumer price index (CPI), as of September 2019, has grown City of Palo Alto Page 4 1.7 percent. Consumer consumption, government spending and exports contributed to the GDP increase, offset by declines in business investments and imports. Consumer spending is expected to slow as real income and job growth further slowdown in 2020. The following graphs depict the GDP and unemployment trends over the past few years. Table 1: U.S. Gross Domestic Product (GDP) Growth Rate The nation continues to operate at what is considered “full employment” levels of 3.6 percent unemployment as of October 2019, compared to 3.5 percent the previous month. As of the end of September, California maintained 4.0 percent unemployment but the unemployment rate for the Bay Area region was lower at 2.2 percent. These levels have not occurred in almost 20 years, last appearing at the height of the dot.com boom. Bay Area job growth has been led by the Peninsula and for the past several years, the local economy continues to outpace the unemployment rate at the state and national level. Compared to other regions in California, the Bay Area experienced the second strongest job growth at 2.1 percent in 2018 and is forecasted to have the strongest growth of 2.2 percent in 2019. City of Palo Alto Page 5 Table 2: U.S. Unemployment Rate It is anticipated that the national job market may slow and the make-up of the market may change as immigration decelerates and labor participation from the Baby-Boomer generation declines. According to the Center for Continuing Study of the California Economy (CCSCE), trends indicate stable job growth in the Bay Area. However, cities are faced with serious challenges that can impact job growth and population, specifically housing supply and affordability and transportation. Immigration and housing policies are important factors to supporting future job growth at the national, state, and local level. Economically sensitive revenue sources such as transient occupancy tax and documentary transfer tax are showing a decline. In spite of this decline, the strong foundations of the local economy – stable housing market, diverse and favorable mix of business segments lead by professional and technology industries, and academic and medical properties – somewhat dampen the financial impact of a severe economic downturn. DISCUSSION Included in this section are both the Base Case and alternative scenarios. As with all forecasts, there is uncertainty regarding the revenue and expenditure estimates contained in this document. For example, General Fund revenues may exceed or fall below expectations based on changes in economic or non-economic conditions. Various cost elements can also vary from year to year. Base Case The following table displays the projected General Fund revenues and expenditures over the next decade and the total cumulative surplus. In addition to the cumulative surplus, the incremental surplus or shortfall (assuming each preceding surplus or shortfall is addressed completely with ongoing solutions in the year it appears) for each year of the forecast is included. Because it is the City’s goal to remain in balance on an ongoing basis, the incremental figure is useful in that it shows the additional surplus and/or shortfall attributed to a particular City of Palo Alto Page 6 fiscal year. To the extent that a shortfall is not resolved, or a surplus is not expended on an ongoing basis, it is important to understand that the remaining budget gap or surplus will carry over to the following year. The hard work of the City in FY 2019 and FY 2020 to proactively balance the budget is seen in the surplus reflected in FY 2021, and in the decreased deficit seen in the middle of the forecast when compared to prior years’ forecasts. Although a small surplus is contemplated in FY 2021, this is not sustained throughout the forecast. The Forecast anticipates gaps ranging from $2.4 million to $1.1 million in the middle of the forecast with surpluses beginning in FY 2026 at $2.3 million and increasing through the final years of the forecast. The need to proactively plan for a structurally balanced budget on an ongoing basis will inform the development of the FY 2021 Budget. TABLE 3: FY 2021 – 2030 Long Range Financial Forecast Base Case Adopted 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Total Revenue $232,101 $241,527 $248,358 $255,808 $263,083 $271,318 $280,028 $289,307 $299,625 $310,488 $321,728 4.1%2.8%3.0%2.8%3.1%3.2%3.3%3.6%3.6%3.6% Total Expenditures $230,809 $240,447 $250,168 $258,194 $265,396 $272,465 $277,743 $283,366 $291,169 $298,276 $304,382 4.2%4.0%3.2%2.8%2.7%1.9%2.0%2.8%2.4%2.0% Net One-Time Surplus/(Gap)$1,292 $1,080 ($1,810)($2,386)($2,313)($1,147)$2,284 $5,941 $8,457 $12,212 $17,347 Cumulative Net Operating Margin (One-Time)$39,664 Net Operating Margin $1,080 ($2,890)($576)$73 $1,166 $3,431 $3,657 $2,516 $3,755 $5,135 Cumulative Net Operating Margin $17,347 Assumes that the annual shortfalls are solved with ongoing solutions and annual surpluses are spent for ongoing expenditures. TABLE 4: FY 2021 – 2030 Long Range Financial Forecast Net Operating Margin Base Case City of Palo Alto Page 7 Revenue Assumptions Overall, economic indicators are providing mixed signals. While the overall U.S. economy continues to be strong, the growth rate has been weaker. The Bay Area economy continues to outperform the state and the nation with strong foreign trade, but this is being negatively impacted by the continuing trade disputes. These disputes and the global economic malaise pose significant challenges to conducting a long-term revenue forecast. Other challenges include an expected slowdown in Bay Area job growth and potential impacts to the local housing market. Despite these challenges, healthy and robust tax revenues for the City are anticipated throughout the term of the forecast in a cautiously optimistic modeling. Tax revenues constitute slightly more than 60 percent of General Fund resources. In FY 2021, the forecast projects a $9.8 million, or 7.0 percent, tax revenue increase compared to the levels in the Adopted FY 2020 Budget. These tax increases are partially offset by reductions in other revenue categories. In total, revenues are anticipated to increase by $9.4 million, from $232.1 included in the FY 2020 Adopted Budget to $241.5 million in FY 2021. The changes by revenue category, as well as the current expected FY 2020 status of many of the categories, are discussed in greater detail below. TABLE 5: FY 2021 – 2030 General Fund Revenue Forecast Base Case Revenue & Other Sources Adopted 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 CAGR 10 Years Sales Taxes $34,346 $37,595 $39,149 $40,670 $42,169 $43,682 $45,162 $46,701 $48,326 $50,075 $51,842 4.2% Property Taxes 48,634 52,863 55,034 57,061 59,303 62,393 66,193 70,344 74,952 80,102 85,668 5.8% Transient Occupancy Tax- General Purpose 17,534 16,896 17,344 17,838 18,356 18,906 19,494 20,089 20,716 21,422 22,251 2.4% Transient Occupancy Tax- Infrastructure 11,774 14,576 14,963 15,389 15,835 16,310 16,818 17,331 17,871 18,481 19,196 5.0% Documentary Transfer Tax 8,369 7,952 8,189 8,428 8,666 8,957 9,264 9,590 9,936 10,297 10,694 2.5% Utility Users Tax 17,581 18,199 18,962 19,804 20,354 20,859 21,465 22,156 22,815 23,222 23,626 3.0% Other Taxes and Fines 2,032 1,989 1,989 1,989 1,989 1,989 1,989 1,989 1,989 1,989 1,989 -0.2% Subtotal: Taxes 140,270 150,071 155,630 161,180 166,673 173,097 180,386 188,200 196,605 205,589 215,266 4.4% Charges for Services 21,834 21,180 21,637 21,988 22,290 22,578 22,723 22,861 23,151 23,423 23,633 0.8% Stanford Fire & Dispatch Services 7,885 8,127 8,466 8,758 9,005 9,233 9,396 9,587 9,819 10,038 10,176 2.6% Permits and Licenses 9,076 8,990 8,997 9,003 9,008 9,012 9,015 9,017 9,021 9,026 9,029 -0.1% Return on Investments 1,388 1,850 1,822 1,844 1,869 1,896 1,950 2,006 2,065 2,127 2,196 4.7% Rental Income 16,399 15,590 15,088 15,480 15,884 16,300 16,728 17,169 17,623 18,091 18,573 1.3% From Other Agencies 980 520 520 520 520 520 520 520 520 520 520 -6.1% Charges to Other Funds 10,908 11,577 11,948 12,290 12,586 12,865 12,962 13,031 13,320 13,586 13,628 2.3% Other Revenue 2,362 2,259 2,260 2,260 2,261 2,262 2,263 2,264 2,264 2,265 2,266 -0.4% Total Non-Tax Revenue 70,832 70,093 70,737 72,143 73,423 74,666 75,555 76,454 77,784 79,076 80,022 1.2% Operating Transfers-In 20,999 21,363 21,990 22,485 22,988 23,555 24,087 24,652 25,236 25,823 26,440 2.3% BSR Contribution (One-Time) Golf Operating Loss Reserve Liquidation Total Source of Funds $232,101 $241,527 $248,358 $255,808 $263,083 $271,318 $280,028 $289,307 $299,625 $310,488 $321,728 3.3% This table is available in a larger format in Attachment A. Sales Tax The sales tax revenue forecast is driven by strong personal income and spending growth and a larger share of consumer spending online. New and innovative retail formats have helped revive physical retail presence. Stores that were once strictly online are now finding physical presence within communities. As the nation transitions from a shopping center country to online sales, a surge in online retail sales will partially displace tax revenue from traditional industry segments to state and county pools. Based on activity and receipts for the recent quarter close, it is estimated that sales tax revenue will exceed the FY 2020 Adopted Budget by $1.6 million, or 4.6 percent, and will generate a total of $35.9 million by year-end of FY 2020. In FY 2021, sales tax is expected increase to $37.4 million, or 4.2 percent, above the revised FY City of Palo Alto Page 8 2020 forecast. This revenue category is currently tracking above budgeted levels in FY 2020 and it is anticipated that appropriate adjustments will be brought forward for the FY 2020 Budget through the mid-year budget process. Segments contributing to this growth include restaurants, office equipment, and auto sales and leases. Department and furniture/appliance sales experienced declines. The FY 2021 – FY 2030 LRFF anticipates a compounded annual growth rate (CAGR) of 4.2 percent through the term of the forecast, with FY 2021’s significant growth over FY 2020’s Adopted Budget level tapering down through the out-years. Property Tax Property tax revenue is the General Fund’s largest revenue source and represents 21.9 percent of total revenues. Over the last three-year period, property tax revenue has grown 20.2 percent, from $39.4 million in FY 2017 to $47.3 million in FY 2019 due to higher assessed values. These higher assessed values reflect continued robust commercial and residential real estate markets. In addition, fiscal years 2017, 2018, and 2019 included receipts of $0.7 million, $1.4 million, and $2.7 million, respectively, for excess Educational Revenue Augmentation Fund (ERAF) distributions from the County of Santa Clara. ERAF is the fund used to collect and disburse property taxes that are shifted to/from cities, the County, and special districts prior to their reallocation to K-14 school agencies. When the state shifts more local property tax than required to support schools these funds are returned and known as excess ERAF. As a result of the volatility of ERAF, it is not considered a permanent local revenue source. The FY 2020 Adopted Budget assumes $48.6 million in total property tax and is expected to grow to $50.5 million, a $1.9 million increase, by year-end which includes $3.8 million in Excess ERAF. This trend, with the exception of Excess ERAF, continues in FY 2021, where property tax revenue is expected to increase by an additional $2.3 million, or 4.5 percent, to total $52.8 million. Due to the uncertainties around the continued receipt of Excess ERAF at the current levels, this revenue sources is being eliminated from the forecast over the next four years and is completed eliminated in FY 2024. This results in lower forecasted growth rates between FY 2022 and FY 2025. City of Palo Alto Page 9 TABLE 6: City of Palo Alto Property Tax Actuals and Forecast through FY 2030 City staff meets with the County quarterly to obtain the latest assessed valuation and assessment roll data used to forecast of property tax revenues. The above graph displays ten years of actual revenue and 11 years of forecast, including the year-end projection for FY 2020. The forecast assumes the anticipated cooling of the housing market and an economic downturn that is spread over the length of the 10-year forecast. Over the 21-year period displayed, there has been some unpredictability in the revenue growth rate, from a negative 1.1 percent in FY 2011 to a high of 11.5 percent in FY 2015. Meeting the property tax revenue forecast is contingent on maintaining property turn over and the median sales price. Data for the first four months of FY 2020 show property sales volume is 14.3 percent lower than the same period for FY 2019 while the price is 7.4 percent higher. According to Zillow, as of September 2019, residential median sales price in Palo Alto is $2.8 million, a decrease of 11.9 percent over the prior year, and lower than the peak seen in June 2018 when the median price was $3.3 million. Transient Occupancy Tax (TOT) In FY 2020, TOT revenue is expected to reach $27.2 million. This is $1.5 million, or 6.0 percent, above the FY 2019 audited revenue amount which includes the April 1, 2019 rate increase of 1.5 percent to TOT. That rate increase resulted in a new total TOT rate of 15.5 percent. Compared to the FY 2020 Adopted Budget, the FY 2020 estimate represents a decrease of 7.2 percent, or $2.1 million. Starting with FY 2019, 4th quarter, the base TOT decreased by 5.4 percent with average occupancy declining by 1.8 percent but average room rates increasing by 2.6 percent. This tread continued in the first quarter of FY 2020 with the base TOT decline of 4.8 percent. If these trends continue, a downward mid-year budget adjustment is expected. City of Palo Alto Page 10 For the first quarter of FY 2020, daily average room rates increase by 1.9 percent from $275.83 per day to $282.79 per day while occupancy rate declined by 4.8 percent from 83.8 percent to 79.8 percent. In the Northern California regions, for September 2019, a similar trend occurred for occupancy and, for daily room rates, half the region had increases and half had declines. The below table compares average room rates and occupancy percentage in September 2019 for northern California regions and the City of Palo Alto. TABLE 7: Northern California Hotel – Motel Business Trends as of September 2019 Month of September 2019 Avg. Daily Room Rate ($) Occupancy Percentage (%) 2019 ($) 2018 ($) Chg. 2019 2018 Chg. San Francisco $326.79 $332.33 -1.7% 88.8% 88.9% -0.2% San Francisco Airport 219.28 229.72 -4.5% 87.9% 88.9% -1.1% San Jose/Peninsula 237.81 231.84 2.6% 79.8% 83.7% -4.6% Oakland/East Bay 182.23 184.22 -1.1% 82.0% 83.7% -2.0% Monterey/Carmel 363.44 332.69 9.2% 82.8% 83.4% -0.8% Central Valley 106.26 104.62 1.6% 77.2% 77.0% 0.3% Sacramento 142.72 141.08 1.2% 80.3% 80.7% -0.6% Marin County 207.73 215.13 -3.4% 79.3% 87.9% -9.8% Napa County 326.59 320.93 1.8% 82.6% 80.2% 3.0% Sonoma County 230.80 233.73 -1.3% 85.3% 85.9% -0.6% Other Northern California 123.68 120.54 2.6% 79.0% 78.4% 0.8% Overall Average 227.21 226.67 0.2% 82.7% 83.9% -1.4% City of Palo Alto (September only) 298.77 287.54 3.9% 80.23% 84.2% -4.7% Table source: TRENDS® in the Hotel Industry Northern California, compiled and produced by CBRE Hotels, Consulting TOT realized double digit growth in FYs 2015 and 2016 due the 2 percent rate increase (from 12 percent to 14 percent tax rate), the recovering economy, and the addition of the three large hotels. Since then, TOT revenue has moderated, however, with 1.5 percent rate increase (from 14 percent to 15.5 percent tax rate) partially offset by declining occupancy percentage there is a healthy growth that is anticipated for FY 2020 and beyond. In addition, in FY 2021, two new Marriot hotels with approximately 300 rooms are expected to open. Primarily as a result of these two new hotels, FY 2021 is forecasted to be $4.3 million, or 15.8 percent, above the current FY 2020 estimate, totaling $31.5 million. Utility User’s Tax (UUT) The UUT is levied on electric, gas, and water consumption, as well as on telephone usage. In total, FY 2020 revenues were budgeted at $17.6 million and are currently on target to be realized before rising to $18.2 million in FY 2021. City of Palo Alto Page 11 UUT telephone revenues rose from $6.0 million in FY 2018 to $6.6 million in FY 2019. This revenue has realized high single digit growth and is forecasted to reach $7.1 million in FY 2020. UUT revenue from Utility sales came in at $9.8 million in FY 2019 and is anticipated to reach nearly $10.4 million in FY 2020. Rate increases of 8.0 percent for electric, 5.0 percent for gas, and 1.0 percent for water, consistent with the financial plans discussed in Spring 2019 with Finance Committee and City Council, are the primary drivers of this revenue growth. This revenue is expected to rise to $10.9 million in FY 2021. Documentary Transfer Tax (DTT) In FY 2015, DTT peaked at $10.1 million. This milestone was a consequence of several large commercial transactions on Page Mill Road and in the Stanford Research Park. Since that time, DTT has significantly moderated, with $6.9 million earned in FY 2019. Though this revenue from July through October in FY 2019 is running nearly 7.4 percent above the same period in FY 2018, staff anticipates modifying the FY 2020 Adopted Budget at midyear from $8.4 million down to $7.7 million. For FY 2021, revenues are expected be slightly above the FY 2020 projected levels at $7.9 million. As in past years, this revenue source is challenging to forecast since it is highly dependent on sales volume and the mix of commercial and residential sales. The number of transactions through October 2019 (186) are running lower than those through October 2018 (217); however, the total value of these transactions has increased by 7.4 percent. Though the Palo Alto housing market remains strong, as discussed in the Property Taxes section, residential median sales price in Palo Alto has declined. Although pressure on the housing market and local economy has driven down property turnover, there is enough of a baseline trend in the Palo Alto housing market to signal a stable 3.0 to 3.9 percent growth in revenue over the length of this forecast. Rental Income Rental Income of $15.6 million primarily reflects rent paid to the General Fund from the City’s Enterprise Funds and the Cubberley Community Center. There is a slight decrease in rental income from FY 2020 to FY 2021 that continues in FY 2022; this decrease represents the phase- out of payments from the Refuse Fund to the General Fund associated with the Landfill. Steady growth after that reflects a 2.6 percent increase for this area partially offset by minor adjustments throughout the forecast. The annual increase for rental revenue is based on a review of the changes in the California Consumer Price Index (CCPI) in the San Francisco Bay Area from the August to August period. It is expected that revenues will be reviewed and revised subsequent to this forecast based on updated information, typically the December to December change in the CCPI. The City is also examining the rent it is currently charging to the various enterprise and special revenue funds and will incorporate adjustments through the budget process as appropriate. City of Palo Alto Page 12 Charges for Services and Permits and Licenses Revenues in the ‘Charges for Services’ and the ‘Permits and Licenses’ categories are anticipated to be $21.2 million and $8.9 million, respectively, in Fiscal Year 2021. These amounts are slightly lower than the Fiscal Year 2020 Adopted Budget levels for each category primarily due to the reduction of revenue related to Animal Shelter services that were previously provided by the Police Department but are now provided by the City’s non-profit partner Pets-in-Need. These budget categories also include revenues associated with the Golf Course and after analyzing prior year actuals, some of the Golf Course revenue estimates have been reduced. Associated expenses for the Golf Course have also been reduced and are accounted for in the Contracts Services section of this document. The revenue estimates in these categories are primarily driven by the cost of staff to provide services to the community; therefore, revenues are impacted by personal service costs. Staff analyzed prior year revenue collections in these categories and determined that actual collections were somewhat below budgeted revenue. Revenue estimates in these categories have therefore been kept generally consistent over the forecast period. One exception to this was for Development Services activities and related revenue. Development Services has been modeled as cost neutral through the forecast, which accounts for the fluctuations in the growth rate over the forecast period, because the average increase in general salaries and benefits for Development Services staff is changing over the ten-year forecast. Staff will analyze municipal fee revenue activity as part of the FY 2021 Budget development process and bring forward adjustments as appropriate. Stanford Fire and Dispatch Services The City has two separate agreements with Stanford University to provide its response and emergency dispatch services. The City and Stanford entered into a new agreement effective July 1, 2018 outlining both terms for service levels and a new cost allocation methodology as the baseline for the contract costs. This contract extends through June 30, 2023 with a renewal through 2028 unless otherwise terminated. The contract included a new staffing deployment model for suppression and medical services, which was approved by the City Council in October 2017 and deployed in January 2018. This forecast assumes this new staffing model and, in accordance with the contract, increases to this revenue from Stanford have been aligned with the year-over-year growth of the operating expenses in the Fire Department over the forecast period. Similarly, increases to the revenue received for dispatching services have been aligned with the year-over-year growth of the operating expenses in the Technical Services Division of the Police Department through which these services are provided. Charges to Other Funds The main source of revenues in this category is General Fund administrative cost allocation plan charges to the Enterprise and Internal Service Funds. Internal support departments such as Administrative Services, Human Resources, and Council Appointed Offices provide services to Enterprise and Internal Service Funds. The costs for these services are recovered through the administrative cost allocation plan charges. The FY 2021 estimate for Charges to Other Funds of City of Palo Alto Page 13 $11.6 million reflects growth of 6.1 percent from the FY 2020 Adopted Budget of $10.9 million; this is primarily attributable to year over year increases in costs for salary and benefits and allocated charges in the Internal Support Departments. After the first year of FY 2021, growth is more moderate ranging from 0.5 percent up to 3.2 percent annual increases throughout the forecast period. Return on Investment The return on investment category reflects the interest earnings on the City’s investment portfolio. This category is a combination of past investments, new investments at current market rates, and available investable cash which fluctuates seasonally and annually. Staff had anticipated the decline in interest rate would occur sooner and at a faster rate than it has occurred, so the City experienced a higher than anticipated return on investments. In addition, prudent investments further resulted in higher investment yields and earnings. The average portfolio rate of return for FY 2019 was 2.30 percent, in FY 2020 first quarter it was 2.35 percent and as of mid-November it’s 2.32 percent. The revised FY 2020 interest earning forecast of $1.90 million is $0.52 million higher than the adopted budgeted of $1.39 million. In FY 2021, the forecast is $1.85 million which reflects the declining interest rate environment. Since the City’s portfolio is laddered over a ten-year period, in a given year, around 10 percent to 16 percent of investments mature that is typically reinvested at the current market rates. As a result, the City’s portfolio yield and earnings decline more gradually than the market rate declines. Operating Transfers-in Operating Transfers-in materialize as expenses in other funds throughout the City and as a revenue in the General Fund. This budget category includes the equity transfer from the Electric and Gas funds. In accordance with a methodology approved by the City Council in June 2009, the equity transfer is calculated by applying a rate of return on the capital asset base of the Electric and Gas funds. This rate of return is based on PG&E's rate of return on equity as approved by the California Public Utilities Commission (CPUC). Using the Utility Department’s projections from the Electric and Gas Five Year Financial Forecasts, as approved by the City Council in spring 2019, the equity transfer from the Electric and Gas funds are projected to increase over the course of this forecast from $21.4 million in FY 2021 to $26.4 million in FY 2030. Overall, the Operating Transfers-in are estimated to increase slightly to $21.4 million in FY 2021, a 1.7 percent increase from the FY 2020 Adopted Budget level of $21.0 million. City of Palo Alto Page 14 Expense Assumptions As part of developing the FY 2021 Forecast expenditure budget, the General Fund expense categories have been adjusted by removing FY 2020 Adopted Budget one-time expenses and updating major cost elements such as salary and benefits costs. The tables below display the expense forecast and when compared to the FY 2020 Adopted Budget, growth of 4.1 percent is expected in FY 2021, with growth ranging from 1.9 percent to 4.0 percent throughout the ten- year forecast. TABLE 8: FY 2021 – 2030 General Fund Expense Forecast Base Case Expenditures & Other Uses Adopted 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 CAGR 10 Years Salary 75,506$ 78,289$ 81,100$ 83,509$ 85,774$ 88,007$ 90,051$ 91,973$ 93,882$ 95,790$ 97,702$ 2.6% Benefits 59,042 62,695 65,921 69,089 71,631 73,917 74,743 75,642 78,340 80,726 82,123 3.4% Subtotal: Salary & Benefits 134,548 140,985 147,022 152,598 157,405 161,924 164,794 167,615 172,222 176,515 179,825 2.9% Contract Services 23,429 23,832 24,355 24,998 25,607 26,224 26,862 27,520 28,188 28,878 29,589 2.4% Supplies & Material 3,365 3,343 3,432 3,524 3,619 3,715 3,815 3,917 4,022 4,130 4,240 2.3% General Expense 12,089 11,267 12,509 12,676 12,818 13,071 13,090 13,413 14,079 14,356 14,535 1.9% Rents & Leases 1,734 1,762 1,777 1,793 1,809 1,825 1,843 1,860 1,878 1,897 1,916 1.0% Facilities & Equipment 771 516 530 544 559 574 589 605 621 638 655 -1.6% Allocated Charges 20,889 22,065 22,551 23,120 23,670 24,197 24,755 25,348 25,947 26,425 26,861 2.5% Committed Additions 223 674 708 728 764 787 825 849 890 916 Total Non Sal/Ben Before Transfers 62,277 63,009 65,828 67,363 68,811 70,372 71,740 73,489 75,584 77,215 78,712 2.4% Operating Transfers-Out 5,023 4,317 4,411 4,508 4,607 4,708 4,817 4,923 5,037 5,154 5,268 0.5% Transfer to Infrastructure - Base/Cubb 17,187 17,561 17,945 18,337 18,739 19,152 19,575 20,009 20,455 20,912 21,381 2.2% Transfer to Infrastructure - TOT 11,774 14,576 14,963 15,389 15,835 16,310 16,818 17,331 17,871 18,481 19,196 5.0% Total Use of Funds $230,809 $240,447 $250,168 $258,194 $265,396 $272,465 $277,743 $283,366 $291,169 $298,276 $304,382 2.8% This table is available in a larger format in Attachment B. Salary and Benefits Table 8 above (also included in Attachment B) depicts the estimated General Fund salaries and benefits costs for the next decade. Over the forecast period, the salaries and benefits costs remain relatively consistent in comparison to the total expenditure budget. In FY 2021, salaries and benefits costs represent approximately 60 percent of the General Fund budget expenditures and remain near that level of General Fund budget expenditures through FY 2030. Salary Consistent with the City’s salary budget methodology for recent budgets, positions are budgeted at the actual rate of pay of employees including benefits as of Fall 2019. Then, by position, salary costs are updated in accordance with applicable Memorandum of Agreements (MOA) between the City and its labor groups and the Management and Professional Personnel and Council Appointees Compensation Plan(s). In 2018, the City completed the bargaining process and reached agreements with all seven represented units1; MOA’s for Police and Fire 1 Represented units include the International Association of Fire Fighters (IAFF), Palo Alto Fire Chiefs’ Association (PAFCA), Palo Alto Peace Officers’ Association (PAPOA), Palo Alto Police Management Association (PAPMA), Service Employees International Union (SEIU), Utilities Management Professional Association of Palo Alto (UMPAPA), and Management and Professional Personnel (MGMT). The most recent agreements can be found here: www.cityofpaloalto.org/gov/depts/human_resources/labor_relations/default.asp City of Palo Alto Page 15 personnel continue through June 30, 2021, SEIU through December 31, 2021, and UMPAPA and MGMT for a one-year period through June 30, 2020. The Forecast assumes step increases for employees in applicable positions, including SEIU, IAFF, and PAPOA and assumes merit increases for Management and Professional employees. Additional general wage adjustments of 2.0 percent are included in each year of the Forecast for all employees in years when there is not a MOA in effect. This is consistent with prior Council direction to use the 2.0 percent increase as a forecasting model, not as a commitment to future negotiations. If agreements are negotiated with salary increases greater than presumed in the forecast, then expenses will increase accordingly. Benefits Pension: The Forecast includes pension rates from CalPERS as of the June 30, 2018 valuation (CMR 10641) for the City’s Miscellaneous and Safety plans for the first six years of the Forecast and projections from the City’s actuarial consultant (Bartel Associates) consistent with the CalPERS methodology for the final years of the Forecast. CalPERS has lowered the discount rate from 7.5 percent to 7.0 percent over three years which has resulted in significant impacts to the City’s pension liability. For Fiscal Year 2021, the final year of this three-year phase in, CalPERS used a 7.0 percent discount rate. CalPERS determines the City’s total contributions for a given Fiscal Year as the sum of two factors: Normal Cost (NC) and Unfunded Accrued Liability (UAL). Together the NC and the UAL expressed as a percentage of payroll is the ‘blended rate’ and is used to represent total costs in the discussion below The Normal Cost (NC) is expressed as a percentage of payroll and is paid as part of the payroll reporting process of active employees. Commonly referred to as the ‘pay-go’ cost, the NC is variable and increases or decreases directly with the salary levels of the City. It represents the necessary funding for the City to pay for employees presuming that CalPERS makes its stated investment returns. In a year that CalPERS does not make its stated investment return, a loss in assets is realized. The accumulation of these losses represents the City’s Unfunded Accrued Liability (UAL), which is calculated by CalPERS and is commonly referred to as the ‘catch-up’ cost. The UAL is expressed as a dollar amount and is calculated over an amortized period with defined annual payments, similar to a mortgage. The contributions for UAL are billed as a flat dollar amount as opposed to a percentage of payroll due to potential funding issues that could arise from a declining payroll or number of active members in the plan. However, CalPERS provides an estimated percentage of payroll for UAL to allow a consistent comparison of total costs. For the miscellaneous plan, the projected blended pension contribution rate will increase from the current 35.6 percent in FY 2020 to 38.4 percent in FY 2021. This includes the continued phase-in of the lower discount rate, which will be completed in FY 2021. The rate steadily City of Palo Alto Page 16 increases to a peak of 42.8 percent in FY 2025 before tapering down over a two-year period to 37.0 percent in FY 2027. This projection is consistent with actuarial assessments done by Bartel Associates which anticipated a slight temporary decline in pension costs associated with various amortization factors including the pay-down of previously sustained losses and benefit improvements offered to employees. This decline in pension costs in FY 2026 is a significant factor of the surplus projected in the Base Case beginning in FY 2026. It also accounts for dampened impacts in other areas that are impacted by salary and benefits, such as charges to other funds. The Safety plan follows a more consistent trend line with steady increases throughout the years of the forecast. In the first year, the safety plan is projected to grow to 65.33 percent of payroll from the current 59.4 percent of payroll and increases steadily to reach a level of 79.5 percent in FY 2030. As with the miscellaneous plan, this initial growth is primarily driven by the phase-in of the 7.0 percent discount rate instead of the previous 7.5 percent discount rate. The table below shows CalPERS’ projected FY 2020 – FY 2030 blended retirement rates. As discussed above, it should be noted that the numbers in FY 2027 are not provided by CalPERS (they only provide a forecast through FY 2026) but have been calculated using a methodology consistent with CalPERS actuarial analysis. These rates are before the employee pick-ups of the employer share are factored in; that pick-up materializes as savings in the City’s pension costs. The forecast does presume that, consistent with applicable MOAs, employees in the miscellaneous plan will pick up 1% of the employer pension cost and that safety plan members will pick up percentages between 3% to 4% depending on the year and the unit. TABLE 9: CalPERS’ Projected FY 2020-2030 Blended Retirement Rates (percentage of payroll) FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 Miscellaneous 35.6 38.4 40.3 41.7 42.3 42.8 40.2 37.0 37.7 38.0 38.5 Safety 59.4 65.3 69.4 72.7 74.4 75.6 75.6 76.6 77.6 78.5 79.5 In addition to the required contribution to CalPERS, the forecast includes supplemental contributions to the City’s irrevocable Section 115 Pension Trust (“Pension Trust Fund”). In January 2017 the City council authorized the establishment of a Pension Trust Fund with the Public Agency Retirement Service (PARS) (CMR 7553). To date, more than $22.0 million in principal contributions has been made into the PARS Trust. Contributions were initially made on an ad-hoc basis, using one-time savings or excess revenues. In October 2018, the City Council directed staff to include in budget assumptions the NC for pension benefits at an equivalent of 6.2 percent discount rate and a transfer of the additional funding beyond CalPERS actuarial determined contribution levels to the Pension Trust Fund (CMR 9740). This change in methodology has been factored into this forecast and is anticipated to generate an approximately $5.0 million in ongoing additional contributions across the organization in all funds. City of Palo Alto Page 17 The marginal costs of the lower discount rates, approximately $3.4 million in the General Fund, have been factored into the entirety of the forecast. In the General Fund, it is anticipated the City will spend a total of $34.3 million on total pension costs in FY 2021, including both CalPERS contributions and additional contributions. This increases to a peak of $45.8 million in FY 2030. These expenses represent approximately 14% of the General Fund’s total expenses. This Base Case does not contemplate the implications of further contributions beyond what was directed by the City Council in October 2018. Alternative Forecast A contemplates how the Long Range Financial Forecast would change if the marginal costs associated with the lower discount rate were excluded from the forecast. Retiree Medical: Retiree Medical is based on the most recent actuarial study prepared by Bartel Associates, which is completed every two years. The most recent study was completed in FY 2018 and presented to the City Council as part of the Fiscal Year 2019 Adopted Budget (CMR 9213). The table below details the cost to the General Fund for every year through FY 2028 based on that actuarial study. The final two years represent an extrapolation of the actuarial study but are consistent with the year over year growth seen throughout the time period. Consistent with City Council direction, as recommended by staff, the City continues to budget for the full payment of the Actuarial Determined Contribution (ADC) for retiree healthcare. Since CalPERS blends active employees with pre-Medicare retirees and charges the same medical premium, even though younger employees on average consume less healthcare and thereby subsidize older employees and retirees, there is an implied subsidy that effectively lowers the funding necessary to meet the ADC. The table below excludes the implied subsidy. TABLE 10: FY 2021 – FY 2030 Retiree Medical General Fund Contributions (Millions) FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 General Fund $9.1 $9.3 $9.5 $9.7 $9.9 $10.2 $10.5 $10.9 $11.2 $11.5 The City’s CERBT Trust, which contains prefunding for the City’s Other Post Employment Benefit (OPEB) liabilities, maintains a very healthy fund balance. The CERBT Trust currently has over $120 million in assets. As the City continues through the next few years, there will be important impacts to examine associated with Retiree Medical as there may be opportunities over the course of this forecast to subsidize the City’s ADC payments with withdrawals from the OPEB CERBT Trust. That savings could possibly be used for other competing priorities, such as prepaying an additional portion of the City’s pension UAL. Staff anticipates returning with an updated actuarial study presented by Bartel Associates as part of the development of the FY 2021 Budget. Healthcare: Consistent with the most recent labor agreements between the City and its bargaining units in the General Fund, the City’s contribution amounts towards medical costs for City of Palo Alto Page 18 employees are based on a flat rate contribution from the City, with the employee contributing towards the remaining medical plan premium. Like salaries, healthcare costs are updated in accordance with applicable Memorandum of Agreements (MOA) between the City and its labor groups and the Management and Professional Personnel and Council Appointees Compensation Plan(s). Consistent with the prior year’s forecast, this forecast assumes an inflation factor of four percent on healthcare and two percent on dental and vision costs to the City in each year of the Forecast for all employees in years when there is not a MOA in effect. Contract Services This forecast assumes contract services of $23.8 million in FY 2021, reflecting a 1.7% increase from the FY 2020 Adopted budget of $23.4 million. This increase is driven primarily by aligning the costs of outside legal counsel in the City Attorney’s office and other important contract increases for contractual obligations already approved by the City Council for items such as tree maintenance, landscape maintenance, and janitorial services, among other items. These Increases are partially offset by the reduction of one-time dollars for items such as the second year of the FTA Grant in FY 2020 as well as a reduction for Golf Course expenses to align with revenue reductions related to actual activity in the prior year. Through the Forecast, a 2.7 percent annual escalator was modeled to capture anticipated growth in this expense category beginning in FY 2021. Supplies and Materials The FY 2020 Adopted Budget for the General Fund included $3.4 million for Supplies and Materials, which is anticipated to decrease slightly to $3.3 million in FY 2021. This decrease is due to the removal of one-time expenses budgeted in FY 2020 for Computer Aided Dispatch (CAD) software and Protective Personnel Equipment (PPE) and uniforms for Fire Department recruits. An escalator of 2.7 percent was applied to this expense category to capture anticipated growth over the course of the forecast. General Expense This category includes costs for travel and meetings, telephone and non-city utilities, contingency accounts, bank card service charges, and subsidies and grants provided through the Human Services Resource Allocation Program (HSRAP). The FY 2020 Adopted Budget of $12.1 million included $1.6 million in a Budget Uncertainty Reserve that has been removed in FY 2021 and partially accounts for the reduction to $11.3 million in FY 2021. That reduction is partially offset by a contribution to the Budget Stabilization Reserve (BSR), which is captured in this category for the purposes of this forecast, to maintain the BSR at the City Council target of 18.5 percent. In FY 2021, $0.6 million is needed to fund the BSR at the 18.5 percent; this amount changes somewhat over the course of the forecast based on the adjustments to the annual expenses. Further discussion of the BSR is detailed later in this document. An annual escalator of 2.7 percent was applied to this category, excluding BSR contributions, to capture anticipated growth over the course of the forecast. These figures do not include General Expenses for the Cubberley Lease, which is explained in further detail below. City of Palo Alto Page 19 General Expense - Cubberley Lease: In FY 2015, the City and Palo Alto Unified School District (PAUSD) agreed to an extension of the Cubberley Lease by five years starting January 1, 2015 and expiring December 31, 2019. On October 7, 2019, Council directed Staff to negotiate with PAUSD to extend the lease agreement an additional five years, though December 31, 2024 (CMR 10730), these negotiations are ongoing. As part of the original lease agreement, the City Council approved creation of a fund for Cubberley infrastructure improvements. It is expected that the lease continues an annual $1.9 million transfer to the Cubberley Property Infrastructure Fund. Therefore, the $1.9 million is classified as an Operating Transfer Out which is discussed in further detail below. With the Cubberley infrastructure funds set aside, the FY 2020 Budget includes $6.3 million for Cubberley Lease payments; this includes extended child daycare sites which may be included in a separate agreement. For planning purposes it is assumed that the current agreement will continue during the entire Forecast period. Rents and Leases The Rents and Leases expense category for FY 2021 is estimated to increase by 1.6 percent from $1.7 million in FY 2020 to $1.8 million in FY 2021. This category includes the lease agreement for some of the Development Services staff at locations outside City Hall. However, funding for those leases have not been increased as part of this forecast due to the uncertainty of the extended need for these leases. Space is anticipated to become available at City Hall after the completion of the Public Safety Building, estimated in FY 2022, however tenant improvements will be necessary. Development Services activities have been modeled as cost neutral through the forecast. If increased expenses for rent for Development Services are needed, corresponding revenue offsets will be incorporated through the budget process to ensure Development Services maintains its cost recovery levels. As a result of excluding these Development Services lease costs from the increases, the growth throughout the forecast is projected at approximately 1.0 percent for this category. Facilities and Equipment The Facilities and Equipment expense category is expected to decrease from the FY 2020 Adopted level of $771,000 to $516,000 in FY 2021. This reflects the annualization of one-time costs that were included in the FY 2020 Operating Budget, including the procurement of solar battery by the Office of Emergency Services and equipment, such as a gurney and air monitors, by the Fire Department. This budget category includes subscription payments for equipment like public safety radios as well as other non-capital equipment. Growth of approximately 2.7 percent is modeled through the forecast to capture anticipated increases. City of Palo Alto Page 20 Allocated Charges Allocated Charges represent expense allocations by the City’s Enterprise and Internal Service Funds for services and products they provide to General Fund departments. The FY 2020 Adopted Budget for the General Fund included $20.9 million for these expenses, including utilities usage, general liability insurance, technology costs, vehicle equipment maintenance and replacement costs and other charges. The FY 2021 allocated charges in the Forecast update the revenues and expenses for these various allocations based on the information available at the time of the Forecast development. FY 2021 is anticipated to experience an increase of 5.6 percent to a total of $22.1 million. This change is primarily due to general CPI and rate increases applied to various charges as well as an increase in Excess General Liability Insurance costs. Based on initial conversations with the City’s broker, a significant increase in the City’s Umbrella Excess Liability insurance costs is anticipated beginning in FY 2021 and continuing through the forecast. Operating Transfers Out Operating Transfers Out include transfers from the General Fund to Debt Service Funds, the Technology Fund, and various other funds but excludes transfers to the Capital Improvement Fund, which are detailed in the following Transfer to Infrastructure section. Transfers to debt service funds include the debt issued to fund the renovation of the golf course. This reflects a change first seen in last year’s Long Range Financial Forecast, where no expenses in the Debt Service category appear in the General Fund, but are instead captured as transfers to the appropriate Debt Service Fund. These payments continue throughout the term of the forecast. The FY 2020 Adopted Budget included Operating Transfers Out of $5.0 million, including a one- time operating subsidy transfer of $0.7 million from the General Fund to the Residential Parking Permit (RPP) Programs Fund to cover an operating deficit. In FY 2021, Operating Transfers Out are anticipated to decrease to $4.3 million as a result of annualizing, or removing, that one-time transfer. Transfer to Infrastructure In FY 2020, the adopted General Fund transfer to the Capital Improvement Fund is $28.3 million, which includes the base transfer of $16.5 million, including $1.2 million in interest earnings, and $11.8 million from additional TOT proceeds generated through a 3.5 percentage point TOT increase as well as through the addition of new hotels. Incremental TOT increases from the rate increase and new hotels are dedicated to the Capital Improvement Fund to support the 2014 Council Infrastructure Plan, consistent with City Council direction. This transfer is anticipated to increase to $17.6 million for the base transfer in FY 2021 and $14.6 million for the dedicated TOT funds per Council priorities. The increase to the dedicated TOT funds is due to the anticipation of new Marriot hotels coming online in FY 2021 and generating additional TOT revenue. This budget category also includes the separate $1.9 million transfer to the Cubberley Property Infrastructure Fund, described earlier in this document. This transfer remains consistent throughout this Forecast despite the sunset date of the current lease in FY 2024 for Cubberley to capture the anticipated costs. City of Palo Alto Page 21 Committed Additions - NEW As highlighted in the FY 2020 Adopted Capital Budget, staff focused on updating and including operating and maintenance (O&M) costs that would begin once the capital projects were complete in the 2020-2025 Capital Improvement Plan (CIP). Continuing this effort, a new category, Committed Additions, has been included in the 2021-2030 Long Range Financial Forecast to account for the estimated O&M costs in the years they are anticipated to materialize in the General Fund. These costs can vary from project to project depending on what was previously budgeted for a facility and generally include, but are not limited to, costs for fixtures and equipment to outfit a new or expanded facility; custodial, landscaping, and maintenance services; utilities; and additional staff to support operations at the facility. Most of the costs in this category are related to the 2014 Council Infrastructure Plan projects that will be coming online over the next five years. A majority of the O&M costs will come online in FY 2021 and 2022 for projects like the fire station replacement, the New Public Safety Building, and the Highway 101 Pedestrian/Bicycle Bridge. O&M costs for projects related to parking have not been included in the General Fund forecast, because it is assumed that parking fees in separate parking funds will be collected to support the O&M costs for these projects. However, depending on funding needs, loans between funds to support investments and operating costs may be needed. There are also a number of capital projects that are included in the five-year CIP that do not have an O&M estimate, either because the full scope of the projects has not yet been defined, or the projects require an initial study in order to establish the full scope of the project. These projects and their subsequent O&M costs would generally fall under the category of Assumptions Not Included in the Forecast which are detailed further below in this document; examples include the new Junior Museum and Zoo. TABLE 11: FY 2021 – FY 2030 Committed Additions (Millions) FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 General Fund $0.2 $0.7 $0.7 $0.7 $0.8 $0.8 $0.8 $0.8 $0.9 $0.9 Budget Stabilization Reserve The City's Budget Stabilization Reserve (BSR) serves as the primary General Fund reserve. By policy, the BSR is maintained in the range of 15 to 20 percent of General Fund operating expenditures, with a target of 18.5 percent. Any reduction to the reserve below 15 percent requires City Council approval. At the discretion of the City Manager, any BSR balance above 18.5 percent may be transferred to the Infrastructure Reserve (IR), which was established to provide funding for maintenance and rehabilitation of the City’s capital assets. As recently discussed with the Finance Committee, on November 18, 2019 the BSR is anticipated to remain above the 18.5 percent target for FY 2020 at $43.7 million after anticipated qualifications for excess BSR. City of Palo Alto Page 22 The BSR is used to fund unanticipated one-time costs as opposed to ongoing or recurring operating expenditures. The City's intent is to fund ongoing programs and services with ongoing dollars. This forecast assumes that the BSR meets or exceeds the City Council approved target of 18.5 percent of anticipated expenses in any given year. Maintaining the BSR at 18.5 percent of anticipated expenses does impact the forecast, worsening the deficits beginning in FY 2022 and dampening the surpluses through the end of the forecast. However, maintaining the BSR at 18.5 percent also provides flexibility to the City do deal with unforeseen issues that may arise. Furthermore, establishing, and following, sound fiscal reserve policies has been a strong factor in the City being rated AAA by rating agencies. Assumptions NOT Included in Forecast It should be noted that this Forecast does not include several potential impacts to the FY 2021 projected budget and the out years of the Forecast. Below is a list of a few items not included. This is not intended to be a comprehensive list nor in any priority order. Labor negotiations: Although the City has recently concluded negotiations with four safety units, these contracts only extend through the first few years of the forecast. These safety units are the Palo Alto Peace Officers Association (PAPOA), the International Association of Fire Fighters (IAFF), Fire Chiefs Association (FCA), and Palo Alto Police Management Association (PAPMA). Each of those contracts expires June 30, 2021. Additionally, the Service Employees International Union (SEIU) MOA expires in December 2021. The Base Case Forecast models only modest increases to salaries in years where there is not a contract. This region’s competition for a qualified workforce remains a significant pressure on the City’s anticipated salary costs. Capital Infrastructure Plan: As referenced earlier, the June 2014 Council approved Infrastructure Plan of $125.8 million in projects was based on construction and design costs with data from 2012. As construction costs have increased and the City is required to pay prevailing wages, the Infrastructure Plan’s funding status has shifted. The FY 2020 Adopted Capital Budget anticipated that these projects would cost $280.6 million. In addition, this Forecast does not assume ongoing operating and maintenance impacts as a result of the Infrastructure Plan, such as the operating costs associated with the new Public Safety building, but future forecasts will incorporate operating cost impacts as the specific projects are designed and implemented. Grade Separation: The City is currently in the process of exploring locations for grade separations. As the City continues the process of determining the number and type of grade separations to pursue the financial impacts are difficult to define. Additionally, it may make sense to undertake a coordinated area plan for transit in the downtown area to synchronize with the grade separation process. Costs for these items are not included in this forecast. City of Palo Alto Page 23 Parks Master Plan: The Parks Master Plan was finalized in 2017; however, when approved it identified a need to develop a funding strategy and this is still in process. As such, this Forecast does not yet contemplate the necessary investments to fully execute this plan. Other Capital Improvement Projects: A number of assets and planned projects remain on the horizon, however, none have resulted in formalized capital improvement projects. Major improvements such as an update to the animal care shelter, rail grade separation, the former ITT site, and the acquisition of land or assets are not factored into the Forecast. City owned assets operated by non-profit organizations: This Forecast does not include any additional capital or operating investments for the Avenidas Senior Center (beyond the current $5 million pledge), the Palo Alto History Museum, the Ventura Child Care Center, the Junior Museum and Zoo, nor the Sea Scout Building. As costs around potential capital or operating investments for these assets solidify, staff will return to City Council to address them as appropriate. Cubberley Community Center Concept Plan: The City is in the process of designing a Cubberley Community Center Concept Plan; however, costs to implement that concept plan in excess of the dedicated Cubberley infrastructure funding included in the existing agreement between the PAUSD and the City are not assumed in this Forecast. Loans for special projects: From time to time the City’s General Fund will assist other City operations with modest cash flow loans to bridge fiscal years. For example, the City provided over $3 million in loans to the Airport Fund as it works to secure significant grant funding from the Federal Aviation Administration (FAA) for capital improvement costs. As of the FY 2020 Adopted Budget, the Airport Fund has begun to pay back the loan to the General Fund. As mentioned in the Committed Additions section, the Base Case presumes that the parking funds will be able to sustain the ongoing operating and maintenance costs of new parking related capital infrastructure. However, these additions and other initiatives may need financial support from the General Fund to ensure they are fully implemented. Additional loans from the General Fund are not assumed in this Forecast. Legislative Updates: Various actions at the state and federal level that could impact the City of Palo Alto have not been incorporated into this forecast due to the changing context and uncertainty of the quantitative impacts of potential legislative changes. This includes the Cadillac Healthcare Tax at the federal level, property tax changes at a state level, and state-level efforts focused on the provision of affordable housing. Property Tax changes may be impacted by a potential state level ballot measure in November 2020. As uncertainty regarding the potential impact of various legislative initiatives is clarified, appropriate adjustments will be identified and brought forward as part of the development of the FY 2021 Operating Budget. Greater CalPERS City contributions: The City has had ongoing conversations with the Finance Committee about options for addressing the City’s long-term pension liability including an initial City of Palo Alto Page 24 discussion regarding development of a pension funding policy. Currently, CalPERS assumes an annual investment return of 7.0 percent. Further, the CalPERS Board approved a gradual de- risking strategy, which is intended to reduce the assumed investment return to 6.5% over the next 20 years. In accordance with the City Council’s direction for the FY 2020 Adopted budget, this forecast assumes a discount rate of 6.2% to more aggressively fund the City’s long-term pension liability. It is anticipated that a formal pension funding policy will be discussed with the City Council in early 2020. Tax revenue alignment with updated Comprehensive Plan: The City Council recently completed updating its Comprehensive Plan, including the potential fiscal impact of various land use scenarios. The fiscal impact of this plan and various land use scenarios are not factored into this Forecast. Changes in the local, regional, and national economy: This Forecast assumes a moderately growing local economy. Any changes may have positive or negative impacts on economically sensitive revenues such as Sales Tax and the Transient Occupancy Tax. Alternative Forecast A: CalPERS’ Pension Rates As discussed in the Salary and Benefits section above, the base forecast includes approximately $3.4 million in additional pension expenses in this Long-Range Financial Forecast. These costs capture the direction from City Council to budget the Normal Cost using a 6.2 percent discount rate to proactively prefund the City’s pension liability. This assumption deviates from the current CalPERS actuarial assumptions for investment earnings; CalPERS currently assumes a 7.0 percent discount rate in FY 2021. This alternative forecast models the impact of using the CalPERS’ discount rate to determine the City’s annual pension contributions. The summary table for this alternative forecast and the Net Operating Margin graph for this alternative forecast are below. Additional discussion for this alternative follows these figures. TABLE 12: FY 2021 – FY 2030 Long Range Financial Forecast Alternative Forecast A Adopted 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Total Revenue $232,101 $241,527 $248,358 $255,808 $263,083 $271,318 $280,028 $289,307 $299,625 $310,488 $321,728 4.1%2.8%3.0%2.8%3.1%3.2%3.3%3.6%3.6%3.6% Total Expenditures $230,809 $236,393 $246,665 $254,647 $261,814 $269,000 $274,160 $279,706 $287,435 $294,468 $300,499 2.4%4.3%3.2%2.8%2.7%1.9%2.0%2.8%2.4%2.0% Net One-Time Surplus/(Gap)$1,292 $5,134 $1,692 $1,161 $1,269 $2,319 $5,867 $9,600 $12,191 $16,020 $21,229 Cumulative Net Operating Margin (One-Time)$76,482 Net Operating Margin $5,134 ($3,442)($532)$108 $1,049 $3,549 $3,733 $2,590 $3,829 $5,209 Cumulative Net Operating Margin $21,229 Assumes that the annual shortfalls are solved with ongoing solutions and annual surpluses are spent for ongoing expenditures. City of Palo Alto Page 25 TABLE 13: FY 2021 –2030 Long Range Financial Forecast Net Operating Margin Alternative Forecast A Compared to the Base Case, the General Fund would run a greater surplus in the first year and then maintain net one-time surpluses through the forecast. However, unlike the base case, no additional contribution to the City’s Section 115 Pension Trust Fund is presumed in this model. This scenario represents the significant efforts the City has taken over the past few years to structurally balance the budget through reprioritization of work and reductions to the City’s full-time staffing in order to help contain rising pension costs. It is anticipated that the City will continue to discuss its options for prefunding its long-term pension obligations through ongoing discussion and development of a pension funding policy. Alternative Forecast B: Major Tax Revenue Sensitivity Analysis For modeling purposes, the base case assumes a smoothed recession throughout the length of the forecast. The base case takes this approach to accommodate any one-time, unusual, or unexpected drops in revenue that may occur throughout the forecast. This alternative scenario models the potential impact if the economy contracted and the growth that would be anticipated for the remainder of the forecast. For modeling purposes, this economic contraction is assumed to occur in January 2021, midway through FY 2021. The lower revenue estimates would continue through the forecast but would recover toward the final years of the forecast. These lower revenue estimates through the initial years of the forecast would significantly constrain the City’s resources. As discussed in the Revenue Assumptions section of this report, tax revenue accounts for approximately 60 percent of the General Fund’s total revenues. This alternative scenario assumes that average tax receipts contract by 1.7 percent, from $140.3 million at FY 2020 Adopted to $137.9 million in FY 2021. The scenario models a further decline in FY 2022 to $131.3 million in tax revenues in FY 2022 and stays consistent in FY 2023. Consistent with growth seen after other recessions, tax revenues begin to grow significantly in FY 2024 through City of Palo Alto Page 26 the end of the forecast. If all other assumptions in the base case remain constant and a major recession were to occur of a magnitude similar to the dot-com bust or the Great Recession, the loss in revenue would be approximately $12.6 million in FY 2021 (half a year) and $24.6 million in FY 2022. In this alternative scenario, the City’s expenses would exceed revenues in the first six years of the forecast before turning positive at the end of the time period. The single greatest one-time gap occurs in FY 2023, with a $32.2 million deficit, before narrowing to $12.7 million in FY 2026 and turning slightly positive in FY 2027. The summary table for this Alternative Scenario and the corresponding graph showing the Net Operating Margin are included below. TABLE 14: FY 2021 – FY 2030 Long Range Financial Forecast Alternative Forecast B Adopted 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Total Revenue $232,101 $229,313 $223,830 $226,020 $237,704 $250,122 $265,085 $283,416 $310,495 $341,969 $378,923 -1.2%-2.4%1.0%5.2%5.2%6.0%6.9%9.6%10.1%10.8% Total Expenditures $230,809 $240,447 $250,168 $258,194 $265,396 $272,465 $277,743 $283,366 $291,169 $298,276 $304,382 4.2%4.0%3.2%2.8%2.7%1.9%2.0%2.8%2.4%2.0% Net One-Time Surplus/(Gap)$1,292 ($11,134)($26,338)($32,174)($27,693)($22,343)($12,658)$50 $19,326 $43,694 $74,542 Cumulative Net Operating Margin (One-Time)$5,271 Net Operating Margin ($11,134)($15,204)($5,836)$4,482 $5,350 $9,684 $12,708 $19,276 $24,368 $30,848 Cumulative Net Operating Margin $74,542 Assumes that the annual shortfalls are solved with ongoing solutions and annual surpluses are spent for ongoing expenditures. TABLE 15: FY 2021 – 2030 Long Range Financial Forecast Net Operating Margin Alternative Forecast B City of Palo Alto Page 27 Alternative Forecast C: Change in Long Range Financial Forecast Assumptions Related to Salary for Bargaining Units Outside of MOA Terms During Finance Committee discussions regarding the Long Range Financial Forecast in the past few years there have been conversations regarding the appropriate methodology for modeling salary and benefit increases year-over-year. Per previous City Council direction and past practice, the Base Case assumes a two percent general wage adjustment in the years beyond the terms of existing MOAs. This is consistent with past direction to use two percent as a forecasting assumption, not as a commitment for future negotiations. As part of the expense sensitivity analysis on the City’s finances, a third alternative forecast is presented here that analyzes a general wage adjustment of three percent for all employees in years when MOAs have not yet been negotiated. As with other alternative models in the LRFF, this model is for forecasting purposes and is not a commitment to future labor negotiations. In this scenario, the initial surplus in FY 2021 is lessened somewhat compared to the Base Case and wider gaps between revenues and expenses would occur in next few years of the forecast. Through the ten years of the forecast, this change in the modeling would increase expenses significantly. In FY 2021, only the management group would be impacted by this change, so a relatively modest increase in expenses of $285,000 is seen. The City’s agreements with the safety units expire at the end of FY 2021 and the agreement with SEIU ends midway through FY 2022. Due to the expiration dates, FY 2023 is the first year that shows the full cost of an additional one percent raise for the General fund. As a result of the increased expenses modeled for the safety units and SEIU the costs increase by $1.1 million in FY 2022 before escalating by $1.9 million in FY 2023. Overall, the general trends of the Base Case persist through this third alternative scenario, despite the changes to the salary and benefit parameters. The Base Case projected that by FY 2026, the City would have a positive net one-time surplus; this alternative forecast extends the deficit to FY 2026 but still projects a positive net one-time surplus in FY 2027. TABLE 16: FY 2021 – FY 2030 Long Range Financial Forecast Alternative Forecast C Adopted 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Total Revenue $232,101 $241,527 $248,358 $255,808 $263,083 $271,318 $280,028 $289,307 $299,625 $310,488 $321,728 4.1%2.8%3.0%2.8%3.1%3.2%3.3%3.6%3.6%3.6% Total Expenditures $230,809 $240,732 $251,229 $260,093 $268,112 $275,996 $282,090 $288,528 $297,146 $305,069 $311,991 4.3%4.4%3.5%3.1%2.9%2.2%2.3%3.0%2.7%2.3% Net One-Time Surplus/(Gap)$1,292 $795 ($2,871)($4,286)($5,028)($4,678)($2,062)$779 $2,479 $5,418 $9,738 Cumulative Net Operating Margin (One-Time)$284 Net Operating Margin $795 ($3,666)($1,415)($742)$350 $2,616 $2,841 $1,700 $2,939 $4,319 Cumulative Net Operating Margin $9,738 Assumes that the annual shortfalls are solved with ongoing solutions and annual surpluses are spent for ongoing expenditures. City of Palo Alto Page 28 TABLE 17: FY 2021 – 2030 Long Range Financial Forecast Net Operating Margin Alternative Forecast C FY 2021 Budget Development Guidelines As discussed earlier in this document, the Long Range Financial Forecast represents the initial steps of the FY 2021 budget development process. In the FY 2019 – FY 2028 Long Range Financial Forecast presented in December 2018, staff included budget development guidelines based on the trends that were identified and the anticipated fiscal condition of the City. Due to the clear overlap of projecting the City’s fiscal condition over the next ten years and the need to shape service level expectations over the same time period, staff recommends that the inclusion of Budget Development Guidelines be incorporated into the Long Range Financial Forecast on an ongoing basis. This year, the FY 2021 Budget Development Guidelines are detailed in Attachment C. They are meant to reflect the anticipated fiscal condition of the City and to provide high-level budgetary direction to the organization. These guidelines will shape and inform the annual financial planning and the allocation of resources across the organization, especially in the General Fund. When the Fiscal Sustainability Workplan (CMR 10267) was approved by the City Council on April 22nd, 2019 drafting a budget development policy was listed as part of the “Newly proposed or potential activities proposed to be completed”. The inclusion of Budget Development Guidelines in this, and future years’, Long Range Financial Forecast represents staff’s recommended method of addressing this referral. Pairing Budget Development Guidelines with the Long Range Financial Forecast links the anticipated fiscal condition of the organization with the necessary context regarding service delivery prioritization and resource allocation that will be further explored through the process. Including the Budget Development Guidelines with City of Palo Alto Page 29 the Long Range Financial Forecast ensures that the City is able to proactively address anticipated changes in its fiscal condition through the budget process. Conclusion The FY 2021 – 2030 Long Range Financial Forecast provides context for balancing high city service expectations against the limited resources available to meet them in a timely manner. The City’s work over the past few years to structurally balance the budget has better positioned the City through the forecast with relatively minor deficits projected, even as the City makes proactive pension contributions, and as costs for salaries and benefits continue to escalate. However, the City must continue to exercise diligence to remain fiscally sustainable and balance the ecosystem of resources, the cost of doing business, and service delivery levels. A continued scrutiny of the expansion and enhancement of existing services, the addition of new services, and the priorities of the community will be necessary, especially as a slowing of the economy is anticipated in the coming years. As the Finance Committee and Council continue to discuss major projects such as pension, infrastructure, and grade separation, the ability to manage expectations and implement innovative solutions will be critical. A prioritization of needs and one-time investments to modernize and advance service delivery models will be necessary to ultimately ensure that we operate within available resources. These strategies are essential to sustaining the City’s sound financial future. STAKEHOLDER ENGAGEMENT The Long Range Financial Forecast represents the beginning of the fiscal year 2021 budget development process. As in previous years, the LRFF will be discussed with the City Council after Finance Committee and those conversations will provide direction to staff in the budget development process. It is anticipated that conversations with City Council and the community will occur through public budget hearings in Spring 2020, according to the standard budget adoption process. RESOURCE IMPACT Financial implications from this report and input from the Finance Committee will be considered in the City Manager’s development of the Fiscal Year 2021 budget. ENVIRONMENTAL IMPACT This report is not a project for the purposes of the California Environmental Quality Act. Environmental review is not required. Attachments: • Attachment A: Long Range Financial Forecast Base Case Revenues Table • Attachment B: Long Range Financial Forecast Base Case Expenses Table • Attachment C: FY 2021 Budget Development Guidelines FY 2021‐2030 Long Range Financial Forecast Base Case Revenue Table ATTACHMENT A Revenue & Other Sources Adopted 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 CAGR 10  Years Sales Taxes $34,346 $37,595 $39,149 $40,670 $42,169 $43,682 $45,162 $46,701 $48,326 $50,075 $51,842 4.2% Property Taxes 48,634             52,863 55,034 57,061 59,303 62,393 66,193 70,344 74,952 80,102 85,668 5.8% Transient Occupancy Tax‐ General Purpose 17,534             16,896 17,344 17,838 18,356 18,906 19,494 20,089 20,716 21,422 22,251 2.4% Transient Occupancy Tax‐ Infrastructure 11,774             14,576 14,963 15,389 15,835 16,310 16,818 17,331 17,871 18,481 19,196 5.0% Documentary Transfer Tax 8,369               7,952 8,189 8,428 8,666 8,957 9,264 9,590 9,936 10,297 10,694 2.5% Utility Users Tax 17,581             18,199    18,962   19,804   20,354    20,859   21,465    22,156     22,815    23,222     23,626   3.0% Other Taxes and Fines 2,032               1,989 1,989 1,989 1,989 1,989 1,989 1,989 1,989 1,989 1,989 ‐0.2% Subtotal: Taxes 140,270             150,071    155,630   161,180    166,673    173,097    180,386     188,200     196,605     205,589     215,266   4.4% Charges for Services 21,834 21,180 21,637 21,988 22,290 22,578 22,723 22,861 23,151 23,423 23,633 0.8% Stanford Fire & Dispatch Services 7,885               8,127 8,466 8,758 9,005 9,233 9,396 9,587 9,819 10,038 10,176 2.6% Permits and Licenses 9,076               8,990 8,997 9,003 9,008 9,012 9,015 9,017 9,021 9,026 9,029 ‐0.1% Return on Investments 1,388               1,850 1,822 1,844 1,869 1,896 1,950 2,006 2,065 2,127 2,196 4.7% Rental Income 16,399             15,590 15,088 15,480 15,884 16,300 16,728 17,169 17,623 18,091 18,573 1.3% From Other Agencies 980                  520 520 520 520 520 520 520 520 520 520 ‐6.1% Charges to Other Funds 10,908             11,577 11,948 12,290 12,586 12,865 12,962 13,031 13,320 13,586 13,628 2.3% Other Revenue 2,362               2,259 2,260 2,260 2,261 2,262 2,263 2,264 2,264 2,265 2,266 ‐0.4% Total Non‐Tax Revenue 70,832               70,093       70,737      72,143      73,423       74,666      75,555       76,454        77,784       79,076       80,022      1.2% Operating Transfers‐In 20,999             21,363 21,990 22,485 22,988 23,555 24,087 24,652 25,236 25,823 26,440 2.3% BSR Contribution (One‐Time) Golf Operating Loss Reserve Liquidation Total Source of Funds $232,101 $241,527 $248,358 $255,808 $263,083 $271,318 $280,028 $289,307 $299,625 $310,488 $321,728 3.3% Revenue & Other Sources 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Sales Taxes 9.0% 4.1% 3.9% 3.7% 3.6% 3.4% 3.4% 3.5% 3.6% 3.5% Property Taxes 8.4% 4.1% 3.7% 3.9% 5.2% 6.1% 6.3% 6.6% 6.9% 6.9% Transient Occupancy Tax ‐ General Purpose ‐3.9% 2.7% 2.9% 2.9% 3.0%3.1% 3.0% 3.1% 3.4% 3.9% Transient Occupancy Tax ‐ Infrastructure 26.1% 2.6% 2.8% 2.9% 3.0% 3.1% 3.1%3.1% 3.4% 3.9% Documentary Transfer Tax ‐5.4% 3.0% 2.9% 2.8% 3.4%3.4% 3.5% 3.6% 3.6% 3.9% Utility Users Tax 3.5% 4.2% 4.4% 2.8% 2.5% 2.9% 3.2% 3.0% 1.8% 1.7% Other Taxes and Fines ‐2.1% 0.0% 0.0% 0.0% 0.0%0.0% 0.0% 0.0% 0.0% 0.0% Subtotal: Taxes 6.9% 3.7% 3.6% 3.4% 3.9% 4.2% 4.3% 4.5% 4.6% 4.7% Charges for Services ‐3.0% 2.2% 1.6% 1.4% 1.3%0.6% 0.6% 1.3% 1.2% 0.9% Stanford Fire & Dispatch Services 3.1% 4.2% 3.4% 2.8%2.5% 1.8% 2.0%2.4% 2.2% 1.4% Permits and Licenses ‐0.9% 0.1% 0.1% 0.1% 0.1%0.0% 0.0% 0.1% 0.0% 0.0% Return on Investments 24.3%‐1.5% 1.2% 1.4% 1.4% 2.8% 2.9% 2.9% 3.0% 3.2% Rental Income ‐4.9%‐3.2% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.7% 2.7% From Other Agencies ‐46.9% 0.0% 0.0% 0.0% 0.0%0.0% 0.0% 0.0% 0.0% 0.0% Charges to Other Funds 6.1% 3.2% 2.9% 2.4% 2.2% 0.8% 0.5% 2.2% 2.0% 0.3% Other Revenue ‐4.4% 0.0% 0.0% 0.0% 0.0%0.0% 0.0% 0.0% 0.0% 0.0% Total Non‐Tax Revenue ‐1.0% 0.9% 2.0% 1.8% 1.7%1.2% 1.2% 1.7% 1.7% 1.2% Operating Transfers‐In 1.7% 2.9% 2.2% 2.2% 2.5%2.3% 2.3% 2.4% 2.3% 2.4% BSR Contribution (One‐Time) Golf Operating Loss Reserve Liquidation Total Source of Funds 4.0% 2.8% 3.0% 2.8% 3.1% 3.2% 3.3% 3.6% 3.6% 3.6% FY 2021‐2030 General Fund Long Range Financial Forecast Base Case Expense Table ATTACHMENT B Expenditures & Other Uses Adopted  2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 CAGR  10  Years Salary 75,506$   78,289$  81,100$  83,509$  85,774$  88,007$  90,051$   91,973$  93,882$  95,790$  97,702$  2.6% Benefits 59,042     62,695 65,921 69,089 71,631 73,917 74,743 75,642 78,340 80,726 82,123 3.4% Subtotal: Salary & Benefits 134,548   140,985 147,022 152,598 157,405 161,924 164,794   167,615 172,222 176,515 179,825 2.9% Contract Services 23,429 23,832 24,355 24,998 25,607 26,224 26,862 27,520 28,188 28,878 29,589 2.4% Supplies & Material 3,365 3,343 3,432 3,524 3,619 3,715 3,815 3,917 4,022 4,130 4,240 2.3% General Expense 12,089 11,267 12,509 12,676 12,818 13,071 13,090 13,413 14,079 14,356 14,535 1.9% Rents & Leases 1,734 1,762 1,777 1,793 1,809 1,825 1,843 1,860 1,878 1,897 1,916 1.0% Facilities & Equipment 771 516 530 544 559 574 589 605 621 638 655 ‐1.6% Allocated Charges 20,889 22,065 22,551 23,120 23,670 24,197 24,755 25,348 25,947 26,425 26,861 2.5% Committed Additions 223 674 708 728 764 787 825 849 890 916 Total Non Sal/Ben Before Transfers 62,277     63,009   65,828   67,363   68,811   70,372   71,740     73,489   75,584   77,215   78,712   2.4% Operating Transfers‐Out 5,023 4,317 4,411 4,508 4,607 4,708 4,817 4,923 5,037 5,154 5,268 0.5% Transfer to Infrastructure ‐ Base/Cubb 17,187 17,561 17,945 18,337 18,739 19,152 19,575 20,009 20,455 20,912 21,381 2.2% Transfer to Infrastructure ‐ TOT 11,774 14,576 14,963 15,389 15,835 16,310 16,818 17,331 17,871 18,481 19,196 5.0% Total Use of Funds $230,809 $240,447 $250,168 $258,194 $265,396 $272,465 $277,743 $283,366 $291,169 $298,276 $304,382 2.8% Expenditures & Other Uses Adopted  2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Salary 3.7% 3.6% 3.0% 2.7% 2.6% 2.3% 2.1% 2.1% 2.0% 2.0% Benefits 6.2% 5.1% 4.8% 3.7% 3.2% 1.1% 1.2% 3.6% 3.0% 1.7% Subtotal: Salary & Benefits 4.8% 4.3% 3.8% 3.2% 2.9% 1.8% 1.7% 2.7% 2.5% 1.9% Contract Services 1.7% 2.2% 2.6% 2.4% 2.4% 2.4% 2.5% 2.4% 2.4% 2.5% Supplies & Material ‐0.7% 2.7% 2.7% 2.7% 2.7% 2.7% 2.7% 2.7% 2.7% 2.7% General Expense ‐6.8% 11.0% 1.3% 1.1% 2.0% 0.1% 2.5% 5.0% 2.0% 1.2% Rents & Leases 1.6% 0.9% 0.9% 0.9% 0.9% 0.9% 1.0% 1.0% 1.0% 1.0% Facilities & Equipment ‐33.0% 2.6% 2.7% 2.7% 2.7% 2.7% 2.7% 2.6% 2.7% 2.7% Allocated Charges 5.6% 2.2% 2.5% 2.4% 2.2% 2.3% 2.4% 2.4% 1.8% 1.6% Committed Additions N/A 202.6% 5.0% 2.9% 4.9% 2.9% 4.9% 2.9% 4.8% 2.9% Total Non Sal/Ben Before Transfers 1.2% 4.5% 2.3% 2.1% 2.3% 1.9% 2.4% 2.9% 2.2% 1.9% Operating Transfers‐Out ‐14.1% 2.2% 2.2% 2.2% 2.2% 2.3% 2.2% 2.3% 2.3% 2.2% Transfer to Infrastructure ‐ Base/Cubb 2.2% 2.2% 2.2% 2.2% 2.2% 2.2% 2.2% 2.2% 2.2% 2.2% Transfer to Infrastructure ‐ TOT 23.8% 2.6% 2.8% 2.9% 3.0% 3.1% 3.1% 3.1% 3.4% 3.9% Total Use of Funds 4.2% 4.0% 3.2% 2.8% 2.7% 1.9% 2.0% 2.8% 2.4% 2.0% Attachment C  1) Develop a structurally balanced budget that brings ongoing revenues and expenses into alignment. Develop a plan for any structural imbalance to ensure that the City maintains it fiscal sustainability over the short, medium, and long- term. 2) Allocate one-time resources for one-time needs rather than committing one-time resources to ongoing services. Examine appropriate uses of revenue surpluses that exceed forecasted levels including planning for recession needs. 3) Ensure appropriate resource allocation for City Council’s existing priorities. 4) Focus on business process redesign to enhance quality, flexibility, and cost- effectiveness of service delivery (include examining opportunities to streamline, simplify, reorganize, and reallocate resources to avoid duplication of effort). 5) Explore alternative service delivery models (such as partnerships with non-profits or other public/private sector groups) to minimize overlap, maximize cost share, and effectively use resources. 6) Continue to thoroughly analyze non-personnel/equipment/other costs, such as contract services, for cost savings opportunities. 7) Explore the expansion of existing revenue sources or the addition of new revenue sources, including the alignment of existing charges for services and the opportunity to establish new fees, when appropriate. 8) Continue to analyze and prioritize resource augmentations, seeking to offset augmentations with reductions elsewhere for net-zero impacts to the budget whenever possible.  FY 2021 Budget Development Guidelines