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2020-05-04 City Council Agenda Packet
City Council 1 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. Monday, May 4, 2020 Special Meeting Virtual Teleconference 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. ****BY VIRTUAL TELECONFERENCE ONLY*** https://zoom.us/join Meeting ID: 362-027-238 Phone No.:1(669)900-6833 Pursuant to the provisions of California Governor’s Executive Order N-29-20, issued on March 17, 2020, to prevent the spread of Covid-19, this meeting will be held by virtual teleconference only, with no physical location. The meeting will be broadcast on Cable TV Channel 26, live on YouTube at https://www.youtube.com/c/cityofpaloalto, and Midpen Media Center at https://midpenmedia.org. Members of the public who wish to participate by computer or phone can find the instructions at the end of this agenda. To ensure participation in a particular item, we suggest calling in or connecting online 15 minutes before the item you wish to speak on. 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. 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 Closed Session 5:00-6:00 PM Public Comments: Members of the public may speak to the Closed Session item(s); three minutes per speaker. 1.CONFERENCE WITH LABOR NEGOTIATORS City Designated Representatives: City Manager and his Designees Pursuant to Merit System Rules and Regulations (Ed Shikada, Rumi Portillo, Molly Stump, Monique LeConge Ziesenhenne, Nick Raisch, Kiely Nose, Gina Roccanova) Employee Organizations: Utilities Management and Professional Association of Palo Alto (UMPAPA); Service Employees International Union, (SEIU) Local 521; Service Employees International Union, (SEIU) Local 521, Hourly Unit; Palo Alto Police Officers Association REVISED 2 May 4, 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. (PAPOA); Palo Alto Fire Chiefs’ Association (FCA) and Employee Organization: International Association of Fire Fighters (IAFF), Local 1319; Palo Alto Police Manager’s Association (PAPMA) Authority: Government Code Section 54957.6(a) Action Item 6:00-6:45 PM 2.Update and Discussion of the COVID-19 Health Emergency and the City's Response Study Session 3.Update to the City's Transportation Analysis Methodology to Comply With Senate Bill 743, Including use of Vehicle Miles Traveled (VMT) for California Environmental Quality Act (CEQA) Review and Level of Service (LOS) Standard for Local Transportation Analysis (THIS ITEM HAS BEEN MOVED TO LATER IN TONIGHT’S AGENDA) Agenda Changes, Additions and Deletions Oral Communications 6:45-7:00 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 7:00-7:05 PM 4.Approval of Action Minutes for the April 13 and 20, 2020 Council Meetings Consent Calendar 7:05-7:10 PM Items will be voted on in one motion unless removed from the calendar by three Council Members. 5.Adoption of Amendments to the City of Palo Alto Tobacco Retail Ordinance (Municipal Code Chapter 4.64) to Further Restrict Electronic Cigarette Products and Flavored Tobacco Products; Direct Staff to Discuss Amending the Tobacco Retail Permit (TRP) Agreement With the County; and Updates to Council's Previous Questions on Reducing Youth Tobacco use 6.Approval of the Acceptance and Appropriation of the State of California Citizens Options for Public Safety (COPS) Funds, and Approval of a Budget Amendment (Requires 2/3 Approval) in the Supplemental Law Enforcement Services Fund 7.Adoption of a Resolution Authorizing Staff to Submit a Cal OES COVID-19 Financial Assistance Application Public Comment Public Comment Q & A Presentation 3 May 4, 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. 8.SECOND READING: Adoption of an Ordinance Temporarily Suspending the Expiration of and Automatically Extending all Planning Entitlements, Building Permits, and Building Permit Applications Valid as of March 16, 2020; the Ordinance Also Suspends and Extends Municipal Code Application Processing Timelines. This Action is Exempt From the California Environmental Quality Act (CEQA) in Accordance With CEQA Guidelines Section 15061(b)(3) (FIRST READING: April 20, 2020 PASSED 7-0) 8A. Review and Approval of the City Auditor Request for Proposals Evaluation Process City Manager Comments 7:10-7:20 PM Action Items Include: Reports of Committees/Commissions, Ordinances and Resolutions, Public Hearings, Reports of Officials, Unfinished Business and Council Matters. 7:20-8:00 PM 9.Adoption of a Resolution Waiving the Business Registration Fee Including Late Fees for Calendar Year 2020; Adoption of a Resolution Rescinding the Levy of Assessments for the Downtown Business Improvement District (BID) for Fiscal Year (FY) 2020; and Approval of the Reimbursement of Business Registration Fees and BID Assessments Due in 2020 8:00-8:45 PM 10.Review of the Potential Financial Scenarios due to the Current COVID- 19 Emergency and Direction to Staff on the Continued Development of the Fiscal Year (FY) 2021 Budget 8:45-9:30 PM 11.Staff Update and Request for Direction on the Details of a Small Business Grant Program Including Grant Amounts, Eligibility and Selection Criteria, Donor Involvement, and Allocation of City Funds in the amount of $500,000 Study Session 9:30-10:30 PM 3.Update to the City's Transportation Analysis Methodology to Comply With Senate Bill 743, Including use of Vehicle Miles Traveled (VMT) for California Environmental Quality Act (CEQA) Review and Level of Service (LOS) Standard for Local Transportation Analysis Council Member Questions, Comments and Announcements Members of the public may not speak to the item(s) Public Comment Public Comment Presentation Presentation Presentation Presentation 4 May 4, 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. 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. 5 May 4, 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 May 5, 2020 Schedule of Meetings Schedule of Meetings Tentative Agenda Tentative Agenda Informational Report Proclamation of the Council of the City of Palo Alto Honoring William Warrior Upon his Retirement 2019 Annual Palo Alto Airport Noise Report Identifying Noise Trends in the Surrounding Areas and Determining Compliance With Established Voluntary Noise Abatement Procedures Public Letters to Council Set 1 6 May 4, 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. Public Comment Instructions Members of the Public may provide public comments to teleconference meetings via email, teleconference, or by phone. 1. Written public comments may be submitted by email to city.council@cityofpaloalto.org. 2. Spoken public comments using a computer will be accepted through the teleconference meeting. To address the Council, click on the link below to access a Zoom-based meeting. Please read the following instructions carefully. A. You may download the Zoom client or connect to the meeting in- browser. If using your browser, make sure you are using a current, up-to-date browser: Chrome 30+, Firefox 27+, Microsoft Edge 12+, Safari 7+. Certain functionality may be disabled in older browsers including Internet Explorer. B. You may be asked to enter an email address and name. We request that you identify yourself by name as this will be visible online and will be used to notify you that it is your turn to speak. C. When you wish to speak on an Agenda Item, click on “raise hand.” The Clerk will activate and unmute speakers in turn. Speakers will be notified shortly before they are called to speak. D. When called, please limit your remarks to the time limit allotted. E. A timer will be shown on the computer to help keep track of your comments. 3. Spoken public comments using a smart phone will be accepted through the teleconference meeting. To address the Council, download the Zoom application onto your phone from the Apple App Store or Google Play Store and enter the Meeting ID below. Please follow the instructions B-E above. 4. Spoken public comments using a phone use the telephone number listed below. When you wish to speak on an agenda item hit *9 on your phone so we know that you wish to speak. You will be asked to provide your first and last name before addressing the Council. You will be advised how long you have to speak. When called please limit your remarks to the agenda item and time limit allotted. https://zoom.us/join Meeting ID: 362 027 238 Phone No.: 1(669)900-6833 City of Palo Alto (ID # 11209) City Council Staff Report Report Type: Study Session Meeting Date: 5/4/2020 City of Palo Alto Page 1 Summary Title: Senate Bill 743 Implementation Title: Update to the City's Transportation Analysis Methodology to Comply With Senate Bill 743, Including Use of Vehicle Miles Traveled (VMT) for CEQA Review and Level of Service (LOS) Standard for Local Transportation Analysis From: City Manager Lead Department: Transportation Department Recommendation Staff recommends that the City Council receive a presentation on: 1. Updating the City’s transportation analysis methodology to implement Vehicle Miles Traveled (VMT) as the metric for conducting analyses of projects, pursuant to the California Environmental Quality Act (CEQA); and 2. Adopting a Council Policy that establishes a standard for vehicular Level of Service (LOS) analyses, consistent with Program T2.3.1 of the Comprehensive Plan Transportation Element. No formal action is requested at this time. Staff will return to Council in June 2020 with a request for action on a VMT threshold of significance for CEQA analyses and a Level of Service Policy for local-level analyses. Executive Summary This staff report provides background information and summarizes key options staff is considering in developing the City’s compliance with changes to CEQA. The focus of CEQA transportation analyses has shifted due to California Senate Bill (SB) adoptions in 2013 and 2018 (SB 743 and SB 375). The previous focus was on driver delay (Level of Service) at intersections. The new focus is on the reduction of greenhouse gas emissions, creation of multimodal transportation networks, and promotion of a mix of land uses that reduces the need to drive. Palo Alto must adopt an official policy regarding the impact threshold criteria to be applied in CEQA analyses of local development projects by July 1, 2020. Staff is tasked to City of Palo Alto Page 2 consider what VMT reduction level to recommend as a CEQA threshold of significance for Council adoption. For reasons stated herein, including consistency with current state guidance, staff anticipates recommending 15 percent below baseline (existing development) VMT as the CEQA VMT reduction threshold for residential and office projects. Background Senate Bill 743 (2013) Senate Bill (SB) 743 required the Governor’s Office of Planning and Research (OPR) to amend the CEQA guidelines with respect to the analysis of potential transportation impacts using an alternative metric to Level of Service (LOS). The legislative intent of this change is to better balance the needs of congestion management with statewide goals related to infill development, promotion of public health through active transportation, and greenhouse gas (GHG) emission reduction targets per SB 375. The California Air Resources Board (CARB) adopted the State’s current GHG reduction targets at the March 22, 2018 Board Hearing. In late 2018, after more than five years of development and public comment, the California Natural Resources Agency adopted OPR’s recommended updates to the CEQA Guidelines. The updated Guidelines became effective on December 28, 2019. The Guidelines now require agencies to use vehicle miles traveled (VMT) as the metric for CEQA transportation analyses by July 1, 2020. Agencies in California may no longer use LOS as a threshold of significance for performing a CEQA analysis of a proposed project after July 1, 2020, although LOS can still be analyzed for other purposes if desired. OPR has posted video presentations explaining the rationale for the move away from LOS and towards VMT. Staff encourages Councilmembers to view these videos in order as they provide an excellent introduction to this topic: • Problems with LOS – https://tinyurl.com/Problems-with-LOS • Benefits of VMT – https://tinyurl.com/Benefits-of-VMT • Methods for Land Use Projects – https://tinyurl.com/Methods-for-Land-Use-Projects Level of Service and TIRE Index Methods The City of Palo Alto currently uses LOS as the primary method for analyzing potential CEQA transportation impacts for all development projects. The City’s CEQA documents also consider the potential for increases in traffic on roadway segments near projects, known as the Traffic Infusion on Residential Environment (TIRE) index. To comply with SB 743, the City, in collaboration with Fehr & Peers (a subconsultant to City’s consultant AECOM), is reviewing existing local and state planning documents and policies. While staff considers appropriate VMT thresholds of significance for CEQA analyses, staff is also considering the appropriate LOS standards to analyze a project’s consistency with City policy. City of Palo Alto Page 3 Greenhouse Gas Emission Reduction The State of California is focused on VMT to achieve the reduction of GHG emissions over time. Recently, the California Air Resources Board (CARB) found that emissions from statewide passenger vehicle travel per capita were increasing. CARB determined that it will not be possible to achieve the State’s 2030 and post-2030 emissions goals without changes to how communities and transportation systems are planned, alongside reductions in single- occupancy vehicle travel and reductions in VMT.1 The SB 375 greenhouse gas reduction targets for our region (the Metropolitan Transportation Commission/Association of Bay Area Governments) were set in 2013 and 2018 as follows: To achieve a 19 percent GHG reduction, the State is promoting the creation of multimodal transportation networks and a finer mix of land uses. And, as noted, the State is requiring jurisdictions to establish a VMT threshold prior to July 1, 2020. Council must establish a VMT threshold of significance for CEQA analyses; however, the Comprehensive Plan directs staff to retain Level of Service as a factor in the City’s consideration of development projects, separate from CEQA. VMT Reduction Threshold and Sustainability and Climate Action Plan Based on the OPR technical advisory document and consistent with other jurisdictions, staff anticipates recommending 15 percent (below existing development VMT) as the CEQA VMT reduction threshold for residential and office projects. Staff’s likely recommendations for initial VMT thresholds to be applied as of July 1, 2020 are consistent with current State guidance. VMT threshold adoption is a necessary first step in a series of Council actions related to transportation in the coming year. Following the 2020 Sustainability and Climate Action Plan (S/CAP) Update, Council will have a 1 California Air Resources Board (Nov. 2018) 2018 Progress Report on California’s Sustainable Communities and Climate Protection Act, pp. 4, 5, 28 available at https://ww2.arb.ca.gov/sites/default/files/2018- 11/Final2018Report_SB150_112618_02_Report.pdf. City of Palo Alto Page 4 chance to again review and adjust the CEQA thresholds to align with S/CAP goals or policies. More detailed information on the S/CAP Update Process is available in a Staff Report to Council in April 2020 (CMR #11201; https://tinyurl.com/SCAP-Update-SR). After Council adopts VMT thresholds in compliance with SB 743 and a Level of Service policy, staff intends to embark upon step 2. That is, staff will bring forward a Transportation Demand Management (TDM) Ordinance, which will include mitigation policies and a menu of mitigation measures for Council consideration. The TDM Ordinance will define VMT reduction and monitoring approaches consistent with CEQA and the City’s Comprehensive Plan. Discussion To assist agencies in establishing a significance threshold and metrics for VMT analysis, OPR issued a guidance document, Technical Advisory on Evaluating Transportation Impacts in CEQA (https://bit.ly/3e32RU9). Staff derived many of the options for establishing a VMT threshold in the City of Palo Alto from this technical advisory document. Staff requests Council consideration in three key areas: methodology/metrics, screening criteria, and thresholds. A Note about Methodology and Metrics Staff has explored options for establishing methodologies and metrics to analyze transportation impacts under CEQA after July 1, 2020. A methodology is the way VMT will be calculated and metrics are the way VMT is measured and reported. Council will not be required to adopt a specific methodology or VMT metric for every CEQA analysis. That is, because the most appropriate methodology or metric varies depending on the proposed land use or type of project, a methodology or metric for a land use plan would be different than for a specific development project. Furthermore, different development projects could require different methodologies and metrics. The information presented at the end of this report provides Council with an understanding of how staff would approach most development projects including residential, office, and retail uses. More detailed information on methodology and metrics can be found in Attachment A. Screening OPR recommends a screening process for project types known to be low VMT generators. Projects that meet screening criteria can be determined to have a less than significant VMT impact without conducting a quantitative VMT analysis unless there is information indicating that the project is unique in some way that determines it may not be a low VMT generator. The City could choose to screen out some, or all, of these project types to enable only a qualitative discussion in their associated CEQA documents. This assumes that cumulative VMT impacts are consistent with long-term air pollution and GHG reduction expectations. This screening approach would enable project streamlining by eliminating the need to prepare a quantitative analysis for low VMT-generating projects that meet the screening criteria. OPR’s Technical Advisory document includes the following list of project types presumed to have a City of Palo Alto Page 5 ‘less than significant’ impact on VMT and that the City may choose to screen: • Small Projects – Projects that generate or attract fewer than 110 trips per day. Based on research for small project triggers, this may equate to nonresidential projects of 10,000 square feet or less and residential projects of 20 units or less. • Projects Located in Low-VMT Areas – Residential and office projects located in low-VMT areas that incorporate similar features to the nearby developments (i.e., density, mix of uses, and transit accessibility) on the basis that the project will exhibit similar, low VMT. • Projects in Proximity to a Major Transit Stop – Projects that are located within a half mile of an existing or planned high-quality transit corridor or major transit station. This includes the existing Downtown Palo Alto Caltrain station, the California Avenue Caltrain station, and bus stops for bus routes with headways of 15 minutes or less. OPR identifies additional criteria that must be met to make this determination, including high density (minimum floor area ratio of 0.75), parking supply (i.e., less than required based on City code), consistency with Plan Bay Area 2040 (http://2040.planbayarea.org/), and no effect on existing affordable residential housing. • Affordable Housing – Residential projects containing a specific amount of affordable housing (based on local circumstances and substantial evidence as determined by the City); this is on the basis that affordable housing generates less VMT than market-rate housing. Affordable housing located within infill locations generally improves jobs- housing balance and may thus result in shorter commutes for low-income workers. • Local-Serving Retail Projects – The City of Palo Alto may also screen local-serving retail projects of less than 50,000 square feet, on the basis that they attract trips that would otherwise travel longer distances. Staff would evaluate both the project characteristics and the context of the project location to determine whether a given retail project is local-serving. Regional-serving retail projects would not be subject to screening. • Transportation Projects – Transit projects, bicycle and pedestrian projects, and roadway projects that do not result in an increase in vehicle capacity or VMT. When staff returns to Council in June, the Council will need to determine which, if any, of the above screening conditions could apply to future development projects, exempting them from quantitative VMT analyses that will likely show a less-than-significant impact. Screening of such projects would be supported by a qualitative discussion of the project, including its site and location characteristics. The discussion would support the conclusion that a given project is a low VMT generator and can be screened from a quantitative VMT assessment. City of Palo Alto Page 6 Threshold OPR’s technical advisory document recommends thresholds that vary by project and land use type. The thresholds are generally based on applying Total VMT or VMT efficiency metrics. For residential and office projects, OPR indicates that a “per capita or per employee VMT that is 15 percent below that of existing development may be a reasonable threshold.” The recommended OPR thresholds are based on substantial evidence that aligns CEQA transportation analysis to meet statewide targets for GHG emission reductions. This overarching goal is consistent with the City’s Comprehensive Plan 2030. The Comp Plan includes several goals and policies that strive to reduce GHG emissions and air quality impacts, reduce single-occupancy vehicle use, and encourage multi-modal transportation. The City’s Sustainability and Climate Action Plan (S/CAP) Framework has GHG emission reduction goals that are more aggressive than state goals. The 15 percent VMT reduction target could be refined in the future to reflect GHG emission reduction goals in the S/CAP that will be completed in 2021. In order to align the City with current state VMT reduction targets before July 1, 2020, staff anticipates recommending Council adopt initial thresholds consistent with OPR’s recommendations. For individual land use projects that are not screened out and require a quantitative VMT assessment, this would mean the following: • Residential Projects – A proposed project exceeding a level of 15 percent below existing (baseline) home-based VMT per resident would indicate a significant transportation impact. • Office Projects – A proposed project exceeding a level of 15 percent below existing (baseline) regional home-based work VMT per employee would indicate a significant transportation impact. • Retail projects – A proposed project that results in a net increase in total VMT would indicate a significant transportation impact. • Mixed-Use Projects – The City will apply one of the above residential, office, or retail thresholds for mixed-use projects with a dominant use. If there is more than one primary land use type, each of the primary land uses would be evaluated independently by applying the relevant threshold above. • Other Project Types – The City will either develop an ad hoc (i.e., project-specific) VMT threshold for a unique land use type or apply the most applicable of the above thresholds depending on project characteristics. • Redevelopment Projects – Where a project replaces existing VMT-generating land uses, if the replacement leads to a net overall decrease in VMT, the project would cause a less City of Palo Alto Page 7 than significant VMT impact. If the redevelopment project leads to a net overall increase in VMT, it would cause a significant VMT impact. When applying the above thresholds, a project’s VMT is compared to a baseline VMT value that is typically either a citywide or regional average for a land use type. The baseline VMT represents existing conditions and estimated changes over time. The values presented below represent conditions of the 2015 baseline year. As VMT assessments are conducted over the coming years, the VMT baseline values will be updated. VTA has provided baseline VMT data from the VTA travel demand model for residential and office uses at both the Palo Alto citywide and Santa Clara countywide scales. This data provides an indication of VMT characteristics for residential and office uses in the city, compared to the county average, which is similar to the regional average. As seen in the table below, residential uses in Palo Alto generate about 29 percent less VMT per capita than the county (or regional) average. Office uses in Palo Alto generate similar VMT per employee as the county (or regional) average. Consistent with the Council’s stated objective to facilitate the implementation of new housing and integration of jobs, staff anticipates recommending that the VMT baseline for residential uses be measured against the regional VMT per capita, and offices uses be measured against the regional VMT per employee. This recognizes that residential uses in Palo Alto are generally low VMT generators because it places housing in closer proximity to jobs, and therefore would be less likely to result in a significant VMT impact. 2015 Baseline VMT Palo Alto Santa Clara County Home-Based VMT Per Capita 9.48 13.33 Employment-Based VMT Per Employee 16.71 16.64 The City is currently preparing an update to its S/CAP. As a leader in climate action, the City of Palo Alto is likely to update its S/CAP to establish more stringent targets for GHG and air emission reductions beyond the state targets. Because of the pressing state deadline for establishing a VMT threshold, and because the City’s S/CAP update is still in progress, staff anticipates returning to Council before July 1, 2020 and recommending that Council adopt thresholds that are consistent with the state’s recommendations. However, upon completion of the S/CAP, staff would return to the Council. Council could then determine if the City’s VMT thresholds should be revised to better align with the City GHG reduction goals, based on the target reductions identified in CEQA analysis for the S/CAP and the adopted S/CAP. Mitigation Options If a project is determined to result in a significant VMT impact, it requires the identification of mitigation measures to avoid or substantially reduce these effects. City of Palo Alto Page 8 The most common strategies for mitigating VMT impact are to: 1) change the project land use mix or density, 2) reduce proposed vehicle parking supply levels, 3) implement on-site or off- site capital improvements for transit, bicycle, or pedestrian travel, and/or 4) implement trip reduction programs as described in a Transportation Demand Management (TDM) program. TDM programs can include several components such as telecommuting, transit subsidies, shuttles, carpool matching, parking cash-out programs, and unbundled parking. Mandated in the City’s current Municipal Code and further defined in the City’s Comprehensive Plan Policy T1.2.3, is the following TDM requirement for certain projects: A project is subjected to a specific percentage reduction in peak hour motor vehicle trips using TDM measures if the project: • generates 50 or more net new peak hour trips, or • claims a reduction in net new trips due to proximity to public transit, or • requests a parking reduction. After adoption of changes in the City’s transportation analysis methodology and process to comply with SB 743, staff will return to Council with a TDM Ordinance. The ordinance will include mitigation measures designed to effectively reduce VMT and a monitoring structure to ensure projects with TDM plans remain compliant with CEQA. Level of Service (LOS) Analysis Palo Alto’s Comprehensive Plan Program T2.3.1 states, “When adopting new CEQA significance thresholds for VMT for compliance with SB 743 (2013), adopt standards for vehicular LOS analysis for use in evaluating the consistency of a proposed project with the Comprehensive Plan, and also explore desired standards for MMLOS, which includes motor vehicle LOS, at signalized intersections.” While agencies may no longer use LOS as a threshold for CEQA analysis, the City intends to retain LOS as a metric for analyzing projects subject to CEQA in conformance with Policy T2.3 and Program T2.3.1. For more background information on LOS, the Council had a study session in 2016 on LOS (https://www.cityofpaloalto.org/civicax/filebank/documents/53796) Currently, the City follows methods and metrics for analyzing LOS like those set forth in VTA’s Congestion Management Program (CMP). Staff will return to Council in June with this information together with a proposed LOS policy for the Council’s consideration, while staff presents recommended VMT screening criteria and significance thresholds under CEQA. VMT Methodology and Metrics City of Palo Alto Page 9 Methodology This section is provided as background to understanding VMT methodology and metrics. Aside from screening, Council will not be asked to approve methodology or metrics since these may vary from project to project. CEQA requires environmental analyses to reflect a “good faith effort at full disclosure.” Lead agencies should not truncate any VMT analysis because of jurisdictional or other boundaries. For example, agencies should not fail to count the portion of a trip that falls outside the jurisdiction or discount the VMT from a trip that crosses a jurisdictional boundary. Thus, where existing methodologies can estimate the full extent of vehicle travel from a project, CEQA specifies that a lead agency should apply them to do so. The following describes both a screening methodology and a quantitative VMT evaluation methodology. • Screening Methodology: To identify projects that could be screened from a quantitative VMT analysis, the Santa Clara Valley Transportation Authority (VTA) is leading the development of a web-based, Santa Clara Countywide VMT Estimation Tool. This tool will provide the basis for identifying Palo Alto land uses that are low VMT generators and/or within a transit priority area. Such uses could thus be screened out from preparing a quantitative VMT analysis. For projects that are screened out, the City would provide a qualitative discussion of the project characteristics. The qualitative discussion would form the basis for determining that the project is presumed to have a less than significant VMT impact. The VTA’s estimation tool is an effort to streamline the process by determining whether a project is likely to result in significant VMT impacts. Staff anticipates the tool will be complete and available for use by July 1, 2020. More information on the VMT Estimation Tool can be found in Attachment B. • Quantitative Methodology: For larger or more unique land development projects that are not screened out, a travel demand model of regional scope should be used to develop quantitative VMT forecasts. A model allows for a more complete accounting of all vehicle trips and trip lengths. A model can produce estimates for the project’s cumulative impacts on VMT that account for changes in behavior. These models can also account for the potential induced travel effects of a project on VMT. For Palo Alto, this would mean using either the Santa Clara Valley Transportation Authority (VTA) or Metropolitan Transportation Commission (MTC) travel models. The VTA model has a substantially more refined transportation network in the City of Palo Alto than the MTC model does. Therefore, the VTA tool would be a preferred tool for most projects. City of Palo Alto Page 10 Due to the level of effort involved in creating and maintaining its own forecasting model, staff anticipate utilizing: • The VTA travel model for preparing quantitative VMT forecasts for large or unique projects, and • The VTA VMT estimation tool for screening land use projects that would be low VMT generators and/or projects located in a transit priority area and thus presumed to have a less than significant impact. Metrics The City may assess projects based on a preferred form of the VMT metric. The following section discusses two options for measuring VMT and several options for reporting VMT where a quantitative estimate of VMT is required for a project. The metric that will be applied for CEQA studies will depend on the type of project evaluated, its scale, and characteristics. There are two options for measuring or calculating VMT: project-generated VMT (which measures total or partial amount of travel to and from the project) and project’s effect on VMT (which measures how the project changes travel in a given geographic area, typically at a city, county, or regional scale, also known as “boundary VMT”). Each VMT metric typically requires the use of a travel forecast model. Project-generated VMT measures the amount of vehicle travel generated by a project (i.e., number of vehicle trips multiplied by their corresponding trip lengths). These calculations are usually performed using outputs from a travel forecasting model. A total project-generated VMT metric is often calculated for land use projects as a key input to CEQA analyses of air quality, GHG, and energy impacts. A partial project-generated VMT metric is often used for screening of certain land use types such as residential and office uses. Project’s effect on VMT is measured by comparing all VMT on roadways within a selected area or boundary (i.e., city, county, or region) for scenarios without and with a project or plan. It is forecasted using a travel demand model and provides a more complete evaluation of the potential effects of land use projects or a land use plan. It captures the combined effect of new VMT, shifting of existing VMT to/from other neighborhoods, and/or shifting of existing VMT to alternate travel routes or modes. Projects’ effect on VMT would be evaluated for retail uses and large development projects that would result in a significant change in the city’s jobs-housing balance. A project’s effect would be evaluated to measure potential VMT impacts for transportation projects that add roadway capacity or otherwise induced vehicle travel. It is also the approach that would be used where a cumulative analysis of VMT is required, likely for office or regional-serving commercial uses. There are also several options for reporting VMT: City of Palo Alto Page 11 • total VMT, • partial VMT (i.e., only light duty vehicles, by trip purpose), and • VMT as an efficiency metric (i.e., VMT per capita). New land use projects accommodate population and employment growth; this growth generates new VMT (i.e., a new office building resulting from a land use rezone will generate new vehicle trips and VMT). Whether a project contributes to a more efficient land use pattern (i.e., one that requires less vehicle travel compared to similar land uses) can be determined by using a VMT efficiency metric. Efficiency metrics express this total increase in VMT relative to the increase in residents and employees (VMT per resident, or VMT per worker). Total VMT metrics include all types of VMT captured by a travel forecasting model, regardless of the type of vehicle or the trip’s purpose. In practice, this means the metric includes visitor trips, medium-duty and heavy-duty vehicles, public transit buses, and other types of vehicle miles, miles that might not be captured in the most common partial VMT metrics. Total VMT is a metric that would be estimated for retail and potentially large mixed-use projects, land use plans (i.e., Comprehensive Plan, Specific Plans, etc.), and transportation projects. Such projects would require a quantitative VMT assessment and have the potential to influence vehicle travel associated with neighboring land uses and/or displace other existing trips within the region. Partial VMT is a metric that involves combining only a subset of the VMT generated by vehicle trips, vehicle types, land uses, and/or trip purposes associated with a land development project. Examples include accounting only for: • light-duty vehicles (as recommended by OPR for residential and office uses), • trips made between home and work (as recommended by OPR for office uses), or • trips associated with a dominant land use type for a multi-use project. The following VMT efficiency metrics (i.e., VMT per capita) are recommended by OPR for residential and office projects. The VTA’s VMT tool provides existing VMT values for the following VMT efficiency metrics by city. The VTA model can be used to provide a project specific estimation of these VMT metrics for future projects in Palo Alto. • Home-based VMT per resident (residential projects) reflects how close households are to common destinations, as well as the available transportation options. The trip type is specific to local residents, and it helps to compare residential projects across different locations. This method answers the question, “Do people living here drive more or less on average compared to other places?” City of Palo Alto Page 12 • Home-based VMT per employee (office projects) reflects how close a workplace is to places where employees live. The trip type is specific to work trips, and it helps to compare employment projects across different locations. This method answers the question, “Do people working here drive more or less during their commutes compared to workers in other places?” For most single-use projects, using a VMT efficiency metric is the most straightforward way to analyze project VMT, and is the metric recommended by OPR in its technical advisory document. Policy Implications The City’s Comprehensive Plan 2030 already acknowledged and incorporated the regulatory changes mandated by SB 743. While the Comprehensive Plan noted that VMT would be used as the metric for analyzing potential transportation impacts under CEQA, the Plan directed staff to adopt LOS standards (and consider multi-modal LOS standards) to analyze the potential for local-level project impacts. Resource Impact This work to develop SB 743 methodology, thresholds, and TDM/mitigation measures is funded through the current S/CAP consultant contract with AECOM. (Fehr & Peers is subconsultant to AECOM.) Transitioning to the use of the VMT metric and thresholds would likely involve the use of the forthcoming VTA VMT estimation tool and staff training. Along with other jurisdictions in Santa Clara County, the City paid additional Congestion Management Program (CMP) dues to VTA in Fiscal Year 2020 (FY20) toward development of the VMT tool and will pay VTA for a license to use the VMT tool. Training costs would be absorbed by the Office of Transportation and Planning and Development Services Department. The cost of performing VMT and other environmental analysis under CEQA for private development projects would be billed to applicants in accordance with the City’s standard application review cost recovery process. Timeline Staff will work with its consultant to further study VMT thresholds. Staff will return to Council before July 1, 2020 with a recommendation and resolution to adopt screening criteria and VMT thresholds in compliance with SB 743 and a LOS policy. The timeline for Council review and discussions of a Transportation Demand Management Ordinance and mitigation measures will follow in the fall. Following S/CAP Update adoption, staff will return to Council for direction on whether to adjust CEQA thresholds to align with S/CAP policies. Environmental Review The adoption of a new transportation threshold of significance under the California City of Palo Alto Page 13 Environmental Quality Act (CEQA) in accordance with CEQA Guidelines Section 15064.7 does not require environmental review and is not a “project” pursuant to State CEQA Guidelines Sections 15060 (c)(3) and 15378. The establishment and implementation of a VMT threshold is a state-mandated requirement under SB 743 and Section 15064.3 of the CEQA Guidelines. Attachments: Attachment A: SB 743 Summary Memo for Council Study Session (PDF) Attachment B: Santa Clara Countywide VMT Estimation Tool (PDF) 332 Pine Street | 4th Floor | San Francisco, CA 94104 | (415) 348-0300 | Fax (415) 773-1790 www.fehrandpeers.com Memorandum Date: April 17, 2020 To: Sylvia Star-Lack and Joanna Chan, City of Palo Alto From: Bob Grandy, Daniel Rubins, and Teresa Whinery, Fehr & Peers Subject: Summary of Key Decisions for SB 743 Implementation in the City of Palo Alto – for May 4 City Council Study Session SF20-1094 This memorandum summarizes the key decisions that are required for implementation of Senate Bill (SB) 743 within the City of Palo Alto. SB 743 eliminates the use of automobile delay from the CEQA environmental review process and the determination of CEQA transportation impacts. The new metric required by the CEQA Guidelines is vehicle-miles traveled (VMT). The shift from automobile delay to VMT changes the focus of transportation impact analysis in CEQA from measuring impacts to drivers, to measuring the impact of driving. SB 743 takes full effect on July 1, 2020; after that time, all transportation impact analysis for CEQA must rely on VMT. CEQA Statute Section 21099(b)(2) states that upon certification of the 2018 CEQA Guidelines, LOS shall not be considered a significant impact on the environment. CEQA transportation studies should continue to evaluate the effect of a project on transit, pedestrian, and bicycle service or facilities as well as safety. As described in this memorandum, SB 743 has ramifications for a range of City processes, including but not limited to the CEQA process, the entitlements review process, and the traffic impact fee. Key Decisions for SB 743 Implementation Changing the metric used to determine significant transportation impacts requires the City to provide guidance to project sponsors and environmental consultants on the following items: • Metrics, or how VMT is presented; • Screening, or determining which projects require quantitative or qualitative VMT analysis; Key Decisions for Palo Alto SB 743 Implementation April 17, 2020 Page 2 of 17 • Methods, or how VMT will be calculated; • Thresholds, or how much VMT is determined to have a significant impact on the environment; and, • Mitigation Options, or how project sponsors can address significant VMT impacts related to their projects. In addition, each of the above decisions must include guidance related to three separate project types: • Land Use Projects, including development projects for a variety of land uses; • Land Use Plans, including future Comprehensive Plan updates and future Specific Plans, Area Plans, and Precise Plans; and, • Transportation Projects, including infrastructure changes, lane additions or removals, bicycle and pedestrian facilities, etc. This memorandum describes alternative approaches to applying VMT as a CEQA transportation metric because the most appropriate method, metric, screening approach, threshold, and mitigation varies depending on the land use or type of project. The information presented provides an understanding of how the City of Palo Alto would approach most land use project types including residential, office, and retail land use projects. Metrics The City of Palo Alto may assess projects based on a preferred form of the VMT metric. There are two options for measuring VMT (project-generated VMT and the project’s effect on VMT) and several options for reporting VMT, includes total VMT, partial VMT (such as VMT disaggregated by trip purpose), or VMT as an efficiency metric (such as VMT per resident). There are two primary metrics for measuring VMT of a given project or geographic area: project- generated VMT, or the total amount of travel to and from the project, and the project’s effect on VMT, or the way a project changes travel in a given geographic area (this is also known as “boundary VMT”). A more detailed description of each metric is provided below. Figure 1 illustrates the difference between these two types of VMT. Project-generated VMT measures the amount of all vehicle type travel generated by a project (i.e., number of vehicle trips multiplied by their corresponding trip lengths). This is the VMT metric that is currently calculated for land use projects as a key input to CEQA air quality, GHG, and Key Decisions for Palo Alto SB 743 Implementation April 17, 2020 Page 3 of 17 energy assessments. This VMT metric will be measured to determine transportation impacts for certain land use types such as residential and office uses, as well as provide inputs to a project’s air quality, GHG, and energy assessments. Project’s effect on VMT is measured by comparing all VMT on roadways within a selected area or boundary for scenarios without and with a project or plan. It is forecast using a travel demand model and provides a more complete evaluation of the potential effects of certain land use projects or an area plan because it captures the combined effect of new VMT, shifting of existing VMT to/from other neighborhoods, and/or shifting of existing VMT to alternate travel routes or modes. Project effect on VMT would be evaluated for retail uses and large development projects that would result in a significant change in the city’s jobs-housing balance. It would be evaluated to measure potential VMT impacts for transportation projects that add roadway capacity. It is also the approach that would be used where a cumulative analysis of VMT is required, likely for office or regional-serving commercial uses. This metric the effect a project would have on the way all people travel in a selected area (i.e., either a citywide, countywide, or regional scale). It can also provide an indication of whether there would be a net increase or net decrease in VMT if a land use project was built in a different location. There are also several ways to report VMT. New land use projects accommodate population and employment growth; this growth generates new VMT (e.g., a new office building resulting from a land use rezone will generate new vehicle trips and VMT). Whether a project contributes to a more efficient land use pattern (i.e., one that requires less vehicle travel compared to similar land uses) can be determined by using a VMT efficiency metric. Efficiency metrics express this total increase in VMT relative to the increase in residents and employees (VMT per resident, or VMT per worker). Total project-generated VMT as a stand-alone metric tends to be more relevant as an input to air quality, GHG, and energy consumption impact analysis. Total VMT is a metric that would be estimated for retail and potentially large mixed-use projects, land use plans (i.e., Comprehensive Plan, Specific Plans, etc.), and transportation projects that require a quantitative VMT assessment and have the potential to influence vehicle travel associated with neighboring land uses and/or displace other existing trips within the region. Partial VMT is a metric that involves combining only a subset of the VMT generated by vehicle trips, vehicle types, land uses, and/or trip purposes associated with a land development project. Examples include accounting only for light-duty vehicles (as recommended by OPR for residential and office uses), only for trips made between home and work (as recommended by OPR for office uses), or only for trips associated with a dominant land use type for a mixed-use project. Measuring Vehicle Miles Traveled (VMT) Figure 1 Project Limits/Jurisdiction Limits Notes: External to External (XX) trips are excluded from this VMT metric. Adjustments to project generated VMT made to include the full length of trips that leave the jurisdiction to capture inter-jurisdiction travel. 1 2 3 Project Generated VMT 4 Project Effect on VMT (Boundary VMT) Notes: Boundary VMT is all the VMT on the streets within the Project Limits / Jurisdiction Limits. External to Internal (XI) VMT Internal to External (IX) VMT Internal to Internal VMT1 2 3 External to External (XX) VMT4 External to Internal (XI) VMT Internal to External (IX) VMT 2x Internal to Internal (2xII) VMT1 2 3 External to External (XX) VMT4 Project Limits/Jurisdiction Limits 3 1 2 4 Key Decisions for Palo Alto SB 743 Implementation April 17, 2020 Page 5 of 17 VMT efficiency metrics can be further disaggregated into specific types of VMT and populations, such as considering only the VMT generated by residents making trips to and from home. Each of the VMT efficiency metrics listed below addresses a slightly different question in terms of impact analysis. • Home-based VMT per resident reflects how close households are to common destinations, as well as the available transportation options. Because the trip type is specific to local residents, it helps compare residential projects across different locations. However, it omits many different trip types and is considered a “partial” VMT metric. Answers the question: Do people living here drive more or less on average compared to other places? • Home-based work VMT per employee reflects how close a workplace is to places where employees live. Because the trip type is specific to work trips, it helps compare office or other employment projects across different locations. However, it omits many different trip types, and is considered a “partial” VMT metric. Answers the question: Do people working here drive more or less during their commutes compared to workers in other places? • Total project-generated VMT per service population provides a more comprehensive understanding of VMT than the home-based or home-based work partial VMT metrics. By taking the total VMT to and from a project or zone and dividing it by the total number of residents plus the total number of employees, we can compare how VMT intensive the project is as a whole. One caveat for total VMT per service population is that employment-based uses generate more total VMT than non-employment uses, so projects with more employment may have a higher VMT rate by this metric. Further, the VMT associated with employees also includes VMT generated by visitors and customers. Retail and commercial land uses, therefore, generate disproportionately higher levels of VMT per employee. Answers the question: Is this area or project as a whole more or less VMT intensive than other places? For most single-use projects, using one of the partial VMT efficiency metrics (home-based trips per resident, for example) is the simplest way to analyze the VMT generated by a project for screening purposes. This is also the method recommended by the Office of Planning and Research (OPR) in its Technical Advisory.1 If a project is not screened out of VMT impact analysis and thereby determined to result in a less than significant VMT impact, then a complete VMT analysis should be performed. 1 http://opr.ca.gov/docs/20190122-743_Technical_Advisory.pdf Key Decisions for Palo Alto SB 743 Implementation April 17, 2020 Page 6 of 17 Screening OPR recommends a screening process for project types known to be low VMT generators. The City of Palo Alto may choose to screen projects based on one or more of the OPR criteria described in more detail below, requiring only a qualitative discussion in the CEQA document. This screening approach would enable project streamlining by eliminating the need to prepare a quantitative VMT analysis for low VMT-generating projects that meet the screening criteria. This is most appropriate for projects that are consistent with the Comprehensive Plan and/or those that would reduce VMT based on their characteristics. As with all CEQA screening, an impact presumption of less-than-significant should be based on substantial evidence for the project. The OPR Technical Advisory includes suggested methods for screening projects to quickly identify when a project should be expected to cause a less than significant VMT impact without conducting a detailed VMT analysis. The OPR Technical Advisory suggests that lead agencies may screen out VMT impacts for small projects, residential and office projects located in low-VMT areas, projects located in proximity to a major transit stop, affordable housing developments, local-serving retail projects of less than 50,000 square feet, and transportation projects that would not result in an increase to vehicle capacity. Since land use plans affect a larger area and serve as the basis for environmental analysis of future projects, all land use plans (including the Comprehensive Plan, Precise Plans, and Specific Plans) should conduct a quantitative VMT analysis and not utilize screening. Screening for Small Projects The City of Palo Alto may choose to screen projects that generate or attract fewer than 110 trips per day. Based on research for small project triggers, this may equate to nonresidential (e.g., office) projects of 10,000 square feet or less and residential projects of 20 units or less. Screening for Projects Located in Low-VMT Areas The City of Palo Alto may choose to screen residential and office projects located in low-VMT areas that incorporate similar features to the nearby developments (i.e., density, mix of uses, and transit accessibility) on the basis that the project will exhibit similarly low VMT. Screening for Projects in Proximity to a Major Transit Stop The City of Palo Alto may choose to screen projects that are located within a half mile of an existing or planned high-quality transit corridor or major transit station. Proximity to transit is Key Decisions for Palo Alto SB 743 Implementation April 17, 2020 Page 7 of 17 explicitly listed in the CEQA Guidelines as a reason to presume a project has no significant impacts based on VMT. In Palo Alto, this includes the existing Downtown Palo Alto Caltrain station and at stops for bus routes with headways of 15 minutes or less. The OPR Technical Advisory notes that a presumption of less than significant should not be applied, and a VMT analysis should be performed, if the project: • Has a Floor Area Ratio (FAR) of less than 0.75 • Includes more parking than required by the City of Palo Alto • Is inconsistent with Plan Bay Area • Replaces affordable residential units with a smaller number of moderate- or high-income residential units If any of the above conditions apply, a detailed VMT analysis should be conducted to determine whether the project exceeds the VMT thresholds. Screening for Affordable Housing The City of Palo Alto may choose to screen residential projects containing a particular amount of affordable housing (based on local circumstances and substantial evidence as determined by the City) on the basis that affordable housing generates less VMT than market-rate housing. Affordable housing located within infill locations generally improves jobs-housing balance and may thus result in shorter commutes for low-income workers. Screening for Local-Serving Retail The City of Palo Alto may choose to screen local-serving retail projects of less than 50,000 square feet, on the basis that they attract trips that would otherwise travel longer distances. Staff would evaluate both the project characteristics and the context of the project location to make a determination as to whether a given retail project is local serving. Regional-serving retail projects would not be subject to screening. Screening for Transportation Projects The City of Palo Alto may choose to screen transit projects, bicycle and pedestrian projects, and roadway projects that do not result in an increase in vehicle capacity or VMT. Key Decisions for Palo Alto SB 743 Implementation April 17, 2020 Page 8 of 17 Methods The City of Palo Alto has discretion to select its preferred method for calculating VMT. The method used for setting VMT impact thresholds must be the same method used for project impact analysis. CEQA requires environmental analyses to reflect a “good faith effort at full disclosure.” Lead agencies should not truncate any VMT analysis because of jurisdictional or other boundaries, for example, by failing to count the portion of a trip that falls outside the jurisdiction or by discounting the VMT from a trip that crosses a jurisdictional boundary. Thus, where methodologies exist that can estimate the full extent of vehicle travel from a project, CEQA specifies that a lead agency should apply them to do so. The following describes both a screening methodology and a quantitative VMT evaluation method. • To identify projects that could be screened from a quantitative VMT analysis, the Santa Clara Valley Transportation Authority (VTA) is leading the development of a web-based countywide Santa Clara Countywide VMT Estimation Tool. This tool will provide the basis for identifying land uses in Palo Alto that are low VMT generators and/or would be located in a transit priority area and could thus be screened out from preparing a quantitative VMT analysis. For projects that are screened out, the City would provide a qualitative discussion of the project characteristics that form the basis for determining that the project is presumed to have a less than significant VMT impact. The VTA’s estimation tool is an effort to streamline the process by determining whether a project is likely to result in significant VMT impacts. It is anticipated to be complete and available for use by July 1, 2020. • For larger or more unique land development projects that are not screened out, a travel demand model of regional scope should be used to develop quantitative VMT forecasts because it allows for a more complete accounting of all vehicle trips and trip lengths, and can produce estimates for the project’s cumulative impacts on VMT that account for changes in behavior. These models can also account for the potential induced travel effects of a project on VMT. For Palo Alto, this would mean using either the Santa Clara Valley Transportation Authority (VTA) or Metropolitan Transportation Commission (MTC) travel models. The VTA model has a substantially more refined transportation network in the City of Palo Alto than the MTC model does and would therefore be a preferred tool for most projects. Key Decisions for Palo Alto SB 743 Implementation April 17, 2020 Page 9 of 17 The VTA travel model may be used to calculate the VMT metrics described above if the project is large enough for the model to be sensitive to changes in land use.2 Ideally, this would consist of calculating total project-generated VMT, total Citywide or County VMT, and VMT per employee/resident/service population for model scenarios with and without the project. Impacts could be assessed based on both efficiency metrics (e.g., home- based VMT per resident) as well as the project’s effect on VMT (the total change between no project and plus project scenarios). Because Palo Alto is located near the edge of the model boundaries, VMT reported by the model should be adjusted to account for VMT that extends beyond the model limits (e.g., from Palo Alto to San Rafael, which is outside the VTA boundary). These adjustments should include adding an average trip length for vehicle trips leaving the model area based on data from the California State Travel Demand Model, the California Household Travel Survey, mobile devices, or the US Census Bureau. Mixed-use projects should be analyzed using the VTA travel model to assess the project’s effect on VMT and report home-based VMT per resident and home-based work VMT per employee for residential and office components, respectively. Home-based VMT per resident may also be useful for other uses with similar travel characteristics, such as hotels or group quarters. Home-based work VMT per employee may be useful for other uses similar to employment, such as schools, universities, etc. Some land use components (retail, restaurant, entertainment) may be assessed qualitatively if they serve primarily local trips. Particularly for retail uses, a qualitative discussion of how the uses would primarily serve local trips may be adequate to determine the project’s effect on VMT. Otherwise, based on guidance in the OPR Technical Advisory, retail projects should be assessed based on the project’s effect on VMT. Some projects may not be large enough for the VTA travel model to be sensitive to the changes they represent, but too large to qualify for small project screening. In these cases, spreadsheet- based methods based on a VMT generation rate for the project’s TAZ may be useful. This method works well when the proposed project is similar to the types of land uses already present in the TAZ (for instance, adding a new multi-family development to a residential zone). If the project is 2 Model calibration and sensitivity testing should occur as part of any analysis involving travel demand model runs. Key Decisions for Palo Alto SB 743 Implementation April 17, 2020 Page 10 of 17 small, and somewhat unique for the area in which it is proposed, additional data may need to be collected. Other alternatives for assessing the VMT effects of smaller projects are to further validate a sub- area travel model (which requires additional time and effort for analysis and may be expensive), or to use a sketch planning tool such as CalEEMod or MXD+ that have been modified to reflect trip generation rates and trip lengths consistent with the VTA travel model used to set thresholds. The determination of whether a project requires a qualitative, sketch-level, or model-level assessment will need to be made during the environmental scoping process. Thresholds OPR’s technical advisory document recommends thresholds that vary by project and land use type. The thresholds are generally based on applying Total VMT or VMT efficiency metrics. The City of Palo Alto has discretion to set its own VMT impact thresholds for land use and transportation projects. A key question that must be addressed as part of choosing this threshold is whether the City’s expectations for VMT reduction align with state goals. State goals are tied directly to greenhouse gas (GHG) reduction goals, which may or may not be shared with the City. Since thresholds must be supported by substantial evidence, the City will need to carefully review state guidance from OPR and CARB about VMT thresholds before making a determination. Further, the Caltrans endorsement of the OPR thresholds is likely to establish the expectation that a state threshold has been set for land use projects that add VMT to the state highway system. The CEQA Guidelines encourage local jurisdictions to adopt significance thresholds intended for general use by resolution or ordinance as part of a public process. Lead agencies also have the option to establish thresholds on a project-by-project basis. The City of Palo Alto will need to identify VMT impact thresholds for land use projects, land use plans, and transportation projects. Adopting these thresholds through a public process improves transparency and can be used to help educate the public and project applicants about the City’s expectations. VMT goals that the City sets should be consistent with other adopted plans. Adopting a VMT threshold is a discretionary action and should be consistent with the Comprehensive Plan in particular. VMT reduction is often a part of policies related to reducing air quality impacts, reducing greenhouse gas emissions, or improving energy efficiency. The City should also reconcile how its adopted VMT threshold would contribute to state goals for GHG reduction and discuss how it is helping to meet these goals. Key Decisions for Palo Alto SB 743 Implementation April 17, 2020 Page 11 of 17 Any CEQA impact threshold should be supported by substantial evidence, which in turn should consist of facts, reasonable assumptions based on facts, and expert opinions supported by facts. The discussion below focuses on the relative substantial evidence available for various threshold options the City may consider. Regardless of the specific threshold the City selects, Palo Alto will still need to consider other substantial evidence related to VMT impacts when analyzing specific projects and making determinations of VMT impact significance.3 Thresholds – Land Use Projects and Plans The state’s guidance on thresholds is presented in the OPR Technical Advisory and the CARB California Air Resources Board 2017 Scoping Plan – Identified VMT Reductions and Relationship to State Climate Goals. The OPR threshold generally requires land use projects to achieve a VMT reduction of 15 percent below the city or regional (e.g., Bay Area or Santa Clara County) baseline average depending on the type of land use. The CARB analysis indicates that this threshold would need to be 16.8 percent for automobile only VMT to achieve state GHG reduction goals. For residential and office projects, OPR indicates that a “per capita or per employee VMT that is 15 percent below that of existing development may be a reasonable threshold.” The recommended OPR thresholds are based on substantial evidence that aligns CEQA transportation analysis to meet statewide targets for GHG emission reductions. This overarching goal is consistent with the City’s Comprehensive Plan 2030. The Comp Plan includes several goals and policies that strive to reduce GHG emissions and air quality impacts, reduce single-occupancy vehicle use, and encourage multi-modal transportation. The City’s current S/CAP has GHG emission reduction goals that are more aggressive than state goals. The 15 percent VMT reduction target may need to be refined to reflect GHG emission reduction goals in the updated S/CAP scheduled for adoption in 2021. In order to align the City with current state VMT reduction targets by July 1, 2020, the City may adopt an initial set of VMT thresholds that are consistent with OPR’s recommendations and update those thresholds later as needed. For individual land use projects that are not screened out and require a quantitative VMT assessment, this would mean the following: 3 One example of this evidence may be the SB 150 report provided by the California Air Resources Board (CARB), which provides evidence that statewide VMT per capita is increasing rather than decreasing. https://ww2.arb.ca.gov/sites/default/files/2018-11/Final2018Report_SB150_112618_02_Report.pdf Key Decisions for Palo Alto SB 743 Implementation April 17, 2020 Page 12 of 17 • Residential projects – A proposed project exceeding a level of 15 percent below existing (baseline) home-based VMT per resident would indicate a significant transportation impact. • Office projects – A proposed project exceeding a level of 15 percent below existing (baseline) regional home-based work VMT per employee would indicate a significant transportation impact. • Retail projects – A net increase in total VMT would indicate a significant transportation impact. This metric reflects the nature of most local-serving retail to distribute existing vehicle trips, rather than generate or induce new vehicle trips. • Mixed-use projects – The City will apply one of the above residential, office, or retail thresholds for mixed-use projects with a dominant use. If there is more than one primary land use type, each of the primary land uses would be evaluated independently by applying the relevant threshold above. • Other project types – The City will either develop an Ad Hoc (i.e., project-specific) VMT threshold for a unique land use type or apply the most applicable of the above thresholds depending on project characteristics. • Redevelopment projects – Where a project replaces existing VMT-generating land uses, if the replacement leads to a net overall decrease in VMT, the project would cause a less than significant VMT impact. If the redevelopment project leads to a net overall increase in VMT, it would cause a significant VMT impact. When applying the above thresholds, project’s VMT is compared to a baseline VMT value that is typically either a citywide or regional average for a land use type. The baseline VMT represents existing conditions and estimated changes over time. The values presented below are for current conditions. As VMT assessments are conducted over the coming years, the VMT Baseline values will be updated. The 15 percent reductions specified in the Technical Advisory are based on light-duty vehicle project generated VMT (i.e., passenger cars and light trucks). They were also included before completion of CARB modeling of MPO regional transportation plan/sustainable communities strategies (RTP/SCSs). The CARB Scoping Plan and Mobile Source Strategy identifies that a 14.3 percent reduction in total VMT or a 16.8-percent reduction in light-duty vehicle VMT per capita from 2018 baseline levels is necessary to meet state GHG reduction goals by 2050. These reduction values are based on a fair share estimate of new development’s responsibility for VMT reduction and presume that all 2050 California residents will be performing at the reduced VMT Key Decisions for Palo Alto SB 743 Implementation April 17, 2020 Page 13 of 17 levels. If existing residents (those present in 2018) do not change their travel behavior and the full reduction in VMT was allocated to new growth, then the reduction goal would be much higher. Further, if VMT per capita trends continue to increase as noted in the 2018 Progress Report California’s Sustainable Communities and Climate Protection Act, California Air Resources Board, November 2018, then these reduction percentage values will have to increase. Also, the recommendation above for mixed-use projects to rely on the ”dominant use” in VMT analysis may present new challenges. The term ”dominant use” is not defined in the CEQA statute or CEQA Guidelines. One other agency threshold to consider is Caltrans. The Local Development-Intergovernmental Review (LD-IGR) Branch at Caltrans (https://dot.ca.gov/programs/transportation-planning/office- of-smart-mobility-climate-change/local-development-intergovernmental-review) has responsibility to reduce potential adverse impacts of local development on the state transportation system. As part of its responsibilities, each district branch performs reviews of CEQA environmental documents for local land use projects. These reviews include providing expectations for transportation impact analysis such as metrics and thresholds. Caltrans released a VMT-Focused Transportation Impact Study Guide (February 28, 2020) that recommends use of the OPR thresholds for land use projects and plans. This guidance did not specify whether to use the 15.0 or 16.8 percent threshold value (both values are included in the OPR Technical Advisory). The Caltrans Guide also mentions that Caltrans may request additional analysis for transportation projects; standards for those projects are discussed in the section below. Setting a threshold lower than the 15-percent reduction recommended by OPR in their Technical Advisory is likely legally defensible, so long as the threshold is supported by substantial evidence. The substantial evidence is critical in the threshold setting process and should explain why the OPR-recommended threshold is not appropriate for the lead agency or project, and why another threshold was selected. This evidence will be the basis for supporting the recommended threshold and should carefully consider the definition of substantial evidence contained Section 15384 of the CEQA Guidelines. Additionally, while this approach would likely result in a more modest (and therefore more feasible) VMT reduction target, feasibility of mitigating an impact is not sufficient justification for setting an impact threshold. Setting a threshold higher than the 15-percent reduction recommended by OPR would be consistent with forecasts in the CARB SB 150 report, which includes evidence that VMT per capita is increasing and, as a result, so are GHG per capita emissions. The thresholds published by CARB Key Decisions for Palo Alto SB 743 Implementation April 17, 2020 Page 14 of 17 and OPR are based on a number of assumptions about future outcomes related to VMT generation of current residents, fuels, electric vehicles, that may not qualify as reasonably foreseeable under CEQA and do not consider the influence of transportation network companies (e.g., Uber and Lyft) and autonomous vehicles (AV) on travel behavior. These sorts of travel trends, if they continue, may contribute to ‘other substantial evidence’ that higher VMT reduction levels must be considered and discussed when making a significance finding. Each of the thresholds above uses a nexus between VMT and GHG to establish substantial evidence. However, future court decisions may indicate that VMT as a metric may be more analogous to prior LOS analysis (i.e., allowing communities to determine what level of VMT change would result in effects that the community finds to be significant, including effects such as increased traffic and noise). If VMT thresholds are treated more like LOS thresholds, then lead agencies would have a similar level of discretion to establish thresholds based on context (i.e., sensitivity to the amount of vehicle travel). Past practice allowed lead agencies to set LOS thresholds based largely on the local community’s sensitivity to travel delay. For example, rural areas that were more sensitive were allowed to establish LOS thresholds that equated to lower levels of delay. Using this analogy, a lead agency could set VMT thresholds based on a community’s sensitivity to the amount of vehicle travel or its associated effects. Thresholds – Transportation Projects OPR and Caltrans recommend that a net increase in total VMT may indicate a significant impact for transportation projects. A net decrease or no change in VMT would be evidence of a less than significant VMT impact. Projects that reduce or have no impact on VMT include most active transportation projects, road diets, and minor operational changes to local roadways. However, capacity increases (i.e., lane additions) on arterial roadways or roadways that carry regional traffic have the potential to induce new vehicle traffic, and therefore new VMT. As an example, adding an additional lane on an arterial roadway that reduces delay, may make driving even more competitive than walking, and shift some trips from walking to driving. The no net new VMT threshold is the threshold preferred by Caltrans for assessment of impacts to Caltrans facilities and recommended in the OPR Technical Advisory. As a threshold, it is also reflective of whether a project simply improves operations for existing users (decreasing delay or improving safety with no change in VMT) or if it also results induces demand for driving. Key Decisions for Palo Alto SB 743 Implementation April 17, 2020 Page 15 of 17 Mitigation Trip reduction measures or changes in project land use mix or density are two of the most common strategies for reducing significant VMT impacts at the project site. Longer-term options include program-based approaches such as adopting VMT impact fees, developing a mitigation exchange, or using a mitigation bank. Program-based approaches rely on VMT reduction as the essential nexus and offer the ability to mitigate off-site. Use of transportation demand management (TDM) strategies for mitigation requires monitoring because effectiveness depends on building tenant performance. The primary methods of mitigating a VMT impact are to either change the project or implement a program designed to reduce VMT, such as a TDM program. VTA has identified the following four VMT mitigation categories. • Change the project land use mix or density • Reduce proposed vehicle parking supply levels • Implement on-site or off-site capital improvements for transit, bicycle, or pedestrian travel • Implement trip reduction programs as described in a Transportation Demand Management (TDM) program Project changes may include incorporating a mix of land uses or increasing a project’s density. Reduced vehicle parking supply, often in combination with providing increased bicycle parking, can have a substantial effect on reducing vehicle travel or VMT. TDM measures include telecommuting, transit subsidies and/or shuttles, parking strategies to discourage automobile trips (e.g., unbundled parking, paid parking, etc.), promotional programs and incentives (e.g., hosting Bike to Work day or providing transit vouchers), subsidies for commuters using transit or carpooling, and facilities for bicyclists and pedestrians. The TDM programs may be implemented on a project-by-project basis or through a coordinated citywide or countywide program, potentially funded by a future VMT impact fee. The effectiveness of TDM programs varies widely based on many factors, including participant travel behavior and preferences, the level of investment, project location, and the quality of the multimodal transportation infrastructure. Because of this variation, mitigating a VMT impact using TDM requires a rigorous ongoing monitoring program that measures VMT performance over time until sufficient evidence exists that the VMT reduction goal has been achieved and will be Key Decisions for Palo Alto SB 743 Implementation April 17, 2020 Page 16 of 17 maintained. This monitoring effort would require additional city staff or project applicant resources and may result in an increased number of projects that have VMT impacts that remain significant and unavoidable even after feasible mitigation. Considerations for Comprehensive Plan Goals and Policies Retaining LOS and Other Metrics The City of Palo Alto may set operational metrics such as delay and LOS as standards in its Circulation Element. Future projects would then be required to conduct traffic studies as part of the entitlement process. The City of Palo Alto can continue to use vehicle LOS outside of the CEQA process if the City determines it is an important part of the transportation analysis process. For instance, the City may wish to set roadway operating standards based on LOS in the Comprehensive Plan or use LOS to determine a nexus for a transportation impact fee program. Although the City of Palo Alto can also continue to condition projects to build transportation improvements through the entitlement process in a variety of ways, projects that increase roadway capacity would likely be required to conduct a detailed CEQA VMT analysis to measure induced vehicle travel. Land Use Planning / EIR Tiering A Comprehensive Plan update can be used to address desired development on parcels outside a screening area, through analyzing the VMT impacts as part of the Comprehensive Plan EIR. While SB 743 presents new standards for transportation impact assessment, the option to “tier” CEQA analysis from previous environmental review will remain. The tiering process consists of streamlining topics studied for a project if that project was assessed under a previous EIR, such as a single parcel that is consistent with a previously analyzed Specific Plan. In this case, the project would only need to analyze those items which were not previously analyzed. Therefore, if the Specific Plan analyzed VMT in the EIR, then the project may not be required to conduct a detailed VMT analysis. In the near term, this may require investment in plan-area VMT analysis, however it would streamline future projects consistent with an environmentally cleared Comprehensive Plan or Specific Plan that analyzed VMT. Should the City expect a future Comprehensive Plan to cause a VMT impact, the CEQA review process can be streamlined by reviewing and mitigating projects in the Comprehensive Plan at a citywide level. An updated Comprehensive Plan with a certified EIR identifying the potential VMT Key Decisions for Palo Alto SB 743 Implementation April 17, 2020 Page 17 of 17 impacts can serve as a starting point for tiered future analysis, and potentially include a framework for developers to contribute to an impact fee program based on VMT reduction as the essential nexus. Mitigation Programs Including improvement measures and plans/programs that reduce VMT in the Comprehensive Plan Circulation Element can help establish a nexus for off-site mitigation. To compensate for limitation of on-site project mitigation, the City can develop off-site mitigation programs as noted above, these types of programs are strengthened when the Comprehensive Plan Circulation Element includes VMT reduction policies and recommends a specific program type considering the other objectives of the Comprehensive Plan. The policies need to consider whether support exists in the community to mitigate in areas not adjacent to the project where the direct impact of new development will be felt the most. Implications for Future CEQA Transportation Analysis Once Palo Alto has implemented SB 743 and prepared the needed technical methods, CEQA transportation analyses for small to medium size projects in Palo Alto would likely require be substantially reduced in scope and schedule, allowing for a streamlined approach. Emphasis would be on discussion of transit, bicycle and pedestrian, and safety concerns rather than vehicular delay. For projects that are unable to be screened from a quantitative VMT assessment, there would be an additional analysis cost; however, this would likely remain somewhat less than the cost for assessing LOS impacts. LOS analysis would not be included in the transportation analysis for CEQA but may be performed independently and used to inform conditions of approval for projects. The City would determine what level of LOS analysis is appropriate, as well as how to assess deficiencies in roadway operations. These criteria will be set in the Circulation Element of the Comprehensive Plan. Critically, this moves the LOS analysis process into the administrative and planning realm; while findings will still be presented to help decision-makers make an informed decision, the potential for litigation based on CEQA adequacy of LOS analysis is removed. ATTACHMENT B Santa Clara Countywide VMT Estimation Tool The Santa Clara Countywide VMT Estimation Tool (SCC VMT Estimation Tool) will screen projects that are exempt from further VMT analysis using project generated VMT thresholds and transportation priority areas, estimate the project generated VMT rate, and estimate VMT reductions for land use projects in Santa Clara County. The types of land use projects addressed include residential, office, and industrial land uses, those land uses in combination with each other, and those land uses with or without local serving retail space. The SCC VMT Estimation Tool will be modular such that Santa Clara Valley Transportation Authority (VTA), along with cities in Santa Clara County and the County of Santa Clara, can include specific VMT screening criteria or model data within the Tool. The Tool will be scalable such that it can be used for a range of project sizes and location within any jurisdiction in Santa Clara County. The SCC VMT Estimation tool evaluates the VMT for proposed land use projects by determining whether the project is located within a low VMT generating area, estimating the project generated VMT, and evaluating the project generated VMT after potential reduction measures have been applied. The travel forecasting data that the SCC VMT Estimation Tool uses is static, meaning that any data in this tool does not affect the data used from the source travel forecasting model. The SCC VMT Estimation Tool consists of three separate modules: ▪ VMT Screening – The location of the project is used to determine if the project site is within a low VMT generating area, including low VMT generating traffic analysis zones (TAZ) or parcels and transit priority areas (TPA). ▪ Project Generated VMT – A combination of the project’s location and project details is used to estimate VMT generated from the project, which is expressed as a VMT rate (i.e., VMT per population generating the VMT). This process can use the Santa Clara Valley Transportation Authority (VTA)’s parcel-level VMT data or TAZ level VMT generation rates to estimate the project’s VMT. ▪ VMT Reductions – A series of VMT mitigation measures are applied to potentially reduce the project generated VMT. The project VMT is compared to the applicable VMT threshold to determine whether it falls below the threshold at the start, or whether it is reduced below the threshold after applying additional VMT reduction measures. The VMT threshold used in this module is calculated in the VMT Screening module CITY OF PALO ALTO OFFICE OF THE CITY CLERK May 4, 2020 The Honorable City Council Attention: Finance Committee Palo Alto, California Approval of Action Minutes for the April 13 and 20, 2020 Council Meetings Staff is requesting Council review and approve the attached Action Minutes. ATTACHMENTS: • Attachment A: 04-13-20 DRAFT Action Minutes (PDF) • Attachment B: 04-20-20 CLOSED SESSION DRAFT Action Minutes (PDF) • Attachment C: 04-20-20 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 Regular Meeting April 13, 2020 The City Council of the City of Palo Alto met on this date via Virtual Teleconference at 6:07 P.M. Participating Remotely: Cormack, DuBois, Filseth, Fine, Kniss, Kou, Tanaka Absent: Action Item 1. Update and Discussion of the COVID-19 Health Emergency and the City's Response – Verbal Report, No Written Staff Report. NO ACTION TAKEN Study Session 2. Annual Earth Day Report Study Session. NO ACTION TAKEN Agenda Changes, Additions and Deletions None. Consent Calendar Council Member Tanaka registered a no vote on Agenda Item Number 3A. MOTION: Mayor Fine moved, seconded by Council Member Cormack to approve Agenda Item Numbers 3 and 3A. 3. PUBLIC HEARING: Approval of a Finding That the Public Safety Building Project (CIP PE-15001) is "Substantially Complex" Under Public Contract Code Section 7201 and Direction to Increase the Retention Schedule From Five Percent to Ten Percent. 3A. Council Delegation of its Authority to the Council Appointed Officers to Authorize Emergency Leave of Absence With Pay to Address the Workforce Needs to Respond to COVID-19, for a Period Not to Extend Beyond the Pay Period Including June 30,2020, Per the City Merit DRAFT ACTION MINUTES Page 2 of 2 City Council Meeting Draft Action Minutes: 04/13/2020 System Rules and Regulations, Section 808. MOTION PASSED FOR AGENDA ITEM NUMBER 3: 7-0 MOTION PASSED FOR AGENDA ITEM NUMBER 3A: 6-1 Tanaka no Council took a break at 8:40 P.M. and returned at 8:50 P.M. Action Items 4. Review the 2020 Sustainability and Climate Action Plan (S/CAP) Update Process and Accept the 2020-2021 Sustainability Work Plan (Continued From March 23, 2020). MOTION: Council Member Kniss moved, seconded by Council Member Tanaka to accept the 2020-2021 Sustainability Work Plan. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to direct Staff to return with an interim report before summer break and before AECOM does an impact analysis of goals and key actions. MOTION AS AMENDED: Council Member Kniss moved, seconded by Council Member Tanaka to accept the 2020-2021 Sustainability Work Plan, and direct Staff to return with an interim report before summer break and before AECOM does an impact analysis of goals and key actions. MOTION AS AMENDED PASSED: 7-0 Adjournment: The meeting was adjourned at 10:05 P.M. CITY OF PALO ALTO CITY COUNCIL DRAFT ACTION MINUTES Page 1 of 2 Special Meeting April 20, 2020 The City Council of the City of Palo Alto met on this date via Virtual Teleconference at 5:03 P.M. Participating Remotely: Cormack, DuBois, Filseth, Fine, Kniss, Kou, Tanaka Absent: Closed Session 1. CONFERENCE WITH LABOR NEGOTIATORS City Designated Representatives: City Manager and his designees Pursuant to Merit System Rules and Regulations (Ed Shikada, Rumi Portillo, Molly Stump, Monique LeConge Ziesenhenne, Nick Raisch, Kiely Nose, Gina Roccanova) Employee Organizations: Utilities Management and Professional Association of Palo Alto (UMPAPA); Service Employees International Union, (SEIU) Local 521; Service Employees International Union, (SEIU) Local 521, Hourly Unit; Palo Alto Police Officers Association (PAPOA); Palo Alto Fire Chiefs’ Association (FCA) and Employee Organization: International Association of Fire Fighters (IAFF), Local 1319; Palo Alto Police Manager’s Association (PAPMA) Authority: Government Code Section 54957.6(a). MOTION: Mayor Fine moved, seconded by Council Member Kniss to go into Closed Session. MOTION PASSED: 7-0 Council went into Closed Session at 5:09 P.M. Council returned from Closed Session at 6:36 P.M. Mayor Fine announced: As everyone is aware, we are entering into a very serious budget season. To meet the challenges that face us we will need participation and sacrifice from every part of our City community. We recognize and thank all of our employees for the work they do for our City, with special appreciation to our essential workers. In the coming days, the City’s labor relations team will be reaching out to all City labor organizations DRAFT ACTION MINUTES Page 2 of 2 City Council Meeting Draft Action Minutes: 04/20/2020 to invite and request labor to work actively with us, as partners, to explore alternatives and find a way forward in these challenging times. Adjournment: The meeting was adjourned at 6:36 P.M. CITY OF PALO ALTO CITY COUNCIL DRAFT ACTION MINUTES Page 1 of 3 Regular Meeting April 20, 2020 The City Council of the City of Palo Alto met on this date via Virtual Teleconference at 6:38 P.M. Participating Remotely: Cormack, DuBois, Filseth, Fine, Kniss, Kou, Tanaka Absent: Special Action Item 1. Update and Discussion of the COVID-19 Health Emergency and the City's Response- Verbal Presentation, no Report. MOTION: Mayor Fine moved, seconded by Council Member Kniss to direct Staff to return with a Business Support Program with the following parameters: in the amount of $500,000 in grants, up to 50 employees, with third party administration, while finding leverage or seeking matching funds. AMENDMENT: Vice Mayor DuBois moved, seconded by Council Member Filseth to require the program to include $500,000 in matching funds. AMENDMENT FAILED: 3-4 Cormack, Kniss, Kou and Tanaka no MOTION PASSED: 7-0 Council took a break at 8:30 P.M. and returned at 8:43 P.M. Study Session 2. Presentation of the City Manager’s Proposed Fiscal Year (FY) 2020-2021 Budget. NO ACTION TAKEN Special Orders of the Day 3. Update and Discussion Regarding the Spring 2020 Board and Commission Recruitment for Positions on the Human Relations Commission, Public Art Commission, and Utilities Advisory Commission. DRAFT ACTION MINUTES Page 2 of 3 City Council Meeting Draft Action Minutes: 04/20/2020 MOTION: Vice Mayor DuBois moved, seconded by Council Member Kniss to direct Staff to return, as soon as possible, with options for reducing the number of members on the Public Art Commission and Human Relations Commission, and then reopen recruiting for the Public Art Commission and Human Resources Commission; and direct Staff to continue with interviews for the Utilities Advisory Commission. MOTION PASSED: 7-0 Agenda Changes, Additions and Deletions Mayor Fine announced Agenda Item Numbers 8 and 10 were removed. Minutes Approval 4. Approval of Action Minutes for the April 6, 2020 Council Meeting. MOTION: Mayor Fine moved, seconded by Council Member Cormack approve the Action Minutes for the April 6, 2020 Council Meeting. MOTION PASSED: 7-0 Consent Calendar Council Member Tanaka registered a no vote on Agenda Item Number 5. MOTION: Vice Mayor DuBois moved, seconded by Council Member Kniss to approve Agenda Item Numbers 5-7 and 9. 5. Approval of Contract Number C20177684 With Contract Sweeping Services, Inc. for Street Sweeping Services With a Five-year Term and Total Not-to-Exceed Amount of $5,608,232; and Authorization of the City Manager or Designee to Execute Contract Amendments to Memorialize any Annual Consumer Price Index Adjustments to the Compensation Rates as Provided in the Contract. 6. 840 Kipling Street [18PLN-00185]: Variance Associated With an Individual Review Application for Modifications to an Existing Historic 1,192 Square Foot, One-story Single-family Home Allowing: (1) a Second-story Home Addition on a Substandard, Irregular R-2 Zoned Lot, and (2) Extension of a Non-complying Wall That Encroaches 2.5 Feet Into an Interior Side Setback; On February 26, 2020, the Planning and Transportation Commission Unanimously Recommended Approval of the Variance. This Project is Exempt From the California Environmental Quality Act (CEQA) in Accordance With CEQA Guidelines Section 15301(e). DRAFT ACTION MINUTES Page 3 of 3 City Council Meeting Draft Action Minutes: 04/20/2020 7. Approval of the Amended and Restated Agreement for the San Francisquito Creek Joint Powers Authority (JPA) Between the Cities of Palo Alto, Menlo Park, and East Palo Alto, the Santa Clara Valley Water District, and the San Mateo County Flood and Sea Level Rise Resiliency District, to Reflect the Recent Name Change of the Latter Agency and the Current Administrative Practices of the JPA. 8. Approval of Amendment Number 1 to Contract Number C16162436 With TJKM Transportation Consultants and Amendment Number 1 to Contract Number C16163381 With Fehr and Peers for Provision of Oncall Transportation Engineering Project Support Services; Each Amendment Will Extend Each Term Through April 30, 2021; and Increase Maximum Compensation by $200,000 to Each Contract for a Total Not-to-Exceed Amount of $1,000,000 per Contract. (Continued to an unknown date) 9. Adoption of an Ordinance Temporarily Suspending the Expiration of and Automatically Extending all Planning Entitlements, Building Permits, and Building Permit Applications Valid as of March 16, 2020; the Ordinance Also Suspends and Extends Municipal Code Application Processing Timelines. This Action is Exempt From the California Environmental Quality Act (CEQA) in Accordance With CEQA Guidelines Section 15061(b)(3). MOTION PASSED FOR AGENDA ITEM NUMBER 5: 6-1 Tanaka no MOTION PASSED FOR AGENDA ITEMS NUMBER 6-7 and 9: 7-0 Action Items 10. Adoption of a Resolution Waiving the Business Registration Fee for Calendar Year 2020 in Calendar Year 2020; Adoption of a Resolution Rescinding the Levy of Assessments for the Downtown Business Improvement District (BID) for Fiscal Year (FY) 2020; and Approval of the Reimbursement of Business Registration Fees and BID Assessments Due in 2020. (Continued to May 4, 2020) Adjournment: The meeting was adjourned at 10:32 P.M. in the spirit of Earth Day and Palo Alto’s Birthday. City of Palo Alto (ID # 11005) City Council Staff Report Report Type: Consent Calendar Meeting Date: 5/4/2020 City of Palo Alto Page 1 Summary Title: Tobacco Retail Permit 4.64 Ordinance Revisions Title: Adoption of Amendments to the City of Palo Alto Tobacco Retail Ordinance (PAMC Chapter 4.64) to Further Restrict Electronic Cigarette Products and Flavored Tobacco Products, Direct Staff to Discuss Amending the Tobacco Retail Permit (TRP) Agreement With the County, and Updates to Council's Previous Questions on Reducing Youth Tobacco use From: City Manager Lead Department: Public Works Recommendation Per Council direction from the December 9, 2019 Council Meeting, staff recommends that Council: 1. Adopt amendments to the Tobacco Retail Permit (TRP) Ordinance (Municipal Code Chapter 4.64) (Attachment A) which will further restrict sales of flavored and electronic tobacco products, exempt adult-only stores (those stores that provide service to people ages 21 and over), and require new, stricter retailer requirements to further limit under- age 21 access to tobacco retailers; 2. Direct Staff to discuss the exemption provision for adult-only stores with Santa Clara County officials. The exemption has been proposed by Palo Alto staff to avoid severe economic impacts to five small businesses. The goals of the discussion with the County would be to modify the tobacco sales agreement to accommodate the exemption, and to maximize the use of County resources for the Permitting and Enforcement program for regulating Tobacco Retail Sales; and 3. Review staff responses to Council’s December 9, 2019 meeting questions about how to further reduce youth access to tobacco and vaping products. Executive Summary At the December 9, 2019 City Council Meeting, Council directed Staff to return with a revised Tobacco Retail Permit Ordinance that mirrors the latest revisions to the County Ordinance for the unincorporated areas of the County, with as few exemptions as possible. In researching the City of Palo Alto Page 2 potential impacts of this Ordinance to Palo Alto businesses, staff learned that adopting the County Ordinance in its entirety would result in the likely closure of five of the seven adult-only stores in Palo Alto (there are also 15 non-adult tobacco retailers in Palo Alto, but these stores would not see a significant impact to their business). To address this potential major impact to the five small businesses, staff has included an exemption provision in the proposed Ordinance. This provision is not currently supported by the County and could result in the City having to run its own cost-recovery permit program for the 22 stores in Palo Alto that sell tobacco. If Council approves the staff recommendation, staff will engage the County in an effort to avoid or minimize the impact of this outcome. Background The December 9, 2019, Council Colleagues’ Memo discussed community and Councilmember concerns about the rise in youth vaping. As recently reported within the California Student Tobacco Survey, e-cigarette use has continued to increase, particularly among young people. In Santa Clara County, a third of all high school students have tried an e-cigarette and one in eight currently uses them. In addition, e-cigarette use is now associated with a wave of dangerous, life-threatening illnesses. As of October 22, 2019, 1,604 cases of lung injury associated with the use of e-cigarette or vaping products had been reported to the Centers for Disease Control and Prevention (CDC), and there had been 34 confirmed deaths due to e-cigarette or vaping associated lung injury. On December 9, 2019, Council directed staff to return to Council with: 1. An ordinance prohibiting the sale and distribution of all electronic cigarettes and flavored tobacco products, in alignment with the County of Santa Clara’s recent approach, with as few exemptions as possible; 2. Avenues identified to support legislation making it harder for minors to successfully order electronic cigarette products online (e.g. needing a signature of a 21-year-old at delivery); 3. A yearly update on the enforcement activities of the existing Tobacco Retail Permit Ordinance; 4. Suggested funding as needed after a Community Meeting in January 2109; 5. Investigative results of disincentives and/or fines for vaping in public; 6. Work done with Palo Alto Unified School District (PAUSD) through the City/School Liaison Committee to reduce youth vaping; and 7. Recommendation of appropriate disposal methods and education for electronic cigarettes. City of Palo Alto Page 3 Discussion The following information provides an update and information for action items identified at the December 9, 2109 Council Meeting. 1. Revisions to Municipal Code Chapter 4.64 Tobacco Retail Permit Ordinance Per Council direction, this staff report includes proposed revisions to Palo Alto’s TRP Ordinance (Attachment A). These revisions mirror the recently revised Santa Clara County Department of Environmental Health Ordinance which now prohibits the sale of flavored tobacco products and electronic cigarette devices, but includes an exemption from these new prohibitions for adult-only stores to avoid the permanent store closure that would likely occur for five adult-only tobacco retailers that would be most impacted by the revised TRP. The effective date is July 1, 2020. The current Palo Alto TRP Ordinance adopted in 2018 includes the following: a. Prohibits pharmacies and vending machine sales of tobacco products; b. Restricts new retailers from receiving a TRP if they are located within 500 feet of another tobacco retailer or within 1,000 feet of a school; c. Prohibits the sale of flavored tobacco products except at “adult-only stores” (stores that prohibit anyone under the age of 21 from entering unless they are with an adult); d. Limits storefront advertising of tobacco products; e. Has a 24-month violation look back period, which is the span of time over which any additional violations are considered to be repeat violations. The City Council approved a City-County agreement in 2016 (staff report) that stipulates that the Santa Clara County Department of Environmental Health will administer the TRP process for Palo Alto retailers, and that the City of Palo Alto Police Department (PAPD) will provide annual youth decoy (undercover) checks at tobacco retailers to confirm that no sales to people under age 21 are conducted. This agreement helps ensure compliance with all federal, state, and local laws and uniform standards for tobacco and electronic cigarette product sales, and more frequent permitting inspections than are provided by state and federal regulators. Adopting the identical Santa Clara County Department of Environmental Health TRP revisions approved by the County on November 19, 2019 would add further restrictions which would: a. Prohibit the sale and distribution of electronic cigarette products at all retailers. E-cigarette products include e-cigarettes, e-cigars, e-pipes, vape pens, e-hookahs, and any flavored or unflavored liquid or substance containing nicotine, whether sold separately or sold in combination with any device or delivery system; b. Prohibit the sale of all flavored tobacco products at all retailers; c. Revise the “look-back” violation period from 24 months to 60 months. The look-back period is the span of time over which additional violations are considered to be repeat violations. City of Palo Alto Page 4 Staff has developed the recommended Ordinance, in place of adopting the County’s November 2019 Ordinance revision in its entirety, given the County Ordinance’s potential impact on five small businesses. This is based on feedback from store owners of Mac’s Smoke Shop, Raw Smoke Shop, Red Brick Café & Hookah Nites Lounge, Smoke and More, and Smokes and Vapes. According to these stores, 60 percent or more of their revenue is from sales of flavored tobacco and/or electronic cigarette products to people over age 21. This level of impact to retailers has not been seen in the unincorporated areas of the County where the County Ordinance is in effect (only one store has been impacted in a significant way), nor in the Town of Los Gatos, which also maintains a TRP partnership with the County (no Los Gatos stores were impacted by the Ordinance adoption, which was largely adopted as a preventative measure). To address this major impact to the five small businesses, staff recommends that Council 1) Adopt amendments to the Tobacco Retail Permit (TRP) Ordinance (Municipal Code Chapter 4.64) (Attachment A), with an exemption for adult-only stores; and 2) Direct Staff to discuss the exemption provision with Santa Clara County officials. The goal of the discussion with the County is to modify the current tobacco retailer permit agreement with the County accordingly, and to maximize the use of County resources for the permitting and enforcement program for regulating tobacco retail sales. The exemption for adult-only stores would include three new retailer requirements to further limit underage sales of tobacco products or electronic cigarette products: a. People under age 21 could not enter an adult-only tobacco retailer, even if accompanied by an adult; b. Store staff at adult-only tobacco retailers must be located close enough to the store entrance to check identification before any member of the public enters; c. If any retailer is caught selling tobacco to a minor under 21 twice within 24 months, the permit for that retailer would be terminated, and the retailer would be suspended from applying for a new permit for one year. Reinstating a permit would be considered a “new” permit (not a renewal) and therefore the retailer would lose any grandfathered exemptions allowed under the Ordinance (e.g., school proximity, selling electronic cigarette products or flavored tobacco). This recommendation, combined with new legislation and regulations that have gone into effect since the December 9, 2019 meeting (discussed in Section 2 of this report), would provide a significant reduction in teen access to vaping, and would allow the existing over age-21 stores to remain open for those over age-21 customers that choose to smoke or vape. All of these stores have complied with the requirement for no underage-21 sales of tobacco products during recent undercover youth decoy checks (discussed in Section 3 below). A comparison of Ordinance options is summarized in Attachment B–Comparison of Current Palo Alto Tobacco Retail Ordinance, Santa Clara County Ordinance, and Proposed Palo Alto Ordinance. City of Palo Alto Page 5 If the County opts to not revise the TRP agreement with the City, staff would assume the enforcement responsibilities for the 22 tobacco retailers. Administrative fees assessed to Palo Alto tobacco retailers for enforcement services would be considered (likely similar to those currently assessed by the County). 2. Legislation that will make it more difficult for minors to order electronic cigarette products online: As of January 1, 2020, a new law (via SB 39, Hill1) requires online tobacco sellers or distributors to place tobacco products in a conspicuously marked container and obtain the signature of a person 21 years of age or older before delivering the tobacco product. SB39 requires: a. Online retailers to verify that the purchaser or recipient of the product is 21 years of age or older by matching the name, address, and date of birth provided by the customer to information contained in a database of individuals whose age has been verified to be 21; b. If the seller cannot verify that the purchasing or recipient is 21 year or older, a valid government identification will need to be provided verifying that the billing address is the same on the check or credit card; c. The words “tobacco product” may be printed in the purchaser’s credit card statement so that potentially a parent would be flagged about the purchase; Additionally, a new United States Food and Drug Administration regulation became effective February 6, 2020 which prohibits all retailers from selling flavored cartridge-based e-cigarette products. However, this regulation exempts menthol and tobacco-flavored e- liquids, tank-based systems, and single-use electronic cigarettes).2 The City has also supported several State bills that could help reduce youth access to tobacco products. Letters are listed publicly at : www.cityofpaloalto.org/gov/city_information/intergovernmental_affairs.asp. Current legislation under consideration includes: a. SB 793 (Hill) as currently drafted would prohibit the sale of flavored tobacco products and electronic cigarette products3 state-wide at all retailers; b. SB 424 (Jackson)–would ban the sale of single-use tobacco products, including single-use filters, single-use plastic devices needed for manipulation of tobacco products, and single-use electronic cigarettes4. This bill would allow the sale of multi-use tobacco 1Senate Bill No. 39 California Legislative Information, leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200SB39. Accessed April 2, 2020 2 McGinley, L. (2020, February 5) Flavored e-cigarette pod ban starts Thursday: What it means for vapers, kids and parents. Retrieved from https://www.washingtonpost.com/health/2020/02/05/flavored-e-cigarette-pod-ban- starts-thursday-what-it-means-vapers/. 3 http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200SB793. Accessed April 3, 2020. 4http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200SB424, Accessed April 3, 2020. City of Palo Alto Page 6 products, so long as those products are recyclable, or are collected for take-back by manufacturers of the product. This bill also targets the litter and hazardous waste associated with e-cigarette products. This bill is a carryover from 2019. Both of these bills are on hold because of an imposed COVID-19 California legislature recess, but activity may resume in May 2020. If the above bills were to become law, they would collectively further reduce youth access to vaping throughout the state by decreasing access to both flavored traditional tobacco products, and also single-use electronic cigarettes and vaping products. 3. Enforcement Summary of the Tobacco Retail Permit Ordinance. Currently, the Santa Clara County Department of Health regulates the Palo Alto tobacco retailers. This function includes in-store visits to ensure that businesses comply with TRP requirements. In addition, the PAPD is required to confirm that stores only sell tobacco products to people ages 21 or older. There are currently 22 tobacco retailers in Palo Alto: 15 retailers (mostly gas stations and liquor stores) and seven adult-only (over age-21) stores which include: Raw Smoke Shop, Red Brick Café & Hookah Nites Lounge, Smoke and More, Smokes and Vapes, Mac’s Smoke Shop, Hemingway, and La Bodeguita del Medio. Santa Clara County Department of Health Permit Compliance Checks and Retailer Density The Santa Clara County Department of Environmental Health conducted the first TRP inspections to each retailer in March 2019. There was a high degree of compliance at Palo Alto retailers with most of the multiple Ordinance requirements (e.g., maintaining a permit, compliance with flavored tobacco restrictions, signage, licenses posted, and other requirements). Follow-up letters and visits were conducted to businesses that were out of compliance with any of the Ordinance provisions and particularly to ensure that stores not exempted from the flavored tobacco restriction continued to cease sales of those products. Since implementing the TRP there has been a decrease of seven tobacco retailers in total. In 2017, there were 29 tobacco retailers in the City whereas now there are 22 retailers. This is because: four businesses were restricted from selling tobacco products because they had a licensed pharmacist on-site (three Walgreens stores and one Safeway); three businesses did not apply for the TRP and are no longer engaging in the sale of tobacco products (Antonio’s Nut House, Palo Alto Hills Golf and Country Club, and Driftwood Deli and Market); one location is no longer in business (Cigar House); one adult-only store went into business (Raw Smoke Shop); two attempts were made to apply for a permit, but due to the density restriction, only one store– Raw Smoke Shop– was eligible to receive a permit. City of Palo Alto Page 7 In regard to the number of over age-21 stores, there were six over age-21 stores when the TRP Ordinance was adopted in 2017. There are now seven over age-21 retailers because, as discussed above, Raw Smoke Shop opened before the first Tobacco Retail Permit Ordinance went into effect on July 1, 2018. Palo Alto Police Department Undercover Investigations In January 2020, the PAPD completed the annual undercover investigations which are a requirement of the TRP. A Police Department staffing shortage in 2019 prohibited the undercover investigations from occurring that year. The Police Department’s undercover investigations showed that at 85% of retailers that were visited (17 of 20; two retailers were not visited for reasons outlined below), clerks properly checked the identification of the undercover Police Department representative. Upon learning that she was under the age of 21, they refused to sell tobacco products to her. Police had given the undercover representative instructions to present her actual identification if asked, and to respond with her truthful age if asked. Police issued citations to clerks from the three retailers who did not properly check her identification and sold tobacco products to her. As these three criminal cases move through the court process, the Palo Alto Police Department is working with the Santa Clara County Department of Environmental Health to take administrative action against the retailers themselves. Administrative sanctions could include fines and a permit suspension for up to 30 days for the first offense. The Police Department did not visit two retailers during the undercover investigations due to an inability to safely monitor the undercover representative, solely as a result of the physical layout of the establishments. However, since both retailers deal primarily with cigars (a tobacco product not as sought after by young adults as vaping products or cigarettes), the Police Department felt that the need to safely monitor the undercover representative outweighed the need to conduct the compliance check. The Police Department will explore alternate means to conduct compliance checks at these two retailers in the future. 4. Community Funding Needed to Reduce Vaping A forum focused on youth vaping was planned by a committee of the Healthy City Healthy Community workgroup. Palo Alto Medical Foundation funded and hosted the event. The event was held on January 23, 2020 with the goal of bringing community leaders and experts together to share information, facilitate discussion on best practices, and identify gaps and opportunities in local and regional efforts. A keynote was delivered by April Roeseler, Chief of the California Tobacco Control Program of the California Department of Public Health. The forum was attended by approximately 65 people representing youth, parents, public and private schools, youth-serving organizations, faith-based organizations, health care, law enforcement, local and regional government, and the media. City of Palo Alto Page 8 The Healthy City Healthy Community committee asked attendees to complete a post-event survey and asked the question, “If funding were available, where would you prioritize use of funds with respect to youth vaping?” Of the responses, education and prevention in schools was ranked the highest followed by (in order of highest to lowest): treatment for youth addicted to nicotine; connection of anxiety and mental health to vaping; education of middle school students; local data collection on youth vaping; and understanding and elimination of vape waste in the environment. The Healthy City Healthy Community group conducted an initial review of the survey results at its March 4, 2020 meeting and agreed that increased youth education and prevention beginning at the middle school level or younger, could have the greatest impact. Additionally, the group discussed that peer-to-peer education may have greater success and so suggested that increased funding to the ThinkFund (formerly Bryant Street Garage Fund) to fund youth-led initiatives would be the best use of resources. 5. Additional Disincentives to Reduce Vaping in Public Palo Alto Municipal Code Chapter 9.14, Smoking and Tobacco Regulations, already prohibits smoking and e-cigarette use (includes vaping) in public spaces and multi-family dwellings, e.g., all parks, open spaces and Palo Alto facilities; outdoor and indoor commercial dining areas, entryways, public events, recreation areas, service areas, commercial indoor areas, outdoor service areas (bus stops, ATMs, and ticket lines), employment places, construction worksites, the Downtown Business District, and 25 feet from any door (or window) to any enclosed area. Exceptions to this ordinance are allowed if a designated smoking area is established by a shopping/commercial/multi-family property area that is at least 25 feet away from any windows or doors to enclosed areas and that provides receptacles to control litter. Fines range from $250 to $500 for repeat violations in public areas. Currently, PAPD is not resourced to cite smoking in multi-family dwellings, but the ordinance allows landlords to find tenants in material breach of their lease for smoking anywhere on the property except in designated areas and gives other tenants the right to enforce. Public signs are already posted in most of these areas that are owned by the City of Palo Alto and specify that both smoking and e-cigarette/vaping use are prohibited. In addition: a. Free no-smoking signs are available to multi-family units upon request (see cityofpaloalto.org/smoking for signage options); b. The City and Santa Clara County Department of Environmental Health are currently working together to supply businesses with new “No Smoking, No e-cigarette/vaping” signs that will be available to businesses upon request. Staff will provide outreach about sign availability. It is important to note that as of 2016, the California legislature decriminalized the purchase or possession of any tobacco products or paraphernalia (this includes e-cigarettes or vaping City of Palo Alto Page 9 devices) by minors under the age of 18. The law now also prohibits businesses from selling tobacco products or paraphernalia to anyone under the age of 21, or under the age of 18 for active military personnel with valid identification (Palo Alto’s TRP prohibits sales to anyone under the age of 21 regardless of military service standing). Since the law change now places the focus on the retailer rather than the minor, the police are no longer able to cite minors for possessing tobacco or smoking devices. For youth in possession of tobacco or smoking devices on a school campus, PAPD’s standard approach is to allow these incidents to be handled administratively as a school matter. PAPD’s School Resource Officers (SROs) report that during the 2018-19 and 2019-2020 academic years, they only encountered approximately 15 devices in possession of students. Approximately 75% of those were from students at the high schools, while the rest came from students at the middle schools. The SROs report that school administration officials usually confiscate the device and may not choose to notify police since it is handled administratively and there are no longer any criminal ramifications to the student due to the 2016 change in state law as described above. If the SROs do confiscate the device, it is either given to the parents or used as a teaching aid in educational programs. The SROs report that in speaking with students, students are most often buying vaping devices and supplies online with their parents’ credit cards, and do not buy them at Palo Alto retailers. This may be more difficult now with the passage of SB39 which became effective January 1, 2020, as discussed previously in this report. 6. Palo Alto Unified School District (PAUSD) and City/School Liaison Committee effort to Reduce Youth Vaping The City/School Liaison Committee meets once monthly. The committee consists of two PAUSD Board members and two Palo Alto City Council members. The committee discusses issues of mutual interest between the two organizations. As part of the effort to reduce youth vaping, the committee is available to hear updates related to the other initiatives mentioned in this report and participate in other efforts related to this topic. The committee reports their discussions back to the PAUSD Board and Palo Alto City Council. 7. Appropriate Disposal Methods and Education for Electronic Cigarettes Hazardous waste from e-cigarette and vaping products includes nickel cadmium batteries, lithium batteries, and electronic components. Nicotine itself, found in both e-liquids and traditional tobacco products, is also an acutely hazardous product. These products’ designation as hazardous wastes cause real-world problems when they are not properly managed at end-of-life: “filters” of traditional cigarettes are plastic and create one of the most prevalent sources of litter and water pollution in local creeks; lithium batteries used in many e-cigarette products are documented to have caused explosions during use and during disposal at waste management facilities, and clean-up costs required by state and local public agencies are becoming increasingly documented. The California City of Palo Alto Page 10 Department of Transportation, for example, estimates that it costs $41 million annually to clean up cigarettes on roadways. (California Product Stewardship Council, calpsc.org/products, January 31, 2020). Ultimately, an industry-funded product-design and disposal model (also known as “Extended Producer Responsibility”) is needed to relieve the burden of public agencies funding the cleanup and disposal of tobacco and e-cigarette products. This is one goal of SB 424, discussed previously in this report. However, until an industry-funded product design and disposal model is established, the City will accept e-cigarettes, vaping products, and tobacco products at weekly Household Hazardous Waste events and plans to provide outreach about this service in 2020. Timeline Should Council adopt the proposed revisions to the Tobacco Retail Ordinance, the Ordinance would become effective July 1, 2020, which aligns with the County’s Ordinance effective start date. Resource Impact If County of Santa Clara continues its enforcement oversight for Palo Alto tobacco retailers, there will be no significant resource impact to the City beyond the staff time already committeed to develop and mail outreach materials for businesses, visit tobacco retailers, and update the current TRP with the new stricter standards. Should the County be unwilling to revise the TRP agreement with the City, staff would assume the enforcement responsibilities for the 22 tobacco retailers. Staff anticipates this would require a relatively minor use of staff time, with costs ultimately recoverable through administrative fees. Policy Implications This action is consistent with existing City policies. Stakeholder Engagement Businesses were sent a letter on February 19, 2020 outlining potential ordinance changes (Attachment C–Business Outreach for Proposed 2020 TRP Update). The letter included a list of Frequently Asked Questions and a summary of each of Palo Alto’s two smoking ordinance requirements. A duplicate packet of information was hand-delivered to each business on Feburary 26 so that retailers could ask questions, and staff could ensure delivery of the letter and supporting information. Businesses who received notices about proposed Ordinance changes were: 1. Hemingway, 480 University Avenue, Palo Alto (over age-21 store) 2. Mac's Smoke Shop, 534 Emerson Street (over age-21 store) 3. Raw Smoke Shop, 265 California Avenue (over age-21 store) 4. Red Brick Café & Hooka Nites Lounge, 235 University Ave (over age-21 store) 5. Smoke & More, 3896 El Camino Real (over age-21 store) 6. Smokes & Vapes, 3491 El Camino Real (over age-21 store) City of Palo Alto Page 11 7. La Bodeguita del Medio, 463 S California Avenue (maintains an over age-21 smoking lounge) 8. 7-Eleven 2366-18584E, 401 Waverley Street 9. 7-Eleven, 708 Colorado Avenue 10. B&P Florist & Plants, 3880 El Camino Real 11. Barron Park Shell, 3601 El Camino Real 12. Embarcadero Shell, 1161 Embarcadero Rd 13. Ermies Liquor, 3870 El Camino Real 14. Jim Davis Valero, 3972 El Camino Real 15. Palo Alto Arco, 699 San Antonio Road 16. Palo Alto Chevron, 3897 El Camino Real 17. Palo Alto Fine Wine and Spirits, 3163 Middlefield Rd 18. Palo Alto Shell, 2200 El Camino Real 19. Palo Alto Unocal, 835 San Antonio Road 20. Smog Pros Arco, 840 San Antonio Road 21. Valero Corner Store, 705 San Antonio Road 22. Valero of Palo Alto, 1963 El Camino Real The initial outreach fully mirrored the County of Santa Clara approach, including prohibiting the sale and distribution of all electronic cigarettes and flavored tobacco products at adult-only retailers. It did not include the exemption for adult-only retailers or the proposed three new requirements to further limit underage sales of tobacco products or electronic cigarette products at those retailers. Staff will notify the adult-only retailers of these changes to the proposed Ordinance in advance of Council’s consideration of the Ordinance. Following Council’s approval of the Ordinance, additional outreach will be conducted via residential and commercial utility bill inserts, a press release, and social media channels. Environmental Review This proposed Ordinance would not be subject to environmental review under the California Environmental Quality Act (CEQA) because it does not cause a direct physical change in the environment or a reasonably foreseeable indirect change in the physical environment. Attachments: Attachment A - Ordinance Amending Chapter 4.64 (Permits for Retailers of Tobacco Products) Attachment B- Summary of TRP Requirements and Alternatives 4 22 20a Attachment C - Business Outreach for Proposed 2020 TRP Update Not Yet Approved 1 20200422_ts_24_206 Ordinance No. _____ Ordinance of the Council of the City of Palo Alto Amending Chapter 4.64 (“Permits for Retailers of Tobacco Products”) Of Title 4 (Business Licenses and Regulations). The Council of the City of Palo Alto ORDAINS as follows: SECTION 1. Findings and Declarations. The City Council finds and declares as follows: A. Electronic cigarettes, also known as e‐cigarettes, e‐vaporizers, or electronic nicotine delivery systems, are battery‐operated devices that people use to inhale an aerosol that typically contains nicotine. In addition to nicotine, the aerosol from e‐cigarettes may include up to 31 other components, including formaldehyde, acetaldehyde, glycidol, acrolein, acetol, and diacetyl. Several of these compounds are likely carcinogens, and acrolein is a powerful irritant.1 These products can resemble traditional tobacco cigarettes (cig‐a‐likes), cigars, or pipes, or even everyday items like pens or USB memory sticks.2 The pervasive use of these and other related Electronic Cigarette Products has given rise to a massive and multi‐faceted public health crisis. B. The Surgeon General has declared the use of e‐cigarettes among youth an “epidemic.” There is an extensive and rapidly growing body of evidence supporting that characterization. For instance: i.E‐cigarette companies use marketing strategies to target youth. In 2014, 18 million (7 out of 10) middle and high school students were exposed to e‐ cigarette ads.3 ii.E‐cigarettes are marketed in a variety of flavors that appeal to youth, including gummy bear, birthday cake, cotton candy, and fruit punch. iii.While youth use of combustible cigarettes has decreased dramatically, e‐ cigarette use—or “vaping”—among middle and high school students increased 1 Centers for Disease Control and Prevention. Cigarette Use Among Youth and Young Adults: A Report of the Surgeon General (2016). https://www.cdc.gov/tobacco/data_statistics/sgr/e‐cigarettes/index.htm. 2 National Institute on Drug Abuse. Electronic Cigarettes (E‐cigarettes) (2019). https://www.drugabuse.gov/publications/drugfacts/electronic‐cigarettes‐e‐cigarettes; Breland A, Soule E, Lopez A, Ramôa C, El‐Hellani A, Eissenberg T. Electronic cigarettes: what are they and what do they do? Ann N Y Acad Sci. 2017;1394(1):5‐30. doi:10.1111/nyas.12977. 3 Centers for Disease Control and Prevention. E‐cigarette Ads and Youth (2017). https://www.cdc.gov/vitalsigns/ecigarette‐ads/index.html. Attachment A Not Yet Approved 2 20200422_ts_24_206 by 78 percent between 2017 and 2018, with over 4 million kids currently using e‐ cigarettes in 2018.4 iv. The proportion of current e‐cigarette users in high school who reported use on 20 days or more in the past 30‐day period increased from 20 percent in 2017 to 27.7 percent in 2018.5 v. In 2019, the national prevalence of e‐cigarette use during the previous 30 days was more than 1 in 4 students in the 12th grade, more than 1 in 5 in the 10th grade, and more than 1 in 11 in the 8th grade.6 vi. Use of e‐cigarettes among undergraduate college students increased from 4.9 percent to 10.1 percent between 2017 and 2018.7 vii. There was a 46.2 percent increase in current e‐cigarette use between 2017 and 2018 among young adults.8 viii. Adolescents obtain e‐cigarettes from a variety of sources. The most common sources are: purchasing from a store or online (31.1 percent); buying from another person (16.3 percent); and giving someone money to purchase for them (15.0 percent).9 C. Nearly 1 in 3 Santa Clara County teens—31.6 percent—report that they have used an e‐ cigarette at least once. Most teens obtained their e‐cigarettes from “social sources,” 4 Cullen KA, Ambrose BK, Gentzke AS, Apelberg BJ, Jamal A, King BA. Use of Electronic Cigarettes and Any Tobacco Product Among Middle and High School Students—United States, 2011–2018. MMWR Morb Mortal Wkly Rep. 2018;67(45):1276‐1277. doi:10.15585/mmwr.mm6745a5. 5 Cullen KA, Ambrose BK, Gentzke AS, Apelberg BJ, Jamal A, King BA. Use of Electronic Cigarettes and Any Tobacco Product Among Middle and High School Students—United States, 2011–2018. MMWR Morb Mortal Wkly Rep. 2018;67(45):1276‐1277. doi:10.15585/mmwr.mm6745a5. 6 Miech R, Johnston L, O’Malley PM, Bachman JG, Patrick ME. Trends in Adolescent Vaping, 2017–2019. N Engl J Med. September 2019:NEJMc1910739. doi:10.1056/NEJMc1910739. 7 Compare American College Health Association‐National College Health Assessment II: Undergraduate Student Reference Group Executive Summary Spring 2018. Silver Spring, MD: American College Health Association with American College Health Association‐National College Health Assessment II: Reference Group Undergraduate Executive Summary Spring 2017. Hanover, MD: American College Health Association. 8 Dai H, Leventhal AM. Prevalence of e‐Cigarette Use Among Adults in the United States, 2014‐2018. JAMA. September 2019. doi:10.1001/jama.2019.15331. 9 Pepper JK, Coats EM, Nonnemaker JM, Loomis BR. How Do Adolescents Get Their E‐Cigarettes and Other Electronic Vaping Devices? Am J Health Promot. 2019;33(3):420‐429. doi:10.1177/0890117118790366. Not Yet Approved 3 20200422_ts_24_206 while around 45 percent reported purchasing their own e‐cigarettes (with over a quarter of this group saying they buy them directly from a local store).10 D. E‐cigarettes have severe adverse health effects for both youth and adults. i. According to the Surgeon General, “[m]ost e‐cigarettes contain nicotine—the addictive drug in regular cigarettes, cigars, and other tobacco products. Nicotine exposure during adolescence can harm the developing brain—which continues to develop until about age 25. Nicotine exposure during adolescence can impact learning, memory, and attention. Using nicotine in adolescence can also increase risk for future addiction to other drugs. In addition to nicotine, the aerosol that users inhale and exhale from e‐cigarettes can potentially expose both themselves and bystanders to other harmful substances, including heavy metals, volatile organic compounds, and ultrafine particles that can be inhaled deeply into the lungs.”11 ii. E‐cigarette use can also play a role in adolescent social maladjustment, including poor learning and academic performance, increased aggressive and impulsive behavior, poor sleep quality, attention deficits, impaired memory, cognition, and increased depression and suicidal ideation.12 iii. Daily e‐cigarette use is associated with increased risk of irreversible cardiovascular and lung disease through the inhalation of harmful chemicals.13 iv. Secondhand emissions from e‐cigarettes are also dangerous because they contain “nicotine; ultrafine particles; flavorings such as diacetyl, a chemical linked to serious lung disease; volatile organic compounds such as benzene, which is found in car exhaust; and heavy metals, such as nickel, tin, and lead.”14 10 Zhu S‐H, Lee J, Zhuang YL, Branden K, Cole A, Wolfson T, Gamst A (2019). Tobacco use among high school students in Santa Clara County: Findings from the 2017‐18 California Student Tobacco Survey. San Diego, California: Center for Research and Intervention in Tobacco Control (CRITC), University of California, San Diego. 11 Surgeon General’s Advisory on E‐cigarette Use Among Youth (2008). https://e‐ cigarettes.surgeongeneral.gov/documents/surgeon‐generals‐advisory‐on‐e‐cigarette‐use‐among‐youth‐2018.pdf. 12 Tobore TO. On the potential harmful effects of E‐Cigarettes (EC) on the developing brain: The relationship between vaping‐induced oxidative stress and adolescent/young adults social maladjustment. J Adolesc. 2019; 76:202‐209. doi:10.1016/j.adolescence.2019.09.004. 13 American Lung Association. The Impact of E‐Cigarettes on the Lung (2011). https://www.lung.org/stop‐ smoking/smoking‐facts/impact‐of‐e‐cigarettes‐on‐lung.html; Bein K, Leikauf GD. Acrolein ‐ a pulmonary hazard. Mol Nutr Food Res 55(9):1342‐60. doi: 10.1002/mnfr.201100279. 14 American Lung Association. The Impact of E‐Cigarettes on the Lung (2011). https://www.lung.org/stop‐ smoking/smoking‐facts/impact‐of‐e‐cigarettes‐on‐lung.html. Not Yet Approved 4 20200422_ts_24_206 v. E‐cigarette use is dangerous for pregnant women and is a fetal risk factor. It is associated with an increased risk of smallness‐for‐gestational‐age.15 E. In addition to these negative long‐term health effects, e‐cigarette use is now associated with a wave of dangerous, life‐threatening illnesses. i. As of October 15, 2019, 1,479 cases of acute lung injury associated with the use of e‐cigarette or vaping products in 49 states, the District of Columbia, and 1 U.S. territory have been reported to the Centers for Disease Control and Prevention (CDC). Thirty‐three deaths have been confirmed in 24 states.16 ii. Since the CDC’s August 30, 2019 Official Health Advisory,17 there have been two reported cases of lung injury associated with e‐cigarettes in Santa Clara County. One of these cases was in an adolescent, and both individuals required hospitalization. F. Other risks and injuries are attributable to the proliferation of e‐cigarettes: i. E‐cigarettes present a poison risk for children. From 2013 to 2017, an estimated 4,745 e‐liquid poisoning cases among children under age five were treated in U.S. hospital emergency departments.18 ii. E‐cigarettes present a risk of burns and other injuries, usually from malfunctioning batteries. From 2015 to 2017, there were an estimated 2,035 e‐ cigarette explosion and burn injuries reported in U.S. hospital emergency rooms.19 15 Cardenas V, Cen R, Clemens M, et al. Use of Electronic Nicotine Delivery Systems (ENDS) by pregnant women I: Risk of small‐for‐gestational‐age birth. Tob Induc Dis. 2019;17(May). doi:10.18332/tid/106089 16 Centers for Disease Control and Prevention. Outbreak of Lung Injury Associated with E‐cigarette Use, or Vaping. October (2019). https://www.cdc.gov/tobacco/basic_information/e‐cigarettes/severe‐lung‐disease.html. 17 Centers for Disease Control and Prevention Official Health Advisory. Severe Pulmonary Disease Associated with Using E‐Cigarette Products (Aug. 30, 2019). https://emergency.cdc.gov/han/han00421.asp. 18 Chang JT, Wang B, Chang CM, Ambrose BK. National estimates of poisoning events related to liquid nicotine in young children treated in US hospital emergency departments, 2013–2017. Inj Epidemiol. 2019;6(1):10. doi:10.1186/s40621‐019‐0188‐9. 19 Rossheim ME, Livingston MD, Soule EK, Zeraye HA, Thombs DL. Electronic cigarette explosion and burn injuries, US Emergency Departments 2015‐2017. Tob Control. 2019;28(4):472‐474. doi:10.1136/tobaccocontrol‐2018‐ 054518. Not Yet Approved 5 20200422_ts_24_206 G. While the e‐cigarette industry claims that its products help people quit smoking combustible cigarettes, the evidence shows that e‐cigarette use is actually associated with increased risk of cigarette initiation, particularly among low‐risk youths.20 i. Use of e‐cigarettes was most common among smokers, and dual users had the highest prevalence of respiratory symptoms. On a population level, this indicates that the present use of e‐cigarettes does not adequately serve as a smoking cessation tool.21 ii. E‐cigarettes are not commonly used as a quit tool among college students, but rather as a secondary source of nicotine, most commonly in current smokers.22 iii. Of adults and young adults over 18 who use e‐cigarettes, around 63 percent typically use non‐tobacco flavored e‐cigarettes, while over a third typically use tobacco‐flavored or unflavored e‐cigarettes.23 H. Open e‐cigarette systems are customizable by consumers and often allow for potential “unorthodox” use of the product. These modifications include altering mechanical components and replacing liquid cartridges with dangerous off‐market or illegal substances.24 Customization is one of the most popular social media topics for e‐ cigarettes.25 // 20 Berry KM, Fetterman JL, Benjamin EJ, et al. Association of Electronic Cigarette Use With Subsequent Initiation of Tobacco Cigarettes in US Youths. JAMA Netw Open. Published online February 01, 2019;2(2):e187794. doi:10.1001/jamanetworkopen.2018.7794. 21 Hedman L, Backman H, Stridsman C, et al. Association of Electronic Cigarette Use With Smoking Habits, Demographic Factors, and Respiratory Symptoms. JAMA Netw Open. 2018;1(3):e180789. doi:10.1001/jamanetworkopen.2018.0789. 22 Martinasek MP, Bowersock A, Wheldon CW. Patterns, Perception and Behavior of Electronic Nicotine Delivery Systems Use and Multiple Product Use Among Young Adults. Respir Care. 2018;63(7):913‐919. doi:10.4187/respcare.06001. 23 Landry RL, Groom AL, Vu T‐HT, et al. The role of flavors in vaping initiation and satisfaction among U.S. adults. Addict Behav. 2019;99:106077. doi:10.1016/j.addbeh.2019.106077. 24 Guy MC, Helt J, Palafox S, et al. Orthodox and Unorthodox Uses of Electronic Cigarettes: A Surveillance of YouTube Video Content. Nicotine Tob Res. 2019;21(10):1378‐1384. doi:10.1093/ntr/nty132. 25 Lee A, Hart J, Sears C, Walker K, Siu A, Smith C. A picture is worth a thousand words: Electronic cigarette content on Instagram and Pinterest. Tob Prev Cessat. 2017;3(July). doi:10.18332/tpc/74709. Not Yet Approved 6 20200422_ts_24_206 SECTION 2. Chapter 4.64 (Permits for Retailers of Tobacco Products) of Title 4 (Business Licenses and Regulations) is hereby amended and restated as follows: CHAPTER 4.64. PERMITS FOR RETAILERS OF TOBACCO PRODUCTS 4.64.010. Intent. This Chapter is adopted to: (1) Ensure compliance with the business standards and practices of the County; (2) Encourage responsible retailing of Tobacco Products; (3) Discourage violations of laws related to Tobacco Products, especially those that prohibit or discourage the Sale or Distribution of Tobacco Products to individuals under 21; (4) Respond to a new wave of addiction to Electronic Cigarette Products; (5) Reduce vulnerability to unexplained illnesses associated with Electronic Cigarette Products; and (6) Protect the public health and welfare. This Chapter does not expand or reduce the degree to which the acts regulated by federal or state law are criminally proscribed or alter the penalties provided by such laws. 4.64.020. Definitions. For the purposes of this Chapter, the following definitions shall apply: (a) Arm’s Length Transaction means a Sale in good faith and for valuable consideration that reflects the fair market value in the open market between two or more informed and willing parties, neither of which is under any compulsion to participate in the transaction. A Sale between relatives, related companies or partners, or a Sale for which a significant purpose is avoiding the effect of the violations of this Chapter is not an Arm’s Length Transaction. (b) Department means any department of the City of Palo Alto or County of Santa Clara designated by the City Manager to enforce or administer this Chapter, including the County of Santa Clara’s Department of Environmental Health and any agency or Person designated by the Director of the Department of Environmental Health to enforce or administer the provisions of this Chapter. Not Yet Approved 7 20200422_ts_24_206 (c) Distribute or Distribution means the transfer, by any Person other than a common carrier, of a Tobacco Product to another Person for Sale or personal consumption. (d) Electronic Cigarette Products means any of the following products: (1) Any device or delivery system that can be used to deliver nicotine in aerosolized or vaporized form, including, but not limited to, an e‐cigarette, e‐cigar, e‐pipe, vape pen, or e‐hookah. (2) Any component, part, or accessory of such a device or delivery system that is used during its operation. (3) Any flavored or unflavored liquid or substance containing nicotine, whether Sold separately or Sold in combination with any device or delivery system that could be used to deliver nicotine in aerosolized or vaporized form. (4) Any product for use in an electronic nicotine device or delivery system whether or not it contains nicotine or tobacco or is derived from nicotine or tobacco. (5) Electronic Cigarette Products shall not include any battery, battery charger, carrying case, or other accessory not used in the operation of the device if Sold separately. Electronic Cigarette Products shall not include any product that has been approved by the United States Food and Drug Administration for Sale as a tobacco cessation product or for other therapeutic purposes where that product is marketed and Sold solely for such approved use. See 21 U.S.C. § 387(a). As used in this subsection, nicotine does not include any food products as that term is defined pursuant to Section 6359 of the California Revenue and Taxation Code. (e) Ownership means possession of a ten percent or greater interest in the stock, assets, or income of a business, other than a security interest for the repayment of debt. Notwithstanding any other definition in this Code, an Owner means a Person who possesses Ownership. (f) Permit means a valid permit issued by the Department to a Person to act as a Retailer. (g) Retailer means any Person who Sells or Distributes Tobacco Products for any form of consideration. Retailing shall mean the doing of any of these actions. This definition is without regard to the quantity of Tobacco Products Sold or Distributed. (h) School means a public or private elementary, middle, junior high, or high school. (i) Sale and Sold includes any sale, exchange, barter or offer for sale. Not Yet Approved 8 20200422_ts_24_206 (j) Tobacco Product means (unless specifically noted elsewhere) any product subject to Subchapter IX (21 U.S.C. § 387 et seq. (“Subchapter IX”)) of the Federal Food, Drug, and Cosmetic Act. (See 21 U.S.C. § 387a(b) (products subject to Subchapter IX); 21 C.F.R. §§ 1100.1‐1100.3 (tobacco products subject to Subchapter IX).) Products subject to Subchapter IX include, but are not limited to, cigarettes, cigarette tobacco, roll‐your‐ own tobacco, smokeless tobacco, cigars, pipe tobacco, waterpipe tobacco, and Electronic Cigarette Products. Products that are not subject to Subchapter IX include accessories of Tobacco Products, such as, but not limited to, ashtrays, spittoons, and conventional matches and lighters that solely provide an external heat source to initiate but not maintain combustion of a Tobacco Product. 4.64.030. Requirements and prohibitions. (a) Permit required. It shall be unlawful for any Person to act as a Retailer without first obtaining and maintaining a Permit pursuant to this Chapter for each location at which Retailing occurs. (b) Lawful business operation. It shall be a violation of this Chapter for any Retailer to violate any local, state, or federal law applicable to Tobacco Products or the Retailing of such Tobacco Products. (c) Display of Permit. Each Permit shall be prominently displayed in a publicly visible place at the location identified in the Permit. (d) Notice of minimum age for purchase of Tobacco Products. Retailers shall post conspicuously, at each point of purchase, a notice stating that selling Tobacco Products to anyone under 21 years of age is illegal and subject to penalties. Such notice shall be subject to the approval of the Public Health Department. (e) Positive identification required. No Retailer shall Sell or Distribute a Tobacco Product to another individual who appears to be under 30 years of age without first examining the individual’s identification to confirm that the individual is at least the minimum age required under state law to purchase and possess the Tobacco Product. (f) Minimum age for individuals selling Tobacco Products. No individual who is younger than the minimum age established by State law for the purchase or possession of Tobacco Products shall engage in Retailing. (g) False and misleading advertising prohibited. A Retailer without a Permit: (1) Shall keep all Tobacco Products out of public view. (2) Shall not display any advertisement relating to Tobacco Products that promotes the Sale or Distribution of such products from the Retailer’s location or that Not Yet Approved 9 20200422_ts_24_206 could lead a reasonable consumer to believe that Tobacco Products can be obtained at that location. (h) Limitation on storefront advertising. No more than 15 percent of the square footage of the windows and clear doors of a physical storefront used for Retailing Tobacco Products shall bear advertising or signs of any sort, and all advertising and signage shall be placed and maintained in a manner that ensures that law enforcement personnel have a clear and unobstructed view of the interior of the premises, including the area in which the cash registers are maintained, from the exterior public sidewalk or entrance to the premises. However, this latter requirement of this subsection (h) shall not apply to an establishment where there are no windows or clear doors, or where existing windows are located only at a height that precludes a view of the interior of the premises by an individual standing outside the premises. (i) Flavored Tobacco Products. (1) Except as permitted in paragraph (3) of this subsection (i), no Retailer shall Sell a Tobacco Product containing, as a constituent or additive, an artificial or natural flavor or aroma (other than tobacco) or an herb or spice, including but not limited to strawberry, grape, orange, clove, cinnamon, pineapple, vanilla, coconut, licorice, cocoa, chocolate, cherry, mint, menthol, or coffee, that is a characterizing flavor or aroma of the Tobacco Product, smoke, or vapor produced by the Tobacco Product. (2) A Tobacco Product shall be subject to a rebuttable presumption that the product is prohibited by paragraph (1) of this subsection if: (i) The product’s manufacturer or any other Person associated with the manufacture or Sale of Tobacco Products makes or disseminates public statements or claims to the effect that the product has or produces a characterizing flavor or aroma, other than tobacco; or (ii) The product’s label, labeling, or packaging includes a statement or claim—including any text and/or images used to communicate information—that the product has or produces a characterizing flavor or aroma, other than tobacco. (3) Except as provided in Paragraph (4) of this subsection (i), Paragraph (1) of this subsection (i) shall not apply to any Retailer that meets all the following criteria: (i) Primarily sells Tobacco Products; (ii) Generates more than 60 percent of its gross revenues annually from the Sale of Tobacco Products; Not Yet Approved 10 20200422_ts_24_206 (iii) Does not permit any individual under 21 years of age to be present or enter the premises at any time; (iv) Does not Sell alcoholic beverages or food for consumption on the premises; and (v) Posts a sign outside the retail location that clearly, sufficiently, and conspicuously informs the public that individuals under 21 years of age are prohibited from entering the premises; (vi) Posts a staff person adjacent to all public entrances to the premises and verifies an individual’s age upon entering using the same standards as section 4.63.030(e) (Positive identification required). The staff person may be located inside or outside the entrance. (4) No Retailer that is issued a new Permit after June 30, 2020 shall Sell or Distribute flavored Tobacco Products under paragraph (3) of this subsection (i) after Permit issuance. No Retailer that receives a Permit renewal after June 30, 2020 shall Sell or Distribute flavored Tobacco Products under paragraph (3) of this subsection (i) after Permit renewal. Regardless of the date of Permit issuance or renewal, no Retailer shall Sell or Distribute flavored Tobacco Products after June 30, 2020. (i) This Paragraph (4) of subsection (i) shall not apply to any Retailer of Tobacco Products (as such term was defined in the predecessor Ordinance No. 5418) who the Department determines meets the criteria of section 4.63.030(i)(3) of Ordinance No. 5418 as of June 30, 2020, and provided that the Retailer obtains a permit prior to July 1, 2020 pursuant to sections 4.64.050 and 4.64.060, timely renews its permit pursuant to section 4.64.070(b), and has not had its permit terminated pursuant to section 4.64.130(g). (j) Vending machines prohibited. No Tobacco Product shall be Sold or Distributed to the public from a vending machine or appliance, or any other coin or token operated mechanical device designed or used for vending purposes, including, but not limited to, machines or devices that use remote control locking mechanisms. (k) Prohibition on Sale or Distribution of Tobacco Products to individuals under 21. No Retailer shall Sell or Distribute any Tobacco Product to any individual who is under 21 years of age. (l) Prohibition on Sale or Distribution of Electronic Cigarette Products. No Retailer that is issued a new Permit after June 30, 2020 shall Sell or Distribute Electronic Cigarette Not Yet Approved 11 20200422_ts_24_206 Products after Permit issuance. No Retailer that receives a Permit renewal after June 30, 2020 shall Sell or Distribute Electronic Cigarette Products after Permit renewal. Regardless of the date of Permit issuance or renewal, no Retailer shall Sell or Distribute Electronic Cigarette Products after June 30, 2020. (i) This subsection (l) shall not apply to any Retailer of Tobacco Products (as such term was defined in the predecessor Ordinance No. 5418) who the Department determines meets the criteria of section 4.63.030(i)(3) of Ordinance No. 5418 as of June 30, 2020, and provided that the Retailer obtains a permit prior to July 1, 2020 pursuant to sections 4.64.050 and 4.64.060, timely renews its permit pursuant to section 4.64.070(b), and has not had its permit terminated pursuant to section 4.64.130(g). 4.64.040. Eligibility requirements for a Permit. (a) No Permit may be issued to authorize Retailing at or from other than a fixed location. For example, Retailing by Persons on foot or from vehicles is prohibited. (b) No Permit may be issued to authorize Retailing at a temporary or recurring temporary event. For example, Retailing at flea markets and farmers’ markets is prohibited. (c) No Permit may be issued to authorize Retailing at any location where the profession of pharmacy is practiced by a pharmacist licensed by the State in accordance with the Business and Professions Code and where prescription drugs are offered for Sale. (d) No Permit may be issued to authorize Retailing at any location within 1,000 feet of a School, as measured by a straight line between any point along the property line of any parcel on which a School is located and any point along the perimeter of the Permit applicant’s proposed business location; provided, however, that the prohibition contained in this subsection (d) shall not apply to the following: (1) Any Retailer of Tobacco Products (as such term was defined in the predecessor Ordinance No. 5418) operating lawfully on June 30, 2018 provided that the Retailer obtains a permit prior to July 1, 2020 pursuant to sections 4.64.050 and 4.64.060, and timely renews its permit pursuant to section 4.64.070(b); (2) Any Retailer of electronic smoking devices (as such term was defined in the predecessor Ordinance No. 5418) operating lawfully on June 30, 2018 provided that the Retailer obtains a permit prior to July 1, 2020 pursuant to sections 4.64.050 and 4.64.060, and timely renews its permit pursuant to section 4.64.070(b); however, any such Retailer is subject to the prohibition on the Sale and Distribution of Electronic Cigarette Products established in Section 4.64.030(l) unless exempt by 4.64.030(l)(i); and Not Yet Approved 12 20200422_ts_24_206 (3) Any lawfully operating Retailer of Tobacco Products that would otherwise become ineligible to receive or renew a Permit due to the creation or relocation of a School. (e) No Permit may be issued to authorize Retailing at a location which is within 500 feet of a location occupied by another Retailer, as measured by a straight line between any point along the perimeter of an existing Retailer’s business location and any point along the perimeter of the Permit applicant’s proposed business location; provided, however, that the prohibition contained in this subsection (e) shall not apply to: (1) Any Retailer of Tobacco Products (as such term was defined in the predecessor Ordinance No. 5418) operating lawfully on June 30, 2018 provided that the Retailer obtains a permit prior to July 1, 2020 pursuant to sections 4.64.050 and 4.64.060, and timely renews its permit pursuant to section 4.64.070(b); and (2) Any Retailer of electronic smoking devices (as such term was defined in the predecessor Ordinance No. 5418) operating lawfully on June 30, 2018 provided that the Retailer obtains a permit prior to July 1, 2020 pursuant to sections 4.64.050 and 4.64.060, and timely renews its permit pursuant to section 4.64.070(b); however, any such Retailer is subject to the Prohibition on the Sale and Distribution of Electronic Cigarette Products established in Section 4.64.030(l) unless exempt by 4.64.030(l)(i). (f) Any exemption granted to a Retailer pursuant to subsections (d) and (e) shall cease to apply upon the earlier of any of the following to occur: (1) The Retailer fails to timely renew the Permit pursuant to Section 4.64.070(b) of this Chapter. (2) A new Person obtains Ownership in the business. (3) A Retailer’s Permit is terminated pursuant to Section 4.64.130(g). 4.64.050. Application procedure. (a) It is the responsibility of each Retailer to be informed of all laws applicable to Retailing, including those laws affecting the issuance of a Permit. No Retailer may rely on the issuance of a Permit as a determination by the City that the Retailer has complied with all laws applicable to Retailing. A Permit issued contrary to this Chapter, contrary to any other law, or on the basis of false or misleading information supplied by a Retailer shall be revoked pursuant to Section 4.64.060 of this Chapter. (b) All Permit applications shall be submitted on a form supplied by the Department. Not Yet Approved 13 20200422_ts_24_206 (c) A permitted Retailer shall inform the Department in writing of any change in the information submitted on an application for a Permit within 14 calendar days of a change. (d) All information specified in an application pursuant to this section shall be subject to disclosure under the California Public Records Act (Government Code Section 6250 et seq.) or any other applicable law, subject to the laws’ exemptions. 4.64.060. Permit issuance, denial, and revocation. (a) Upon the receipt of a complete application for a Permit, the application fee, and the annual Permit fee, the Department shall issue a Permit unless substantial evidence demonstrates that one or more of the following bases for denial exists: (1) The information presented in the application is inaccurate or false. (2) The application seeks authorization for Retailing at a location for which this Chapter prohibits issuance of a Permit. (3) The application seeks authorization for Retailing by a Person to whom this Chapter prohibits issuance of a Permit. (4) The application seeks authorization for Retailing that is prohibited pursuant to this Chapter (e.g., mobile vending, Electronic Cigarette Products) or that is unlawful pursuant to any other law. (b) A Permit shall be revoked if the Department finds that one or more of the bases for denial of a Permit under this section existed at the time application was made or at any time before the Permit issued. Such a revocation shall be without prejudice to the filing of a new Permit application. 4.64.070. Permit term, renewal, and expiration. (a) Term of Permit. The term of a Permit is one year. A Permit is invalid upon expiration. (b) Renewal of Permit. The Department shall renew a Permit upon timely payment of the annual Permit fee provided that the Retailer is in compliance with this Chapter, as amended. The Department may, in its discretion, agree to renew any expired Permit within the three‐month period following expiration if the Retailer pays the annual Permit fee and applicable late charges. For every calendar month, or fraction thereof, that a Retailer fails to renew an expired Permit, a late charge equal to 20 percent of the annual Permit fee shall be assessed. A Permit renewed within three calendar months of expiration shall be treated as if timely renewed. Not Yet Approved 14 20200422_ts_24_206 (c) Issuance of Permit after revocation or expiration of Permit. To apply for a new Permit more than three calendar months after expiration of a Permit or following revocation of a Permit that was wrongly issued, a Retailer must submit a complete application for a Permit, along with the application fee and annual Permit fee. The Department shall issue a Permit pursuant to the requirements of Section 4.64.060 of this Chapter. 4.64.080. Permits nontransferable. (a) A Permit may not be transferred from one Person to another or from one location to another. Whenever a new Person obtains Ownership in a business for which a Permit has been issued, a new Permit shall be required, but any exemption granted pursuant to Sections 4.64.030 or 4.64.040 of this Chapter shall cease to apply. (b) Notwithstanding any other provision of this Chapter, prior violations of this Chapter at a location shall continue to be counted against a location and Permit ineligibility and suspension periods shall continue to apply to a location unless: (1) One hundred percent of the interest in the stock, assets, or income of the business, other than a security interest for the repayment of debt, has been transferred to one or more new owners; and (2) The City is provided with clear and convincing evidence, including an affidavit, that the business has been acquired in an Arm’s Length Transaction. 4.64.090. Permit conveys a limited, conditional privilege. Nothing in this Chapter shall be construed to grant any Person obtaining and maintaining a Permit any status or right other than the limited, conditional privilege to act as a Retailer at the location in the City identified on the face of the Permit. All Permits are issued subject to the City’s right to amend this Chapter, and Retailers shall comply with all provisions of this Chapter, as amended. 4.64.100. Fees. The Department shall not issue or renew a Permit prior to full payment of any applicable fees. The City shall, from time to time, establish by resolution or ordinance the fees to issue or to renew a Permit. The fees shall be calculated so as to recover the cost of administration and enforcement of this Chapter, including, for example, issuing a Permit, administering the Permit program, Retailer education, Retailer inspection and compliance checks, documentation of violations, and prosecution of violators, but shall not exceed the cost of the regulatory program authorized by this Chapter. All fees and interest earned from such fees shall be used exclusively to fund administration and enforcement of this Chapter. Not Yet Approved 15 20200422_ts_24_206 4.64.110. Compliance monitoring. (a) Compliance with this Chapter shall be monitored by the Department. In addition, any peace officer may enforce the penal provisions of this Chapter. The City Manager may designate any number of additional individuals to monitor and facilitate compliance with this Chapter. (b) The Department or other individuals designated to enforce the provisions of this Chapter shall check each Retailer at least once per 12‐month period to determine if the Retailer is complying with all laws applicable to Retailing, other than those laws regulating underage access to Tobacco Products. Nothing in this paragraph shall create a right of action in any Retailer or other Person against the City, the County of Santa Clara, or its agents. 4.64.120. Prevention of underage Sales. (a) The Department or other departments or individuals designated to enforce the provisions of this Chapter shall, in conjunction with the Police Department, check each Retailer at least once per 12‐month period to determine whether the Retailer is conducting business in a manner that complies with laws regulating youth access to Tobacco Products. Nothing in this paragraph shall create a right of action in any Retailer or other Person against the City, the County of Santa Clara, or its agents. (b) The City shall not enforce any law establishing a minimum age for Tobacco Product purchases against an individual who otherwise might be in violation of such law because of the individual’s age (“Youth Decoy”) if the potential violation occurs when: (1) The Youth Decoy is participating in a compliance check supervised by a peace officer or a code enforcement official of the City or County of Santa Clara; (2) The Youth Decoy is acting as an agent of a Department or individual designated by the City or County of Santa Clara to monitor compliance with this Chapter; or (3) The Youth Decoy is participating in a compliance check funded in part, either directly or indirectly through subcontracting, by the City, the County of Santa Clara, or the California Department of Public Health. 4.64.130. Penalties for a violation by a Retailer with a Permit. (a) Administrative fine. In addition to any other penalty authorized by law, an administrative fine shall be imposed and a Permit shall be suspended if any court of competent jurisdiction determines, or the Department finds based on a preponderance of the evidence that the Retailer, or any of the Retailer’s agents or employees, has violated any of the requirements, conditions, or prohibitions of this Chapter, has pled Not Yet Approved 16 20200422_ts_24_206 guilty, “no contest” or its equivalent to such a violation, or has admitted to a such a violation. (b) Amount of fine. The amount of the administrative fine for each such violation shall be as follows: (1) A fine not to exceed $100.00 for a first violation within a 12‐month period; (2) A fine not to exceed $200.00 for a second violation within a 12‐month period; and; (3) A fine not to exceed $500.00 for each additional violation within a 12‐month period. (c) Time period for Permit suspension. The period of the suspension shall be as follows: (1) For a first violation of this Chapter at a location within any 60‐month period, the Permit shall be suspended for up to 30 calendar days. (2) For a second violation of this Chapter at a location within any 60‐month period, the Permit shall be suspended for up to 90 calendar days. (3) For each additional violation of this Chapter at a location within any 60‐month period, the Permit shall be suspended for up to one year. (d) Waiver of penalties for first violation. The Department may waive any penalties for a Retailer’s first violation of any requirement, condition, or prohibition of this Chapter, other than a violation of a law regulating youth access to Tobacco Products, if the Retailer admits the violation in writing and agrees to forego a hearing on the allegations. Regardless of the Department’s waiver of penalties for a first violation, the violation will be considered in determining the penalties for any future violation. (e) Corrections period. The Department shall have discretion to allow a Retailer a period of time to correct any violation of any requirement, condition, or prohibition of this Chapter, other than a violation of a law regulating youth access to Tobacco Products. If the Department exercises its discretion to provide a corrections period, and a Retailer’s violation is corrected within the time allowed for correction, no penalty shall be imposed under this section. (f) Written notice of penalties. Whenever a fine is issued and/or a Permit is suspended based on a violation of this Chapter, the Department shall provide the Retailer written notice of the violation and the fine and suspension, including when the suspension shall take effect. Not Yet Approved 17 20200422_ts_24_206 (g) Revocation for Retailers of flavored Tobacco Products or Electronic Cigarette Products. In addition to any other penalty authorized by law, a Permit shall be revoked if any court of competent jurisdiction determines, or the Department finds based on a preponderance of the evidence that any Retailer of flavored Tobacco Products and/or Electronic Cigarette Products, or any of the Retailer’s agents or employees, has violated section 4.64.030(k) (Prohibition on Sale or Distribution of Tobacco Products to individuals under 21), has pled guilty, “no contest” or its equivalent to such a violation, or has admitted to a such a violation, on two or more occasions within any 24‐ month period. The Department shall provide the Retailer written notice of the violations and revocation, including when the revocation shall take effect. 4.64.140. Penalties for Retailing without a Permit. (a) Administrative fine. In addition to any other penalty authorized by law, an administrative fine and an ineligibility period for application or issuance of a Permit shall be imposed if a court of competent jurisdiction determines, or the Department finds based on a preponderance of evidence, that any Person has engaged in Retailing at a location without a valid Permit, either directly or through the Person’s agents or employees, has pled guilty, “no contest” or its equivalent to such a violation, or has admitted to such a violation. (b) Amount of fine. The amount of the administrative fine for each such violation shall be as follows: (1) A fine not to exceed $100.00 for a first violation within a 12‐month period; (2) A fine not to exceed $200.00 for a second violation within a 12‐month period; and (3) A fine not to exceed $500.00 for each additional violation within a 12‐month period. (c) Time period for Permit ineligibility. The ineligibility period shall be as follows: (1) For a first violation of this section at a location within any 60‐month period, no new Permit may be issued for the Person or the location (unless Ownership of the business at the location has been transferred in an Arm’s Length Transaction) until 30 calendar days have passed from the date of the violation. (2) For a second violation of this section at a location within any 60‐month period, no new Permit may be issued for the Person or the location (unless Ownership of the business at the location has been transferred in an Arm’s Length Transaction) until 90 calendar days have passed from the date of the violation. Not Yet Approved 18 20200422_ts_24_206 (3) For each additional violation of this section at a location within any 60‐month period, no new Permit may be issued for the Person or the location (unless Ownership of the business at the location has been transferred in an Arm’s Length Transaction) until one year has passed from the date of the violation. (d) Waiver of penalties for first violation. The Department may waive any penalties for a Retailer’s first violation of this section, unless the violation also involves a violation of a law regulating youth access to Tobacco Products, if the Retailer admits the violation in writing and agrees to forego a hearing on the allegations. Regardless of the Department’s waiver of penalties for a first violation, the violation will be considered in determining the penalties for any future violation. (e) Written notice of penalties. Whenever a fine is issued and/or a Permit is suspended pursuant to this section, the Department shall provide the Retailer written notice of the fine and suspension, including when the suspension shall take effect. (f) Appeals. Any penalties imposed under this section may be appealed pursuant to Section 4.64.150 of this Chapter. A timely appeal shall stay enforcement of the appealed penalties while the appeal is ongoing. 4.64.150. Appeals. (a) Any Retailer served with a written notice of penalties may request an administrative hearing to appeal the existence of the violation, the amount of the fine, and/or the length of the suspension by returning a completed hearing request form to the Office of the County Hearing Officer (or City Clerk if violation is enforced by City) within 10 days from the date of the written notice of penalties. (b) The Retailer shall include the following in or with the hearing request form: (1) A statement indicating the reason the Retailer contests the written notice of penalties; (2) Any evidence the Retailer wants the Hearing Officer to consider; (3) An advance deposit of the amount of any fine challenged; and (4) The address of the Retailer and, if available, an email address that can be used for contact and correspondence by the Office of the County Hearing Officer (or City Clerk if violation is enforced by City) and the Department. The Retailer may request service of notice by mail. Not Yet Approved 19 20200422_ts_24_206 (c) The hearing request form shall be deemed filed on the date received by the Office of the County Hearing Officer (or City Clerk if violation is enforced by City). A timely appeal shall stay enforcement of the appealed penalties while the appeal is ongoing. (d) After receiving a timely hearing request form, the Office of the County Hearing Officer (or City Clerk if violation is enforced by City) shall notify the Department as soon as practicable and then shall schedule an administrative hearing. The Office of the County Hearing Officer (or City Clerk if violation is enforced by City) shall provide the Retailer and the Department at least ten calendar days’ written notice of the date, time, and place of the administrative hearing and the name of the Hearing Officer who will conduct the hearing. The notice shall be given to the Retailer either by email, if requested, or by first class mail, postage prepaid. (e) Between the time the Retailer requests the administrative hearing and the time of the Hearing Officer’s decision, the Retailer, the Department, and each of their representatives shall not engage in ex parte communications with the Office of the County Hearing Officer (or City Clerk if violation is enforced by City) or the Hearing Officer regarding the matters at issue in the hearing. (f) The hearing shall be conducted by the Hearing Officer on the date, time, and place specified in the notice to the Retailer. A Retailer’s failure to appear at the hearing shall constitute an abandonment of the hearing request and a failure to exhaust administrative remedies as a precedent to judicially challenge the existence of the violation and the imposition of the fine and suspension. (g) At the hearing, the Retailer and the Department shall have the opportunity to present evidence, including witnesses, relevant to the Hearing Officer’s determination of the matter. Neither the provisions of the Administrative Procedure Act (Government Code Section 11500 et seq.) nor the formal rules of evidence in civil or criminal judicial proceedings shall apply to such hearing. The Hearing Officer may admit any evidence, including witnesses, relevant to the determination of the matter, except as otherwise provided in Section 4.64.160(c). (h) The written notice of penalties and any other reports prepared by or for the Department concerning the violation shall be admissible and accepted by the Hearing Officer as prima facie evidence of the violation and the facts stated in those documents. (i) The Hearing Officer may continue the hearing from time to time, in his or her sole discretion, to allow for its orderly completion. After receiving the evidence submitted at the hearing, the Hearing Officer may further continue the hearing and request additional information from either the Department or the Retailer. Not Yet Approved 20 20200422_ts_24_206 (j) After considering the evidence and testimony submitted the Hearing Officer shall issue a written decision regarding the matters properly raised in the request for administrative hearing. The Hearing Officer’s decision shall: (1) Be based on a preponderance of the evidence. (2) Include a statement of the reasons for the decision. (3) Be issued within 20 calendar days of the close of the hearing. (4) Be served on both the Retailer and the Department. The decision shall be given to the Retailer either by email, if requested, or by first class mail, postage prepaid. (k) Based on the Hearing Officer’s decision, the Office of the County Hearing Officer (or City’s Administrative Services Division if violation is enforced by City) shall promptly refund to the Retailer any amount of the advance fine deposit the Department is not entitled to and shall provide the remainder to the Department. (l) The Hearing Officer’s written decision shall constitute the final administrative decision of the City. 4.64.160. Enforcement. (a) Any violation of this Chapter is hereby declared to be a public nuisance. (b) Causing, permitting, aiding, abetting, or concealing a violation of any provision of this Chapter shall also constitute a violation of this Chapter. (c) Whenever evidence of a violation of this Chapter is obtained in any part through the participation of an individual under the age of 21 years old, such an individual shall not be required over his or her objection to appear or give testimony in any civil or administrative process brought to enforce this Chapter and the alleged violation shall be adjudicated based upon the sufficiency and persuasiveness of the evidence presented. (d) Violations of this Chapter may be remedied by a civil action brought by the City Attorney or Santa Clara County Counsel, including, but not limited to, administrative or judicial nuisance abatement proceedings, civil code enforcement proceedings, and suits for injunctive relief. For the purposes of the civil remedies provided in this Chapter, each day on which a Tobacco Product is offered for Sale in violation of this Chapter, and each individual retail Tobacco Product that is Sold or Distributed in violation of this Chapter, shall constitute a separate violation of this Chapter. Not Yet Approved 21 20200422_ts_24_206 (e) Any Person found guilty of violating any provision of this Chapter shall be deemed guilty of an infraction, punishable as provided by California Government Code § 25132. (f) The remedies provided by this Chapter are cumulative and in addition to any other remedies available at law or in equity. 4.64.170. No conflict with federal or state law. Nothing in this Chapter shall be interpreted or applied so as to create any requirement, power, or duty that is preempted by, or in conflict with, federal or state law, rules, or regulations. SECTION 3. If any section, subsection, clause or phrase of this Ordinance is for any reason held to be invalid, such decision shall not affect the validity of the remaining portion or sections of the Ordinance. The Council hereby declares that it should have adopted the Ordinance and each section, subsection, sentence, clause or phrase thereof irrespective of the fact that any one or more sections, subsections, sentences, clauses or phrases be declared invalid. SECTION 4. The Council finds that this project is exempt from the provisions of the California Environmental Quality Act (“CEQA”), pursuant to Section 15061 of the CEQA Guidelines, because it can be seen with certainty that there is no possibility that the ordinance will have a significant effect on the environment. // // // // // // // // // // // Not Yet Approved 22 20200422_ts_24_206 SECTION 5. This ordinance shall be effective on July 1, 2020. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ____________________________ ____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ____________________________ ____________________________ Deputy City Attorney City Manager ____________________________ Director of Public Works ____________________________ Chief of Police ____________________________ Director of Administrative Services Attachment B-Comparison of Current Palo Alto Tobacco Retail Ordinance, Santa Clara County Ordinance, and Proposed Palo Alto Ordinance Current TRP Ordinance Requirements Adopted in 2018 Santa Clara County TRP Ordinance Changes Adopted by Santa Clara County in November 2019 Proposed Palo Alto TRP Ordinance Changes Banned Products Prohibits pharmacies and vending machine sales of tobacco products; Prohibits the sale of flavored tobacco products except at adult-only stores (stores that prohibit anyone under the age of 21 from entering unless they are with an adult). Prohibits the sale and distribution of electronic cigarette products at all retailers including adult-only (over-21) retailers; Prohibits the sale of all flavored tobacco products at all retailers including adult-only stores. Same as current ordinance but would: prohibit the sale of all Electronic Cigarette Products except at adult- only stores. Administrative Requirements Limits storefront advertising of tobacco products; New retailers may not locate within 500 feet of another tobacco retailer or within 1,000 feet of a school. Limits storefront advertising of tobacco products; New retailers may not locate within 500 feet of another tobacco retailer or within 1,000 feet of a school. Same as current ordinance but would: prohibit people under age 21 from entering an adult-only store even if accompanied by an adult; require store staff to be located close enough to the store entrance to check ID before any member of the public enters. Enforcement Periodic compliance checks by state and federal agencies; Permit checks conducted by Santa Clara County Department of Health; Undercover checks conducted by Palo Alto Police Department to enforce no under age -21 sales; Repeat violations are considered over 24-month time span. Periodic compliance checks by state and federal agencies; Permit checks conducted by Santa Clara County Department of Health; Undercover checks conducted by Palo Alto Police Department to enforce no under age - 21 sales; Repeat violations are considered over 60- month time span. Same as current ordinance but: repeat violations of sales to anyone under age 21 are considered over 60- month time span; Retailer would lose exemption if two under age-21 sales violations occurred within 24 months. Additional State and Federal Restrictions (discussed in Section 2 of this report) Effective January 1, 2020 SB 39, Hill requires signature of a person 21 years of age or older for delivery of an online tobacco product sale; Effective February 6, 2020 the United States Food and Drug Administration prohibits all retailers from selling flavored cartridge-based e- cigarette products. The following products are exempted: tobacco and menthol flavors, e-liquid flavors used in tank-based systems, and in disposable, single-use “disposable” electronic cigarettes. Attachment B cityofpaloalto. or g Printed with soy-based inks on 100% recycled paper processed without chlorine. CITY OF PALO ALTO Public Works 2501 Embarcadero Way Palo Alto, CA 94303 February 18, 2020 Dear Business Owner, You are receiving this letter because Palo Alto City Council will be voting on proposed changes to the City of Palo Alto Ordinance Code 4.64 Permits for Retailers of Tobacco Products (TRP) which may impact your business. On December 9, 2019, Palo Alto City Council directed City staff to recommend additional measures to address the rapid increase in use of e-cigarettes and vaping products among youth. This included direction to adopt the updated requirements of the Santa Clara County Tobacco Retail Permit Ordinance passed by Santa Clara County Board of Supervisors on November 5, 2019. The key proposed changes are summarized below: 1. For “adult-only (over age-21) tobacco stores” where 60% gross revenue is from tobacco products, the primary proposed TRP changes would: a) Prohibit the sale and distribution of all electronic cigarette products, e.g., devices such as e-cigarette, e-cigar, e-pipe, vape pen, or e-hookah, or any flavored or unflavored liquid or substance containing nicotine, whether sold separately or sold in combination with any device or delivery system); b) Prohibit the sale of flavored tobacco products. Current ordinance requirements allow adult-only stores to sell flavored tobacco products; c) Extend the look-back” violation period from 24 months to 60 months. 2. For all other retailers, the proposed changes to the Ordinance Code would: a) Prohibit the sale and distribution of all electronic cigarette products e.g., devices such as e-cigarette, e-cigar, e-pipe, vape pen, or e-hookah, or any flavored or unflavored liquid or substance containing nicotine, whether sold separately or sold in combination with any device or delivery system; b) Extend the look-back violation period from 24 months to 60 months. To help retailers understand the proposed new ordinance requirements a Summary of the Tobacco Retail Permit Requirements and a list of Frequently Asked Questions are included as attachments. Palo Alto City Council will vote on the proposed Tobacco Retail Permit Ordinance during the April 6, 2020 City Council Meeting (6:00pm, 250 Hamilton Avenue, Palo Alto, City Council Chambers). Council meeting agendas are subject to change so please check the agenda online before attending. The proposed ordinance changes and staff report are posted two weeks before the Council meeting at cityofpaloalto.org/gov/depts/cou/council_agendas.asp. Retailers may attend the Council meeting to provide public comment, or email citycouncil@cityofpaloalto.org. For more information cityofpaloalto.org/smokingordinance, email smoking@cityofpaloalto.org, or call (650) 329-2122. Sincerely, Phil Bobel, Assistant Director City of Palo Alto Public Works Department 1 City of Palo Alto Tobacco Retail Permit Ordinance (Municipal Code 4.64) Frequently Asked Questions On December 9, 2019, Palo Alto City Council directed City staff to revise the City’s current Tobacco Retail Permit Ordinance (TRP) to further restrict the sale and distribution of all e-cigarette products and flavored tobacco products in Palo Alto. The direction was in response to public concern about increased use of e-cigarette products and vaping among youth, and more than 1,600 cases of related lung injury and 34 confirmed deaths nation-wide in 2019. The following information provides answers to frequently asked questions about the proposed changes to Palo Alto’s Tobacco Retail Permit Ordinance. 1. What is the difference between the California Cigarette and Tobacco Products Retailer License and the Santa Clara County Tobacco Retail Permit? Tobacco retailers must maintain both a California Cigarette and Tobacco Products Retailer License ($265 per year) and a Santa Clara County Tobacco Retail Permit ($425 per year). The TRP is administered by the Santa Clara County Department of Environmental Health. The TRP requires additional measures beyond State requirements to curb youth smoking. 2. How are Electronic Cigarette Products and Flavored Tobacco Products defined? An “Electronic Cigarette Product (or e-cigarette)” is any device or delivery system used to deliver nicotine in aerosolized or vaporized form, including e-cigarettes, e-cigars, e-pipes, vape pens, or e-hookahs, or any component, part, or accessory of such a device or delivery system that is used during its operation. Electronic Cigarette Products also include flavored and unflavored liquids or substances containing nicotine, whether sold separately or sold in combination with any device or delivery system. Specific examples include: e-juice or liquid (flavored or unflavored), e-cigarette pods or cartridges (flavored or unflavored), any e-cigarette devices, puff bars or disposable e-cigarette products. A “Flavored Tobacco Product” includes flavored cigarettes, cigarillos or smokeless tobacco that imparts a characterizing taste or smell other than tobacco. Examples include: menthol, mint, wintergreen, fruit, candy, alcohol or spice flavors. 3. What is considered an “adult-only” tobacco store or retailer? “Adult-only” tobacco stores: Primarily sell tobacco products; Generate more than 60% of gross revenue from tobacco products or paraphernalia; Are required to post a sign outside the location clearly stating that anyone under age 21 is prohibited from entering the premises; Do not sell alcohol or food for onsite consumption. 4. What are the new proposed requirements in the revised Tobacco Retail Ordinance? If City Council approves the new Ordinance requirements, all retailers would be restricted from selling e-cigarette products and “adult-only (over age-21)” stores would no longer be allowed to sell any flavored tobacco products. 2 5. I am an “adult-only (over age 21)” tobacco retailer in Palo Alto. What would the new Ordinance requirements be for my business? Under new Ordinance requirements, these retailers would no longer be able to sell any Flavored Tobacco Products or Electronic Cigarette Products. 6. I am a retailer (not an over age 21 Tobacco Retailer) in Palo Alto. What would the new requirements be for my business? For these retailers, the new Ordinance would prohibit the sale of all Electronic Cigarette Products. Ordinance requirements that became effective January 1, 2019 prohibiting the sale Flavored Tobacco Products would remain. 7. Which tobacco products or e-cigarette products can retailers or adult-only tobacco retailers sell under the proposed Ordinance revisions? Retailers would be able to sell smoking cessation products that have been approved by the United States Food and Drug Administration for sale as a tobacco cessation product, and non-flavored tobacco products such as cigarettes, smokeless/chewing tobacco, cigars, cigarillos/little cigars, and sisha (hookah tobacco). No e-cigarette products of any kind would be allowed for sale. 8. When would the new Ordinance take effect? If approved by City Council, the revised Tobacco Retail Permit Ordinance would become effective on the annual renewal date of each retailer’s permit, and all retailers regardless of their annual permit start date would be required to comply by July 1, 2020. If you have questions about your permit expiration date, please contact Don Tran at don.tran@phd.sccgov.org, Santa Clara County Public Health Department. 9. How would the Ordinance be enforced? The County of Santa Clara Department of Environmental Health conducts yearly inspections of all tobacco retailers. In addition, the City of Palo Alto Police Department conducts annual undercover youth decoy checks to confirm that retailers comply with Ordinance requirements. 10. What are the proposed penalties for not complying with the new Ordinance requirements? Administrative fines up to $500 and permit suspensions for up to one year may be imposed under the proposed Ordinance. 11. How do I provide input to City Council about the proposed Ordinance changes? Palo Alto City Council will vote on the proposed Tobacco Retail Permit Ordinance during the April 6, 2020 City Council Meeting (6:00pm, 250 Hamilton Avenue, Palo Alto, City Council Chambers). Retailers may attend the Council meeting to provide public comment, email citycouncil@cityofpaloalto.org, or mail comments to City Council, 250 Hamilton Avenue, Palo Alto, CA 94301. Please note that Council Meeting agendas are subject to change so check the agenda online before attending. The proposed Ordinance changes and staff report will be posted two weeks before the Council meeting at http://www.cityofpaloalto.org/gov/depts/cou/council_agendas.asp. For more information visit cityofpaloalto.org/smokingordinance, email cleanbay@cityofpaloalto.org, or call (650) 329-2122. The City of Palo Alto has two ordinances which restrict smoking to protect public health. The ordinances are summarized below. For more information visit cityofpaloalto.org/smokingordinance, call (650) 329-2122, or email smokingordinance@cityofpaloalto.org. SUMMARY OF SMOKING AND VAPING ORDINANCE REQUIREMENTS Public spaces, e.g., all parks, open spaces and Palo Alto facilities commercial dining areas, entryways, public events, recreation areas, service areas, commercial indoor areas, outdoor service areas (bus stops, ATMs, and ticket lines), employment places, construction worksites; The Downtown Business District (the University Avenue area); 25 feet from any door or window to any enclosed area; All multi-unit residences with two or more units and common areas, excluding accessory dwelling units, and junior accessory dwelling units; Exceptions: designated smoking areas established by commercial areas that are at least 25 feet away from any windows or doors to enclosed areas; and that include receptacles to control litter. 1.Municipal Code 9.14-Smoking and Tobacco Regulations This ordinance restricts where tobacco may be used. Smoking/vaping is prohibited in: Prohibits pharmacies and vending machines from selling tobacco products; Retailers must display a Tobacco Retail Permit and new retailers are not eligible for a permit if their business is located within 500 feet of another retailer or 1,000 feet of a school; Retailers such as gas stations and liquor stores can currently sell e-cigarette devices but not flavored tobacco products or flavored e-liquids; Flavored tobacco products may only be sold at “adult-only (over age-21)” stores; Limits storefront advertising of tobacco products; Requires the County to administer permits, and Palo Alto Police Department to provide youth decoy undercover checks. 2. Municipal Code 4.64-Permits for Retailers of Tobacco Products (TRP) This ordinance restricts where and which tobacco products may be sold. The current Tobacco Retail Permit: The proposed revisions to the TRP would: Prohibit the sale and distribution of all Electronic Cigarette Products at all stores (e.g, gas stations, liquor stores and adult-only stores); Prohibit the sale of flavored tobacco products at adult-only stores; Extend span of time over which repeat violations are considered from 24 months to 60 months after the first violation so that the number of violations a retailer might accrue with escalating penalties (fines, permit suspensions) would be considered over a span of five years instead of two years. Definitions: 1. An “Electronic Cigarette Product is: a) any device or delivery system used to deliver nicotine in aerosolized or vaporized form, including e-cigarettes, e-cigars, e-pipes, vape pens, or e-hookahs, or any component, part, or accessory of such a device or delivery system that is used during its operation. b) flavored and unflavored liquids or substances containing nicotine, Specific examples include: e-juice or liquid (flavored or unflavored), e-cigarette pods or cartridges (flavored or unflavored), any e-cigarette devices, puff bars or disposable e-cigarette products. 2. A “Flavored Tobacco Product” includes flavored cigarettes, cigarillos or smokeless tobacco that imparts a characterizing taste or smell other than tobacco. Examples include: menthol, mint, wintergreen, fruit, candy, alcohol or spice flavors. City of Palo Alto (ID # 11177) City Council Staff Report Report Type: Consent Calendar Meeting Date: 5/4/2020 City of Palo Alto Page 1 Summary Title: Approval for COPS Funds Title: Approval of the Acceptance and Appropriation of State of California Citizens Options for Public Safety (COPS) Funds and Approval of a Budget Amendment (Requires 2/3 Approval) in the Supplemental Law Enforcement Services Fund From: City Manager Lead Department: Police Recommendation Staff recommends that the City Council: 1. Approve the acceptance and expenditure of Citizens Options for Public Safety (COPS) funds from the State of California; and 2. Amend the Fiscal Year 2020 Budget Appropriation Ordinance (requires 2/3 approval) for the Supplemental Law Enforcement Services Fund (SLESF) by: a. Increasing the estimate for Revenue from the State of California by $105,174; and, b. Increasing the Police Department Facilities and Equipment expense appropriation by $105,174. Background Since 1997, the California State Budget Act has included allocations to counties and cities for the COPS program. This funding is intended to fill the need for additional resources at the local level to ensure public safety. Under the provisions of Government Code Section 30061, a percentage of the funds are allocated to counties and cities, based upon population, for law enforcement services. Funds must supplement existing services and cannot be used to supplant any existing funds. Each city is also required to deposit the funds into a separate Supplemental Law Enforcement Services Fund so that these funds are not intermingled with General Fund dollars. The funds must be used to benefit front-line law enforcement efforts. Previous uses of COPS funds have included re-starting the Community Service Officer (CSO) program, purchasing an E-Citation system, rifle magnifiers and range safety equipment and upgrades to the patrol vehicle and traffic motorcycle programs. Discussion City of Palo Alto Page 2 Staff proposes to use the COPS funds in the following manner: • Conductive Electronic Weapons ($60,000) Conductive Electronic Weapons (CEW), sometimes referred to as Tasers, are a constructive resource to patrol officers in times of crisis. The technology has been around since the 1990’s and is used to gain compliance of combative suspects in accordance to the department’s use-of-force policy. The technology is another tool in the use-of-force continuum between less-than-lethal tools such as pepper spray and batons and lethal weapons such as handguns and rifles. The purchase of the latest design in CEW devices will be an improvement on the current older technology in use today. • Tactical Communication Equipment ($45,000) The purchase of the tactical communication technology improves the outcome of critical incidents like the incident involving a prolonged standoff with a barricaded suspect that came to a peaceful resolution in 2019. Tactical equipment can include “throw-phones” and incident communication devices that enhance communication between officers and messaging with the public that may be impacted. Resource Impact The Police Department has received funds each year under this program since its inception in 1998. Annual allocations have averaged approximately $100,000 over the last few years. The City received the official notice from the California Department of Finance in September 2019 that the City’s COPS allocation for Fiscal Year 2020 is $105,174. Revenues of $105,174 are recommended to be recognized in the City’s Supplemental Law Enforcement Services Fund. A total of $105,174 of expenditures are anticipated as described previously in the memorandum, which will be covered by the COPS grant funding appropriated in FY 2020 ($105,174). There will be no impact to the General Fund as ongoing maintenance costs for the items purchased by the SLESF will be absorbed in the Department’s existing non-salary budget. Policy Implications Expenditures of funds associated with COPS funds are consistent with City Policy. Environmental Assessment Acceptance of COPS funding and the proposed expenditures for public safety equipment are not projects subject to CEQA requirements. City of Palo Alto (ID # 11241) City Council Staff Report Report Type: Consent Calendar Meeting Date: 5/4/2020 City of Palo Alto Page 1 Summary Title: Adoption of a Resolution Authorizing Staff to Submit Cal OES COVID-19 Fin. Assistance Application Title: Adoption of a Resolution Authorizing Staff to Submit a Cal OES COVID- 19 Financial Assistance Application From: City Manager Lead Department: Administrative Services Recommendation Staff recommends that Council adopt the attached resolution (Attachment A) authorizing certain City staff to file an application with the California Department of Emergency Services (Cal OES) for federal financial assistance related to the Coronavirus (COVID-19) response. Background On March 16 Council ratified the Director of Emergency Services’ (City Manager) proclamation of a local emergency due to the presence and community spread of novel coronavirus (COVID-19) in Santa Clara County (CMR 11192). This followed the State of California’s proclaimed State of Emergency on March 4. On March 22 California secured a presidential Major Disaster Declaration, which makes federal funding available to the state for emergency protective measures. The City’s response to the COVID-19 event has incurred certain costs associated with the purchase of protective supplies and materials, quarantine lodging, personnel time and other expenses. These costs may be reimbursable by the Federal Emergency Management Association (FEMA) at a later stage as emergency protective measures, which are referred to as Category B activities by FEMA and are defined as work to eliminate or lessen immediate threats to lives, public health, or safety. In order to be eligible for receiving potential reimbursements the City Council must authorize designated City staff to submit applications by resolution, as required by Cal OES. Discussion In order for the City to receive reimbursement from FEMA through the public assistance (RPA) process the Council must authorize staff to file an application. The attached City of Palo Alto Page 2 resolution designates the City Manager, Director of Administrative Services (Chief Financial Officer) and Assistant Director of Administrative Services as the authorized staff. A letter will be attached to the resolution that will specify the individual names associated with each title. Staff expects to submit eligible expenses to Cal OES and FEMA through the RPA process after an initial review meeting with FEMA representatives. The City filed the initial RPA forms with Cal OES on 4/14 to meet the April 17 deadline, which has now been extended. The resolution can be submitted after the RPA forms, but must be received before the City can receive reimbursements. Timeline The resolution must be approved and submitted prior to any reimbursement being recieved. After the City submits the formal request for public assistance this will trigger a review with FEMA and Cal OES and cost data submittal that may lead to a future reimbursement. Resource Impact The City has incurred salary and non-salary costs associated with the response to COVID-19. The non-salary expenses are currently estimated to be $60,000, which is made up of safety supplies, cleaners and remote work tools, such as Zoom video conferencing. The preliminary estimate of the cost of staff time devoted to the COVID- 19 response is $528,000, largely comprised of the work of having an active Emergency Operations Center and running the call center. The City is in the process of capturing and verifying the costs and determining what can be submitted to Cal OES and FEMA for reimbursement. As outline in FEMA guidelines FEMA only reimburses for overtime pay for eligible emergency work. At this time nearly all of City staff time devoted to COVID-19 has been categorized as regular pay not overtime, therefore the City is not expecting significant reimbursement for staff time, based on current trends. Stakeholder Engagement Staff has coordinated this effort with the City’s Office of Emergency Services, the City Manager’s Office and the City Attorney’s Office. Environmental Review The resolution does not constitute a project under the California Environmental Quality Act (CEQA). Attachments: • Attachment A: Resolution STATE OF CALIFORNIA GOVERNOR’S OFFICE OF EMERGENCY SERVICESCal OES 130 Cal OES ID No:______________________ DESIGNATION OF APPLICANT'S AGENT RESOLUTION FOR NON-STATE AGENCIES BE IT RESOLVED BY THE OF THE (Governing Body)(Name of Applicant) THAT ,OR (Title of Authorized Agent) ,OR (Title of Authorized Agent) (Title of Authorized Agent) is hereby authorized to execute for and on behalf of the , a public entity (Name of Applicant) established under the laws of the State of California, this application and to file it with the California Governor’s Office of Emergency Services for the purpose of obtaining certain federal financial assistance under Public Law 93-288 as amended by the Robert T.Stafford Disaster Relief and Emergency Assistance Act of 1988, and/or state financial assistance under the California Disaster Assistance Act. THAT the ________________________________________________, a public entity established under the laws of the State of California, (Name of Applicant) hereby authorizes its agent(s) to provide to the Governor’s Office of Emergency Services for all matters pertaining to such state disaster assistance the assurances and agreements required. Please check the appropriate box below: This is a universal resolution and is effective for all open and future disasters up to three (3) years following the date of approval below. This is a disaster specific resolution and is effective for only disaster number(s) ________________________ Passed and approved this day of ,20 (Name and Title of Governing Body Representative) (Name and Title of Governing Body Representative) (Name and Title of Governing Body Representative) CERTIFICATION I,,duly appointed and of (Name)(Title) ,do hereby certify that the above is a true and correct copy of a (Name of Applicant) Resolution passed and approved by the of the (Governing Body)(Name of Applicant) on the day of ,20 . (Title) Page 1 (Signature) Cal OES 130 (Rev.9/13) CITY OF PALO ALTO OFFICE OF THE CITY CLERK May 4, 2020 The Honorable City Council Palo Alto, California SECOND READING: Adoption of an Ordinance Temporarily Suspending the Expiration of and Automatically Extending all Planning Entitlements, Building Permits, and Building Permit Applications Valid as of March 16, 2020; the Ordinance Also Suspends and Extends Municipal Code Application Processing Timelines. This Action is Exempt From the California Environmental Quality Act (CEQA) in Accordance With CEQA Guidelines Section 15061(b)(3)(FIRST READING: April 20, 2020 PASSED 7-0) This ordinance was first heard by the City Council on April 20, 2020. The Council passed it on a vote of 7-0 with no changes to it. It is now before the Council for the second reading. ATTACHMENTS: • Attachment A: Ordinance (PDF) Department Head: Beth Minor, City Clerk Page 2 *NOT YET APPROVED* 1 20200402_ay_016_0160024 Ordinance No. ____ Ordinance of the Council of the City of Palo Alto Extending the Validity of Planning Entitlements and Permits Issued by the Department of Planning and Development Services and Extending the Time for City Review and Action on Development Applications. The Council of the City of Palo Alto ORDAINS as follows: SECTION 1. Findings and declarations. The City Council finds and declares as follows: A. On March 4, 2020, California Governor Gavin Newsom declared a State of Emergency due to the threat of Coronavirus Disease 2019 (“COVID-19”). B. On March 9, 2020, Santa Clara County reported there were 43 cases of persons testing positive for COVID-19, an increase of 23 confirmed cases in 5 days. The County also experienced its first death due to the virus. Due to the increased threat and evidence of community transmission of the virus, the County Public Health Officer issued an order prohibiting mass gatherings attended by 1,000 persons until March 31, 2020. C. On March 12, 2020, due to the escalating increase in cases and community spread of COVID-19 in Santa Clara County, City Manager Ed Shikada, acting as the Director of Emergency Services, issued a Proclamation of Local Emergency. The City Council ratified the issuance of the proclamation on March 16, 2020. D. On March 13, 2020, the County Public Health Officer issued a new order mandating a countywide moratorium on gatherings of more than 100 persons and a conditional countywide moratorium on gatherings between 35-100 persons. Most school districts throughout the San Francisco Bay Area also announced closures for three weeks commencing the following week on March 16, 2020. E. On March 15, 2020, Governor Newsom directed the closing of all bars, nightclubs, brewpubs, and wineries in the state, and called for residents age 65 and older to self- isolate, to increase social distancing and protect persons most vulnerable to COVID-19. At the same time, he emphasized the plight of the thousands of unsheltered persons in the state as a top public health concern. F. On March 16, 2020, the public health officers for the six Bay Area counties, including Santa Clara County, took the unprecedented and dramatic step of issuing “shelter-in- place” orders directing county residents to shelter at home for three weeks beginning March 17. The Order limited activity, travel, and business functions to only the most essential needs. In particular, the Order allowed some residential construction to continue, but required most commercial construction to cease. *NOT YET APPROVED* 2 20200402_ay_016_0160024 G. On March 31, 2020, the public health officers for the six Bay Area counties, including Santa Clara County, issued an updated “shelter-in-place” order effective from April 1, 2020 through May 3, 2020 (the “Shelter-in-Place Order” or “Order”). The Order further prohibited most residential and almost all commercial construction. H. In an effort to reduce the spread of COVID-19, the City has cancelled several meetings of the City Council and other City Boards and Commissions in March and April 2020. I. The Order and other efforts to slow the spread of COVID-19 have resulted in the delay or cessation of land use development activity and permit processing, effectively shortening the validity of planning entitlements and building permits. J. The City Council finds that it is necessary for the public health, safety, and welfare to temporarily extend the validity of certain planning entitlements and other permits issued by the Department of Planning and Development Services and to extend the time provided for City review of and action on such applications. SECTION 2. Notwithstanding the provisions of Palo Alto Municipal Code (“PAMC”) Sections 16.04.085 and 16.04.090, the following permit applications and permits issued by the Chief Building Official pursuant to PAMC Chapter 16.04 are hereby extended until the Shelter-in-Place Order is lifted, plus an additional 180 days: (1) any permit application or permit that had not expired as of March 16, 2020; and (2) any permit application submitted or permit issued during the pendency of the Shelter-in-Place Order. This extension shall be provided automatically and at no cost to a project applicant. SECTION 3. Notwithstanding the provisions of PAMC Section 18.77.090 and any Record of Land Use Action or Final Director’s Decision, the time to commence construction for the following Planning Approvals is hereby extended until the Shelter-in-Place Order is lifted, plus an additional 180 days: (1) Planning Approvals for which the time to commence construction had not expired as of March 16, 2020; and (2) Planning Approvals issued during the pendency of the Shelter-in-Place Order. This extension shall be provided automatically and at no cost to a project applicant. SECTION 4. The times established in the Municipal Code for the City to act on any application pursuant to PAMC Titles 16, 18, or 20, including without limitation, Building Permits, Architectural Review, Standard Staff Review, Low Density Project Review, and Subdivisions, are hereby extended until the Shelter-in-Place Order is lifted, plus an additional 180 days. This extension shall be applied in a manner consistent with timelines dictated by state law, including any emergency orders issued by the Governor. SECTION 5. If any section, subsection, sentence, clause, or phrase of this Ordinance is for any reason held to be invalid or unconstitutional by a decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have passed this Ordinance and each *NOT YET APPROVED* 3 20200402_ay_016_0160024 and every section, subsection, sentence, clause, or phrase not declared invalid or unconstitutional without regard to whether any portion of the Ordinance would be subsequently declared invalid or unconstitutional. SECTION 6. The City Council finds that adoption of this ordinance is exempt from environmental review under the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines section 15061(b)(3), because it can be seen with certainty that temporarily extending certain permit approvals and application processing timelines for a limited period of time will not have a significant effect on the environment. SECTION 7. This Ordinance shall be effective on the thirty-first date after the date of its adoption. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: NOT PARTICIPATING: ATTEST: ____________________________ ____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ____________________________ ____________________________ Assistant City Attorney City Manager ____________________________ Director of Planning & Development Services City of Palo Alto COLLEAGUES MEMO May 04, 2020 Page 1 of 4 (ID # 11317) DATE: May 4, 2020 TO: City Council Members FROM: Council Member Kniss, Council Member Filseth SUBJECT: REVIEW AND APPROVAL OF THE CITY AUDITOR REQUEST FOR PROPOSALS EVALUATION PROCESS Executive Summary Per City Council direction, the Council Appointed Officers (CAO) Committee has prepared and issued a request for proposals (RFP) for internal auditing services, including designation of a new City Auditor. Responses from firms bidding on this work are due on May 15. The CAO Committee requests the City Council review and approve the proposed evaluation and selection process described below, including designation of a tentative Fiscal Year 2020-21 budget allocation of $750,000 for services to be provided. Background On February 10, 2020, the City Council unanimously requested the Council Appointed Officers Committee (Committee) to initiate a request for proposals process to engage an outside firm to provide internal auditor services for the City of Palo Alto. The City Council action did not specify or delegate the proposal evaluation process and schedule, which are the focus of this report. After the City Council’s action, City staff managed a process to engage an outside consultant to support the work of the City Appointed Officers Committee. On March 17, the Committee approved a consulting engagement with Management Partners, a national local government consulting firm with offices in San Jose that has previously worked with the City of Palo Alto on internal auditing support and is currently providing expert advice related to purchasing processes. The Management Partners team is led by Partner Greg Larson, the former city manager of Los Gatos and Milpitas and past chief deputy controller for the State of California. In addition, the Council Appointed Officers Committee appointed an Ad Hoc City Auditor RFP Subcommittee consisting of Council Member Eric Filseth to oversee and advise on this work between Committee meetings. On April 16, the Committee had a robust discussion about the auditor scope of services, May 04, 2020 Page 2 of 4 (ID # 11317) the RFP itself, and the evaluation process using a report prepared by Management Partners as the framework for the discussion. The CAO Committee approved the RFP with an initial contract term of two years with a possible extension up to three additional years. In addition, the RFP requires a citywide risk assessment upon commencement of the contract and every other year thereafter, an annual benchmark comparison of average audit costs, a biannual peer review as provided for by the Association of Local Government Auditors, and a performance evaluation of the City Auditor after six months and annually thereafter. Based on the Committee’s direction, Management Partners prepared the RFP document for review by City staff and the City Attorney’s Office, as well as Council Member Eric Filseth as the City Auditor RFP Ad Hoc Subcommittee. The final RFP was released on Tuesday, March 21 on the City’s PlanetBids purchasing website, and Management Partners has done additional outreach to prospective proposers. A copy of the full RFP is provided as Attachment A. In addition to approving the release of the RFP as directed by the City Council on February 10, the Committee also approved recommendations to the City Council for the subsequent evaluation of the proposals that are submitted. This report is intended to obtain City Council review and approval of or modifications to the Committee’s recommended City Auditor RFP evaluation process. Discussion The City Auditor RFP evaluation and contract approval process is recommended to include two broad steps, as discussed below. The two steps are: 1) Evaluation of the proposals and selection of one or more finalists for recommendation to the City Council; and 2) City Council appointment of the City Auditor and contract approval. The objective is to approve the contract before the summer recess so that the selected contractor can begin work at the start of the new fiscal year. Each of the steps are reviewed below. 1. RFP Evaluation Process The City of Palo Alto has a well-structured purchasing process as specified in the Municipal Code, including the use of the RFP process to award contracts based on the best overall value to the City (as opposed to awarding to the lowest bidder). This process details the information required for professional services contracts as well as the evaluation criteria to be used, as listed on page 8 of the RFP with the recommended points allocation for each criterion. The CAO Committee anticipates responses to the City Auditor RFP through May 15, and May 04, 2020 Page 3 of 4 (ID # 11317) recommends the following proposal evaluation process: May 15 (Friday) Proposals due and evaluated for responsiveness May 18 (Monday) Evaluator’s briefing to kickoff evaluation process* May 22 (Friday) Completion of written proposal evaluations by evaluators* May 26 (Monday) CAO Committee reviews evaluation ratings and selects finalist(s) June 2 (Tuesday) CAO Committee interviews finalist(s) and recommends to Council *If there are three or fewer responsive proposals, then the CAO Committee members will serve as the proposal evaluators. If there are more than three responsive proposals received, then Council Member Eric Filseth, Greg Larson from Management Partners, and an independent third party appointed by the CAO Committee Chair will serve as the initial proposal evaluators. 2. City Council Appointment of the City Auditor and Contract Approval The Palo Alto City Charter specifies that the City Council will appoint a City Auditor who will report to and serve at the will of the City Council. Consequently, the selection of an outsourced service provider for the City’s internal audit functions will also entail the City Council appointment of a designated staff member of the selected contractor to serve as City Auditor. In addition, the RFP and services contract specify requirements for the evaluation and replacement of the appointed City Auditor if required during the term of the contract. The CAO Committee recommends the following City Auditor appointment process: May 15 (Friday) Submitted proposals include resumes for City Auditor candidates June 2 (Tuesday) Council receives resume(s) of proposed City Auditor finalist(s) June 3 (Wednesday) Council interviews City Auditor finalist(s) and provides direction June 15 (Monday) Completion of contract negotiations by Management Partners June 22 (Tuesday) City Council consideration of the recommended contract approval and appointment of the City Auditor June 29 (Monday) Potential special Council meeting if needed for Council action July 1 (Wednesday) Selected contractor commences services delivery Timeline, Resource Impact, Policy Implications (If Applicable) The consolidated timeline for the entire RFP process, including the recommendations above, is summarized in Attachment B. The City Auditor’s Office approved budget and actual funds used has varied considerably over the past several years, as is shown in the table below. The lowest actual expenditure was $362,000 in FY 2014-15 and the greatest budgeted amount was $1,301,326 in FY 2017-18. The current year budget allocation was $1,235,450, but that includes some expenditures that have been included in the City Auditor’s Office previously but are being moved to the City administration next fiscal year, such as the periodic citizen survey. May 04, 2020 Page 4 of 4 (ID # 11317) FY 2019-20 FY 2018-19 FY 2017-18 FY 2016-17 FY 2015-16 FY 2014-15 Budgeted $1,235,450 $1,267,289 $1,301,326 $1,221,149 $1,174,927 $1,064,195 Actuals $1,081,000 $994,000 $847,000 $414,000 $362,000 Given fiscal challenges facing the City due to the COVID-19 emergency, yet wanting to provide some assurance to potential vendors as to the level of internal audit activity desired by the City, the CAO Committee is recommending that the City Council approve a preliminary budget allocation of $750,000 to use during the City Auditor RFP selection process as a means to evaluate proposals based on efficiency and effectiveness. In addition, the CAO Committee has specified that proposers could identify additional services which could be provided if up to an additional $250,000 was available for addditional internal audit services. There are no additional policy implications associated with this report. The City administration and City Attorney’s Office have also reviewed as to form and advised on the preparation of the RFP and this report. Stakeholder Engagement This work has been based on extensive prior discussion and direction from the City Council during public meetings and overseen by the Council Appointed Officers Committee which has also met in public meetings. Environmental Review This action is exempt from CEQA and requires no further environmental review. Attachments: • Attachment A - City Auditor RFP • Attachment B- City Auditor RFP Timeline City Council Council Appointed Officers Committee Request for Proposal (RFP) Number #F21-001 for Internal Auditor Services Pre-proposal Meeting: 10:00 a.m. Tuesday, April 28, 2020 RFP submittal deadline: 3:00 p.m. Friday, May 15, 2020 RFP Contact: Pete Gonda, 831-345-0025 PGonda@ManagementPartners.com CITY OF PALO ALTO PURCHASING/CONTRACT ADMINISTRATION 250 HAMILTON AVENUE PALO ALTO, CA 94301 (650) 329-2271 Rev. February 12, 2018 1 REQUEST FOR PROPOSAL (RFP) NO. F21-001 FOR PROFESSIONAL SERVICES TITLE: Internal Auditor Services 1. INTRODUCTION The Palo Alto City Council is seeking proposals from qualified firms to provide Internal Auditor services. The required services and performance conditions are described in the Scope of Services (Attachment B). In accordance with City Charter and Municipal Code requirements, the Palo Alto City Council must appoint a City Auditor who serves at the will of the Council, and who executes annual Council-approved internal audit plans through the Office of the City auditor. The City Auditor is responsible for conducting internal audits in accordance with Government Auditing Standards in order to provide stakeholders with independent and objective analysis as to whether city management is: • Using its financial, physical and informational resources effectively, efficiently, economically, ethically, and equitably, and • In compliance with laws, regulations, contract and grant requirements, and city policies and procedures. The City Council desires to consider proposals from qualified firms to fulfil the City’s Charter and Municipal Code requirements to provide internal auditing services. The City Council anticipates budgeting $750,000 for these services in the FY 2020/21 Fiscal Year, subject to final approval and/or adjustment as needs and available funding dictate, and as more fully described in Attachment B, Scope of Services. Proposing firms will be evaluated on a best value basis, based on the criteria set forth in the evaluation section of this RFP, including amongst the criteria the ability to provide the most cost effective and efficient services within the anticipated budget specified herein. The City Council intends to award an initial two-year contract with extensions up to three years. 2. ATTACHMENTS The attachments below are included with this Request for Proposals (RFP) for the Proposer’s review and submittal (see asterisk): Attachment A – Proposer’s Information Form* Attachment B – Scope of Services Attachment C – Sample Agreement for Professional Services Attachment D –Table Format for Firm Qualifications Attachment E – Cost Proposal Format Attachment F – Insurance Requirements Rev. February 12, 2018 2 The items identified with an asterisk (*) shall be filled out, signed by the appropriate representative of the Proposer’s company and returned with submittal. 3. PRE-PROPOSAL CONFERENCE AND CERTIFICATIONS 3.1 Pre-proposal Conference A pre-proposal conference will be held Tuesday, April 28, at 10:00 a.m. via the secure Zoom link that will be provided upon RSVP to Pete Gonda at PGonda@ManagementPartners.com. Attendance is not mandatory. However, all prospective Proposers are strongly encouraged to attend. 3.2 Examination of Proposal Documents The submission of a proposal shall be deemed a representation and certification by the Proposer that it: 3.2.1 Has carefully read and fully understands the information that was provided by the City to serve as the basis for submission of this proposal. 3.2.2 Has the capability to successfully undertake and complete the responsibilities and obligations of the proposal being submitted. 3.2.3 Represents that all information contained in the proposal is true and correct. 3.2.4 Did not, in any way, collude, conspire to agree, directly or indirectly, with any person, firm, corporation or other Proposer in regard to the amount, terms or conditions of this proposal. 3.2.5 Acknowledge that the City has the right to make any inquiry it deems appropriate to substantiate or supplement information supplied by Proposer, and Proposer hereby grants the City permission to make these inquiries, and to provide any and all related documentation in a timely manner. 3.3 Addenda/Clarifications Should discrepancies or omissions be found in this RFP or should there be a need to clarify this RFP, questions or comments regarding this RFP must be emailed to and received by the RFP Contact no later than 1:00 p.m., Monday, May 4, 2020. Correspondence shall be communicated either through the City’s electronic procurement system or e-mailed to Pete Gonda, RFP Contact at PGonda@ManagementPartners.com. Responses from the City will be communicated through the City’s electronic procurement system to all recipients of this RFP via Proposal addendum. Inquiries received after the Rev. February 12, 2018 3 date and time stated will not be accepted. All addenda shall become a part of this RFP and shall be acknowledged on the Proposer’s submittal. The City shall not be responsible for nor be bound by any oral instructions, interpretations or explanations issued by its representatives. 3.4 Preparation and Submission of Proposals All proposals shall be submitted electronically through the City’s electronic procurement system (PlanetBids) at: https://www.planetbids.com/portal/portal.cfm?CompanyID=25569 Proposals must be received by no later than 3:00 p.m. on Friday, May 15, 2020. The e-procurement system will not accept any proposals after the specified close time. 3.5 Withdrawal or Modification of Proposals A Proposer may withdraw or modify its proposal at any time before the expiration of the time for submission of proposals as provided in the RFP by entering the e-procurement system and selecting to withdraw the proposal. No request for modification of the proposal shall be considered after its submission and acceptance on grounds that Proposer was not fully informed to any fact or condition. 3.6 Rights of the City of Palo Alto This RFP does not commit the City to enter into a contract, nor does it obligate the City to pay for any costs incurred in preparation and submission of proposals or in anticipation of a contract. The City reserves the right to: • Make the selection based on its sole discretion; • Reject any and all proposals; • Issue subsequent Requests for Proposals; • Postpone the due date and/or time for its own convenience; • Remedy technical errors in the Request for Proposals process; • Approve or disapprove the use of particular subconsultants; • Negotiate with any, all or none of the Proposers; • Accept other than the lowest offer; • Waive informalities and irregularities in the Proposals and/or • Enter into an agreement with another Proposer in the event the originally selected Proposer defaults or fails to execute an agreement with the City. Rev. February 12, 2018 4 An agreement shall not be binding on the City unless and until it is executed by authorized representatives of the City and of the Proposer, and approved as required under Palo Alto Municipal Code. 4. TENTATIVE TIMELINE The tentative RFP timeline is provided for the convenience of the Proposers, but may be subject to change at any time by the City. Any such change will be stated in an addendum to this RFP. The tentative RFP timeline is as follows: RFP Issued April 21, 2020 Pre-Proposal Meeting April 28, 2020 Deadline for questions, clarifications May 4, 2020 Proposals Due May 15, 2020 Finalist Identified May 26, 2020 Consultant Interviews June 2 and 3, 2020 Scope and Fee Negotiations June 4 to June12, 2020 Contract awarded June 22, 2020 Work commences July 2020 Time is of the essence in conducting this RFP and awarding a contract to the firm whose proposal provides the best overall value to the City. 5. PROPOSAL CONTENT AND FORMAT (to be submitted in this order only) These instructions outline the governing format and content of the proposal and the approach to be used in its development and presentation. The intent of the RFP is to encourage responses that clearly communicate the Proposer’s understanding of the City’s requirements and its approach to successfully provide the products and/or services on time and within budget. Only that information which is essential to an understanding and evaluation of the proposal should be submitted. Items not specifically and explicitly related to the RFP and proposal, e.g. brochures, marketing material, etc. will not be considered in the evaluation. All proposals shall address the following items in the order listed below and shall be numbered Chapters 1 through 8 in the proposal document. 5.1 Chapter 1 – Proposal Summary This Chapter shall discuss the highlights, key features and distinguishing points of the Proposal. A separate sheet shall include a list of individuals and contacts for this Proposal and how to communicate with them. Limit this Chapter to a total of three (3) pages including the separate sheet. 5.2 Chapter 2 – Profile on the Proposing Firm(s) Rev. February 12, 2018 5 This Chapter shall include a brief description of the Proposer’s firm size as well as the proposed local organization structure. Include a discussion of the Proposer firm’s financial stability, capacity and resources. Include all other firms participating in the Proposal, including similar information about the firms. Additionally, this section shall include a listing of any lawsuit or litigation and the result of that action resulting from (a) any public project undertaken by the Proposer or by its subcontractors where litigation is still pending or has occurred within the last five years or (b) any type of project where claims or settlements were paid by the consultant or its insurers within the last five years. 5.3 Chapter 3 – Qualifications of the Firm This Chapter shall include a brief description of the Proposer’s and any sub- Proposer’s qualifications and previous experience on similar or related projects. Previous experience shall be provided in a table format (see Table for Firm Qualifications, Attachment D), and must include descriptions of pertinent project experience with other public municipalities and private sector entities, including a summary of the work performed, the total project cost, the percentage of work the firm was responsible for, the period over which the work was completed, and the name, title, and phone number of clients to be contacted for references. Proposers must also provide a brief statement of the firm’s adherence to the schedule and budget for the project, and cost per audit information for each project listed. This Chapter shall include information regarding any relationships with firms and/or individuals that may submit proposals in response to the RFPs being developed. Minimum Qualifications of the Proposing Firm and Proposed City Auditor In order to be considered for evaluation, proposing firms must demonstrate at least the minimum experience, certification and auditing standards requirements that are described in Section III of Appendix B (Scope of Services – Internal Auditor Services Designation of City Auditor, Minimum Experience Requirements, Auditing Standards and Required Disclosures). 5.4 Chapter 4 – Work Plan or Proposal This Chapter shall present a well-conceived service plan. Include a full description of major tasks and subtasks. This section of the proposal shall establish that the Proposer understands the City’s objectives and service requirements and Proposer’s ability to satisfy those objectives and requirements. Succinctly describe the proposed approach for addressing the required services and the firm’s ability to meet the City’s schedule, outlining the approach that would be undertaken in providing the requested services. Rev. February 12, 2018 6 5.5 Chapter 5 – Proposed Innovations The Proposer may include for consideration innovations that have been used successfully on other engagements and which may provide the City with better service delivery. In this Chapter discuss any ideas, innovative approaches, or specific new concepts included in the Proposal that would provide benefit to the City. Associated pricing can be provided in Attachment E, Cost Proposal. 5.6 Chapter 6 – Project Staffing This Chapter shall discuss how the Proposer would staff this project. Key project team members shall be identified by name, title, professional certification and specific responsibilities on the project. An organizational chart for the project team and resumes for key Proposer personnel shall be included. Key personnel will be an important factor considered by the review committee. Changes in key personnel may be cause for rejection of the proposal. NOTE: The resume of the proposed City Auditor must be submitted as a separate page or pages within this Chapter of the submittal. 5.7 Chapter 7 – Proposal Exceptions This Chapter shall discuss any exceptions or requested changes that Proposer has to the City’s RFP conditions, requirements and sample contract. If there are no exceptions noted, it is assumed the Proposer will accept all conditions and requirements identified in the Attachment C – “Sample Agreement for Professional Services.” Items not excepted will not be open to later negotiation. 5.8 Chapter 8 – Proposal Costs Sheet and Rates The fee information is relevant to a determination of whether the fee is fair and reasonable in light of the services to be provided. Provision of this information assists the City in determining the firm’s understanding of the project, and provides staff with tools to negotiate the cost, provide in a table (See the Cost Proposal Table, Attachment E). Consultant shall provide the following information: • Direct labor rates for proposed staff; • Overhead rate and breakdown of overhead elements; • Subconsultant billing rates and mark-up percentage for ODC’s (other direct costs); and identify all reimbursable expenses. This Chapter shall include the proposed costs to provide the services desired. Include any other cost and price information, plus a not-to-exceed amount, that Rev. February 12, 2018 7 would be contained in a potential agreement with the City. The hourly rates may be used for pricing the cost of additional services outlined in the Scope of Work. PLEASE NOTE: The City of Palo Alto does not pay for services before it receives them. Therefore, do not propose contract terms that call for upfront payments or deposits. 5.9 Chapter 9 – Evidence of Financial Stability Proposers are required to submit evidence of financial stability that establishes the Proposer’s ability to complete the obligations of the contract resulting from this solicitation. This may include submission of an audited financial statement or provision of a letter from a credible financial institution or Certified Public Accountant that certifies, under penalty of perjury, the Proposer’s financial viability. 6. CONTRACT TYPE AND METHOD OF PAYMENT It is anticipated that the agreement resulting from this solicitation, if awarded, will be a not-to-exceed budget per task form of contract. The City’s required Agreement for Professional Services template is provided in Attachment C. The method of payment to the successful Proposer shall be on a per task basis with a maximum “not to exceed” fee as agreed to by the City as being the maximum cost to perform all services. This figure shall include direct costs and overhead such as transportation, communications, subsistence and materials and subcontracted items of work. Progress payments will be based on a percentage of tasks completed and accepted by the City. Proposers shall be prepared to accept the terms and conditions of the Agreement, including Insurance Requirements in Attachment F. If a Proposer desires to take exception to the Agreement, Proposer shall provide the following information in Chapter 7 of their submittal package: • Proposer shall clearly identify each proposed change to the Agreement, including all relevant Attachments. • Proposer shall furnish the reasons for, as well as specific recommendations, for alternative language. The above factors will be taken into account in evaluating proposals. Proposals that take substantial exceptions to the proposed Agreement may be determined by the City, at its sole discretion, to be unacceptable and no longer considered for award. Insurance Requirements Rev. February 12, 2018 8 The selected Proposer(s), at Proposer’s sole cost and expense and for the full term of the Agreement or any extension thereof, shall obtain and maintain, at a minimum, all of the insurance requirements outlined in Attachment F. All policies, endorsements, certificates and/or binders shall be subject to the approval of the Risk Manager of the City of Palo Alto as to form and content. These requirements are subject to amendment or waiver if so approved by the Risk Manager. The selected Proposer agrees to provide the City with a copy of said policies, certificates and/or endorsement upon award of contract. 7. EVALUATION CRITERIA AND SELECTION PROCESS The City will evaluate the proposals provided based on the following criteria, at a minimum: Evaluation Criteria Potential Points 7.1 Quality and completeness of proposal 10 7.2 Quality, performance and effectiveness of the solution, goods and/or services to be provided by the Proposer 10 7.3 Proposers experience, including the experience of staff to be assigned to the project, with engagements of similar scope and complexity 15 7.4 Cost to the city 15 7.5 Proposer’s financial condition and stability 10 7.6 Proposer’s ability to perform the work within the time specified 10 7.7 Proposer’s prior record of performance with City or other local, county or state agency 10 7.8 Proposer’s ability to provide future services 10 7.9 Proposer’s compliance with applicable laws, regulations, policies (including City Council policies), guidelines and orders governing prior or existing contracts performed by the contractor 10 Total Potential Points 100 The selection committee will make a recommendation to the awarding authority, if a recommendation for an award is made. The acceptance of the proposal will be evidenced by written Notice of Award from the City’s Purchasing/Contract Administration Division to the successful Proposer. 8. ORAL INTERVIEWS Proposers may be required to participate in oral interview(s). It is anticipated that an initial interview of selected Proposers will be conducted by the City’s Council Appointed Officers (CAO) Committee. It is also anticipated that the final City Auditor candidate or candidates will be interviewed by the City Council in closed session. Rev. February 12, 2018 9 Proposers who are selected to proceed to an interview shall make every effort to attend. If representatives of the City experience difficulty on the part of any Proposer in scheduling a time for the oral interview, it may result in disqualification from further consideration. 9. PUBLIC NATURE OF MATERIALS Responses to this RFP become the exclusive property of the City of Palo Alto. At such time as the Administrative Services Department recommends to form to the City Manager or to the City Council, as applicable, all proposals received in response to this RFP becomes a matter of public record and shall be regarded as public records, with the exception of those elements in each proposal which are defined by the Proposer as business or trade secrets and plainly marked as “Confidential,” “Trade Secret,” or “Proprietary”. The City shall not in any way be liable or responsible for the disclosure of any such proposal or portions thereof, if they are not plainly marked as “Confidential,” “Trade Secret,” or “Proprietary” or if disclosure is required under the Public Records Act. Any proposal which contains language purporting to render all or significant portions of the proposal “Confidential,” “Trade Secret,” or “Proprietary” shall be regarded as non-responsive. Although the California Public Records Act recognizes that certain confidential trade secret information may be protected from disclosure, the City of Palo Alto may not accept or approve that the information that a Proposer submits is a trade secret. If a request is made for information marked “Confidential,” “Trade Secret,” or “Proprietary,” the City shall provide the Proposer who submitted the information with reasonable notice to allow the Proposer to seek protection from disclosure by a court of competent jurisdiction. 10. COLLUSION By submitting a proposal, each Proposer represents and warrants that its proposal is genuine and not a sham or collusive or made in the interest of or on behalf of any person not named therein; that the Proposer has not directly induced or solicited any other person to submit a sham proposal or any other person to refrain from submitting a proposal; and that the Proposer has not in any manner sought collusion to secure any improper advantage over any other person submitting a proposal. 11. DISQUALIFICATION Factors such as, but not limited to, any of the following may be considered just cause to disqualify a proposal without further consideration: Rev. February 12, 2018 10 11.1 Evidence of collusion, directly or indirectly, among Proposers in regard to the amount, terms or conditions of this proposal; 11.2 Any attempt to improperly influence any member of the evaluation team; 11.3 Existence of any lawsuit, unresolved contractual claim or dispute between Proposer and the City; 11.4 Evidence of incorrect information submitted as part of the proposal; 11.5 Evidence of Proposer’s inability to successfully complete the responsibilities and obligation of the proposal; and 11.6 Proposer’s default under any previous agreement with the City, which results in termination of the Agreement. 12. NON-CONFORMING PROPOSAL A proposal shall be prepared and submitted in accordance with the provisions of these RFP instructions and specifications. Any alteration, omission, addition, variance, or limitation of, from or to a proposal may be sufficient grounds for non-acceptance of the proposal, at the sole discretion of the City. 13. GRATUITIES No person shall offer, give or agree to give any City employee any gratuity, discount or offer of employment in connection with the award of contract by the city. No city employee shall solicit, demand, accept or agree to accept from any other person a gratuity, discount or offer of employment in connection with a city contract. 14. FIRMS OR PERSONS NOT ELIGIBLE TO SUBMIT A PROPOSAL In order to avoid any conflict of interest or perception of a conflict of interest, Proposer(s) selected to provide professional services under this RFP will be subject to the following requirements: 14.1 The Proposer(s) who works on the procurement will be precluded from submitting proposals as a prime contractor or subcontractor in the ultimate procurement. 14.2 The Proposer(s) may not have interest in any potential Proposer for the ultimate procurement. 14.3 The Proposer may not have a conflict of interest as defined under Palo Alto Municipal Code section 2.30.600 or 2.30.610, or as defined under state law including the Political Reform Act or Government Code section 1090 et seq. 15. LICENSE REQUIRED: Rev. February 12, 2018 11 This Section 15 (“License Required”) applies to this Request for Proposals. The City Auditor proposed for this work must hold current licensure as a Certified Public Account (CPA) or Certified Internal Auditor (CIA) and maintain such certification throughout any resultant contract term. 16. [RESERVED] (CA DIR REGISTRATION REQUIREMENTS) 17. [RESERVED] (PREVAILING WAGE INFORMATION) 18. [RESERVED] (CERTIFIED PAYROLL) 19. SUSPENSION AND DEBARMENT STATUS: As applicable, the City will verify whether a contractor and its subcontractors, if any, are suspended or debarred from doing business with the federal government by searching the Excluded Parties List System (www.sam.gov). This verification process applies to contracts funded by federal grants and which are for $25,000 or more (including as well any subcontract that is for $25,000 or more). Unless an exception applies, no such federal funds may go to a person or entity that is suspended or disbarred, thus any such person or entity found to be suspended or disbarred in the check of the www.sam.gov list system will be disqualified under the Request for Proposals. This Section 19 (“Suspension and Debarment Status”) applies to this Request for Proposals. ~ End of Section ~ Rev. February 12, 2018 12 Attachment A Proposer’s Information Form PROPOSER (please type/ print): Name: __________________________________________________________ Address: __________________________________________________________ Telephone: _______________________ Email: ______________________________ Contact Person: _______________________________________Title: _______________ eMail (Required): ________________________________________________________ Telephone (Required): ________________________________ Proposer, if selected, intends to carry on the business as (check one): Individual Joint Venture Partnership Corporation When incorporated? ______________ In what state? _______________ When authorized to do business in California? _______ Other (explain):____________________________________________________ ADDENDA To assure that all Proposers have received each addendum, check the appropriate box(s) below. Failure to acknowledge receipt of an addendum/addenda may be considered an irregularity in the Proposal: Addendum number(s) received: 1; 2; 3; 4; 5; 6; Or, _____ _____No Addendum/Addenda Were Received (check and initial). 2 PROPOSER’S SIGNATURE No proposal shall be accepted which has not been signed in ink in the appropriate space below: By signing below, the submission of a proposal shall be deemed a representation and certification by the Proposer that they have investigated all aspects of the RFP, that they are aware of the applicable facts pertaining to the RFP process, its procedures and requirements, and they have read and understand the RFP. No request for modification of the proposal shall be considered after its submission on the grounds that the Proposer was not fully informed as to any fact or condition. Rev. February 12, 2018 13 Attachment A – Proposer Information continued… 1. If Proposer is INDIVIDUAL, sign here Date: ________________________ __________________________________________ Signature Name and Title (type or print) 2. If Proposer is PARTNERSHIP or JOINT VENTURE; at least two (2) Partners shall sign here: ________________________________________________ Partnership or Joint Venture Name (type or print) Date:______________ _____________________________________ Member of the Partnership or Joint Venture signature Date:______________ _____________________________________ Member of the Partnership or Joint Venture signature 3. If Proposer is a CORPORATION or LLC, the duly authorized officer(s) shall sign as follows: The undersigned certify that he/she is respectively: _____________________ ________________________ _____________________ Officer Signature Name Title Corp./LLC Contract Signature Method: Authorization to sign contracts and other documents on behalf of the corporation must be indicated by selecting one of the following methods: Method 1 (Two Specified Officers). Authorization may be shown by two officers, one from each of the following groups, signing the instrument. (Corp. Code §§313; 5214.) Group A Group B (i) Chairman of the Board (ii) President (iii) Any Vice-President Email:______________________________ _ (i) Secretary or Assistant Secretary (ii) Chief Financial Officer (iii) Any Assistant Treasurer Email:_______________________________ _ Method 2 (Certified Board Authorization). Authorization may be shown by providing the City a copy of the corporation’s bylaws, board of directors meeting minutes, or any resolution of corporation’s board authorizing the person signing the instrument to execute instruments of the type in question, and certified by the Secretary or Asst. Secretary of the corporation to be a true copy. (Corp. Code §§314; 5215.) Method 3 (Notarized Officer Signature). Authorization may be shown by the signature of either the corporation’s president, vice president, secretary, or assistant secretary accompanied by a notary acknowledgment in the form prescribed by Civil Code §1189. (Civil Code §1190.) Of the corporation named below; that they are designated to sign the Proposal Cost Form by resolution (attach a certified copy, with corporate seal, if applicable, notarized as to its authenticity or Secretary’s certificate of authorization) for and on behalf of the below named CORPORATION, and that they are authorized to execute same for and on behalf of said CORPORATION. ______________________________________ Rev. February 12, 2018 14 Corporation Name (type or print) By:______________________________________ Date: _________________ Title:__________________________________________ City of Palo Alto, Scope of Services, page 1 ATTACHMENT B – SCOPE OF SERVICES I. Background In accordance with City Charter and Municipal Code requirements, the Palo Alto City Council must appoint a City Auditor who serves at the will of the Council, and who executes annual Council-approved internal audit plans through the Office of the City Auditor. Mission of the Office of the City Auditor The mission of the office of the city auditor is to promote honest, efficient, effective, economical, and fully accountable and transparent city government. This mission is fulfilled by conducting annual performance audits and financial/operational analyses of city departments, programs, services or activities. These audits are intended to ensure that city management is using its financial, physical, and informational resources effectively, efficiently, economically, ethically, and equitably, and in compliance with laws, regulations, contract and grant requirements, and city policies and procedures. City Council Decision to Outsource Internal Auditing Services On February 10, 2020, the Palo Alto City Council unanimously voted to issue a Request for Proposals (RFP), overseen by the Council Appointed Officers (CAO) Committee, to consider qualified firms for the provision of internal auditor services. This decision was preceded by the actions briefly described below. Following the retirement of the City Auditor in February 2019, the City Council authorized consultant engagements to: • Help to ensure the continuity of operations and completion of work products in the City Auditor’s Office, and • Conduct a review of public sector and Palo Alto internal auditing practices. The local government consulting firm Management Partners was engaged in March 2019 to assist with continuity of operations and provided assistance until mid-November 2019. The firm of Kevin W. Harper CPA & Associates was engaged in May 2019 to conduct the internal auditing practices review, delivering a written report to City Council in December 2019. Key concerns expressed by the City Council during its deliberations included: • The significant turnover in the City Auditor position in the last decade. • A high cost per audit as compared with other cities with an internal function, • Limited implementation of audit recommendations, and • Limited focus on risk exposure and strengthening internal controls. Key aspects of the City Council’s decision to outsource the internal audit function included the desire to focus on: • Annual audit planning through risk-based assessments, and • The most efficient use of increasingly scarce City resources. City of Palo Alto, Scope of Services, page 2 II. Internal Auditor Scope of Services This section contains the scope of internal auditor services as required by the City Charter and Municipal Code, including the required duties of, and audit tasks to performed by, the City Auditor. Duties of the City Auditor The duties of the City Auditor are to: • Ensure that city departments and officers responsible for accounting and financial management activities comply with statutory requirements and accounting standards. • Perform internal audits of all the fiscal transactions and operations of the City, in accordance with annual audit plans approved and directed by the City Council, that include: o Conducting performance audits of city departments, programs, services or activities, o Examination and analysis of fiscal procedures and expenditures, o Provision of other analyses of financial and operational data, and o Periodic unscheduled audits. Required Internal Audit Tasks The following 6 tasks represent the core services to be provided by the selected firm in accordance with RFP and contractual requirements. Pricing for these tasks must be provided in the manner specified in Section IV below, Section 5, Subsection 5.8 of the RFP (Proposal Cost Sheet and Rates) and in further accordance with Attachment E (Cost Proposal). Task 1. Preparation of Annual Audit Plan: Prepare an annual audit plan for review by the City Manager and appropriate City Council committee(s), and review and approval by the City Council. The audit plan must identify preliminary objectives of each audit to be performed, the schedule for each audit, and the estimated resources and costs for each audit. The City Auditor will consult with the City Attorney as necessary when developing audit plans. The annual audit plan will be largely based on the risk assessment required in Task 2. Task 2. Citywide Risk Assessment: Beginning with year 1 and continuing every other year thereafter, prepare a citywide risk assessment following the same review and approval requirements described in Task 1. This risk assessment will be the primary determinant of subsequent audit activity. Task 3. Selection of External Financial Auditor and Annual Audit Coordination: Coordinate the annual external financial audit in each year of the contract term. The City Charter also requires that the City Auditor to oversee the selection process for the annual external financial auditor. The City anticipates conducting an RFP for this purpose in early 2022. For pricing purposes, proposers should assume that one RFP process will be conducted during the initial anticipated two-year term. Task 4. Execute Annual Audit Plan: City of Palo Alto, Scope of Services, page 3 Conduct a minimum of X internal audits in accordance with the approved annual audit plan. Each internal audit requires the preparation of a written report for review by the City Manager, City Attorney and appropriate committee, and review/approval by the City Council as required. For pricing, proposers may assume that an average annual audit plan consists of X performance audits, X financial/operational audits and X follow-up/unscheduled audits. Task 5. Preparation of Quarterly Reports and Annual Status Report: Prepare and issue quarterly reports describing the status and progress toward audit completion, to be provided as information reports to the City Council and reviewed by the appropriate committee. Prepare and issue an annual report in the first quarter of each fiscal year on the status of recommendations made in completed audits, to be provided as an information report to the City Council and reviewed by the appropriate committee. Task 6. Evaluation and Benchmarking Undergo a peer evaluation following the guidelines of the Association of Local Government Auditors every two years (i.e., at the end of the initial two-year contract terms, then every other year thereafter throughout the contract term), or as required by the City Council, so that performance of the internal audit function can be objectively assessed. Prepare a cost per audit analysis following the first completed contract year, to be submitted at the beginning of the second contract year and every other year thereafter throughout the contract term, that includes benchmark agencies determined by the City Council, and obtain independent third-party certification of data accuracy. Note: As required by Section 5, Subsection 5.3 of the RPF (Qualifications of the Firm), proposers must include cost per audit information for its past projects identified in Attachment D (Firm Experience). Last, the City Council will perform periodic Closed Session performance evaluations with the designated City Auditor as allowed by law and performed with the other City Council appointees (the City Manager, City Attorney and City Clerk). It is anticipated that the new City Auditor appointed through this process will have a 6-month evaluation, and then annually thereafter throughout the initial contract term and any extensions granted by the City Council. III. Internal Auditor Services – Designation of City Auditor, Minimum Experience Requirements, Auditing Standards and Required Disclosures Consistent with City Charter and Municipal Code provisions, the City Council must appoint a City Auditor who serves at the will of the Council, and who executes annual Council- approved internal audit plans through the Office of the City auditor. Designation of City Auditor Proposing firms must designate an employee to fulfil the role of City Auditor, whose designation requires City Council approval and appointment, and whose appointment is subject to at-will modification by the Council. City of Palo Alto, Scope of Services, page 4 The successful proposing firm must be willing to contractually accept this requirement and stipulate to reserved rights of the City and City Council to appoint a new City Auditor in the event the City Auditor vacates the appointment for whatever reason. These reserved rights, and corollary firm requirements include but may not be limited to: • Stipulation that the contracted firm designate a temporary replacement not to exceed 3 months if the City Auditor vacates the appointment without enough time for Council to appoint a replacement. • Stipulation that a new appointment be conducted in the manner specified by the City Council, subject to applicable laws. • Continued appointment based on and subject to acceptable performance. • Contractual allowance of the contracted firm to propose alternative City Auditor(s) for Council consideration during the term of the agreement. Minimum Experience Requirements Proposing firms, and the proposed City Auditor, must have at least 5 years of experience performing internal audit services to local, state, federal or quasi-public entities, with a focus on performance auditing. Firms (and the proposed City Auditor) that may not have the required 5 years of public sector experience may include relevant private sector experience so long as City Charter and Municipal Code requirements for auditing standards are demonstrably met. Auditing Standards In order to be considered for evaluation, the City Auditor must be a Certified Public Accountant (CPA) or Certified Internal Auditor (CIA) in good standing and must maintain such certification during any resultant contract term. All staff members proposed for internal auditor services in conjunction with this RFP or assigned to internal auditor services under any resultant contract must be able to conduct or assist in conducting internal audits in accordance with Government Accounting Standards, as established by the Comptroller General of the United States, Governmental Accountability Office. Proposers whose staff members hold professional certifications such as CPA, CIA, Certified Government Auditing Professional (CGAP) or Certified Information Systems Auditor (CISA) will be favorably considered. Required Disclosures In order to be considered for evaluation, proposers must provide complete disclosure of any current or prior incidents within the last 5 years where it is/was alleged that proposer defaulted or failed to perform under contract which led the other party to terminate a contract or initiate termination proceedings whether such proceedings resulted in cured or curable defects. Proposers must also disclose any civil or criminal litigation or investigation pending which involves the proposer or in which proposer has been judged guilty or liable. Unless prohibited by law, identify the involved parties and the circumstances of the termination, termination proceedings, civil or criminal litigation, or investigation. City of Palo Alto, Scope of Services, page 5 IV. Staffing Plan for Internal Auditor Services Proposers must provide relevant information on key project team members in accordance with Section 5, Subsection 5.6 of the RFP (Project Staffing). V. Maintenance of Independent Contractor Status Proposers must include in their submittals recommendation(s) as to how the firm will ensure staff assigned to internal auditor services will maintain independent contractor status. VI. Cost Proposal and Best Value Determination The City Council intends to award a contract to a qualified firm whose proposal and staffing plan for internal auditor services represents the best overall value to the City based on the evaluation criteria and process detailed in the RFP. The cost proposal must be submitted in the format required in Attachment E, Cost Proposal (proposers are encouraged to submit cost proposals on an Excel spreadsheet as long as it conforms to the table format used in the Attachment E). The City Council is anticipating a Fiscal Year 2020/21 budget of $750,000 for internal auditor services. Proposing firms will be evaluated in large part on their proposed workplans to provide internal auditor services within this budgetary amount. Note: The current budget includes approximately $1 million for internal auditing services. This amount is anticipated to be reduced to $750,000 as the City Council conducts budget deliberations, based on a recommendation by the Council Appointed Officers (CAO) Committee. Should budget deliberations result in a Fiscal Year 2020/21 budget for internal auditing that restores the full $1 million, then the successful proposer may be asked to submit a proposal to conduct additional audits that, upon mutually agreeable terms, could be included in a resultant contract or a contract amendment, depending on timing of contract award and other factors. Proposers are encouraged to consider the ramifications of the COVID-19 pandemic and how economic and working conditions may affect the internal audit program and the costs thereof. Proposers are also encouraged to propose pricing for additional or innovative services not envisioned under this RFP that could result in cost savings or efficiencies, so long as such services are compliant with applicable laws and regulations. Proposers must provide cost parameters for contract years 3 through 5 as specified in Attachment E. Professional Services Rev. April 27, 2018 1 ATTACHMENT C SAMPLE AGREEMENT FOR PROFRESSIONAL SERVICES (USE FOR PROFESSIONAL SERVICES (DESIGN and NON-DESIGN) CITY OF PALO ALTO CONTRACT NO. AGREEMENT BETWEEN THE CITY OF PALO ALTO AND FOR PROFESSIONAL SERVICES This Agreement is entered into on this day of , , (“Agreement”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and , a , located at ("CONSULTANT"). RECITALS The following recitals are a substantive portion of this Agreement. A. CITY intends to (“Project”) and desires to engage a consultant to in connection with the Project (“Services”). B. CONSULTANT has represented that it has the necessary professional expertise, qualifications, and capability, and all required licenses and/or certifications to provide the Services. C. CITY in reliance on these representations desires to engage CONSULTANT to provide the Services as more fully described in Exhibit “A”, attached to and made a part of this Agreement. NOW, THEREFORE, in consideration of the recitals, covenants, terms, and conditions, in this Agreement, the parties agree: AGREEMENT SECTION 1. SCOPE OF SERVICES. CONSULTANT shall perform the Services described at Exhibit “A” in accordance with the terms and conditions contained in this Agreement. The performance of all Services shall be to the reasonable satisfaction of CITY. Optional On-Call Provision (This provision only applies if checked and only applies to on-call agreements.) Services will be authorized by CITY, as needed, with a Task Order assigned and approved by CITY’s Project Manager. Each Task Order shall be in substantially the same form as Exhibit A-1. Each Task Order shall designate a CITY Project Manager and shall contain a specific scope of work, a specific schedule of performance and a specific compensation amount. The total price of all Task Orders issued under this Agreement shall not exceed the amount of Compensation set forth in Section 4 of this Agreement. CONSULTANT shall only be compensated for work Professional Services Rev. April 27, 2018 2 performed under an authorized Task Order and CITY may elect, but is not required, to authorize work up to the maximum compensation amount set forth in Section 4. SECTION 2. TERM. The term of this Agreement shall be from the date of its full execution through unless terminated earlier pursuant to Section 19 of this Agreement. OR The term of this Agreement shall be from the date of its full execution through completion of the services in accordance with the Schedule of Performance attached at Exhibit “B” unless terminated earlier pursuant to Section 19 of this Agreement. SECTION 3. SCHEDULE OF PERFORMANCE. Time is of the essence in the performance of Services under this Agreement. CONSULTANT shall complete the Services within the term of this Agreement and in accordance with the schedule set forth in Exhibit “B”, attached to and made a part of this Agreement. Any Services for which times for performance are not specified in this Agreement shall be commenced and completed by CONSULTANT in a reasonably prompt and timely manner based upon the circumstances and direction communicated to the CONSULTANT. CITY’s agreement to extend the term or the schedule for performance shall not preclude recovery of damages for delay if the extension is required due to the fault of CONSULTANT. SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be paid to CONSULTANT for performance of the Services described in Exhibit “A” (“Basic Services”), and reimbursable expenses, shall not exceed Dollars ($ ). CONSULTANT agrees to complete all Basic Services, including reimbursable expenses, within this amount. In the event Additional Services are authorized, the total compensation for Basic Services, Additional Services and reimbursable expenses shall not exceed Dollars ($ ). The applicable rates and schedule of payment are set out at Exhibit “C-1”, entitled “HOURLY RATE SCHEDULE,” which is attached to and made a part of this Agreement. Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth herein shall be at no cost to the CITY. Additional Services, if any, shall be authorized in accordance with and subject to the provisions of Exhibit “C”. CONSULTANT shall not receive any compensation for Additional Services performed without the prior written authorization of CITY. Additional Services shall mean any work that is determined by CITY to be necessary for the proper completion of the Project, but which is not included within the Scope of Services described at Exhibit “A”. SECTION 5. INVOICES. In order to request payment, CONSULTANT shall submit monthly invoices to the CITY describing the services performed and the applicable charges (including an identification of personnel who performed the services, hours worked, hourly rates, and reimbursable expenses), based upon the CONSULTANT’s billing rates (set forth in Exhibit “C- 1”). If applicable, the invoice shall also describe the percentage of completion of each task. The information in CONSULTANT’s payment requests shall be subject to verification by CITY. CONSULTANT shall send all invoices to the City’s project manager at the address specified in Section 13 below. The City will generally process and pay invoices within thirty (30) days of Professional Services Rev. April 27, 2018 3 receipt. SECTION 6. QUALIFICATIONS/STANDARD OF CARE. All of the Services shall be performed by CONSULTANT or under CONSULTANT’s supervision. CONSULTANT represents that it possesses the professional and technical personnel necessary to perform the Services required by this Agreement and that the personnel have sufficient skill and experience to perform the Services assigned to them. CONSULTANT represents that it, its employees and subconsultants, if permitted, have and shall maintain during the term of this Agreement all licenses, permits, qualifications, insurance and approvals of whatever nature that are legally required to perform the Services. All of the services to be furnished by CONSULTANT under this agreement shall meet the professional standard and quality that prevail among professionals in the same discipline and of similar knowledge and skill engaged in related work throughout California under the same or similar circumstances. SECTION 7. COMPLIANCE WITH LAWS. CONSULTANT shall keep itself informed of and in compliance with all federal, state and local laws, ordinances, regulations, and orders that may affect in any manner the Project or the performance of the Services or those engaged to perform Services under this Agreement. CONSULTANT shall procure all permits and licenses, pay all charges and fees, and give all notices required by law in the performance of the Services. SECTION 8. ERRORS/OMISSIONS. CONSULTANT is solely responsible for costs, including, but not limited to, increases in the cost of Services, arising from or caused by CONSULTANT’s errors and omissions, including, but not limited to, the costs of corrections 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. Professional Services Rev. April 27, 2018 4 SECTION 12. SUBCONTRACTING. Option A: No Subcontractor: CONSULTANT shall not subcontract any portion of the work to be performed under this Agreement without the prior written authorization of the city manager or designee. Option B: Subcontracts Authorized: Notwithstanding Section 11 above, CITY agrees that subconsultants may be used to complete the Services. The subconsultants authorized by CITY to perform work on this Project are: 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 as the to have supervisory responsibility for the performance, progress, and execution of the Services and as the project to represent CONSULTANT during the day-to-day work on the Project. If circumstances cause the substitution of the project director, project coordinator, or any other key personnel for any reason, the appointment of a substitute project director and the assignment of any key new or replacement personnel will be subject to the prior written approval of the CITY’s project manager. CONSULTANT, at CITY’s request, shall promptly remove personnel who CITY finds do not perform the Services in an acceptable manner, are uncooperative, or present a threat to the adequate or timely completion of the Project or a threat to the safety of persons or property. CITY’s project manager is , Department, Division, Palo Alto, CA 94303, Telephone: . The project manager will be CONSULTANT’s point of contact with respect to performance, progress and execution of the Services. CITY may designate an alternate project manager from time to time. SECTION 14. OWNERSHIP OF MATERIALS. Upon delivery, all work product, including without limitation, all writings, drawings, plans, reports, specifications, calculations, documents, other materials and copyright interests developed under this Agreement shall be and remain the exclusive property of CITY without restriction or limitation upon their use. CONSULTANT agrees that all copyrights which arise from creation of the work pursuant to this Agreement shall be vested in CITY, and CONSULTANT waives and relinquishes all claims to copyright or other intellectual property rights in favor of the CITY. Neither CONSULTANT nor its contractors, if any, shall make any of such materials available to any individual or organization without the prior written approval of the City Manager or designee. CONSULTANT makes no representation of the suitability of the work product for use in or application to circumstances not contemplated by the scope of work. SECTION 15. AUDITS. CONSULTANT will permit CITY to audit, at any reasonable time during the term of this Agreement and for three (3) years thereafter, CONSULTANT’s records Professional Services Rev. April 27, 2018 5 pertaining to matters covered by this Agreement. CONSULTANT further agrees to maintain and retain such records for at least three (3) years after the expiration or earlier termination of this Agreement. SECTION 16. INDEMNITY. [Option A applies to the following design professionals pursuant to Civil Code Section 2782.8: architects; landscape architects; registered professional engineers and licensed professional land surveyors.] 16.1. To the fullest extent permitted by law, CONSULTANT shall protect, indemnify, defend and hold harmless CITY, its Council members, officers, employees and agents (each an “Indemnified Party”) from and against any and all demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, including all costs and expenses of whatever nature including attorneys fees, experts fees, court costs and disbursements (“Claims”) that arise out of, pertain to, or relate to the negligence, recklessness, or willful misconduct of CONSULTANT, its officers, employees, agents or contractors under this Agreement, regardless of whether or not it is caused in part by an Indemnified Party. [Option B applies to any consultant who does not qualify as a design professional as defined in Civil Code Section 2782.8.] 16.1. To the fullest extent permitted by law, CONSULTANT shall protect, indemnify, defend and hold harmless CITY, its Council members, officers, employees and agents (each an “Indemnified Party”) from and against any and all demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, including all costs and expenses of whatever nature including attorneys fees, experts fees, court costs and disbursements (“Claims”) resulting from, arising out of or in any manner related to performance or nonperformance by CONSULTANT, its officers, employees, agents or contractors under this Agreement, regardless of whether or not it is caused in part by an Indemnified Party. 16.2. Notwithstanding the above, nothing in this Section 16 shall be construed to require CONSULTANT to indemnify an Indemnified Party from Claims arising from the active negligence, sole negligence or willful misconduct of an Indemnified Party. 16.3. The acceptance of CONSULTANT’s services and duties by CITY shall not operate as a waiver of the right of indemnification. The provisions of this Section 16 shall survive the expiration or early termination of this Agreement. SECTION 17. WAIVERS. The waiver by either party of any breach or violation of any covenant, term, condition or provision of this Agreement, or of the provisions of any ordinance or law, will not be deemed to be a waiver of any other term, covenant, condition, provisions, ordinance or law, or of any subsequent breach or violation of the same or of any other term, covenant, condition, provision, ordinance or law. SECTION 18. INSURANCE. 18.1. CONSULTANT, at its sole cost and expense, shall obtain and maintain, in full force and effect during the term of this Agreement, the insurance coverage described in Exhibit "D". CONSULTANT and its contractors, if any, shall obtain a policy endorsement naming CITY Professional Services Rev. April 27, 2018 6 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 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 Professional Services Rev. April 27, 2018 7 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 at the address of CONSULTANT recited above SECTION 21. CONFLICT OF INTEREST. 21.1. In accepting this Agreement, CONSULTANT covenants that it presently has no interest, and will not acquire any interest, direct or indirect, financial or otherwise, which would conflict in any manner or degree with the performance of the Services. 21.2. CONSULTANT further covenants that, in the performance of this Agreement, it will not employ subconsultants, contractors or persons having such an interest. CONSULTANT certifies that no person who has or will have any financial interest under this Agreement is an officer or employee of CITY; this provision will be interpreted in accordance with the applicable provisions of the Palo Alto Municipal Code and the Government Code of the State of California. 21.3. If the Project Manager determines that CONSULTANT is a “Consultant” as that term is defined by the Regulations of the Fair Political Practices Commission, CONSULTANT shall be required and agrees to file the appropriate financial disclosure documents required by the Palo Alto Municipal Code and the Political Reform Act. SECTION 22. NONDISCRIMINATION. As set forth in Palo Alto Municipal Code section 2.30.510, CONSULTANT certifies that in the performance of this Agreement, it shall not discriminate in the employment of any person due to that person’s race, skin color, gender, gender Professional Services Rev. April 27, 2018 8 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 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 Professional Services Rev. April 27, 2018 9 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. OR 26.1 CONSULTANT is required to pay general prevailing wages as defined in Subchapter 3, Title 8 of the California Code of Regulations and Section 16000 et seq. and Section 1773.1 of the California Labor Code. Pursuant to the provisions of Section 1773 of the Labor Code of the State of California, the City Council has obtained the general prevailing rate of per diem wages and the general rate for holiday and overtime work in this locality for each craft, classification, or type of worker needed to execute the contract for this Project from the Director of the Department of Industrial Relations (“DIR”). Copies of these rates may be obtained at the Purchasing Division’s office of the City of Palo Alto. CONSULTANT shall provide a copy of prevailing wage rates to any staff or subcontractor hired, and shall pay the adopted prevailing wage rates as a minimum. CONSULTANT shall comply with the provisions of all sections, including, but not limited to, Sections 1775, 1776, 1777.5, 1782, 1810, and 1813, of the Labor Code pertaining to prevailing wages. 26.2 CONSULTANT shall comply with the requirements of Exhibit “E” for any contract for public works construction, alteration, demolition, repair or maintenance. SECTION 27. MISCELLANEOUS PROVISIONS. 27.1. This Agreement will be governed by the laws of the State of California. 27.2. In the event that an action is brought, the parties agree that trial of such action will be vested exclusively in the state courts of California in the County of Santa Clara, State of California. 27.3. The prevailing party in any action brought to enforce the provisions of this Agreement may recover its reasonable costs and attorneys' fees expended in connection with that action. The prevailing party shall be entitled to recover an amount equal to the fair market value of legal services provided by attorneys employed by it as well as any attorneys’ fees paid to third parties. Professional Services Rev. April 27, 2018 10 27.4. This document represents the entire and integrated agreement between the parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This document may be amended only by a written instrument, which is signed by the parties. 27.5. The covenants, terms, conditions and provisions of this Agreement will apply to, and will bind, the heirs, successors, executors, administrators, assignees, and consultants of the parties. 27.6. If a court of competent jurisdiction finds or rules that any provision of this Agreement or any amendment thereto is void or unenforceable, the unaffected provisions of this Agreement and any amendments thereto will remain in full force and effect. 27.7. All exhibits referred to in this Agreement and any addenda, appendices, attachments, and schedules to this Agreement which, from time to time, may be referred to in any duly executed amendment hereto are by such reference incorporated in this Agreement and will be deemed to be a part of this Agreement. 27.8 In the event of a conflict between the terms of this Agreement and the exhibits hereto or CONSULTANT’s proposal (if any), the Agreement shall control. In the case of any conflict between the exhibits hereto and CONSULTANT’s proposal, the exhibits shall control. 27.9 If, pursuant to this contract with CONSULTANT, CITY shares with CONSULTANT personal information as defined in California Civil Code section 1798.81.5(d) about a California resident (“Personal Information”), CONSULTANT shall maintain reasonable and appropriate security procedures to protect that Personal Information, and shall inform City immediately upon learning that there has been a breach in the security of the system or in the security of the Personal Information. CONSULTANT shall not use Personal Information for direct marketing purposes without City’s express written consent. 27.10 All unchecked boxes do not apply to this Agreement. 27.11 The individuals executing this Agreement represent and warrant that they have the legal capacity and authority to do so on behalf of their respective legal entities. 27.12 This Agreement may be signed in multiple counterparts, which shall, when executed by all the parties, constitute a single binding agreement. Professional Services Rev. April 27, 2018 11 CONTRACT No. S19XXXXXX 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 (Required on contracts over $85,000) Purchasing Manager (Required on contracts over $50,000) Contracts Administrator (Required on contracts under $50,000) APPROVED AS TO FORM: __________________________ City Attorney or designee (Required on Contracts over $25,000) CONSULTANT Officer 1 By: Name: Title: Officer 2 (Required for Corp. or LLC) By: Name: Title: Attachments: EXHIBIT “A”: SCOPE OF SERVICES EXHIBIT “A-1” PROFESSIONAL SERVICES TASK ORDER (for on-call contracts only) EXHIBIT “B”: SCHEDULE OF PERFORMANCE EXHIBIT “C”: COMPENSATION EXHIBIT “C-1”: SCHEDULE OF RATES EXHIBIT “D”: INSURANCE REQUIREMENTS EXHIBIT “E”: DIR REGISTRATION FOR PUBLIC WORKS CONTRACTS Professional Services Rev. April 27, 2018 12 EXHIBIT “A” SCOPE OF SERVICES Professional Services Rev. April 27, 2018 13 (Optional – for On Call Agreements only) EXHIBIT “A-1” PROFESSIONAL SERVICES TASK ORDER Consultant hereby agrees to perform the work detailed below in accordance with all the terms and conditions of the Agreement referenced in Item 1A below. All exhibits referenced in Item 8 are incorporated into the Agreement by this reference. The Consultant shall furnish the necessary facilities, professional, technical and supporting personnel required by this Task Order as described below. CONTRACT NO. ISSUE DATE Purchase Requisition No. 1A. MASTER AGREEMENT NUMBER 1B. TASK ORDER NO. 2. CONSULTANT 3. PERIOD OF PERFORMANCE: START: COMPLETION: 4 TOTAL TASK ORDER PRICE: $__________________ BALANCE REMAINING IN MASTER AGREEMENT $__________________________________ 5. BUDGET CODE: _______________ COST CENTER_________________ COST ELEMENT______________ WBS/CIP___ _______PHASE___ 6. CITY PROJECT MANAGER’S NAME/DEPARTMENT_________________________________________ 7. DESCRIPTION OF SCOPE OF SERVICES MUST INCLUDE: WORK TO BE PERFORMED SCHEDULE OF WORK BASIS FOR PAYMENT & FEE SCHEDULE DELIVERABLES REIMBURSABLES (with “not to exceed” cost) 8. ATTACHMENTS: A: Scope of Services B: __________________________________ ----------------------------------------------------------------------------------------------------------------------------------- I hereby authorize the performance of I hereby acknowledge receipt and acceptance the work described above in this Task Order. of this Task Order and warrant that I have authority to sign on behalf of Consultant. APPROVED: APPROVED: CITY OF PALO ALTO COMPANY NAME: ______________________ BY:__________________________________ BY:____________________________________ Name ________________________________ Name __________________________________ Title_________________________________ Title___________________________________ Date _________________________________ Date ___________________________________ Professional Services Rev. April 27, 2018 14 EXHIBIT “B” SCHEDULE OF PERFORMANCE CONSULTANT shall perform the Services so as to complete each milestone within the number of days/weeks specified below. The time to complete each milestone may be increased or decreased by mutual written agreement of the project managers for CONSULTANT and CITY so long as all work is completed within the term of the Agreement. CONSULTANT shall provide a detailed schedule of work consistent with the schedule below within 2 weeks of receipt of the notice to proceed. Milestones Completion No. of Days/Weeks From NTP 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Professional Services Rev. April 27, 2018 15 (Version 1 - use for task based compensation) EXHIBIT “C” COMPENSATION The CITY agrees to compensate the CONSULTANT for professional services performed in accordance with the terms and conditions of this Agreement, and as set forth in the budget schedule below. Compensation shall be calculated based on the hourly rate schedule attached as exhibit C-1 up to the not to exceed budget amount for each task set forth below. CONSULTANT shall perform the tasks and categories of work as outlined and budgeted below. The CITY’s Project Manager may approve in writing the transfer of budget amounts between any of the tasks or categories listed below provided the total compensation for Basic Services, including reimbursable expenses, and the total compensation for Additional Services do not exceed the amounts set forth in Section 4 of this Agreement. BUDGET SCHEDULE NOT TO EXCEED AMOUNT Task 1 $ ( ) Task 2 $ ( ) Task 3 $ ( ) Task 4 $ ( ) Task 5 $ ( ) Sub-total Basic Services $ Reimbursable Expenses $ Total Basic Services and Reimbursable expenses $ Additional Services (Not to Exceed) $ Maximum Total Compensation $ REIMBURSABLE EXPENSES Professional Services Rev. April 27, 2018 16 The administrative, overhead, secretarial time or secretarial overtime, word processing, photocopying, in-house printing, insurance and other ordinary business expenses are included within the scope of payment for services and are not reimbursable expenses. CITY shall reimburse CONSULTANT for the following reimbursable expenses at cost. Expenses for which CONSULTANT shall be reimbursed are: A. Travel outside the San Francisco Bay area, including transportation and meals, will be reimbursed at actual cost subject to the City of Palo Alto’s policy for reimbursement of travel and meal expenses for City of Palo Alto employees. B. Long distance telephone service charges, cellular phone service charges, facsimile transmission and postage charges are reimbursable at actual cost. All requests for payment of expenses shall be accompanied by appropriate backup information. Any expense anticipated to be more than $ shall be approved in advance by the CITY’s project manager. ADDITIONAL SERVICES The CONSULTANT shall provide additional services only by advanced, written authorization from the CITY. The CONSULTANT, at the CITY’s project manager’s request, shall submit a detailed written proposal including a description of the scope of services, schedule, level of effort, and CONSULTANT’s proposed maximum compensation, including reimbursable expense, for such services based on the rates set forth in Exhibit C-1. The additional services scope, schedule and maximum compensation shall be negotiated and agreed to in writing by the CITY’s 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: Professional Services Rev. April 27, 2018 17 (Version 2 – hourly rate - not task based) EXHIBIT “C” COMPENSATION The CITY agrees to compensate the CONSULTANT for professional services performed in accordance with the terms and conditions of this Agreement based on the hourly rate schedule attached as Exhibit C-1. The compensation to be paid to CONSULTANT under this Agreement for all services, additional services, and reimbursable expenses shall not exceed the amount(s) stated in Section 4 of this Agreement. CONSULTANT agrees to complete all Services and Additional Services, including reimbursable expenses, within this/these amount(s). Any work performed or expenses incurred for which payment would result in a total exceeding the maximum amount of compensation set forth in this Agreement shall be at no cost to the CITY. REIMBURSABLE EXPENSES The administrative, overhead, secretarial time or secretarial overtime, word processing, photocopying, in-house printing, insurance and other ordinary business expenses are included within the scope of payment for services and are not reimbursable expenses. CITY shall reimburse CONSULTANT for the following reimbursable expenses at cost. Expenses for which CONSULTANT shall be reimbursed are: A. Travel outside the San Francisco Bay area, including transportation and meals, will be reimbursed at actual cost subject to the City of Palo Alto’s policy for reimbursement of travel and meal expenses for City of Palo Alto employees. B. Long distance telephone service charges, cellular phone service charges, facsimile transmission and postage charges are reimbursable at actual cost. All requests for payment of expenses shall be accompanied by appropriate backup information. Any expense anticipated to be more than $ shall be approved in advance by the CITY’s project manager. ADDITIONAL SERVICES The CONSULTANT shall provide additional services only by advanced, written authorization from the CITY. The CONSULTANT, at the CITY’s project manager’s request, shall submit a detailed written proposal including a description of the scope of services, schedule, level of effort, and CONSULTANT’s proposed maximum compensation, including reimbursable expenses, 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. Professional Services Rev. April 27, 2018 18 [OPTIONAL] Work required because the following conditions are not satisfied or are exceeded shall be considered as Additional Services: Professional Services Rev. April 27, 2018 19 EXHIBIT “C-1” SCHEDULE OF RATES Professional Services Rev. April 27, 2018 20 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. Professional Services Rev. April 27, 2018 21 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 Professional Services Rev. April 27, 2018 22 EXHIBIT “E” DIR REGISTRATION FOR PUBLIC WORKS CONTRACTS This Exhibit shall apply only to a contract for public works construction, alteration, demolition, repair or maintenance work, CITY will not accept a bid proposal from or enter into this Agreement with CONSULTANT without proof that CONSULTANT and its listed subcontractors are registered with the California Department of Industrial Relations (“DIR”) to perform public work, subject to limited exceptions. City requires CONSULTANT and its listed subcontractors to comply with the requirements of SB 854. CITY provides notice to CONSULTANT of the requirements of California Labor Code section 1771.1(a), which reads: “A contractor or subcontractor shall not be qualified to bid on, be listed in a bid proposal, subject to the requirements of Section 4104 of the Public Contract Code, or engage in the performance of any contract for public work, as defined in this chapter, unless currently registered and qualified to perform public work pursuant to Section 1725.5. It is not a violation of this section for an unregistered contractor to submit a bid that is authorized by Section 7029.1 of the Business and Professions Code or Section 10164 or 20103.5 of the Public Contract Code, provided the contractor is registered to perform public work pursuant to Section 1725.5 at the time the contract is awarded.” CITY gives notice to CONSULTANT and its listed subcontractors that CONSULTANT is required to post all job site notices prescribed by law or regulation and CONSULTANT is subject to SB 854-compliance monitoring and enforcement by DIR. CITY requires CONSULTANT and its listed subcontractors to comply with the requirements of Labor Code section 1776, including: Keep accurate payroll records, showing the name, address, social security number, work classification, straight time and overtime hours worked each day and week, and the actual per diem wages paid to each journeyman, apprentice, worker, or other employee employed by, respectively, CONSULTANT and its listed subcontractors, in connection with the Project. The payroll records shall be verified as true and correct and shall be certified and made available for inspection at all reasonable hours at the principal office of CONSULTANT and its listed subcontractors, respectively. At the request of CITY, acting by its project manager, CONSULTANT and its listed subcontractors shall make the certified payroll records available for inspection or furnished upon request to the project manager within ten (10) days of receipt of CITY’s request. City of Palo Alto Attachment D TABLE FORMAT QUALIFICATIONS OF FIRM RELATIVE TO CITY’S NEEDS Minimum Qualifications of the Proposing Firm and Proposed City Auditor (provide brief, concise description of how the firm and proposed City Auditor meet at least the minimum requirements established in this RFP): Use this table to provide relevant project experience (add row to include additional projects if desired) Project Name Client Description of work performed Total Project Cost Percentage of work firm as responsible for Period work was completed Client contact information* Did your firm meet the project schedule (Circle one) : Yes No Give a brief statement of the firm’s adherence to the schedule and budget for the project: Provide relevant cost per audit information: Did your firm meet the project schedule (Circle one) : Yes No Give a brief statement of the firm’s adherence to the schedule and budget for the project: Provide relevant cost per audit information: City of Palo Alto Did your firm meet the project schedule (Circle one) : Yes No Give a brief statement of the firm’s adherence to the schedule and budget for the project: Provide relevant cost per audit information: Did your firm meet the project schedule (Circle one) : Yes No Give a brief statement of the firm’s adherence to the schedule and budget for the project: Provide relevant cost per audit information: *Include name, title and phone number. City of Palo Alto Attachment E COST PROPOSAL FORMAT – RFP (The City requires a submittal in this format for the first two contract years – content should match cost for scope of services required. Proposers are encouraged to submit their pricing on an Excel spreadsheet.) Scope Labor Categories (e.g., City Auditor, Consultant, Sr. Consultant, etc.) Est. Hours Hourly Rate Extended Rate Task 1. Preparation of Annual Audit Plan $ $ $ $ $ $ TOTAL NOT TO EXCEED, TASK 1 $ $ Task 2. Conduct Citywide Risk Assessment $ $ $ $ $ $ TOTAL NOT TO EXCEED, TASK 2 $ $ Task 3. Selection of External Financial Auditor and Annual Audit Coordination $ $ $ $ $ $ TOTAL NOT TO EXCEED, TASK 3 $ $ Task 4. Execute Annual Audit Plan $ $ TOTAL NOT TO EXCEED, TASK 4 $ $ Task. 5. Preparation of Quarterly Reports and Annual Status Report $ $ City of Palo Alto TOTAL NOT TO EXCEED, TASK 5 $ $ Task 6. Evaluation and Benchmarking $ $ TOTAL NOT TO EXCEED, TASK 6 $ $ TOTAL NOT TO EXCEED (TASKS 1 – 6)* $ $ *For the purpose of the RFP evaluation process, the total for Tasks 1 through 6 should not exceed $750,000 in years 1 and 2 of the contract. Adjustments may be made in conjunction with the budget adoption process and/or through contract negotiations with the top-rated proposer. Innovations or Other Factors for Cost Savings or Efficiencies (describe or list; proposed costs can be additive or deductive) $ $ TOTAL INNOVATIONS or OTHER FACTORS $ $ GRAND TOTAL TASKS 1 – 6 AND INNOVATIONS/OTHER FACTORS $ $ Use this row to identify pricing assumptions in contract years 3 through 5: 1. 2. 3. Attachment “F” INSURANCE REQUIREMENTS Rev. 11/07 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 DAY ADVANCE NOTICE TO CITY OF CHANGE IN COVERAGE OR OF COVERAGE CANCELLATION; AND B. A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR CONTRACTOR’S AGREEMENT TO INDEMNIFY CITY. C. DEDUCTIBLE AMOUNTS IN EXCESS OF $5,000 REQUIRE CITY’S PRIOR APPROVAL. II. CONTACTOR MUST SUBMIT CERTIFICATES(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE. III. ENDORSEMENT PROVISIONS, WITH RESPECT TO THE INSURANCE AFFORDED TO “ADDITIONAL INSUREDS” A. PRIMARY COVERAGE WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED, INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR CONTRIBUTING WITH ANY OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE ADDITIONAL INSUREDS. B. CROSS LIABILITY Attachment “F” INSURANCE REQUIREMENTS Rev. 11/07 THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS POLICY. C. NOTICE OF CANCELLATION 1. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. 2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON-PAYMENT OF PREMIUM, THE ISSUING COMPANY SHALL PROVIDE CITY AT LEAST A TEN (10) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. NOTICES SHALL BE MAILED TO: PURCHASING AND CONTRACT ADMINISTRATION CITY OF PALO ALTO P.O. BOX 10250 PALO ALTO, CA 94303. Attachment B – Palo Alto City Auditor Request for Proposals Timeline Activity (items completed as of the May 4th Council meeting are in italics) Date April (1) Conduct kick off meeting with staff April 2 (2) Conduct meetings with the City Attorney and Council Member Filseth Week of April 6 (3) Approval of the scope of work by CAO Committee April 15 (4) Prepare and issue RFP: April 8 – 21 April 8 – 21 (5) Conduct pre-proposal meeting: April 28 April 28 May (6) Deadline for RFP questions from possible proposers May 4 (7) Provide responses to questions: May 4-8 May 4 - 8 (8) Proposal due date May 15 (3:00 p.m.) (9) CAO Committee and/or Evaluation Team briefing and training May 18 (a.m.) (10) Evaluate proposals May 18 - 22 (11) CAO Committee selects finalists to interview May 26 (p.m.) June (12) CAO Committee conducts interview(s) and identifies top-rated proposer(s) June 2 (a.m.) (13) City Council conducts closed session interview(s) of City Auditor candidate(s) June 3 (p.m.) (14) Conduct scope and fee negotiations June 4 - 15 (15) City Council considers award of contract and appointment of City Auditor June 22 (regular meeting) or 29 (special meeting) July (16) Commence provision of services July 1 City of Palo Alto (ID # 11219) City Council Staff Report Report Type: Action Items Meeting Date: 5/4/2020 City of Palo Alto Page 1 Council Priority: Fiscal Sustainability Summary Title: BRC Fee Waiver Resolution Title: Adoption of a Resolution Waiving the Business Registration Fee Including Late Fees for Calendar Year 2020; Adoption of a Resolution Rescinding the Levy of Assessments for the Downtown Business Improvement District (BID) for FY20; and Approval of the Reimbursement of Business Registration Fees and BID Assessments Due in 2020 From: City Manager Lead Department: Administrative Services Recommendation Staff recommends that the City Council: 1) Adopt a resolution waiving the business registration fee (Palo Alto Municipal Code Chapter 4.60) due and payable in calendar year 2020 and waiving all late fees for the 2020 collection cycle (Attachment A); 2) Adopt a resolution rescinding the approval of the levy of assessments for the Downtown Business Improvement District (BID) for FY20 (Attachment B); and, 3) Approve the reimbursement of business registration fees and BID assessments due in 2020 that have been paid by businesses. Background During the March 23, 2020 Council meeting, in response to the current public health emergency, Council approved a motion to discontinue work on the local business tax measure for the November 2020 election and to have Staff focus on the business registry certificate program with specific goals outlined. This report is in response to the goal directing Staff to consider waiving the business registration fee. Staff is also proposing rescission of the levied FY 2020 Downtown Business Improvement District (BID) assessment for the Council’s consideration. Business Registry The Business Registration Program requirements in Palo Alto Municipal Code Chapter 4.60 (commonly referred to as the “Business Registry”) apply to all businesses located in Palo Alto, City of Palo Alto Page 2 with the exception of nonprofits and businesses with less than one full-time equivalent employee, home-based or transitory businesses, a religious organization with no ancillary business on-site, businesses who relocated outside of Palo Alto in the past year, and businesses that are permanently closed. Most exempt businesses need to annually claim their exemption through the application but do not pay the fees. The $50 business registration fee is for cost recovery purposes and the $4 certified access specialist (CASp) fee is a State requirement (SB1186 and AB1379) for local jurisdictions to collect a $4 fee from new or renewal applicants for a local business license or equivalent instrument or permit. This fee is for the purposes of increasing CASp services and compliance with construction-related accessibility requirements in Palo Alto and cannot be waived by the City. Business Improvement District The Downtown Business Improvement District (BID) was established to promote the economic revitalization and physical maintenance of the Palo Alto Downtown Business Improvement District. The City contracts with Palo Alto Downtown Business and Professional Association (PADBPA) to provide services to businesses in the BID. Examples of services that have been completed and services that were anticipated for FY 2020 can be seen in Attachment C. The BID assessment is levied on and paid by businesses in the district boundary to provide these services. The assessment ranges between $50-$500 based on the location of the business in the BID, type of business, and number of employees (or number of rooms for a lodging business). The assessment schedule can be seen in Attachment C. In June 2019, Council adopted a resolution approving the annual levy of the BID assessments for FY 2020. Discussion Based on the City Council action take on March 23, 2020, staff is bringing forward the following actions: 1) Waive the FY 2020 Business Registry Fee of $50; 2) Rescind the FY 2020 BID assessment that ranges between $50-$500 depending on the business; and 3) Reimburse business registration fees and BID assessments due in 2020. Staff was in the process of issuing and collecting both the BID and BRC assessments and fees when COVID-19 began, in coordination with the City’s vendor Avenue Insights & Analytics that manages BID assessment and Business Registry application and fee collections. Invoices for both the Business Registry and BID assessment were sent to businesses in the beginning of March 2020. The collection process for both programs have been underway with the original due dates of March 31st for the Business Registry, and April 13th for BID assessments. The City Manager extended both deadlines at the end of March to June 30, 2020. Because of COVID-19 and in efforts to assist business during this time, these waivers are recommended. Rescinding the approval of the levy of assessments for the BID as well as waiving the business registration fee are included in this recommendation to further assist businesses during this time. The BID assessment can be a larger amount for many businesses in the district compared City of Palo Alto Page 3 to the Business Registry fee. With the Business Registry and BID assessment collections administered together, implementing refunds for both would not require additional resources. If the proposed resolution (Attachment A) is approved, the City would not collect the $50 registration fee from businesses due for 2020. Businesses would still pay the state-mandated $4 CASp fee, a portion of which is remitted to the State and the balance maintained in a restricted City fund. All businesses are still required to register; however, staff recognizes that with the waiver of the fee and late fees, there is potentially a disincentive for businesses to register in FY 2020. Staff will work to encourage this through other methods such as potentially requiring registry for any grant or loan assistance as part of the business support program the City Council is considering in response to the COVID-19 emergency. Providing refunds is the recommended method to waive fees for those who have already paid for the 2020 collection cycle as opposed to providing fee and assessment credits. Providing credits for 2021 was determined to be administratively too complex after consulting with Avenu Insights & Analytics, on details required for implementation. Additionally, issuing refunds as opposed to credits for the current collection cycle would make it easier to make changes, if needed, to the 2021 cycle. Additionally, if a business closes or moves, the business would not use the credit for 2021, making a refund now more useful. Refunds would be issued by mail to all those businesses that have already paid, no action will be required by these organizations to receive this refund. Businesses that are still unregistered will be encouraged to register through the available downloadable application form so that they are charged only for the $4 CASp fee before July. Also, due to resource constraints impacting Avenu Insights & Analytics’s ability to update the online registration website, all businesses who continue to register online will need to be refunded for waived fees. At this time, Avenu Insights & Analytics is unable to commit to any online changes and is putting all resources into prioritizing processing payments, disbursing funds, and providing customer support. Those who have not registered yet would be sent an application with updated fee calculation. Resource Impact Fees collected through the BID assessment are typically used by the Palo Alto Downtown Business and Professional Association (PADBPA) for programs and activities. Not collecting the BID assessment will impact the ability to fund the anticipated work for FY20 that can be seen in Attachment C. An average of approximately $76,000 is collected from a BID assessment cycle. $73,000 was collected for the 2017 assessment, the 2018 assessment was moved to 2019 to align fee collection with the Business Registry, and approximately $79,000 was collected for the 2019 assessment. Assuming no new BID expenditures for FY20, there would still be a negative available BID fund balance of approximately $65,000 by the end of FY20 and around $3,000 left available in cash if we reimbursed for 2020 assessments. There will be new expenditures for April-June for Avenu Insights & Analytics invoices for collections. The amount of the invoices depends on how many City of Palo Alto Page 4 businesses submit the combined Business Registry and BID application because there is a charge per initial application a business submits per year. Staff continues to work to confirm the expenditures that will be needed in FY20 and will return to Council, as needed, to recommend a budget adjustment to address any negative fund balance. This amount is not expected to be greater than $70,000. Staff will continue to work with PADBA to understand actual expenses, however, to the extent there is insufficient funding, a subsidy from the General Fund may be necessary to keep this fund solvent. This recommendation will also impact the Business Registry fees collected for cost recovery. For the Business Registry fee, approximately $117,000 has been collected for 2018 and approximately $110,000 has been collected for 2019. Approximately $15,000 of the total Business Registry fee collections in 2018 and 2019 were collected from of late fees. It is expected that this action will result in a loss in revenues of approximately $100,000, this is based on prior year average collections, and approximately $32,000 of which has already been collected by Avenu Insights & Analytics and will be refunded. Avenu Insights & Analytics Contract Avenu Insights & Analytics bills the City $12 per initial registry payment from each business per registry period. This will still be owed by the City to Avenu Insights & Analytics even if no registration payments are collected from businesses to defray that cost. The General Fund would need to cover this cost. The proposed plan to have Avenu Insights & Analytics issue refunds to businesses comes at no additional cost. Stakeholder Engagement The City contacted representatives of PADBPA who expressed support for not collecting the assessment for FY20. Avenu Insights & Analytics has confirmed other jurisdictions are also implementing extended timelines and/or penalty waivers for business license and certificate registrations, although no other jurisdiction has waived the fee entirely. Environmental Review The proposed actions are not a project under the California Environmental Quality Act. Attachments: • Attachment A: RESO Waiving Business Registry Fees for 2020 • Attachment B: RESO Rescinding Levy of Downtown BID Assessment for FY20 • Attachment C: Levy of Proposed FY20 BID Assessments NOT YET ADOPTED ATTACHMENT A 2020040702 1 Resolution No. Resolution of the Council of the City of Palo Alto Waiving the 2020 Business Registration Fee (Palo Alto Municipal Code Chapter 4.60), and Waiving All Business Registration Late Fees for the 2020 Collection Cycle The Council of the City of Palo Alto hereby DECLARES as follows: SECTION 1. Under the City of Palo Alto Business Registry Program (Palo Alto Municipal Code (PAMC) Chapter 4.60), Palo Alto businesses are required to annually register and submit an application for a business registration certificate, together with payment of a registration fee, which is currently $50. In compliance with state law, the City also collects with each business certificate application a $4 fee to support the Certified Access Specialist (CASp) program. SECTION 2. Due to the substantial detrimental impacts on businesses in Palo Alto resulting from the ongoing coronavirus (covid-19) pandemic and state of emergency, including the effects of the Shelter in Place public health orders still in effect, the Council desires to waive payment of the business registration fee by businesses that are otherwise in compliance with PAMC Chapter 4.60. SECTION 3. The City Council hereby authorizes and approves the waiver of the 2020 business registration fee. This waiver applies only to the $50 registration fee and not to the $4 state-mandated CASp fee which remains due and payable with each application. SECTION 4. The City Council hereby authorizes and directs the City Manager to return or reimburse any payments of the business registration fee already made by businesses for 2020. SECTION 5. The City Council hereby authorizes and approves the waiver of late payment fees for business registration fees initially due and payable in 2020. // // // NOT YET ADOPTED ATTACHMENT A 2020040702 2 SECTION 6. The Council finds that the adoption of this Resolution does not meet the definition of a project under Section 21065 of the California Environmental Quality Act and, therefore, no environmental impact assessment is necessary. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk Mayor APPROVED AS TO FORM: APPROVED: Assistant City Attorney City Manager Director of Administrative Services NOT YET ADOPTED ATTACHMENT B 2020040702 1 Resolution No. Resolution of the Council of the City of Palo Alto Rescinding the Levy of Assessment Against Businesses Within the Downtown Palo Alto Business Improvement District for Fiscal Year 2020 The Council of the City of Palo Alto hereby DECLARES as follows: SECTION 1. On June 24, 2019, the City Council adopted Resolution No. 9851 approving the levy and collection of the annual assessment for fiscal year 2020 (July 1, 2019 to June 30, 2020) (“FY20”) against businesses within the Downtown Palo Alto Business Improvement District (the "District"), in accordance with Ordinance No. 4819 and the Parking and Business Improvement Area Law of 1989 (the "Law"), California Streets and Highways Code Sections 36500 et seq. Resolution No. 9851 is attached hereto as Exhibit A. SECTION 2. Due to the substantial detrimental impacts on businesses in Palo Alto resulting from the ongoing coronavirus (covid-19) pandemic and state of emergency, including the effects of the Shelter in Place public health orders still in effect, the Council desires to cease collection of the levied assessment for FY20, and rescind said levy of assessment. SECTION 3. The City Council hereby rescinds the approval of levy of assessment for the District for FY20 only. SECTION 4. The City Council hereby authorizes and directs the City Manager to cease collection efforts for the District’s FY20 assessment and to return or reimburse any payments already made by businesses for FY20. // // // // // // // NOT YET ADOPTED ATTACHMENT B 2020040702 2 SECTION 5. The Council finds that the adoption of this Resolution does not meet the definition of a project under Section 21065 of the California Environmental Quality Act and, therefore, no environmental impact assessment is necessary. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: __________________________ _____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: __________________________ _____________________________ Assistant City Attorney City Manager _____________________________ Director of Administrative Services 2019060301 1 Resolution No. 9851 Resolution of the Council of the City of Palo Alto Confirming the Report of the Advisory Board and Levying an Assessment for Fiscal Year 2020 on the Downtown Palo Alto Business Improvement District R E C I T A L S The Council of the City of Palo Alto hereby DECLARES as follows: SECTION 1. The Parking and Business Improvement Area Law of 1989, City Council to levy an assessment against businesses within a parking and business improvement area which is in addition to any assessments, fees, charges, or taxes imposed in the City. SECTION 2. Pursuant to the Law, the City Council adopted Ordinance No. 4819 establishing the Downtown Palo Alto Business Improvement District (the "District") in the City of Palo Alto. SECTION 3. The City Council, by Resolution No. 8416, appointed the Board of Directors of the Palo Alto Downtown Business & Professional Association, a California nonprofit mutual benefit corporation, to serve as the Advisory Board for the District (the "Advisory Board"). SECTION 4. In accordance with Section 36533 of the Law, the Advisory Board prepared and filed with the City Clerk a report entitled "Downtown Palo Alto Business and Professional Association Annual Report 201920 regarding the District (the Resolution No. 9851, the City Council preliminarily approved such report as filed. SECTION 5. The boundaries of the District are within the City limits of the City of Palo Alto (the "City") and encompass the greater downtown area of the City, generally extending from El Camino Real to the West, Webster Street to the East, Lytton Avenue to the North and Addison Avenue to the South (east of Emerson Street, the boundaries extend only to Forest Avenue to the South). Reference is hereby made to the map of the District attached hereto as Exhibit "A" and incorporated herein by reference for a complete description of the boundaries of the District. SECTION 6. The City Council has adopted a Resolution of Intention, Resolution No. 9851, declaring its intention to levy and collect an assessment for fiscal year 2020 against the businesses in the District. SECTION 7. Following notice duly given pursuant to law, the City Council has held a full and fair public hearing regarding the levy and collection of an assessment (SGY7MKR)RZIPSTI-( ') *%(% *&%% & Exhibit A 2019060301 2 within the District for fiscal year 2020. All interested persons were afforded the opportunity to hear and be heard regarding protests and objections to the levy and collection of the assessment for fiscal year 2020. The City Council finds that there was no majority protest within the meaning of the Law. All protests and objections to the levy and collection of the assessment and any and all protests and objections are hereby overruled by the City Council. SECTION 8. Based on its review of the Report, a copy of which has been presented to the City Council and has been filed with the City Clerk, and other reports and information, the City Council hereby finds and determines that (i) the businesses in the District will be benefited by the expenditure of funds raised by the assessment (ii) the District includes all of the businesses so benefited; and (iii) the net amount of the assessment levied within the District for the 2020 fiscal year in accordance with the Report is apportioned by a formula and method which fairly distributes the net amount in proportion to the estimated benefits to be received by each such business. SECTION 9. The City Council hereby confirms the Report as filed by the Advisory Board. New businesses established in the District after the beginning of any fiscal year shall be exempt from the levy of the assessment for that fiscal year. In addition, nonprofit organizations, newspapers and professional "singleperson businesses," defined as those businesses which have 25% or less full time equivalent employees, including the business owner, shall be exempt from the assessment. SECTION 10. The adoption of this Resolution constitutes a levy of an assessment for the fiscal year 2020 (commencing July 1, 2019, and ending June 30, 2020). The assessment formula, including the method and basis of levying the assessment, is set forth Ex attached hereto and incorporated herein by reference. New businesses established in the District after the beginning of any fiscal year shall be exempt from the levy of the assessment for that fiscal year. In addition, nonprofit organizations, newspapers and professional "singleperson businesses," defined as those businesses which have 25% or less full time equivalent employees, including the business owner, shall be exempt from the assessment. SECTION 11. The City Council hereby declares that the proposed uses of the revenues derived from the assessments levied against the businesses in the District are for the following facilities and activities: The types of improvements to be funded by the levy of an assessment against businesses within the District are the acquisition, construction, installation or maintenance of any tangible property with an estimated useful life of five years or more. The types of activities to be funded by the levy of an assessment against businesses within the District are marketing activities which benefit businesses in the area and which take place on or in public places within the District; improvement and maintenance of public spaces; and activities which benefit businesses locating and operating in the District. (SGY7MKR)RZIPSTI-( ') *%(% *&%% & 2019060301 3 SECTION 12. The Council finds that the adoption of this Resolution does not meet the definition of a project under Section 21065 of the California Environmental Quality Act and, therefore, no environmental impact assessment is necessary. INTRODUCED AND PASSED: June 24, 2019 AYES: CORMACK, DUBOIS, FILSETH, FINE, KNISS, KOU, TANAKA NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk Mayor APPROVED AS TO FORM: APPROVED: Assistant City Attorney City Manager Director of Administrative Services (SGY7MKR)RZIPSTI-( ') *%(% *&%% & 233 281 327 427-453 362 370 471 459 400 451453 559563 536 526 483 468 537 505-507 519-521518-520 539541543 515-517 420 376 370 34 354 326 426 4 448 471 483 425-443 463-465 458 460 440 428426 527-533 543 551 510520 558-560 581 575 556 596 561-567 569 580 574 566 116-122 150 140 102 116 124 167 180 164 158156 151-165 200 151 115 125 135 208 228220 240-248 177 156 229 180 172-174 230-238 220-244 221-225 205 201203 209 219 221 233 235 185 165 181 250 245 171-169 222 240 278 250 251 255 271 281 300 310 301 259-267 271 281 252 270 240-248 251 337339 323317 332330 314 305 265272-278 366369 390 325 361 338 340 345 321325 315 385 365 375380 300 318-324 326 352 425 415-419 405403 499 467 459 439 425400 436-452 456 370-374 376 380-382 384-396 364 360 423 499 432 428 460-476 450 512 518 482486 496 455 400 532534 542544 470 313 334 333 325326 342 303301 336 308 310 312 316 318 311 331 315 319 317 321 335 356-360 347-367 351357 369-379360 350 379 437 412 404 407 401 411 452 360 - 1A - 1C360 - 2A - 2C360 - 3A - 3C360 - 4A - 4C360 - 5A - 5C360 - 6A 418420 482 456 477 475 467 457 453 60 505-509 513-519 460 474472 535 558 16 12 20 521 80 530-540 544-554 457451 465463 489-499 530 480 463 451 480-498 525 570568 556 550 543 515 551 555 518-528 536-540 552-554 558-562 573 A-E 591-599 557-571 568 524 550 500-528 578 564 550 546 540 530 505 525 537 555 565 571 610 600 566 579 575 565 559 604 576 566 02 600 137 111 100100 160 181 145 165 190 203 209 219 225 240 270 171 130 186 192 151 131 129 163 115 64 177 251-257 205 70 2 183 241-247 54 52 50 313-317318 542-550 532 188 190 202 206 208 210 212 216 220 302 324 340 483A - F 532 350 441 441A 230 325 420 424 430 351A 351 355A 355 359A 359 363A 363 367A 367 271 253 241 319 264 423425413 - 419 457-467 469-471473-481 328 590 507 561 536 200 150 276 127 180 345 336 321 140 350 255 260 375 560564568572 576580584588592594 423 405 352354 484 528 426 264 549 151 160 257 433-457 482 312 202 262 335 218 Alma Street Kipling Street Scott Street Ramona Street Lane 15 E CalTrain ROW Emerson Street Waverley Street Kipling Street Bryant Street Ramona Street Lane 5 E This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. Legend abc Zone A (Ground Floor) - Zone B (Upper Floors) abc Zone B 0' 500' Downtown Palo Alto Business ImprovementDistrict Area MapP a l o A l t oT h e C i t y o f 6 The City of Palo Alto assumes no responsibility for any errors ©1989 to 2012 City of Palo Alto rrivera, 2012-04-30 16:57:54CPA BID (\\cc-maps\gis$\gis\admin\Personal\rrivera.mdb) )<,-&-8 %DocuSign Envelope ID: 722301CE-08FA-4D20-A260-9FB505AA68B4 DocuSign Envelope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ity of Palo Alto (ID # 10315) City Council Staff Report Report Type: Action Items Meeting Date: 6/24/2019 City of Palo Alto Page 1 Summary Title: Downtown Palo Alto Business Improvement District Title: PUBLIC HEARING: to Hear Objections to the Levy of Proposed Assessments on the Palo Alto Downtown Business Improvement District; Adoption of a Resolution Confirming the Report of the Advisory Board and Levying Assessments for Fiscal Year 2020 on the Downtown Palo Alto Business Improvement District and Adoption of a Budget Amendment in the Business Improvement District Fund From: City Manager Lead Department: City Manager Recommendation 1.Hold a public hearing on the levy of proposed assessments in Fiscal Year 2020 in connection with the Downtown Palo Alto Business Improvement District (BID); and 2.Approve the resolution (Attachment B) confirming the report of the Advisory Board and levying an assessment for Fiscal Year 2020 on the Downtown Palo Alto Business Improvement District. 3. Amend the Fiscal Year 2020 Budget Appropriation Ordinance for the Business Improvement District (BID) Fund by: a. Decreasing the revenue estimate by $52,500; and, b. Decreasing the expense appropriation by $60,500; and, c.Increase the ending fund balance by $8,000. Background On June 3, 2019, the Council preliminarily approved the BID Advisory Board’s 2020 Annual Report and adopted a Resolution of Intention to Levy Assessments in the BID for Fiscal Year 2020, setting a date and time for the public hearing on the levy of the proposed assessments for June 24, 2019, at 6:00 PM, or thereafter, in the City Council Chambers (link to staff report). The City contracts with Palo Alto Downtown Business and Professional Association (PADBPA) to provide services to businesses in the BID. (A copy of the contract between the City and PADBPA is attached as Attachment F). PADBPA addresses issues facing downtown businesses such as cleanliness, safety, and attractiveness. PADBPA also assists downtown businesses with Attachment C City of Palo Alto Page 2 communication about the City’s capital improvement projects such as Upgrade Downtown, the new parking garage, mobility projects and other City policy matters affecting downtown businesses. Assessments for BID businesses are based on the size, type and location of the business. Assessments range from $50 for individually owned professional businesses to $500 annually for financial institutions. The BID was established by the City Council in 2004 pursuant to the California Parking and Business Improvement Area Law to promote the economic revitalization and physical maintenance of the Palo Alto Downtown business district. The Council appointed the Board of Directors of PADBPA, a non-profit corporation, as the Advisory Board for the BID. The Board’s purpose is to advise the Council on the method and basis for levy of assessments in the BID and the expenditure of revenues derived from the assessments. PADBPA in its capacity as the BID Advisory Board has monthly open meetings governed by the Brown Act which any business or individual can attend. After an initial 10-year term, running from 2004 to 2014, the agreement between the City and PADBPA has been renewed annually for a one-year period through approval of the Annual Report (subject to termination by either party on 90 days written notice). If Council declines to approve PADBPA’s Annual Report as filed, Council may propose amendments to PADBPA’s budget and proposed activities for FY 2020. If the Council proposes modifications to the Annual Report, the agreement between the City and PADBPA provides that final approval should be stayed for a period of up to 30 days to provide time for PADBPA to respond to Council’s concerns and for City staff and PADBPA to confer. Discussion The PADBPA Annual Report is attached and provides a summary of activities from Fiscal Year 2019 and presents the proposed activities and budget for Fiscal Year 2020. The PADBPA Annual Report includes $104,500 in revenue and a corresponding amount of expenses. Included in this amount is an expense appropriation of $17,000 for the cost of collecting the BID assessments. In FY 2019, the City’s General Fund covered these costs. The FY 2020 budget also proposes the City’s General Fund continue to cover collection costs through an operating transfer of $17,000 in order to ensure that all revenues generated by the assessment are committed to the goods, services, and programs that serve businesses within the boundaries of the BID. In future years, staff anticipate the BID Fund will be able to pay for these costs as a result of operational adjustments and more effective collection efforts. PADBPA will explore operating models in the coming year in order to determine the most sustainable operating model that will allow PADPBA and the BID to serve the downtown business community now and into the future. BID fee collection has been conducted by MuniServices, LLC for the last several years. To save costs, streamline efforts and provide businesses with one annual invoice, PADBPA and city staff aligned the BID and Business Registry Certificate (BRC) fee collection timeline. In Fiscal Year 2019, the BID invoice was sent in late April along with the BRC invoice to businesses within the BID boundaries. Through this streamlined collection process, the City anticipates increased City of Palo Alto Page 3 revenue. In FY2020, the City plans to identify means and methods to further enhance collection of the assessment in order to increase revenues. Absent a majority protest at the public hearing, the Council may adopt the attached resolution approving the report for Fiscal Year 2020 as filed or as modified by the Council at the conclusion of the public hearing. (As noted above, if PADBA requires time to respond to any modification, the Council action would be deferred.) The adoption of the resolution constitutes the levying of the BID assessments for Fiscal Year 2020. Resource Impacts At the timing of the development of the FY 2020 Budget the assessments and proposed PADBPA budget for the BID was not yet available. For budgeting purposes staff maintained FY 2019 funding levels, pending the submission of the PADBPA Annual Report for City Council review and approval. The action recommended in this report will amend the FY 2020 Budget to align the revenue and expense appropriations to $104,500, as outlined in the 2019-2020 PADBPA Annual Report. This amount assumes a $17,000 transfer from the General Fund to the BID Fund in FY 2020 for the cost of collecting the BID assessments, which was recommended as an amendment to the FY 2020 Proposed Budget at the May 28th, 2019 Finance Committee meeting. The FY 2020 Budget, including budgetary actions for the General Fund transfer and corresponding expense appropriation is scheduled for adoption by the City Council on June 17th, 2019. Adoption of the proposed BID budget does not impact City revenue. BID assessments are restricted for use exclusively by the BID. A healthy BID will encourage vitality in the retail community and consequently result in additional sales tax revenue for the City. Staff time from the City Manager’s Office and Development Services Department will be utilized to provide oversight to the BID, administer the contract with MuniServices, liaise with stakeholders and prepare the annual reauthorization. The Attorney's Office will continue to provide legal oversight to the BID during the annual reauthorization process. Attachments: • Attachment A - Annual Report • Attachment B - Resolution Confirming Report and Levying Assessment for Downtown Business Improvement District Fiscal Year 2020 • Attachment C - Exhibit A - BID Map • Attachment D - Exhibit B - BID Fee Schedule • Attachment E - BID Agreement Attachment A – PAD Annual Report 2019-2020 2 Introduction This report from the Advisory Board of the Palo Alto Downtown Business & Professional Association (“PADB&PA”) was prepared for City Council to review for the annual reauthorization of the Downtown Palo Alto Business Improvement District (“BID”) pursuant to Section 36533 of the Parking and Business Improvement Law of 1989 (Section 36500 and following of the California Streets and Highways code) (the “Law”). This report is for the proposed fiscal year for the BID commencing July 1, 2019 and ending June 30, 2020. (“Fiscal Year 2019-20”). As required by the Law, this report contains the following information: I. Any proposed changes in BID boundaries and benefit zones within the BID; II. The improvements and activities to be provided for Fiscal Year 2019-20; III. An estimate of the cost of providing the improvements and the activities for Fiscal Year 2019- 20; IV. The method and basis of levying the assessment in sufficient detail to allow each business owner to estimate the amount of the assessment to be levied against his or her business for Fiscal Year 2019-20. V. The amount of any surplus or deficit revenues to be carried over from a previous fiscal year. VI. The amount of any contributions to be made from sources other than assessments levied pursuant to the Law. Submitted by Brad Ehikian, Chair of the Advisory Board (“Advisory Board”) of the Palo Alto Downtown Business & Professional Association (“PADB&PA”). The Advisory Board approved this report on May 8, 2019. Received on file in the Office of the City Clerk of the City of Palo Alto on May 8, 2019. The Immediate Future Upon the departure of the Executive Director in June of 2018, the Palo Alto Business and Professional Association Board of Directors developed several forward-looking scenarios, which are described below in no particular order: 1. Replace the existing full time Executive Director position with another full-time Executive Director 2. Replace the existing full-time Executive Director position with a part-time Executive Director 3. Form a partnership with the City of Palo Alto, in which the City would provide some administrative support and the PADBPA board would provide guidance of downtown programs and improvements 4. Form a partnership with the Palo Alto Chamber of Commerce in which the Chamber would provide administrative support and the PADB&PA board would provide leadership and funding for downtown improvements and programs 5. Do not have paid staff, use assessments to fund projects in the downtown that would support retail businesses PADB&PA proposes to use the next year to thoroughly assess these options in order to determine which model is the most sustainable. This assessment will include identifying the goals of the BID and PADB&PA, understanding the revenue generation and expenses of each 3 model, the impact of each model on achieving the stated goals, and the feasibility of each model in the local context. During the coming months it is the board’s intention to pursue and engage in a consultative approach to determine the most appropriate course of action. At the same time, we will continue identifying and executing programs, special projects, and partners that can enhance the downtown experience. Historical Perspective PADB&PA’s takes great pride in the programs and services that it has contributed since inception. Several are listed here: • Creation of the Downtown Streets Team (PADB&PA started the effort in 2005) with continued support through 2019 • Display of American Flags during national holidays ( began in 2012) and continues to present. • Holiday Tree Lighting (this program was brought back in 2011 after a long hiatus.) • “Art” benches and replacement of the over twenty year old utilitarian benches (these programs were initiated with both Public Works and Public Arts in 2015.) • Free summer concerts (began in 2013) and continued through 2018 • Increase the frequency of steam-cleaning sidewalks, replacement of trashcans and increase in patrols of the parking garages (all programs initiated by PAd in conjunction with Public Works, PAPD, Downtown Streets Team and the Parking Assessment District.) • Streetlight banner program branding and promoting downtown as a great destination (began in 2012) and continues to present • Collaborated on “No smoking” ordinance and “no amplified music” ordinance (both initiated in 2014) • Lytton Plaza umbrellas and new foliage (partnership with the PAd, City and the Friends of Lytton Plaza, beginning in 2014) and continues to present. • University Avenue Tunnels repainting. ( initiated and completed in 2013) • Additional partnerships between the City of Palo Alto and the business community for communications about encroachment permit enforcement, downtown infrastructure improvement impacts, Residential Permit Parking issues, TMA, World Music Day and other street closure events. PADB&PA’s contribution illustrates the ongoing benefit of an organization dedicated to enhancing the quality of life for residents and patrons of Downtown Palo Alto. Further accomplishments for Fiscal Year 2019 are listed below in the Annual Report. 4 Section I: BID boundaries and Benefit Zones There have been no changes in the BID boundaries or benefit zones within the BID and no changes are proposed. The current boundaries are depicted on the map below. The area of the BID is referred to as “Downtown.” 934-944 927 932 233 281 933-937 943 327 1001 942 469 475 744 459 832 801 APT 1-5 427-453 920 912 362 370 900 838 846 471 459 835-855460 815 840836 834 845 400 803 928930 931933 835-837 831-833 451453 802800 810-816 818-820 828-830 817-819 823-825 567-569 559563 536 526 1001 1011- 540 483 904 912 468 918 926 537 965-971505-507 519-521 939-945 931-935 923-925518-520 539541543 515-517 809811 420 1001 1011 1010 376 370 980960 990 34 354 326 426 4 1000 448 944 471 483948952 959947925 915 933935 425-443 451449 463-465 936-940 458 460 440 428426 527-533 543 551 510520 558-560 903 825 837 581 575940934 813-823 501-509 511-519 521-529 531-539 541-547 556 596 904 926 561-567 569 845 580 574 566 991- 997 136 610 116-122 150 535529525 542516140 102 116124 163 145 566556 167 528 643635 635 645- 685 660-666 620 180 164 158156 624628 632636640 644 617621 151-165 171-195 203 642640636 200 151 115 125 135 514 101 440 444 436432 427 425 117119 630616 208 228220 240-248 575 530-534 536540 552 177 156 201209215 225 595 229231 611-623 180 508500 625-631 170172-174 542544 538- 542 552548546 541- 547 230-238 734 723 721 702-730220-244 744 701 731 755757 771 200 160 728-732 762- 776740-746 250 275 270 255741 265 724 730 651 221-225 227 668 707 205 201203451449 209219 221 233235450460470442444 400 420 430 411 425 429 185 165 181 412 250 420 245 171-169 441-445 435- 439 346344 333335 342 344 431 460 450 235530 220 220 B 222 240 514278 274270 250 545 540 251485255 271 281 300310 301 581 259-267 533535537 261 267 518-526 532-536 520-526 530-536 271 281 252 270 240-248 202- 216 228226 234238 244242 210-216 228-234 223-229 209215 247-259 240 232230 311-317 251 344326340 337339 323317 400 420 332330 314 353 355 367 305 347 265272-278 418 319 321-341 328 330 300- 310 431401 366 436 426 #1-7 369 335 319 390 301 315 375 307-311 325330 332 1&2330 1-3 324 326316 318 373- 377 416- 424 361 338 340 560 345 321325 315 529 285 555 650636 628 1-12 628 A-E 385 365 375380 345 664 325650-654 661635300 690 675 555541-549533 535- 539 318-324 326 352 425 439-441 435429425 415-419 405403453 461 383460 502 510 526 520 540 499 467 459 439 425 555 400 436-452 456 379 370-374376 380-382 384-396 550-552 364 360 431 440-444 423 499 475 421-423 431-433 432428 460-476 450 635 446 430 400 745 720706 385744734 724-730 720712704 360 351 315737 332 300 653 -681 683685 512 501619 609605 518 482486496 610 630 455 400 651-687 543-545 532534 542544 550 552 554556 558560562564 635-6 643-6 470 313 334 333 325326 342 303301 229 336 308 310312 316 318 311 331 315 319 317 321 335 228220 356-360 347-367 351357 369-379360 258- 296 350 210204 302-316 379310 320 328 332 340 437 412 311 A-B 404 313 325 327 333 407401385 411 452 378-390 360 - 1A - 1C360 - 2A - 2C360 - 3A - 3C360 - 4A - 4C360 - 5A - 5C360 - 6A 344-348 418420 482 328 456 321 325 330204218 236 240 250- 252 477 475 467 457 453249235 225221 201 60 275505-509 239- 243209-213 210-214 513-519 460 474472228- 230 535 558 201 1612 20 209 215 223 231 521 80 239-245 530-540 544-554 212- 216 218-222 333 335-337 351 457451 465463 489-499360 530 480 420 430 480 463 451443437411405 419405401 441 480-498 347 351 355 359 525 430 473 332-342 425415 400 570568 556 550 543 327321315305 343 515 525 551 555 328 309-311 518-528 536-540 552-554 558-562 573 A-E 591-599 557-571 330-332 318-320 406-418 417 542548568 524 550 500-528 578 564 550 546 540 530 531-535 541 505 525 537 555 565 571530 619-6 520 440-446 579 567 523610 600 555 581 420-438 437 566 224 228 A-F 244 579 575 565 559 251 355 A-J 335329604 576 566 345-347 243245 25725920921922723502 505 610-616 727 678 676 674672 642 636-638 567 555 711 701705 725 525 759 730718 734 738-740 760 746-750 701 721-7 600 827 835 899 850 530 609 759 7517537737-62611 601 600 1013 10041000 1006 1001 623 137 145 700 780 790 744 111700 753100 825805 33 51 75 63 841 44675 49 41 711 799 703 100 101 139654 625 160 1001 1005 1009 1010 1004 930 975945929931 948 181 940 960 145900 955 999875 853 925 81 855 901-907 909 87 98 917 921 925 735 849 707 847 842828 820248 230-232 212 825 829833 839 800 812818 882 165831 801 815 809801 841 791153 718 774 761 795745 201 209 834836 845 895 926 190 934 942 948 203 209 219 225 929200 240 904 910 926 270 935 904 909 909A 217 222 148 171 421 130 312 318 324 317 301 186 192 323 329 151 325 329 334 131129 355301 235 258 212 163 115 291247 210 201207 64 202 235 251249 252 247 244 250 177220 261 251-257 205245231225213205 70 2 206 234240 183 251 270 241-247 215-237 210- 216 219 235 62 202 245 5452 50 203 215 221 313-317318 220-224 238 542-550 531-539 532 759 223-239 905 911-917907 188190 251-293 202 206 208 210 212 216220 1008 275 539 201 400 27 168 865857 302 324 340 795 848 918 903 903A 408412 440 483A - F 435 751 735 745 532 210 727 733 335 328 330 345 214 350 800 806 441441A 230302306308312316 301 303 305307309 325 251 807 821 829 801 818-824 420 424 430 832A 832 842A 842 852A 852 862A 862 872A 872 351A 351 355A 355 359A 359 363A 363 367A 367 425 911 943 951 918 936 940 944 271 253 241 301 319 919A 919 935 949 928 936 940-946 353 264 367 361 310 1005 1010 423425413 - 419 457-467 469-471473-481 454 729 A-D 733-743 734-740 724-732 936 824-828 920 949 943941 715 95 445 324 328 545 590 425447 827 565585595 904 315 507 561 706 536 200 100 280-290 150 158164 276 516 698 161 159 157777 132 127 180 528 120 247 372 524 548550 538 152 345 336 515 658 227 27 29 539 115 135 321 558 #200-202 558 #C & D 965 140 350 808 915 461 435433 945 1012 421 727 A-C 218 255 206 739 260 840 650 642 351 451 551 375 530 643 415 12 700 802 99 89 87 901 560564568572576580584588592594 906908 910 912914 916 918920 922924 548 423 668 901 305 -313 423 405 352354 611 320322 346 323 471 484 528 426 264 430 1001 508 756 - 760 940 930 544546 515 7 7457 549 211213 151 160 257 433-457 482 330 349 401 539 440 691 755 67 312 202 651 443445 447 716 218 398 998 262 335 218 640-646506 327 469 303 401 403 254 401 91 40 101 819 301 725 595 705 541 Quarry Road Homer Avenue Lane 8 West Medical Foundation Way Lane 7 West Lane 7 East Encina Avenue El Camino Real Urban Lane Wells Avenue Forest Avenue High Street Emerson Street Channing Avenue Alma Street El Camino Real Mitchell Lane Everett Avenue Lytton Avenue Lane 15 E High Street Alma Street Bryant Street Lane 6 E Lane 11 W Lane 21 High Street Gilman Street Hamilton Avenue University Avenue Bryant Court Lane 30 Florence Street Kipling Street Tasso Street Cowper Street Everett Avenue Waverley Street Cowper Street Webster Street Everett Court Lytton Avenue Lane A West L L La Addison Avenue Forest Avenue Downing Lane Homer Avenue La Lane 39 Lane 56 Hamilton Avenue Webster Street Waverley Street Kipling Street Bryant Street Ramona Street Addison Avenue Scott Street Webster Street Cowper Street Addison Avenue Channing Avenue Ramona Street Paulsen Ln Lane 15 E Lane 20 W Lane 20 E University Avenue CalTrain ROW Emerson Street Waverley Street Kipling Street Bryant Street Ramona Street Palo Road ay Pear Lane Lane 12 W Lane 5 E Everett Avenue Homer Avenue Emerson Street talm D riv e Alma Street Lytton Avenue This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. Legend abc Zone A (Ground Floor) - Zone B (Upper Floors) abc Zone B 0'500' Downtown Palo AltoBusiness ImprovementDistrictArea Map CITY O F PALO A LTO IN COR PORAT E D CALIFOR NI A P a l o A l t oT h e C i t y o f APRIL 16 1894 The City of Palo Alto assumes no responsibility for any errors ©1989 to 2012 City of Palo Altorrivera, 2012-04-30 16:57:54CPA BID (\\cc-maps\gis$\gis\admin\Personal\rrivera.mdb) EXHIBIT A 5 Section II: Improvements & Activities Downtown Palo Alto is a far different place than it was when the organization was founded in 2004. Downtown is a dynamic, entrepreneurial neighborhood that boasts clean and safe walkable streets, a well balanced confluence of small, medium and large businesses and an almost even balance of independently owned retail and restaurants operating along side national chains. It is a globally recognized mecca for innovating the social and the technical. However, we are currently noticing difficulty in attracting retail businesses. We have heard from several sources that retail spaces are not filling due to lack of parking, the tenant improvement process and higher than anticipated rent. Restaurants are also suffering due to the increased number of restaurants at the Stanford Shopping Center competing for our business. Several restaurants have closed while others have reduced hours. Despite these challenges, PADBPA operate a number of programs and activities in the past year. 2018-19 Programs that help the public good as well as members: • Spearheaded the effort on the systematic replacement of downtown benches to both enhance the esthetics of downtown and inhibit loitering. A combination of a more utilitarian bench design along with a small variety of artful benches have been installed, this in partnership with City of Palo Alto Public Works Division and the Public Arts Commission. Funding to keep and maintin these benches has been secured through a partnership with the Arts Commission and the Public Utilities Department. This project is complete. • Worked with a variety of city staff to help communicate and mitigate the impacts of downtown construction related to the Upgrade Downtwon Utilities project. • Initiated a plan to partner with Zero Waste to enhance the cleanliness of the alleyways throughout downtown. • Designed and managed the downtown lamppost banner program which provided Holiday, Spring and Summer banners along University, Lytton and Hamilton as well as site specific banners for Bryant, Emerson, Waverly and Ramona as well as Lyton Plaza. Downtown now has compiled a library of banner designs that can be used in years to come. This brand building program continues to promote downtown as the special place it is. No new banner designs are planned for 2019-20. • Initiated, developed, managed and promoted the 6 week long Summer concert series, “Music On the Plaza” including the development and design of social media, web and print efforts as well as raising the $20K in sponsorships needed to execute the series. We have moved the series to Lytton Plaza and closed a small section of Emerson to accommodate staging in order to accommodate partipants. This move resulted in larger crowds and even larger crowds are anticipated this year. Continuing the series in 2019- 20 is under consideration but not likely given the absence of leadership. • Partnered with the Friends of Lytton Plaza and the City of Palo Alto to maintin umbrellas, foliage, public art and banners to the plaza to enliven and soften the hardscape of the plaza. Further efforts will continue in 2019-20. • Initiated a comprehensive review of all newsrack conditions. Provided City Engineering staff with this report. Met with other municipalities to compare those city’s newsrack ordninaces in order to make recommendations regarding how to refine our current ordinance. 6 Looking ahead to Fiscal Year 2019-2020 As previously stated, PADBPA and the City will work together to identify and implement a sustainable operating model for both PADBPA and the BID Fund. While the strategic planning is underway, PADBPA will continue programs and activities that benefit the businesses within the BID boundaries. These programs and activities include: • Improvement and maintenance of public spaces, including public plazas, streets, and sidewalks; • Acquisition, construction, installation or maintenance of physical property intended to improve the public spaces of downtown; • Collaborating with the City to redesign and refresh the public newsracks; • Marketing activities, including the downtown banner program and consideration of events to promote and market downtown Palo Alto; • Activities and programs that benefit the member businesses. 7 Section III. Budget for 2019-20 The total funds available for activities for this fiscal year are estimated to be $104,500. The budget for providing the activities is set forth as follows: BID 2019/20 Budget INCOME Total Non-Assessment Sources Assessments $112,500 Allowance for Uncollectible Assessments ($25,000) Other Revenue $0 $0 City of Palo Alto $17,000 $17,000 TOTAL INCOME $104,500 EXPENSES Operating Expenses Staff Salaries Executive Director Salary - Part Time $35,000 Payroll taxes and expense $3,500 Invoicing $17,000 $17,000 Office Supplies & Expenses $150 Internet/Website/ Phone Maintenance $1,000 Reauthorization Advertising $2,690 Audit-Tax Returns $6,500 Legal $1,000 $1,000 Insurance - Liability $2,300 Nominating $1,500 Contingencies $500 Subtotal -- Operating Expenses $71,140 $35,000 Programs, Marketing and Events Banners $1,000 Location Specific Banners $0 Outreach & Communication $0 Downtown Streets Team $3,000 District Opportunity Reserve $29,360 Subtotal --Programs, Marketing & Events $33,360 $35,000 Total Expenses $104,500 8 Section IV: Method and Basis of Levying the Assessment Cost Benefit Analysis / Bid Assessments The method and basis of levying the assessment is provided in sufficient detail to allow each business owner to estimate the amount of the assessment to be levied against his or her business for Fiscal Year 2018-19 and is not changed from the FY 2019-20 assessment. There have been no changes made to the Cost-Benefit Analysis or to the BID Assessments since they were approved by City Council on February 2, 2004. Any change to the assessment would require a formal vote of all businesses in the district. We are confident that our reasonable apporach to this subject is thoughtful and well valued. The method of calculation used to determine the cost and benefit to each business located in the BID is described below. The BID assessments are based on three criteria: the type of business, the location of the business and the size of the business. It has been consistently demonstrated that the typical BID program places a higher priority on activities such as commercial marketing. As a result, the retail and restaurant establishments in the BID are assessed more than service and professional businesses in the district. While service-oriented businesses benefit from a BID less than retailers and restaurateurs, they benefit more than professional businesses such as medical, dental, architectural, consultant and legal offices with their minimal advertising and promotion needs. For these reasons, various business types are assessed according to the benefit that they receive from the BID, as follows: ➢ Retail and Restaurant 100% of base amount ➢ Service 75% of base amount ➢ Professional 50% of base amount Exceptions to this rule include financial institutions that are traditionally charged a flat rate regardless of location or size and lodging businesses that are typically charged by total rooms. The location of a business also determines the degree of benefit that accrues to that business. Centrally located businesses tend to benefit more, as do businesses located on the ground floor. For this reason, A and B benefit zones have been identified for the BID. In Palo Alto, Zone A benefit businesses are assessed 100% of the base benefit assessment while Zone B businesses are assessed 75%. A third criterion is used in the BID to determine benefit. This criterion, the size of the business, takes into consideration the number of full time employees employed by the business. Please refer to Attachment 1 for a more complete understanding of the application of these three variables to establish BID benefit. Attachment 2 is the BID assessment for each business located within the BID boundaries. Applying the criteria identified in Attachment 1, a summary of the assessment that applies to each business by size, type and location is outlined. In addition to the Cost-Benefit Analysis, the assessments include the following criteria: 9 ➢ An exemption for “single person professional businesses” that have 25% or fewer full time equivalent (“FTE”), including the business owner. This covers employees who work less than 10 hours a week (based on a 40 hour work week; an FTE equals approximately 2000 hours annually) ➢ An assessment specifically for “single person businesses” that have 26% FTE to 1 FTE in the professional business category of the BID (An FTE equals approximately 2000 hours annually) ➢ The tiering of other professional businesses by size based (according to benefit) on the “single person business” criteria This outline provides information by which a business can determine its annual assessment based on objective criteria. Except where otherwise defined, all terms shall have the meanings identified below: Definitions of Business Types in the Downtown Business Improvement District Retailers and Restaurants: Businesses that buy or resell goods such as clothing stores, shoe stores, office supplies as well as businesses that sell prepared food and drink. Service Businesses: Businesses that sell services such as beauty or barber shops, repair shops, most automotive businesses, dry cleaners, art and dance studios, printing firms, film processing companies, travel agencies, entertainment businesses such as theatres, etc. Hotel and Lodging: These include businesses that have as their main business the lodging of customers. This is restricted to residential businesses that provide lodging services to customers for less than 30 days. Professional Businesses: Businesses that require advanced and/or specialized licenses or academic degrees such as architects, engineers, attorneys, chiropractors, dentists, doctors, accountants, optometrists, realtors, insurance brokers, venture capital firms, consultants, advertising and marketing professionals and mortgage brokers and similar professions. Financial Institutions: Includes banking, savings and loan institutions and credit unions. Additional clarification on business definitions will be defined according to Section 18.04.030 (Definitions) of the Palo Alto Municipal Code. The Advisory Board recommends that the following businesses be exempt from the BID assessment: ➢ New businesses established in the BID area following the annual assessment for the year in which they locate in the BID area ➢ Non-profit organizations ➢ Newspapers ➢ “Single person professional businesses” that have 25% or less FTE, including the business owner 10 Section V: Revenue Deficit The Assessment calculated shall be paid to the City no later 30 days after receipt of the invoice with the amount of the annual assessment sent by the City. A second notice will be mailed as a reminder to businesses that have not remitted payment by that date. Late payment will be subject to a 10% late fee. Expected expenses for the remainder of FY 2019 are as follows: Operating Expenses Staff Salaries $0 Invoicing $17,000 Office Supplies & Expenses $0 Internet/Website/ Phone Maintenance $0 Reauthorization Advertising $2,690 Audit-Tax Returns $6,500 Legal $1,000 Insurance - Liability $2,300 Nominating $0 Contingencies $0 Subtotal -- Operating Expenses $29,490 Programs, Marketing and Events Banners $0 Location Specific Banners $0 Outreach & Communication $0 Downtown Streets Team $0 District Opportunity Reserve $0 Subtotal --Programs, Marketing & Events $0 Total Remaining Expenses $29,490 Section VI: Non-assessment Income: It is estimated that $1,000.00 will be raised in fundraising, and sponsor support. Additionally, we anticipate in kind contribution towards expenses for fiscal year 2019-20. Projected Additional/In-kind Income for Fiscal Year 2019-20 Legal (donation) $1,000 Banners $0 Summer Concert Series $ Events $0 Total $1,000 11 Section VI: PADB&PA Board of Directors by Business Type Retailers and Restaurants Georgie Gleim, Gleim the Jeweler Jill Bibo, McRoskey Mattress Rob George, Lemonade Jeff Selzer, Palo Alto Bicycles Nancy Coupal, Coupa Cafe Hospitality Barbara Gross, Palo Alto Hotel Council Stephanie Wansek, Cardinal Hotel Financial Institutions Ali Agah, Boston Private Bank & Trust Company Katie Seedman, Presidio Private Bank and Trust Professional Organizations Brad Ehikian, Premier Properties Patty McGuigan, Cornish & Carey Commercial Non Profit Organizations [vacant], Downtown Street Team COMMUNITY PARTNERS Palo Alto Chamber of Commerce Judy Kleinberg, President & CEO Downtown Streets Team Eileen Richardson, Executive Director City Of Palo Alto Greg Tanaka, Palo Alto City Council Liaison Michelle Flaherty, Deputy City Manager, City Manager’s Office Rachael Tanner, Assistant to the City Manager, City Manager’s Office ATTACHMENT 1 A General Statement Regarding Cost-Benefit Analysis For BID Businesses Using The Traditional Three Criteria Formula Criteria 1) Type of Business: Statement Concerning Cost-Benefit Formula For BID Businesses Regarding Type Of Business: In a review of 200 California Business Improvement Districts, it is consistently demonstrated that the typical BID Program places a higher priority on Commercial Marketing Programs than on Civic Beautification and Commercial Recruitment Programs. With that trend in mind, retail and restaurant businesses, with their emphasis on, and need for, commercial marketing, are traditionally assessed more than less marketing-sensitive service-oriented or professional-oriented businesses. However, while service-oriented businesses benefit from a BID less than retailers and restaurateurs, they benefit more, (from commercial marketing programs), than professional businesses such as medical, dental and legal offices with their minimal advertising and promotion needs. Therefore, set forth below, is an example of how various business types might be considered regarding the computation of the annual benefit assessment. • Retail and Restaurant: 100% of base amount • Service: 75% of base amount • Professional: 50% of base amount Exceptions to this rule include financial institutions that are traditionally charged a flat rate regardless of location or size and lodging businesses that are typically charged by total rooms. Lodging businesses are assessed based on the total number of rooms because it is a more equitable manner of determining size. Many lodging businesses have many part time employees, but revenues are based on the room occupancies of the hotel, not the goods sold or serviced provided by employees. Criteria 2) Location of Business: Statement Concerning Cost-Benefit Formula For BID Businesses Regarding Location of Business: It has also been consistently demonstrated that the more centrally located businesses tend to benefit from BID activities and services to a greater degree than businesses located toward the periphery of the proposed BID boundaries. Events and activities tend to originate in the central core of the Downtown area and spread benefit to the outer areas with diminishing energy and impact, much like the ripple effect of a stone tossed into a body of calm water. Furthermore, ground floor businesses tend to benefit to a greater degree than businesses located in upper floors. Therefore, in some cases, a new BID's annual benefit assessment formula also takes these street level criteria into account. As mentioned above, special events, fairs, festivals and other activities tend to take place within, or along, the Main Street core rather than in the areas at the periphery of the Downtown core. Additionally, BID- sponsored seasonal decorations, public art projects, street banners and street furniture tend to be located within the immediate core area. Therefore, businesses located within the most central area of the proposed BID are considered to be within "Zone A" which should be considered the primary benefit zone. There is typically a "secondary zone" or "Zone B" within most proposed BID areas. This area receives less benefit than Zone A and should be assessed accordingly. An example of how different zones might be treated regarding the computation of the annual benefit assessment is as follows. • Zone A: 100% of base benefit assessment • Zone B: 75% of base benefit assessment In the case of Downtown Palo Alto, it is recommended that all Zone A upper floor businesses, as well as any other businesses located at the periphery of the proposed BID, be considered as Zone B businesses. Please refer to the map in Attachment I. Criteria 3) Size of Business: Statement Concerning Cost-Benefit Formula For BID Businesses Regarding Size of Business: In approximately 50% of newly established BIDs, a third assessment criterion is used. This criterion involves the size of each individual business that is based upon the businesses’ total number of full-time employees. Full-time employees are those working a total of 2,000 hours per year. Part-time employees are grouped into full-time job positions, i.e., two half-time employees total one full-time. Fractions are rounded down to the nearest whole number with no less than one person as a minimum for business. An example of how various business sizes might be treated regarding the computation of the annual benefit assessment is as follows: Retail/Restaurants Service Businesses Small 50% of base amount Under 6 FTE* Under 4 FTE Medium 75% of base amount 6 to under 11 FTE 4 to under 7 FTE Large 100% of base amount 11 or more FTE 7 or more FTE * FTE = full time employees Additionally, an exemption was established for “single person professional businesses” that have 25% or less FTE, including the business owner. This covers employees who work less 10 hours a week (based on a 40 hour work week) Since “single person businesses” that have 26% FTE to 1 FTE in the professional business category of the BID benefit the very least from the assessment, their assessments have been tiered by size based (according to benefit) on the new “single person business” criteria. ATTACHMENT 2 Downtown Palo Alto Business Improvement District Annual BID Assessments ZONE A ZONE B (75% of Zone A amount) Restaurants & Retailers Under 6 FTE (50% of base amount) $225 $170 6 to under 11 FTE (75% of base amount) $340 $260 11 or more FTE (100% of base amount) $450 $340 Service Businesses Under 4 FTE (50% of base amount) $170 $130 4 to under 7 FTE (75% of base amount) $260 $200 Over 7 FTE (100% of base amount) $340 $260 Professional Businesses 25% or fewer FTE, including owner (0% of base amount) Exempt Exempt 26% FTE to under 1 FTE (25% of base amount) $60 $50 2 to 4 FTE (50% of base amount) $110 $90 5 to 9 FTE (75% of base amount) $170 $130 10+ FTE (100% of base amount) $225 $170 Lodging Businesses Up to 20 rooms (50% of base amount) $225 $170 21 to 40 rooms (75% of base amount) $340 $260 41+ rooms (100% of base amount) $450 $340 Financial Institutions $500 $500 Note 1: For retail, restaurant, service, and professional businesses, size will be determined by number of employees either full-time or equivalent (FTE) made up of multiples of part-time employees. A full FTE equals approximately 2000 hours annually. Lodging facilities will be charged by number of rooms available and financial institutions will be charged a flat fee. Note 2: Second floor (and higher) businesses located within Zone A will be assessed the same as similar street-level businesses located within Zone B. Note 3: Assessment amounts are rounded to the nearest ten dollars. The minimum assessment will be $50.00. 2019060301 1 Not Yet Approved Resolution No. ______ Resolution of the Council of the City of Palo Alto Confirming the Report of the Advisory Board and Levying an Assessment for Fiscal Year 2020 on the Downtown Palo Alto Business Improvement District R E C I T A L S The Council of the City of Palo Alto hereby DECLARES as follows: SECTION 1. The Parking and Business Improvement Area Law of 1989, California Streets and Highways Code Sections 36500 et seq. (the “Law”), authorizes the City Council to levy an assessment against businesses within a parking and business improvement area which is in addition to any assessments, fees, charges, or taxes imposed in the City. SECTION 2. Pursuant to the Law, the City Council adopted Ordinance No. 4819 establishing the Downtown Palo Alto Business Improvement District (the "District") in the City of Palo Alto. SECTION 3. The City Council, by Resolution No. 8416, appointed the Board of Directors of the Palo Alto Downtown Business & Professional Association, a California nonprofit mutual benefit corporation, to serve as the Advisory Board for the District (the "Advisory Board"). SECTION 4. In accordance with Section 36533 of the Law, the Advisory Board prepared and filed with the City Clerk a report entitled "Downtown Palo Alto Business and Professional Association Annual Report 2019-20” regarding the District (the "Report”), and, by Resolution No. _______ [insert number after resolution approved on consent], the City Council preliminarily approved such report as filed. SECTION 5. The boundaries of the District are within the City limits of the City of Palo Alto (the "City") and encompass the greater downtown area of the City, generally extending from El Camino Real to the West, Webster Street to the East, Lytton Avenue to the North and Addison Avenue to the South (east of Emerson Street, the boundaries extend only to Forest Avenue to the South). Reference is hereby made to the map of the District attached hereto as Exhibit "A" and incorporated herein by reference for a complete description of the boundaries of the District. SECTION 6. The City Council has adopted a Resolution of Intention, Resolution No. _____ [insert number after resolution approved on consent], declaring its intention to levy and collect an assessment for fiscal year 2020 against the businesses in the District. 2019060301 2 SECTION 7. Following notice duly given pursuant to law, the City Council has held a full and fair public hearing regarding the levy and collection of an assessment within the District for fiscal year 2020. All interested persons were afforded the opportunity to hear and be heard regarding protests and objections to the levy and collection of the assessment for fiscal year 2020. The City Council finds that there was no majority protest within the meaning of the Law. All protests and objections to the levy and collection of the assessment and any and all protests and objections are hereby overruled by the City Council. SECTION 8. Based on its review of the Report, a copy of which has been presented to the City Council and has been filed with the City Clerk, and other reports and information, the City Council hereby finds and determines that (i) the businesses in the District will be benefited by the expenditure of funds raised by the assessment (ii) the District includes all of the businesses so benefited; and (iii) the net amount of the assessment levied within the District for the 2020 fiscal year in accordance with the Report is apportioned by a formula and method which fairly distributes the net amount in proportion to the estimated benefits to be received by each such business. SECTION 9. The City Council hereby confirms the Report as filed by the Advisory Board. New businesses established in the District after the beginning of any fiscal year shall be exempt from the levy of the assessment for that fiscal year. In addition, non-profit organizations, newspapers and professional "single-person businesses," defined as those businesses which have 25% or less full time equivalent employees, including the business owner, shall be exempt from the assessment. SECTION 10. The adoption of this Resolution constitutes a levy of an assessment for the fiscal year 2020 (commencing July 1, 2019, and ending June 30, 2020). The assessment formula, including the method and basis of levying the assessment, is set forth Exhibit “B” attached hereto and incorporated herein by reference. New businesses established in the District after the beginning of any fiscal year shall be exempt from the levy of the assessment for that fiscal year. In addition, non-profit organizations, newspapers and professional "single-person businesses," defined as those businesses which have 25% or less full time equivalent employees, including the business owner, shall be exempt from the assessment. SECTION 11. The City Council hereby declares that the proposed uses of the revenues derived from the assessments levied against the businesses in the District are for the following facilities and activities: The types of improvements to be funded by the levy of an assessment against businesses within the District are the acquisition, construction, installation or maintenance of any tangible property with an estimated useful life of five years or more. The types of activities to be funded by the levy of an assessment against businesses within the District are marketing activities which benefit businesses in the area and which take place on or in public places within the District; improvement and maintenance of public spaces; and activities which benefit businesses locating and operating in the District. 2019060301 3 SECTION 12. The Council finds that the adoption of this Resolution does not meet the definition of a project under Section 21065 of the California Environmental Quality Act and, therefore, no environmental impact assessment is necessary. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: __________________________ _____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: __________________________ _____________________________ Senior Assistant City Attorney City Manager _____________________________ Director of Administrative Services 934 - 9 4 4 927 932 233 281 933 - 9 3 7 943 327 1001 94 2 469 475 74 4 459 832 801 A P T 1 - 5 427-453 920 912 362 370 900 838 846 471 459 835 - 8 5 5 460 81 5 840 836 834 845 400 803 928930 931 933 835 - 8 3 7 831 - 8 3 3 451453 802800 81 0 - 8 1 6 81 8 - 8 2 0 82 8 - 8 3 0 817 - 8 1 9 82 3 - 8 2 5 567-569 559563 536 526 100 1 101 1 - 540 483 904 912 468 918 926 537 965-971505-507 519-521 939-945 931-935 923-925 518-520 539541543 515-517 809 811 420 1001 1011 1010 376 370 980960 990 34 354 326 426 4 1000 448 944 471 483948952 959947925 915 933 935 425-443 451449 463-465 936-940 458 460 440 428426 527-533 543 551 510520 558-560 903 825 837 581 575 940934 813-823 501-509 511-519 521-529 531-539 541-547 556 596 904 926 561-567 569 845 580 574 566 991- 997 136 610 116-122 150 535529 525 542516140 102 116 124 163 145 566 556 167 528 643635 635 645- 685 660- 666 620 180 164 158156 624628 632 636 640 644 617 621 151-165 171-195 203 642640 636 200 151 115 125 135 514 101 440 444 436432 427 425 117119 630616 208 228220 240-248 575 530- 534 536 540 552 177 156 201 209215 225 595 229231 611-623 180 508500 625-631 170 172-174 542544 538- 542 552 548 546 541- 547 230-238 734 723 721 702- 730220-244 744 701 731 755757 771 200 160 728-732 762- 776740-746 250 275 270 255 741 265 724 730 651 221-225 227 668 707 205 201203 451449 209 219 221 233 235450 460 470 442 444 400 420 430 411 425 429 185 165 181 412 250 420 245 171-169 441- 445 435- 439 346344 333 335 342 344 431 460 450 235530 220 220 B 222 240 514278 274270 250 545 540 251485255 271 281 300 310 301 581 259-267 533535537 261 267 518-526 532- 536 520-526 530-536 271 281 252 270 240-248 202- 216 228226 234238 244 242 210- 216 228- 234 223- 229 209215 247-259 240 232230 311-317 251 344 326 340 337339 323317 400 420 332330 314 353 355 367 305 347 265272-278 418 319 321- 341 328 330 300- 310 431401 366 436 426 #1-7 369 335 319 390 301 315 375 307- 311 325330 332 1&2330 1-3 324 326316 318 373- 377 416- 424 361 338 340 560 345 321325 315 529 285 555 650636 628 1-12 628 A-E 385 365 375380 345 664 325650-654 661635300 690 675 555541-549533 535- 539 318-324 326 352 425 439-441 435429425 415-419 405403453 461 383460 502 510 526 520 540 499 467 459 439 425 555 400 436-452 456 379 370-374 376 380-382 384-396 550-552 364 360 431 440-444 423 499 475 421-423 431-433 432428 460-476 450 635 446 430 400 745 720706 385744 734 724-730 720 712 704 360 351 315737 332 300 653 -681 683 685 512 501619 609605 518 482486 496 610 630 455 400 651-687 543-545 532534 542544 550 552 554556 558560562564 635-6 643-6 470 313 334 333 325326 342 303301 229 336 308 310 312 316 318 311 331 315 319 317 321 335 228220 356-360 347-367 351357 369-379360 258- 296 350 210 204 302- 316 379310 320 328 332 340 437 412 311 A-B 404 313 325 327 333 407 401385 411 452 378-390 360 - 1A - 1C360 - 2A - 2C360 - 3A - 3C360 - 4A - 4C360 - 5A - 5C360 - 6A 344-348 418420 482 328 456 321 325 330204 218 236 240 250- 252 477 475 467 457 453249235225221 201 60 275 505-509 239- 243 209- 213 210- 214 513-519 460 474472228- 230 535 558 201 16 12 20 209 215 223 231 521 80 239-245 530-540 544-554 212- 216 218-222 333 335- 337 351 457451 465463 489-499360 530 480 420 430 480 463 451443437411 405 419405401 441 480-498 347 351 355 359 525 430 473 332- 342 425415 400 570568 556 550 543 327321315305 343 515 525 551 555 328 309-311 518-528 536-540 552-554 558-562 573 A-E 591-599 557-571 330-332 318-320 406-418 417 542 548568 524 550 500-528 578 564 550 546 540 530 531-535 541 505 525 537 555 565 571 530 619-6 520 440-446 579 567 523610 600 555 581 420-438 437 566 224 228 A-F 244 579 575 565 559 251 355 A-J 335329 604 576 566 345-347 243245 25725920921922723502 505 610-616 727 678 676 674672 642 636-638 567 555 711 701705 725 525 759 730 718 734 738-740 760 746-750 701 721-7 600 827 835 899 850 530 609 759 751753 7 737-62611 601 600 1013 10041000 1006 1001 623 137 145 700 780 790 744 111700 753100 825805 33 51 75 63 841 44 675 49 41 711 799 703 100 101 139654 625 160 1001 1005 1009 1010 1004 930 975 945929931 948 181 940 960 145900 955 999875 853 925 81 855 901-907 909 87 98 917 921 925 735 849 707 847 842828 820248 230-232 212 825 829 833 839 800 812 818 882 165831 801 815 809801 841 791153 718 774 761 795745 201 209 834836 845 895 926 190 934 942 948 203 209 219 225 929200 240 904 910 926 270 935 904 909 909A 217 222 148 171 421 130 312 318 324 317 301 186 192 323 329 151 325 329 334 131 129 355301 235 258 212 163 115 291247 210 201 207 64 202 235 251 249 252 247 244250 177220 261 251-257 205245 231225213205 70 2 206 234240 183 251 270 241-247 215- 237 210- 216 219 235 62 202 245 54 52 50 203 215 221 313-317318 220- 224 238 542-550 531-539 532 759 223-239 905 911-917907 188 190 251- 293 202 206 208 210 212 216 220 1008 275 539 201 400 27 168 865857 302 324 340 795 848 918 903 903A 408 412 440 483A - F 435 751 735 745 532 210 727 733 335 328 330 345 214 350 800 806 441 441A 230302 306 308 312 316 301 303 305 307 309 325 251 807 821 829 801 818-824 420 424 430 832A 832 842A 842 852A 852 862A 862 872A 872 351A 351 355A 355 359A 359 363A 363 367A 367 425 911 943 951 918 936 940 944 271 253 241 301 319 919A 919 935 949 928 936 940-946 353 264 367 361 310 1005 1010 423425413 - 419 457-467 469-471473-481 454 729 A-D 733-743 734-740 724-732 936 824-828 920 949 943941 715 95 445 324 328 545 590 425447 827 565 585 595 904 315 507 561 706 536 200 100 280-290 150 158164 276 516 698 161 159 157777 132 127 180 528 120 247 372 524 548550 538 152 345 336 515 658 227 27 29 539 115 135 321 558 #200-202 558 #C & D 965 140 350 808 915 461 435433 945 1012 421 727 A-C 218 255 206 739 260 840 650 642 351 451 551 375 530 643 415 12 700 802 99 89 87 901 560564568572576580584588592594 906 908 910 912 914 916 918920 922 924 548 423 668 901 305 -313 423 405 352354 611 320322 346 323 471 484 528 426 264 430 1001 508 756 - 760 940 930 544546 515 7 745 7 549 211 213 151 160 257 433-457 482 330 349 401 539 440 691 755 67 312 202 651 443 445 447 716 218 398 998 262 335 218 640-646506 327 469 303 401 403 254 401 91 40 101 819 301 725 595 705 541 Quarry Road Homer Avenue Lane 8 West Medical Foundation Way Lane 7 West Lane 7 East Encina Avenue El Camino Real Urban Lane Wells Avenue Forest Avenue High Street Emerson Street Ch a n n i n g A v e n u e Alma Street El Camino Real Mitchell Lane Everett Avenue Lytton Avenue Lane 15 E High Street Alma Street Bryant Street Lane 6 E Lane 11 W Lane 21 High Street Gilman Street Hamilton Avenue University Avenue Bryant Court Lane 30 Florence Street Kipling Street Tasso Street Cowper Street Everett Avenue Waverley Street Cowper Street Webster Street Everett Court Lytton Avenue Lane A West L L La Addison Avenue Forest Avenue Downing Lane Homer Avenue La Lane 39 Lane 56 Hamilton Avenue Webster Street Waverley Street Kipling Street Bryant Street Ramona Street Addison Avenue Scott Street Webster Street Cowper Street Addison Avenue Channing Avenue Ramona Street Paulsen Ln Lane 15 E Lane 20 W Lane 20 E University Avenue CalTrain ROW Emerson Street Waverley Street Kipling Street Bryant Street Ramona Street Palo Road ay Pear Lane Lane 12 W Lane 5 E Everett Avenue Homer Avenue Emerson Street tal m D r iv e Alma Street Lytton Avenue This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. Legend abc Zone A (Ground Floor) - Zone B (Upper Floors) abc Zone B 0' 500' Downtown Palo Alto Business ImprovementDistrict Area Map CITY O F PALO A L TO IN C O R P O RATE D C ALIFOR N IA P a l o A l t oT h e C i t y o f A P RIL 16 1894 The City of Palo Alto assumes no responsibility for any errors ©1989 to 2012 City of Palo Alto rrivera, 2012-04-30 16:57:54CPA BID (\\cc-maps\gis$\gis\admin\Personal\rrivera.mdb) City of Palo Alto (ID # 11315) City Council Staff Report Report Type: Action Items Meeting Date: 5/4/2020 City of Palo Alto Page 1 Summary Title: Potential Financial Scenarios due to the Current COVID-19 Emergency Title: Review of the Potential Financial Scenarios due to the Current COVID- 19 Emergency and Direction to Staff on the Continued Development of the FY 2021 Budget From: City Manager Lead Department: Administrative Services Recommendation Staff recommends that the City Council select a financial scenario to be used for planning and issuance of the FY 2021 revised operating and capital budgets to be considered by the City Council during their budget deliberations beginning May 11, 2020. Background In light of the disruptions caused by novel coronavirus (COVID-19), staff has been working with the City Council on a modified budget process for the development of the FY 2021 proposed operating and capital budgets. Based on the approved action by the City Council on March 23, 2020, CMR #11208, and in accordance with the City Charter, staff provided a baseline budget on April 20, 2020 for both the operating and capital budgets. At the time of the development of the FY 2021 budget, the world is grappling with COVID-19, a global pandemic. The financial implications of this public health emergency are significant, with regional, national and global impacts on economies in response to shelter in place orders required by the State of California and the County of Santa Clara and related social distancing restrictions. On March 12, 2020 the City Manager, acting as the Director of Emergency Services, issued a Proclamation of Local Emergency regarding the presence and community spread of COVID-19 in Santa Clara County and our region. On Sunday, March 15, 2020, the City Manager activated the Emergency Operations Center (EOC) and since that time, the City has managed the EOC virtually through a cross-functional multi-departmental team. On March 16, 2020, the City Council ratified the Proclamation of Local Emergency. The proposed budgets released in April reflect the cost of current service levels recalculated to FY 2021 rates and limited adjustments and were in response to City Council direction to be used City of Palo Alto Page 2 as baseline for further Council deliberations. The capital budget was updated with current cost estimates of projects based on engineering designs and only adds limited new projects for urgent health and safety needs. Despite reflecting most recent figures, the release of the proposed budgets revenue estimates contained in these budgets were released knowing that the revenue estimates would need to be revised and additional work would be needed to balance the budgets reflecting the current public health emergency. Discussion While mindful of the unprecedented circumstances in front of us as a City, this staff report provides additional details to inform the City Council and to gain further direction for staff to return with revised proposed budgets for consideration beginning on May 11. The scenarios outlined in this staff report reflect the tough budget decisions ahead of us. Depending on the length and depth of this current public health emergency, the severity of the financial ramifications remain unknown. In the General Fund, staff provided an estimate that major General Fund taxes would decline at minimum by $20.0 million in FY 2021 compared to the estimates carried in the baseline budget. Based on revised information, potential timelines and State criteria developed for the lifting of the shelter in place order, staff has provided two scenarios for the City Council to discuss and provide guidance to staff on which scenario to use to prepare the FY 2021 Proposed Budget. Inevitably, the scenario chosen will directly correlate with the level of service impacts that may be felt. Ultimately it is estimated that the City may face between a $20 million and $39 million loss in major tax revenues during the next fiscal year. Staff anticipates revenues will fall somewhere between these two scenarios. As federal, state, and local agencies gain more clarity of the financial implications of this public health emergency, staff will update Council and recommend additional options or adjustments, as needed. High-level Scenarios Scenario A: This scenario originally looked at what a natural disaster may look like, what some refer to as a “V” economic recovery where there is a precipitous reduction due to typically physical event such as a hurricane, and once the event has passed, a quick recovery is seen. This scenario has been removed as an option to consider at this point as the shelter in place period continues to be extended and this is unlikely to be a viable model. Scenario B: This scenario assumes a shelter in place order through this spring/early summer, with an economic recessionary period slowing growth once the order is lifted. This scenario also reflects impacts related to longer term social distancing requirements to continue. Scenario C: This scenario assumes a shelter in place order through the winter, with an economic recessionary period dampening the growth once the order is lifted. This reflects a much slower recovery as the lifting of the shelter in pace order is approached in phases through the calendar year. City of Palo Alto Page 3 Major Tax Revenue Assumptions and Related Financial Scenario Impacts The table below provides a summary of major tax revenue for the City of Palo Alto including both historical and projected collections. Of note, the FY 2020 modified budget reflects the revenue estimates as approved by the City Council in the FY 2020 Mid-Year Budget Review, approved on March 2, 2020, and reflects revenue estimates prior to the COVID-19 emergency. Staff expects the FY 2020 General Fund budget to see significant losses, projecting a deficit of $20 million in the General Fund in FY 2020. The FY 2021 Proposed Budget reflects the baseline revenue estimates published in the April 20, 2020 budget documents. These, as discussed earlier, reflect estimates prior to the COVID-19 emergency and are provided to assist in articulating the magnitude of the estimated revenue losses and specifically the impact on the FY 2021 budget proceedings that the Council will continue on May 11, 2020. Details on the revenue assumptions behind these scenarios follows the table. The table also highlights staff assumptions related to tax revenue based on Scenario B and Scenario C impacts. Scenario B includes a $20 million shortfall with an additional $4.3 million impact to the General Fund CIP due to TOT losses. Scenario C includes a $38.7 million shortfall with an additional $9.2 million impact to the General Fund CIP due to TOT losses. FY 2018 Actuals FY 2019 Actuals FY 2020 Modified Budget 2/20/2020 FY 2021 Proposed 4/20/2020 FY 2021 Scenario B chng vs FY20 chng vs FY21 FY 2021 Scenario C chng vs FY20 chng vs FY21 Property Taxes 42,839,330$ 47,327,394$ 50,576,000$ 52,863,000$ 52,600,000$ 4%0%52,000,000$ 3%-2% Sales Taxes 31,091,158$ 36,507,728$ 36,085,000$ 37,605,000$ 26,500,000$ -27%-30%20,500,000$ -43%-45% Transient Occupancy Tax 24,937,066$ 25,648,696$ 26,554,853$ 29,689,000$ 23,800,000$ -10%-20%14,900,000$ -44%-50% Utility Users Tax 15,414,275$ 16,402,044$ 17,572,071$ 17,553,000$ 16,000,000$ -9%-9%15,100,000$ -14%-14% Documentary Transfer Tax 9,228,905$ 6,922,609$ 8,100,292$ 8,016,000$ 5,600,000$ -31%-30%4,700,000$ -42%-41% Return on Investments 1,436,979$ 2,018,018$ 1,388,100$ 1,367,700$ 1,300,000$ -6%-5%1,100,000$ -21%-20% Subtotal Major Tax Revenues 124,947,713$ 134,826,488$ 140,276,316$ 147,093,700$ 125,800,000$ -10%-14%108,300,000$ -23%-26% Change from FY 2021 Proposed (21,293,700)$ (38,793,700)$ Estimated Impact to General Fund CIP due to TOT loss (4,539,000)$ (8,455,000)$ GF 13,328,000$ 8,344,000$ Scenario B assumes a shelter in place order through this spring/early summer, with an economic recessionary period dampening the growth once the order is lifted. As such, it is expected in this scenario, once the shelter in place order lifted, that as soon as June, businesses would be able to re-open and movement within society would be able to begin at some level. People would be able to return to economic engines such as the downtown core, California Avenue, and Stanford Shopping Center to support local restaurants and retail establishments. Both limited business and visitor travel would resume to some level allowing for increased activity in our hotel occupancy levels, restaurants, and retail. These activities, although sluggish compared to levels prior to COVID-19, would allow for some revenue collection through Sales Tax and Transient Occupancy Taxes during the beginning of FY 2021, with continued slow growth through the end of FY 2021. Due to the timing of property tax assessments and the tax cycle, a delay in impacts to the City’s revenues are expected and assumed in this scenario. Scenario C assumes a shelter in place order with a very slow phased lifting of that order through the calendar year. This would result in continued restrictions on travel and other related City of Palo Alto Page 4 impacts as a result of social distancing, continued closure of populous locations and local economic engines such as the downtown core, California Avenue, and Stanford Shopping Center and other related business activities remain significantly impacted during this timeframe. Once the shelter in place order is eventually lifted halfway through the year, following in 2021, recessionary levels of activity would continue with long-term constrains on discretionary spending of both businesses and consumers alike. This scenario is a very pessimistic protracted shelter in place and would result in significant extended closure of many “non-essential” businesses. This is likely too pessimistic and should be considered as an extreme level of impact. This is evidenced by the recent news as of April 29, 2020, referenced later in this report, where the County is beginning to ease some restrictions already. Not included in either of these scenarios are the additional factors that may have both a positive or negative impact on these scenarios. For example, these do not assume changes in licenses and fees for services from recreation and educational classes, to regulatory fees for activities such as construction. Staff expects to monitor these cost recovery activities and adjust both revenues and expenses to maintain cost recovery levels depending on the activity levels. With the recent April 29, 2020 announcement by the Santa Clara County Public Health Officer easing certain economic restrictions associated with the revised Shelter in Place Order beginning on May 4, it is anticipated that construction will begin to rebound quicker than the current assumptions outlined in both Scenario B and C. Lastly, preliminary figures from CalPERS reflect that original expected investment returns will not be met this year. CalPERS is currently hovering around -1 percent to +1 percent in investment earnings. It is expected that the impacts to CalPERS’ investment portfolio will materialize in the City's FY 2022-2023 retirement rates and continue through a 20-year period. Budget Balancing Options for Consideration In conclusion, the City Council has several options to consider on how to continue to address the financial impacts of COVID-19 and proactively plan for a shelter in place order extension and other impacts, and a recessionary recovery, while maintaining flexibility due to the significant number of unknowns still before us. Below are a few options to consider as direction to the staff regarding potential FY 2021 budget balancing actions: 1) Build a FY 2021 proposed budget assuming Scenario B 2) Build a FY 2021 proposed budget assuming Scenario B with a Tier 2 plan that balances no less than 50% of Scenario C 3) Build a FY 2021 proposed budget assuming Scenario C The significant unknowns that the City is facing in terms of the duration and type of shelter in place continues to be a moving target, as noted above with the recent easing of County Shelter in Place restrictions which could have a positive impact on the City’s economy in the shorter term. The changes continue to be swift and being able to react in a nimble way, while prioritizing our ability to reengage services and serve this community continues to be a high priority. City of Palo Alto Page 5 Based on Council direction today, staff will return with budget proposals that respond to the severity of the financial ramifications before us, recognizing the City Council’s adopted Budget Principles as approved in the FY 2021–2030 General Fund Long Range Financial Forecast, and including new Budget and Fiscal Recovery Priorities to help guide our work to balance this significant change and continue to evolve through these uncertain times. These priorities include supporting economic recovery through changes to our policies and programs; focusing on resiliency over the long term, while making service reductions and changes; ensuring that any services eliminated can be restored in future years; seeking new ways to conduct our work through efficiencies and a learning environment; applying citywide approaches to reductions where possible, and using temporary solutions to bridge extreme revenue losses expected in the short term. Timeline This is the next step in the multi-step process for review of the FY 2021 budget. Next, the Finance Committee will review the Electric and Gas utility rates for FY 2021 and the financial forecasts for those utilities on May 5, 2020. Staff will return to the full City Council May 11-13, 2020 for budget discussions surrounding the action necessary to balance the FY 2021 budget with these revised assumptions, including service reductions and department specific budget proposals. Final balancing actions will be reviewed on May 26, 2020 with the full Council and ultimately FY 2021 Budget adoption is scheduled for June 22, 2020, as required by the City’s Charter. The City’s new fiscal year begins on July 1, 2020. Stakeholder Engagement Staff continues to bring incremental steps to the City Council for continued check-ins and engagement on the financial outlook for the City in both FY 2020 and FY 2021. Based on the timeline outlined above, staff is also planning to inform and engage the public and the workforce during the month of May to solicit feedback and ideas on the proposed budget balancing solutions and prioritization efforts that will be required. This is expected to be completed in phases beginning next week with gaining input on prioritization of service areas, with more in depth engagement planned towards the end of May on specific balancing solutions proposed and the service impacts that would result for FY 2021 and beyond. Staff is also sharing budget details through various communications channels including a dedicated webpage at www.cityofpaloalto.org/budget Resource Impact Although no recommendation in this report specifically has an impact on the City’s financials, ultimately, the discussion and recommendation by the City Council on which assumptions to use in our future financial planning will have significant impacts on the FY 2021 financial landscape and ultimately the services and investments that the City makes as it prioritizes its constrained resources. City of Palo Alto Page 6 Environmental Review This report is not a project for the purposes of the California Environmental Quality Act (CEQA). City of Palo Alto (ID # 11309) City Council Staff Report Report Type: Action Items Meeting Date: 5/4/2020 City of Palo Alto Page 1 Summary Title: Business Support Program & Budget Amendment Title: Small Business Grant Program: Council Designation of Grant Amounts, Eligibility and Selection Criteria; Approval of $500,000 in City Funds; Authorization to the City Manager to Manage the Program Internally or Select a Third-party Administrator With a Waiver of Competitive Solicitation; Authorization to Waive Competitive Solicitation for a Donation Program Administrator; and Approval of a Budget Amendment in the General Fund From: City Manager Lead Department: City Manager Recommendation To establish a Small Business Grant Program, staff recommends that Council: 1. Select the criteria by which businesses are eligible to receive a grant, select the grant amounts, the method by which businesses are chosen, any limitations on the use of funds, and whether the distribution of grants may begin before donations are received; 2. Authorize the City Manager to: (a) choose a third party to administer the grants and waive any otherwise- applicable competitive solicitation requirements, OR (b) choose to administer the program internally; 3. Authorize the City Manager to select a third-party to administer a donation program with a waiver of competitive solicitation; and 4. Amend the FY 2020 Budget Appropriation Ordinance (majority approval) for the General Fund by: (a) Increasing the City Manager’s appropriation for general services by $430,000; (b) Decreasing the Administrative Services Department appropriation for contractual services by $80,000; and (c) Decreasing the Non-Departmental Reserve: Budget Operations Reserve appropriation by $350,000. Background On April 20, 2020, during a discussion of the City’s response the COVID-19 emergency, Council directed staff to return with a suggested Business Support Program with the following parameters: City funding of $500,000 in grants for businesses of up to 50 employees, with a City of Palo Alto Page 2 third party administrating the program, while finding leverage or seeking matching funds. This report fulfills this direction and includes suggestions to more fully define this Program. Discussion Staff recommends Council select the below criteria to establish grant eligibility In its April 20, 2020 motion, Council specified that businesses receiving grants may have up to 50 employees. Staff suggests that Council include additional criteria to further define which businesses might apply for grant funding. Examples of criteria from other localities include: In business for at least one year Gross revenue under a certain amount Storefront only Demonstrated financial loss of at least 25% A certain number of locations in the City Agreeing to a restricted use of funds (i.e.: payroll and lease payments only) Active business license, in good standing Deemed non-essential only; or deemed essential, but will receive a smaller amount At least one paid employee (not including contractors) Up to $10,000 per non-essential business, or up to $5,000 per essential business Staff has reviewed options for advancing the Council’s stated goals while maintaining administrative simplicity for applicants as well as program administration. For Palo Alto’s program, staff therefore recommends the following eligibility criteria, consistent with Council’s discussion on April 20, 2020, similar programs, and the needs of local businesses: 1. The business must employ at least one, but no more than 50 W-2 employees 2. Grants will be limited to storefront businesses only, defined as having a physical business location within Palo Alto offering goods and/or services to retail consumers, excluding professional services such as attorneys, engineers, and real estate brokerages. 3. Grantees may be either for-profit or non-profit enterprises. 4. Grantees must possess a City of Palo Alto business registration active on May 11, 2020. 5. Grantees must have been in business at least twelve months (established prior to May 11, 2019). 6. Grantees must have demonstrated financial harm, using a supplied form, of a 25% or greater loss in revenue attributed to COVID-19. Each of the criteria above is open to City Council discussion and direction, while representing staff’s interpretation of the intent of the program. Additional program elements are discussed below. A. Staff recommends Council direct staff to utilize a lottery-type selection method when choosing recipients and allow the first set of grants to be distributed once the City’s funding is in place While many localities are using a first-come, first-served selection process, staff suggests the City use a lottery system. Under this method, a period would be established for business applicants to register and be assigned a number. The numbers will then be drawn at random. The recipients and number of grants given will depend on (1) how much money is available at the time of the drawing, and (2) Council’s determination of how much each applicant may receive. City of Palo Alto Page 3 While a first-come, first-served method may be slightly easier to administer, it may advantage those who are more sophisticated in completing financial applications, using online tools to complete an application, or who have the time to quickly apply. A lottery system eliminates these advantages. Additionally, staff is mindful of the poor outcomes of the federal Small Business Administration (SBA) loans applications, which used a first-come, first-served method. Council may wish the City to avoid administering a method like the one used, with mixed outcomes, by many in our business community. Additionally, as Council would like to begin assisting businesses quickly, staff requests Council’s authorization to begin selecting grant recipients once the program is ready and the City’s funding is complete. This may mean that grantees would be selected before all donations have been collected, as creating a donation program is a separate, but closely related task; City funding and the grant administration may come online more quickly than donations. Under this scenario, once donations come in, additional numbers would be drawn, and additional grantees selected. Staff requests the ability to determine when to make the additional selections after donations are received, depending on the amount and timing of donations. B. Staff recommends Council direct staff to limit each grantee to two months of operating expenses, not to exceed $10,000 Staff suggests that each selected business receive an amount equal to two months of operating expenses, not to exceed $10,000 per business. This is consistent with similar programs of many other cities. C. Staff recommends Council direct staff to allow grantees to utilize the funding in the manner best meeting the needs of their business Staff recommends Council allow grant recipients the discretion to use the funds in a manner that best allows their business to remain in operation. While some cities restrict the use to only payroll or lease payments, staff has heard that many businesses are currently operating as best they can without staff. And some businesses could use the grant monies for operating expenses in order to help sustain their business and reopen after the shelter-in-place. Lastly, it would be burdensome for both the selected business and the grant administrator to produce and review documents to ensure the grants were used according to any predetermined restrictions. D. Staff recommends Council authorize the City Manager to choose a third party to administer the grants and waive any otherwise-applicable competitive solicitation requirements or choose to administer the program internally In seeking a partner to administer a grant program, staff communicated with a representative of a Community Development Financial Institution, three philanthropic foundations, one credit union, and the local chamber of commerce. In speaking with these groups, staff learned that some charged higher fees than others, some are better positioned than others to begin a new program immediately, some had potential challenges with staff capacity, and the levels of experience in grant administration varied. As staff finalizes our efforts to seek a third-party partner, we recognize that City staff may ultimately be best positioned to administer the program effectively. As we further research all City of Palo Alto Page 4 possibilities, staff requests Council authorize the City Manager to select the best course of action regarding administration, while considering speed, cost, and quality and waiving applicable solicitation requirements. E. Staff recommends authorizing the City Manager to choose a third party to administer the donation program and waive any otherwise-applicable competitive solicitation requirements In its April 20, 2020 motion, Council directed staff to leverage or seek matching funds for the small business grant program. In doing so, staff researched similar programs of other cities to learn more about which third parties are most suitable to work with in accepting donations from other businesses and individuals. As a result, staff contacted philanthropic foundations and our local chamber about accepting these donations. As noted above, each organization is at a different stage of readiness with varying levels of expertise and abilities, including perspectives on the tax deductibility of donations. Staff will continue to urgently work to partner with the most appropriate third party who can best manage a donation program, with the expectation that a partner will be selected quickly. Separating the function of soliciting and accepting donations from the grant distribution function described above will allow the City to more quickly finalize program parameters and aid businesses. In administering the donation program, staff requests Council authorize the City Manager to select the best donation administration partner and waive applicable solicitation requirements. Timeline and Resource Impact Regarding timing, staff is prepared to begin implementing Council’s direction immediately. The $500,000 Council agreed to in its April 20, 2020 motion are appropriated in the General Fund in the City Manager’s Office, the Administrative Services Department, and Non- Departmental FY 2020 budgets. These identified funds are recommended to be consolidated in the City Manager’s Office through the appropriation actions recommended in this report. As these actions are a reallocation of already appropriated funds, a simple majority approval by the City Council (4 votes) is necessary to approve these actions. Funding is recommended to be reallocated from the following to compile the full $500,000, no recommended draw from the Budget Stabilization Reserve is recommended. $70,000 City Manager’s Office FY 2020 Economic Development Funding Augmentation budget adjustment. $80,000 Administrative Services Department unspent funding designated for the potential local business tax measure work that was discontinued in March. $350,000 Non-departmental FY 2020 Reserve: Budget Operations Reserve which was appropriated for anticipated, but not yet quantified, impacts in the General Fund that did not have fully refined costs or financial implications outlined as of the adoption of the budget. This action exhausts this reserve in FY 2020. Stakeholder Engagement As part of a separate but related effort, staff engaged approximately 60 businesses in a series of roundtable discussions in late April. Part of these discussions involved hearing from participants about how financial support from and through the City would assist their operations. Staff has also discussed program parameters with the Palo Alto Chamber of Commerce. City of Palo Alto Page 5 Environmental Review The small business grant program is not a project for the purposes of the California Environmental Quality Act; an environmental review is not required. City of Palo Alto (ID # 11272) City Council Staff Report Report Type: Informational Report Meeting Date: 5/4/2020 City of Palo Alto Page 1 Summary Title: Retirement Proclamation for William Warrior Title: Proclamation of the Council of the City of Palo Alto Honoring William Warrior Upon his Retirement From: City Manager Lead Department: Police Attachments: • Attachment A Honoring William Warrior upon his Retirement ______________________________ Adrian Fine Mayor Proclamation HONORING WILLIAM WARRIOR UPON HIS RETIREMENT WHEREAS, William Warrior served the City of Palo Alto and its citizens as a member of the Palo Alto Police Department for 40 years; and WHEREAS, William Warrior became an Animal Control Officer in 1979, and since then, has rescued countless numbers of stray, sick, and injured domestic and wild animals within Palo Alto, Los Altos, and Los Altos Hills; and WHEREAS, ACO Warrior has served the animals and citizens of Palo Alto by handling numerous phone inquiries, investigating animal bites and reports of neglect, while educating and relaying important information to both animal owners and concerned citizens; and WHEREAS, ACO Warrior provided routine 24hr support to the Patrol and Traffic Divisions when assistance with an animal was needed, and provided the same level of service to allied law enforcement agencies; and WHEREAS, ACO Warrior provided traffic control for presidential visits, and marched in the beloved May Fete Parade and Special Olympic Torch run in Palo Alto; and WHEREAS, William Warrior passed along his vast knowledge of Palo Alto and its history, particularly relating to Animal Services, to his coworkers, other city employees, and the public; and WHEREAS, ACO Warrior has pursued his 40-year career with the City of Palo Alto with dedication, a can- do attitude, energy and exemplary customer service to the citizens he served; and WHEREAS, ACO Warrior supported his coworkers with a high degree of professionalism and respect that is in alignment with the mission of the Department; and WHEREAS, William Warrior deserves a long and happy retirement for all his years of dedicated service. NOW, THEREFORE, I, Adrian Fine, Mayor of the City of Palo Alto on behalf of the entire City Council do hereby commend the outstanding public service of William Warrior and records its appreciation, as well as the appreciation of citizens of this community, upon his retirement. PRESENTED: May 4, 2020 City of Palo Alto (ID # 11139) City Council Staff Report Report Type: Informational Report Meeting Date: 5/4/2020 City of Palo Alto Page 1 Council Priority: Land Use and Transportation Planning Summary Title: 2019 Annual Palo Alto Airport Noise Report Title: 2019 Annual Palo Alto Airport Noise Report Identifying Noise Trends in the Surrounding Areas and Determining Compliance With Established Voluntary Noise Abatement Procedures From: City Manager Lead Department: Public Works Recommendation This is an informational report only and no Council action is required. Discussion The purpose of the Palo Alto Airport Annual Aircraft Noise Complaints Report is to identify noise trends in the surrounding areas and determine compliance with established voluntary noise abatement procedures. Attachment A is the annual report prepared by the Public Works Department’s Airport Division staff on the aircraft noise complaints received during the 2019 calendar year. The Palo Alto Airport (PAO) receives noise complaints via e-mail at pao@cityofpaloalto.org and a designated hotline, 650-329-2405. Staff reviews and responds timely to all complaints, ascertaining from complainants their contact information and the date, time, and description of the offending occurrence. Staff reviews and compiles the data to determine flying activity trends. Staff contacts pilots when violations are observed or reported, advising them of established procedures, requesting compliance, and reminding them about our city’s strong commitment to limiting community impacts from airplane noise. This report is generated on an annual basis and posted to the airport’s webpage: www.cityofpaloalto.org/PAO. Courtesy copies to: Palo Alto Airport Association Attachments: ·Attachment A: Palo Alto Airport -2019 Annual Aircraft Noise Complaints Report PALO ALTO AIRPORT PUBLIC WORKS DEPARTMENT 2019 ANNUAL NOISE COMPLAINTS REPORT (January 2019 to December 2019) Vision: Palo Alto Airport strives to balance the rights of pilots to fly with the rights of neighbors to a peaceful living environment. This document is a report of the noise complaints received by the airport in 2019. Airport staff uses this information to identify trends in neighboring communities. These trends inform communications between airport staff and pilots on the issue of noise. Introduction: The following is a report of noise complaints received by Palo Alto Airport (PAO) in 2019. The Federal Aviation Administration (FAA)defines air travel routes and procedures, including defining separation distances between aircraft, determining hazards to aviation and all other safety criteria for aircraft,and is responsible for directing and enforcing the movement of aircraft in flight. Although organizations can petition the FAA regarding flight procedures, the FAA has the final say in what is safe and acceptable. The Airport Noise and Capacity Act (ANCA) of 1990 federally prohibits public-use airports from restricting airspace in any way. The FAA measures noise based on the Yearly Day and Night Average Sound Level (DNL) and the Community Noise Equivalent Level (CNEL). While both are essentially the same, airports in California use the CNEL method to measure noise. CNEL is a method of averaging single event aircraft noise into a weighted 24-hour average. The system adds penalties to all events occurring during the evening (7pm – 10pm) and the night (10pm –7am). The Santa Clara County Airport Land Use Commission (SCC ALUC) performed a noise study for the Palo Alto Airport using the CNEL to determine the noise contours for 55, 60, 65, and 70 decibels. The contour map is included as Attachment A. Regarding safety and altitude,the FAA has in place Federal Aviation Regulations (FARs) that establish Minimum Safe Altitudes (MSAs)for aircraft. For fixed wing aircraft, the MSA is 1000 feet above ground when over congested areas and 500 feet when not over congested areas. These MSAs apply to all fixed wing aircraft except when necessary for landing and takeoff operations. Helicopters are exempt from these altitude restrictions due to the nature of their flight. These minimum altitudes are enforced by the FAA Flight Standards District Office in San Jose,not by the Palo Alto Airport. Palo Alto Airport cannot tell pilots when or where to fly; the airport,however, does have voluntary noise abatement procedures that Palo Alto Airport recommends that pilots follow.(See the Noise Abatement Procedures section below.) The airport receives noise complaints via email at pao@cityofpaloalto.org and a noise complaint hotline, 650-329-2405. Airport staff review and timely respond to all complaints,ascertaining as much information from complainants,including contact information, date, time and description of the occurrence. Various flight trackers can be used in an attempt to help identify the aircraft involved and verify if FAA regulations or Palo Alto Airport procedures were violated. The airport staff reviews and compiles all data to determine trends with flying activities. Purpose: The purpose of the Palo Alto Airport Annual Noise Report is to identify noise trends in the surrounding areas and determine compliance with established voluntary noise abatement procedures. Airspace: The Palo Alto Airport airspace is unique.The congested Bay Area airspace is dominated by SFO Class Bravo airspace, which encompasses a 30 nautical mile radius around SFO. Palo Alto Airport Sectional Map Palo Alto Airport in Green PAO Airspace highlighted in Red Source: http://vfrmap.com/?type=vfrc&lat=37.461&lon=-122.115&zoom=10 Underneath the Class Bravo airspace lays the Class Charlie airspace of Oakland and San Jose international airports. Finally, Moffett Airfield lies approximately 4 nautical miles to the southeast of Palo Alto Airport. As a result, Palo Alto Airport airspace ends only 1.5 nautical miles southeast of the Palo Alto Airport’s single runway (Runway 13/31). To land at Palo Alto Airport, aircraft must turn before entering Moffett’s airspace, resulting in aircraft having to space themselves in traffic patterns over the peninsula when take-off/landing volumes peak. The FAA’s Air Traffic Control Tower (ATCT) at Palo Alto Airport has a letter of agreement with Moffett’s ATCT providing Palo Alto Airport aircraft with extensions into Moffett airspace when Moffett airfield is not in use.The additional airspace is a useful mitigation tool during busy times. Further restrictions in Palo Alto Airport airspace come from San Jose Class C airspace, starting at 1500 feet Mean Sea Level,just southeast of Palo Alto Airport and SFO Class B airspace, starting at 2500 feet Mean Sea Level, just northeast of the Palo Alto Airport. Both are identified on the Palo Alto Airport Sectional Map: San Jose Class C is shown with thick magenta lines and SFO Class B is shown with thick blue lines. These restrictions play a vital role in aircraft departures, in turn influencing noise abatement procedures for the Palo Alto Airport. Noise Abatement Procedures: Noise abatement procedures are voluntary procedures that the airport asks pilots to follow. The airport is prohibited from restricting airspace. Palo Alto Airport staff will speak with individual pilots and educate them about the voluntary noise abatement procedures.The Palo Alto Airport cannot levy fines on pilots that violate the voluntary noise procedures. For illustrated noise abatement procedures reference Palo Alto Airport Pilots Handout included as Attachment B. The noise abatement procedures depend on the runway that is in use at the time. Depending on weather patterns, aircraft can depart on Runway 31 to the northeast or Runway 13 to the south east. Approximately 90% of the time, weather conditions require the use of Runway 31. Pilots are asked to not make a left crosswind departure from Runway 31, but instead make a “Left Dumbarton Departure” (fly to the Dumbarton Auto Bridge before making a left turn and flying over East Palo Alto) or a right 270 degree turn before departing to the south or west. When aircraft are using Runway 13, pilots are asked to make a left 270 degree turn. In addition to these procedures, pilots are asked to climb to 1500 feet or above ground before crossing Highway 101 and reduce power when safely able. For arrivals,it is standard practice and necessary for pilots to descend to pattern altitude before entering the traffic pattern around PAO, sometimes requiring aircraft to descend below the 1500 feet minimum of departing aircraft over Palo Alto. As these aircraft are descending to land the engines are generally powered back and quieter than ascending aircraft. Airport staff continuously engages with tenants and pilots about the voluntary noise abatement procedures, noting that safety always supersedes noise. Findings: The Palo Alto Airport remains one of the busiest general aviation airports in the bay area with an average of 162,831 operations per year since 2010,significantly less than the average of 190,812 operations per year between 2000 and 2009 (Table 1). An operation is defined as either a takeoff or a landing and a touch-and-go procedure will account for two operations. Table 1. Airport Operations Air Taxi Military Total Air Taxi Military Total 2000 2 0 197283 2010 2077 6 158217 2001 29 370 216483 2011 1572 8 170389 2002 62 1 208755 2012 1700 16 176564 2003 17 1 212981 2013 1628 14 172653 2004 619 12 199453 2014 1518 22 179900 2005 2397 28 184821 2015 1082 118 172132 2006 1932 17 176570 2016 708 52 153238 2007 1440 318 181883 2017 872 146 148769 2008 1697 280 174332 2018 760 133 146181 2009 1650 301 155556 2019 920 210 150266 Average 910.5556 114.1111 190812 Average 1284 73 162831 During the 2019 Calendar year, the Airport logged 1050 total noise complaints from 21 households. Table 2 shows the number of complaints by quarter, and includes the totals from 2018. Table 3 sorts the complaints logged into three sections. The first one is PAO which includes all complaints that involve aircraft that performed an operation at the airport. The next section is General which includes complaints that did not include a specific aircraft or incident of noise. These complaints may or may not involve aircraft from PAO. The last section is Non-PAO, which include aircraft that are not based or did not operate at the airport. These flights could include CHP, Coast Guard, Air Taxis, Survey and or banner towing operations. Also included in Table 3 are the totals for 2018. Table 4 below provides a detailed breakdown of the 1050 complaints by city. Most complaints came from Saratoga, with 974 complaints logged from 1 household.There were no observed violations to voluntary noise abatement procedures in flights over Saratoga, and staff explained the procedures, regulations, and nature of the airspace to the resident. Palo Alto was the second most impacted city, with 26 complaints from 9 households. Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total 2019 Total 2018 Complaints 55 467 499 29 1050 110 Households 6 8 9 10 21 32 Table 2. Complaints Received Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total 2019 Total 2018 PAO 55 467 499 21 1042 100 General 0 0 0 8 8 2 Non-PAO 0 0 0 0 0 8 Table 3. Aircraft Association Table 5 below shows the general type of aircraft identified as causing noise complaints at the airport. There are 2 types of engines for aircraft utilizing PAO. The first is reciprocating which is similar to an automobile engine, and the second is turboprop which is a turbine engine with a propeller that produces thrust. Aircraft are further differentiated by “multi” and “single” which denotes the number of engines for the aircraft. In the case of PAO all multi engine aircraft have 2 engines. As Table 5,shows single reciprocating aircraft produced the largest portion of noise complaints. This class of aircraft represents most of the fleet at PAO and usually consists of Cessna, Pipers and Cirrus aircraft.There were 10 complaints where staff was unable to identify the type of aircraft involved in the flight. Table 6 below shows the number of violations of the established noise abatement procedures. Airport staff makes every effort to talk to all pilots that violate these procedures, but it is difficult to talk to all transient pilots about noise abatement procedures. It is not the role of the FAA Air Traffic Control Tower to advise pilots of the noise abatement procedures, but the City has develop a working relationship with the ATCT and Air Controllers do advise pilots of the noise abatement procedures when they have the ability. City C H C H C H C H C H C H East Palo Alto 2 2 1 1 3 3 2 2 Fremont 1 1 Los Altos 8 1 12 1 1 1 1 1 22 1 7 2 Menlo Park 1 1 1 1 3 3 Mountain View 3 2 3 2 1 1 Palo Alto 4 1 2 1 10 4 10 6 26 9 26 11 Portola Valley 5 5 San Carlos 1 1 Saratoga 32 1 447 1 480 1 15 1 974 1 Scotts Valley 1 1 Sunnyvale 9 2 1 1 6 1 16 2 62 3 Woodside 2 1 2 1 4 1 1 1 Unknown 1 1 1 1 Total 55 6 467 8 499 9 29 10 1050 21 110 32 Total 2019 Total 2018 Table 4. PAO Noise Complaints by City Quarter 1 Quarter 2 Quarter 3 Quarter 4 Helicopter Multi- Reciprocating Multi- Turboprop Single- Reciprocating Single- Turboprop Unknown 2019 Complaints 12 40 15 951 22 10 2018 Complaints 2 8 2 81 5 2 Table 5. Aircraft Type Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total Tenant 3 0 1 6 10 Transient 1 0 0 3 4 Unknown 1 0 0 1 2 Total 5 0 1 10 16 Complaints 55 467 499 29 1050 Operations 33,123 44,250 44,175 28718 150,266 % Compliance 99.98%100.00% 99.998%99.97% 99.99% Table 6. Observed Violations of Noise Abatement Procedures Following is a noise contour map for PAO, adopted by the Santa Clara County Airport Land Use Commission (SCC ALUC) in their 2008 Comprehensive Land Use Plan,reflecting the forecasted noise contours for Palo Alto Airport in 2022. SCC ALUC used the Integrated Noise Model which considers airport altitude, mean temperature, runway configuration, aircraft flight track definition, aircraft departure and approach profiles, aircraft traffic volume and fleet mix, and flight track utilization by aircraft types. All data is entered into the CNEL formula to prepare the noise contours for Palo Alto Airport. The 65 decibel (db)noise level of the airport extends beyond the airport boundaries,but is only over Palo Alto Golf Course, Palo Alto Baylands Nature Preserve, and the salt marshes in San Mateo County. Refer to https://www.sccgov.org/sites/dpd/DocsForms/Documents/ALUC_20081119_PAO_CLUP.pdf, for a more detailed description of how the SCC ALUC prepared this map. Attachment A PAO Noise Contour Map Attachment B PAO Pilot Handout Santa Clara County created a Pilot Handout for Palo Alto Airport that described the noise abatement procedures. When the City of Palo Alto assumed control of the airport, the existing noise abatement procedures were adopted, with one exception, “pilots must maintain 1500 feet or above across Highway 101” was replaced with “Aircraft are asked to climb to and maintain at least 1500 feet before crossing Highway 101.”The change is consistent with the voluntary nature of noise abatement procedures as airports are federally prohibited from instructing pilots how to fly. Bayside Pattern –800ft Left 270 Right 270 Peninsula Side Pattern –1000ft Left Dumbarton Departure Not to be used for navigation Safety First Be Aware Palo Alto Airport Lies under SFO Class B Airspace Key Pattern Noise Abatement Departures RWY 31 RWY 13 Noise Abatement Procedures Please fly neighborly and be aware of the surrounding communities. There are noise sensitive areas to the west and south of the Airport. Aircraft are asked to climb and maintain at least 1500 feet before crossing Highway 101. Fly over the bay whenever possible. Please use reduced power setting whenever possible to reduce noise impacts. Even a reduction in a 200 RPM can significantly reduce noise. Safety Always Supersedes Noise Abatement Palo Alto Airport General Information Bayside Pattern Alt - 800 feet Peninsula Side Pattern Alt –1000 feet MSL ATCT hours of operation – 0700 –2100 hrs ATC / CTA Frequency –118.600 ATC Ground Frequency –125.000 Fuel Frequencies –122.85 or 122.95 Airport Office Phone #–(650) 329-2444 320° Preferred West Bound Departures Runway 31 Left Dumbarton Departure When departing runway 31 turn right 10°on takeoff and climb over the bay. Fly straight to Dumbarton Auto Bridge before making a left turn to fly over the peninsula or to the south. Cross Highway 101 at or above 1500 feet. Left 270 Departure After takeoff climb over the bay while making a 270°turn and heading west or south over the peninsula. Cross Highway 101 at or above 1500 feet. Runway 13 Right 270 Departure After takeoff turn right over and climb over the bay while making a 270°turn and heading west or south over peninsula. Cross Highway 101 at or above 1500 feet. Palo Alto Airport asks for your cooperation in reducing the noise impact of aircraft on the neighboring communities. BE A GOOD NEIGHBOR –FLY SAFELY AND QUEITLY CAUTION The Palo Alto Baylands preserve is located immediately to the north of the airport. Watch for birds on or near the airport. Be alert for bikes & pedestrians crossing a levee road 290’ from departure end to Runway 31. Attachment C Map of Palo Alto Households This map shows the approximate location and number of complaints from households within Palo Alto. This map was generated using GISt by airport staff. 16 1 2 1 There were three Palo Alto Residents that did not provide an address and are not represented on this map. 1 1