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Monday, September 21, 2020
Special Meeting
5:00 PM
Agenda posted according to PAMC Section 2.04.070. Supporting materials are available
online on the Thursday 11 days preceding the meeting.
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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.
Agenda Changes, Additions and Deletions
Oral Communications 5:00-5:30 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.
Consent Calendar 5:30-5:35 PM
Items will be voted on in one motion unless removed from the calendar by three Council Members.
1.Approval of Construction Cameras for use at the California Avenue
Parking Garage and Highway 101 Pedestrian/Bicycle Overpass
Construction Projects; and Approval of a Parking Guidance System in
Accordance With the Surveillance and Privacy Protection Ordinance
2.Approve Contract Amendments to Extend the Following Banking and
Related Services Contracts: 1) U.S. Bank and its Wholly-owned
2 September 21, 2020
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Subsidiary Elavon for General Banking and Merchant Services; 2)
Wells Fargo for Lockbox Services; 3) Union Bank for Investment
Safekeeping (Custodial) Services; and 4) JP Morgan Chase Bank for
Purchase Card (P-card) Services
3.Consideration of an Appeal of a Director's Interpretation Made
Pursuant to Palo Alto Municipal Code Section 18.01.025 and Related to
Seismic Rehabilitation. The Project is Exempt From the California
Environmental Quality Act (CEQA) in Accordance With CEQA Guidelines
15061(b)(3)
4.Approval of a Contract Between Project Safety Net, Inc. for Youth
Mental Health Support in the Amount of $100,000 per Year; Approval
of a One-time Transfer of $21,604 in Donations for a Not-to-Exceed
Amount of $521,604 for the Term of September 21, 2020 Through
June 30, 2025; and Approval of a Budget Amendment in the Public
Services Donation Fund by a Two-thirds Vote
5.Adoption of a Resolution to Extend the Bicycle and Electric Scooter
Share Pilot Program for 18 Months
6.Adoption of a Resolution Approving and Authorizing the City Manager
or Designee to Execute the Continuing Reimbursement Agreement for
Letters of Credit With US Bank National Association at an Estimated
Cost of $35,000 per Year in Connection With the City’s Market
Purchase Program Agreement With Northern California Power
Association (NCPA); and Authorizing the Execution and Delivery of all
Documents Relating to the Letters of Credit
City Manager Comments 5:35-5:45 PM
Rail Communications Update 5:45-6:45 PM
7.Connecting Palo Alto Rail Grade Separation: Receive an Update From
the Expanded Community Advisory Panel (XCAP)
Action Items
Include: Reports of Committees/Commissions, Ordinances and Resolutions, Public Hearings, Reports of Officials,
Unfinished Business and Council Matters.
6:45-8:15 PM
8.Recommendation of the Planning and Transportation Commission
(PTC) to: 1) Discuss the Draft Economic Analysis Analyzing Potential
Increases to Inclusionary Housing Requirements; 2) Maintain the
Inclusionary Housing Requirements at 15 Percent for Ownership
Housing and the Housing Impact Fee for Rental Housing; and
3) Authorize an Analysis of Specific Adjustments Across the Spectrum
Presentation
Public
Comment
Public
Comment
Public
Comment
3 September 21, 2020
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of Zoning and Financial Factors That Would Support a 20 Percent
Inclusionary Housing Requirement
8:15-9:30 PM
9.Discussion and Direction to Staff on Housing Affordability
Requirements for Projects Proposed Under the Planned Home Zoning
(Planned Community Zoning). This Action is Exempt From the
California Environmental Quality Act (CEQA) in Accordance With CEQA
Guidelines 15061(b)(3)
Council Member Questions, Comments and Announcements
Members of the public may not speak to the item(s)
Adjournment
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Public
Comment
Presentation
4 September 21, 2020
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Additional Information
Informational Report
Surveillance Technology Report for Fiscal Years 2019 and 2020
Schedule of Meetings
Schedule of Meetings
Tentative Agenda
Tentative Agenda
Public Letters to Council
Set 1
Council Meetings
Sp. City Council Meeting September 22, 2020
Sp. City Council Meeting September 23, 2020
5 September 21, 2020
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City of Palo Alto (ID # 11359)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 9/21/2020
City of Palo Alto Page 1
Summary Title: Construction Cameras & Parking Guidance System
Surveillance Policy Approval
Title: Approval of Construction Cameras for Use at the California Avenue
Parking Garage and Highway 101 Pedestrian/Bicycle Overpass Construction
Projects; and a Parking Guidance System in Accordance With the Surveillance
and Privacy Protection Ordinance
From: City Manager
Lead Department: Public Works
Recommendation
Staff recommends that Council:
1.Approve the surveillance policy and use of the construction video cameras for the
California Avenue Parking Garage and Highway 101 Pedestrian/Bicycle Overpass
projects, which will be used to share progress on the construction projects with staff
and residents and create a time-lapse video at the end of each project; and
2.Approve the surveillance policy and use of a parking guidance system (PGS) for the
California Avenue Parking Garage and future installations at other City-owned parking
garages.
Background
In September 2018, Council adopted a Surveillance and Privacy Protection Ordinance outlining
procedures and reporting requirements for protecting personal privacy and use of surveillance
technologies (SR #8834). The ordinance addresses technologies of concern today while allowing
for the inclusion of new surveillance technologies that may be developed in the future. The
ordinance also establishes a reporting and approval process that increases transparency
without compromising public safety, limiting local control, or requiring additional resources.
CITY OF
PALO
ALTO
City of Palo Alto Page 2
▪A detailed description of the technology with an explanation of how it works and what
information it captures;
▪Statutory and/or regulatory rules governing use of the technology;
▪Measures that will be taken to protect private information;
▪How data will be managed and retained; and,
▪Existing and/or recommended City administrative policies and procedures regarding use
of the technology and the information it produces.
Surveillance Evaluation – Construction Cameras
1.A description of the surveillance technology, including how it works and what
information it captures
a.The California Avenue Parking Garage project construction webcam (Oxblue
https://www.oxblue.com/) and the Highway 101 Pedestrian/Bicycle Overpass
Discussion
In December 2018, Council approved a construction contract with Swinerton Builders for the
new California Avenue Garage project (SR #9688). The contract included the procurement and
installation of a webcam to document day-to-day construction progress of the garage project.
At the time, staff determined that the construction webcam did not constitute a surveillance
technology under the surveillance and privacy protection ordinance, and that PAMC
§2.30.680(c)(1) excludes any technology that collects information exclusively on or regarding
City employees or contractors. After reviewing screenshots with the City Manager and the
Attorney’s Office, it was determined there is a potential for the camera to capture images
(personal identifying information, under the ordinance) of non-employees/non-contractors.
Similarly, the construction camera for the Highway 101 bike bridge was purchased and installed
at the beginning of that construction project. In accordance with the surveillance ordinance, an
evaluation of the construction camera technology is provided below, and a policy relating to
the construction cameras was developed and is provided at Attachment A.
Additionally, procurement and installation of a parking guidance system was included in the
construction contract for the California Avenue Garage project. The Indect Parking Guidance
System similarly presents a potential to capture personal identifying information via its camera-
sensor technology. Accordingly, an evaluation of the parking guidance system technology is
provided below, and a policy relating to the system was developed and is provided in
Attachment B.
Per the ordinance, “surveillance technology” means any device or system primarily designed
and used or intended to be used to collect and retain, audio, electronic, visual, location, or
similar information constituting personally identifiable information associated with any specific
individual or group of specific individuals, for the purpose of tracking, monitoring or analysis
associated with that individual or group of individuals. Examples of surveillance technology
include but are not limited to; drones with cameras or monitoring capabilities, automated
license plate readers, closed-circuit cameras/televisions, cell-site simulators, biometrics-
identification technology, and facial recognition technology.
The ordinance requires at a minimum the following information to be provided:
City of Palo Alto Page 3
construction webcam (EarthCam https://www.earthcam.net/) capture real-time
imagery of the construction sites for progress monitoring and creation of time-
lapse videos.
2.Information on the proposed purpose, use and benefits of the surveillance technology
a.The purpose is to monitor the garage construction progress and ultimately
create a time-lapse video of the work to share progress on the construction
projects with staff and residents. The benefits of this are to capture key
milestones and keep stakeholders up to date as the projects progress.
3.The location where the surveillance technology may be used
a.The camera is positioned on top of the building at 385 Sherman Avenue with a
wide view of the California Avenue Parking Garage construction site at 350
Sherman Avenue.
b.The camera is attached to a street light pole on East Bayshore Road, north of the
Highway 101 Pedestrian/Bicycle Overpass project site with a wide view of the
construction site.
4.Existing federal, state, and local laws and regulations applicable to the surveillance
technology and the information it captures; the potential impacts on civil liberties and
privacy; and proposals to mitigate and manage any impacts
a.There are no known federal, state, local laws, and regulations other than the
City’s Surveillance Technology ordinance.
b.Regarding the potential impacts on civil liberties and privacy, it is possible that
the camera will capture images (personal identifying information, under the
ordinance) of non-employees/non-contractors.
c.Mitigation of the potential of the camera to capture images, as immediately
above, shall be accomplished by the location of the camera such that it is hard to
convey any personally identifying features. The camera only posts images every
15 minutes. This further obfuscates the exact public activities taking place in the
photos. There are no technologies available to prevent digital copying of the
posted website images.
5.The data will be managed and retained on the California Avenue Parking Garage and
Bike Bridge project websites and stored on the City’s servers. The time-lapse video is
also stored in the vendors’ cloud-based data storage indefinitely and can be removed if
requested by the City.
6.Existing and or recommended City administrative policies and procedures regarding use
of the technology and the information it produces
a.There are no existing or recommended policies or procedures regarding use of
the construction webcam.
City of Palo Alto Page 4
7.The costs for the surveillance technology, including acquisition, maintenance, personnel,
and other costs, and current or potential of funding
a.The cost of the California Avenue garage and Highway 101 Pedestrian/Bicycle
Overpass cameras was $1,500 and $16,000, respectively. This cost included
procurement and installation of the camera as well as the webpage hosting
during construction.
The intent of the webcams is to share progress on the construction projects with staff and
residents. Given the limited potential of personally identifiable information being captured by
the camera and the measures detailed above, staff recommends approving the use of the
cameras. The surveillance policy for the construction cameras is included in Attachment A.
Surveillance Evaluation – Parking Guidance System
1.A description of the surveillance technology, including how it works and what information it
captures
a.The Indect Parking Guidance System (PGS) installation utilizes camera-based sensors
to provide parking guidance and management tools. It uniquely identifies individual
vehicles for the purposes of car locating and parking time tracking, enabling a variety
of parking management tools. Vehicles, in this case, will be identified by their unique
image signature but not an associated license plate number (LPR) until Council
separately reviews and approves an LPR surveillance policy.
2.Information on the proposed purpose, use and benefits of the surveillance technology
a.The PGS is primarily intended to improve the parking experience for customers
seeking open and available spaces via a digital and customizable, wayfinding system
consisting of overhead mounted lights and signage. The system also provides
customers space availability on various floors of the new garage.
3.The location where the surveillance technology may be used
a.The Indect PGS will be utilized at the California Avenue garage at 350 Sherman
Avenue, as well as other public garages and lots where the system is planned to be
installed in the future.
4.Present federal, state, and local laws and regulations applicable to the Surveillance
Technology and the information it captures; the potential impacts on civil liberties and
privacy; and proposals to mitigate and manage any impacts
a.There are no known federal, state, local laws, and regulations other than the City’s
Surveillance Technology ordinance.
b.Camera sensor data will only be utilized to log parking stall information and data, to
communicate parking availability, and to quantify parking occupancy rates. LPR will
not be enabled until addressed separately by the Office of Transportation and
Council.
c.Regarding the potential impacts on civil liberties and privacy, camera sensor data
City of Palo Alto Page 5
images will initially be used only for parking wayfinding guidance and parking space
availability monitoring.
5.All data downloaded to City equipment and in storage shall be accessible only through a
login/password-protected system capable of documenting all access of information by
name, date, and time (Civil Code § 1798.90.52). Staff and/or contractors approved to access
PGS data will only be permitted to access the data for legitimate Office of Transportation
purposes. PGS system audits will be conducted yearly and will report who has accessed
what types of data and why.
6.Existing and or recommended City administrative policies and procedures regarding use of
the technology and the information it produces
a.There are no existing or recommended policies or procedures regarding use of
parking guidance systems.
7.The costs for the surveillance technology, including acquisition, maintenance, personnel,
and other costs, and current or potential of funding.
a.The cost of the PGS for the California Avenue Garage was $337,000 and installation
and setup were included in the construction contract. Annual maintenance is
expected to be approximately $20,000.
The intent of the parking guidance system is to improve parking management strategies for
improved customer satisfaction, as well as to improve cost effectiveness and operational
efficiencies. Given the limited potential of personally identifiable information being transmitted
or shared by this technology, its limited and purposely narrowed applicability to parking
management strategies, combined with data security and non-retention practices, staff
recommends approving the use of the Indect PGS. The surveillance policy for the parking
guidance system is included in Attachment B.
Resource Impact
Funding for the construction camera and parking guidance system is included in the California
Avenue Parking Garage Project Capital Improvement Program (CIP) Project PE-18000. Funding
for the construction camera was included in the Highway 101 Pedestrian/Bicycle Overpass CIP
Project PE-11011. No additional funding is required.
Policy Implications
This project does not represent any changes to existing City policies.
Stakeholder Engagement
No stakeholder engagement was completed for the purchase and use of the construction
cameras or parking guidance system.
City of Palo Alto Page 6
Environmental Review
Approval of this camera does not constitute a project and is exempt from the requirements of
California Environmental Protection Act (CEQA) pursuant to Section 15061(b)(3).
Attachments:
•Attachment A Surveillance Use Policy for Construction Cameras
•Attachment B - Surveillance Use Policy for the Parking Guidance System
Draft
Surveillance Use Policy for the Construction Cameras for the California Avenue Garage and
Highway 101 Pedestrian/Bicycle Overpass projects
In accordance with Palo Alto Municipal Code section PAMC 2.30.680(d), the Surveillance Use
Policy for construction cameras for the California Avenue Garage and Highway 101 Pedestrian/
Bicycle Overpass projects is as follows.
1.Intended purpose of technology. The intended purpose of the construction webcams
for the California Avenue Garage and Highway 101 Pedestrian/Bicycle Overpass projects is to
monitor construction progress and create a time-lapse video for each project of the
construction work in order to share progress on the construction projects with staff and
residents. The plan is to share such videos on the City’s project websites.
2.Authorized uses of the information. The uses that are authorized are activities
promoting knowledge and information about the projects. The uses that are prohibited are
activities that attempt to capture personal information from the images or any third-party
generation of revenues from the images.
3.Information collected by the technology. The information collected by the construction
webcams consists of the capture of still images at approximately 15-minute intervals to
facilitate the creation of time-lapse videos. The construction cameras may also inadvertently
capture images of non-employees/non-contractors (including members of the public) passing
by the construction site for example on the street or sidewalk.
4.Safeguards. The safeguards that protect information from unauthorized access, include
camera installations in an inaccessible location to the public. The video link will be added to the
City’s website and users will only be able to look at the current view or time-lapse videos. Users
will be unable to change the camera angle. Once construction is complete, the camera will be
removed and the footage will be kept in a City network folder with limited access by City staff.
5.Information retention. The time period for which information collected by the
construction webcams will be routinely retained is indefinitely. The City may remove the time-
lapse videos from the project websites at any time.
6.Access to information outside City. Non-city entity access or use of the online-posted
video images includes anyone who visits the project websites. There will be no non-city direct
access to the camera footage, which will be stored on City servers. The conditions and
rationales for sharing information as described in this policy are to share progress on the
construction.
Attachment A
7.Procedures to ensure compliance. Procedures to ensure compliance with this policy
are to monitor website usage and City staff can remove the time-lapse videos at any time. Once
construction is complete, the camera will be removed and the footage will be kept in a City
network folder with limited access by City staff.
DRAFT
Surveillance Use Policy for the
Parking Guidance System (PGS) Technology
for City Parking Facilities
In accordance with Palo Alto Municipal Code (PAMC) Section 2.30.680(d), the Surveillance Use
Policy for the use of technology related to the parking guidance system (PGS) is as follows.
1.Intended purpose of technology. The PGS is a suite of equipment, hardware and software
(provided by Indect USA Corporation, known as “Indect”), that provides for several features
that can be integrated with current and future parking systems, including license plate
recognition, car locating and custom signage. The PGS provides a customizable mobile
application platform, incorporates wayfinding and reliable space availability guidance,
providing improved customer parking experience. This installation includes camera-based
sensors that monitor up to 6 spaces. It was selected with the ability to add LPR technology
(for additional enforcement and management tools) but will function without LPR until the
City Council has separately reviewed an LPR surveillance evaluation and policy which the
Office of Transportation will bring forward at a future Council meeting.
2.Authorized uses of the information. The information collected by the PGS will be used only
for the purposes of monitoring parking availability in City parking facilities and
communicating parking availability to customers and users of the application.
3.Information collected by the technology. The PGS technology will collect the following
personally identifying information: images of vehicles and license plates in the City parking
facility.
4.Safeguards and Compliance Procedures. The safeguards that protect information from
unauthorized access, include encryption, access-control, and access oversight mechanisms,
as applicable. City staff and contractors accessing PGS data will utilize physical access
controls, computer application permission controls, and other technological, administrative,
procedural, operational, and personnel security measures to record who has accessed PGS
data, the time and date of access, and reason for access, to protect the data from
unauthorized access, destruction, use, modification or disclosure. All data downloaded to
City equipment and in storage shall be accessible only through a login/password-protected
system capable of documenting all access of information by name, date and time (Civil Code
§ 1798.90.52). Only parking stall data will be saved, with personally identifiable images of
vehicles, license plates, or persons immediately discarded until Council considers the LPR
technology more fully and approves an LPR-specific surveillance policy (Office of
Transportation to bring forward an LPR technology surveillance evaluation and policy in the
future). PGS system audits of who has accessed what types of data and why will be
reported yearly.
Attachment B
5. Information retention.
Camera sensor data associated with individual persons will not be retained.
6. Access to information outside City. Camera-sensor data associated with individual persons
will only be viewed by City personnel and by City contractors on an as-needed basis (i.e., as
required to perform contracted services). No other entities will have access to the
information.
7. Compliance Procedures. Compliance procedures are detailed in association with the
safeguards described in Section 4 above.
City of Palo Alto (ID # 11402)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 9/21/2020
City of Palo Alto Page 1
Summary Title: Banking and Related Service Contracts Amendments for
Extension
Title: Approve Contract Amendments to Extend the Following Banking and
Related Services Contracts: 1) U.S. Bank and its Wholly-owned Subsidiary
Elavon for General Banking and Merchant Services; 2) Wells Fargo for
Lockbox Services; 3) Union Bank for Investment Safekeeping (Custodial)
Services; and 4) JP Morgan Chase Bank for Purchase Card (P-card) Services
From: City Manager
Lead Department: Administrative Services
Recommendation
Staff recommends that the City Council approve four contract extensions for banking and
related services, extending the contract terms as noted below, effective July 1, 2020:
1) U.S. Bank and its wholly owned subsidiary, Elavon, for general banking and merchant
services (Attachment A), extending the term for three years, beginning July 1, 2020;
2) Wells Fargo for lockbox services (Attachment B), extending the term for three years,
beginning July 1, 2020;
3) Union Bank for investment safekeeping (custodial) services (Attachment C),
extending the term for two years, beginning July 1, 2020; and
4) JP Morgan Chase Bank’s cloud-based and paperless purchase card services (P-Card)
(Attachment D), authorizing the continuation of the contract between the City and
JP Morgan Chase executed on July 1, 2014.
Executive Summary
This report recommends the approval of an up to two- or three-year extension for banking
services contracts and related services, extending the contracts to a total term of eight or nine
years. These four contracts were originally approved by the City Council in FY 2014 after a
Request for Proposal (RFP) process for the purpose of increasing competition among banking
City of Palo Alto Page 2
service and related providers and lowering costs. Services provided by these four contracts
include: (1) general banking and merchant (credit and debit card acceptance), (2) lockbox
(processing of utility bill check payment), (3) safekeeping or custodial (settlement, safekeeping,
and reporting of investment security), and (4) purchase (credit) card (P-Card) services. Under
these contracts, pricing achieved and awarded in FY 2014 will continue through the extended
term without any annual increase to unit prices. The current vendors have agreed to keep or
lower the current prices for the next three years except for Union Bank, which has only
committed to a two-year extension at current prices. Therefore, the City will continue to
receive FY 2014 fixed unit pricing through FY 2022 or FY 2023, eight to nine years.
Due to the imbedded nature of banking contracts in day to day financial transactions of City
business, it is not uncommon to see longer term contracts up to 10 years to ensure continuity
of service and necessary strategic deployment of resources for major projects such as the
implementation of a new banking relationship. Staff spent time reviewing the current services
and analyzing comparatives to several other municipalities to ensure the pricing of these
contracts remain competitive. Upon the completion of these recommended extended terms,
staff expects to conduct a new RFP for these services.
These contracts are structured based on service and activity level; the City essentially controls
costs via a fixed payment per service during the length of the contracts. Therefore, staff
recommends continuation of the previous contract terms that do not include a “not-to-exceed
limit”, as cost is dictated by transaction volume which can change over time. Staff has and will
continue to closely monitor costs on a regular basis. In total, net annual costs for these
contracts have remained at or below $100,000 annually while rebate revenue from the P-Card
service has been above $135,000.
Below is a summary of the recommended agreements:
1) U.S. Bank and its wholly owned subsidiary, Elavon, for general banking and merchant
services (a three-party agreement). U.S. Bank and Elavon have agreed to continue the same
transaction prices for the next three years that were agreed to in the original contract in FY
2014. Average annual spending of $20,000: a net $14,200 (gross expense of $50,200 offset
by rebates of $36,000) for general banking and $9,500 for merchant services (bank fee
only). (Attachment A)
2) Wells Fargo (Wells), provides lockbox services. This extension reflects a reduction in the
current lockbox transaction cost by 10 percent; an average annual savings of $3,100.
Average annual expenses of $30,800. (Attachment B)
3) Union Bank (Union) provides investment safekeeping (custodial) services. This two-year
extension continues the same transaction prices that were agreed to in the original contract
in FY 2014. Average annual expenses of $29,000. (Attachment C)
City of Palo Alto Page 3
4) JP Morgan Chase Bank’s (JP Morgan) provides cloud-based and paperless purchase card
services (P-Card). This is a revenue (rebate) contract where there are no service fees.
Average annual rebate revenues of $148,500, which has increased 16.3 percent the prior
three years due to higher activity level by the City. The current rebate rate remains
unchanged in this extension term. (Attachment D)
The proposed contract extension term for each provider is two or three years, starting July 1,
2020 to June 30, 2022 or 2023. The contract with JP Morgan Chase does not contain a term
end, and staff is requesting that Council authorize the continuation of the City’s banking
contract with JP Morgan for the City’s P-Card program. For the four contracts, during the last
three years, (per Table 1) the City’s total (cumulative) rebates or revenues was $445,500 while
costs were $214,000 resulting in net earnings of $231,500. The three-year net annual average
net earnings were $74,00. Similar results are forecasted for the next two or three years should
the recommended contract extensions be approved. In each contract, the City and the banking
services provider each retains the option to terminate the contract upon 30-day notice.
Background
In 2005, the City conducted an RFP process for banking related services. After reviewing the
proposals from several banks, the City selected Wells Fargo (Wells) for general banking services.
The selection of Wells ended a long-term relationship with Bank of America, the prior banking
services provider. The agreement with Wells consisted of a three-year contract plus an
additional two-year extension. That five-year service contract and extension ended on
December 31, 2010.
In November 2010, staff requested that Council extend the existing contract with Wells for
three years, rather than initiate a new RFP. This approach was taken at the depth of the
recession for a number of operational and cost related issues. Lower fees were successfully
negotiated with Wells during this time and the extension was approved by Council.
As a result of a more complex evaluation process, staff requested and City Council approved on
December 9, 2013 (ID # 4284), a one-year banking services contract extension from January 1,
2014 to December 31, 2014. Staff did not request separate contract extensions for lockbox and
merchant services because their contract dates had not expired.
The Purchase Card (P-Card) did not expire until January 2015 but to evaluate options and
pricing, these services were included in the RFP performed in 2014. Of the firms responded, JP
Morgan (the City’s current P-Card provider) offered the highest rebate rate of all the proposers.
In June 2014, based on the RFP results and staff recommendation, Council awarded contracts
(ID # 4905) to the following financial institutions:
1) U.S. Bank and Elavon for banking and merchant services,
2) Wells Fargo for lockbox service,
City of Palo Alto Page 4
3) Commerce Bank for a new and innovative Accounts Payable bill payment service,
4) Union Bank for investment safekeeping (custodial) service, and
5) JP Morgan Chase Banks for purchase card (P-Card) service.
The contracts were for six years from July 1, 2014 to June 30, 2020. The Commerce Bank’s
Accounts Payable bill payment implementation was halted and then discontinued as the service
was unable to meet the City’s needs as was originally expected as part of their proposal.
Discussion
After an evaluation of the offered bank fees and comparison to other agencies, staff
recommends that Council extend the agreements with the City’s current banking and P-Card
service providers. In addition to competitive pricing, customer service level and user-friendly
on-line portals, the current service providers are willing to extend or reduce the current pricing
for the next two or three years. Wells Fargo proposes a 10 percent cost reduction, while all
other banks held pricing and/or rebates. Though staff asked all service providers for pricing
concessions, U.S. Bank, Elavon and Union Bank stated Palo Alto has their lowest prices which is
supported by staff’s experience based on the last RFP and by comparisons to other
municipalities. Due to the above and increased complexity of the financial services used by the
City, having the flexibility to address the current financial constraints, and the evaluation
process being more complicated and more time-consuming, extending these contracts are
prudent to balance available staff resources while still obtaining competitive service, costs,
and/or rebates. Per Table 1 (see Timeline and Resource Impact section), the four contracts net
total activities earn revenue for the City of several hundred thousand dollars.
1) Banking and Merchant (credit and debit card) Services:
Banking services include, for example: maintaining the City’s various checking accounts, wiring
funds for purchases of goods and overnight deposits, processing cash, processing payroll and
bill payments, providing a variety of reports to enhance cash management, downloading files to
update City financial system, and merchant services. For these services, U.S. Bank and Elavon
provides a range of products including a dedicated team for customer support. Also, they
provide a user-friendly Internet portal that staff can use to perform banking services tasks
including monitoring and preventing fraudulent activities, wiring funds, and obtaining reports.
Typically, the main difference between similar service providers is cost. In the RFP performed in
2014 U.S. Bank was the lowest bidder and provided a proposal that was 43.2 percent lower
than the banking fees at that time and 32.7 percent lower than the second lowest bidder. In
addition, Elavon’s pricing proposal, for merchant service, was not priced as a percentage of
credit card charges (typically 0.05 percent to 0.075 percent of the charged amount). Instead,
Elavon quoted a fixed fee per transaction of 10 cents. As a result, its cost then was 53.6 percent
lower than the second lowest proposal. Most of the credit card processing cost is attributable
to the card networks. For both, the U.S. Bank and Elavon have proposed to continue these low
prices for the next three years.
City of Palo Alto Page 5
It is important to note that the majority of the credit card fees are attributable to the credit
card (brand) networks (e.g., VISA, MasterCard, etc.). These network fees are not negotiable, so
they were not included in the contract pricing. Only bank fees, which are for the portal to the
card networks, were evaluated in the RFP.
U.S. Bank merchant services are provided through Elavon, a wholly owned subsidiary of U.S.
Bank. The Elavon’s merchant services annual average costs were around $9,500 the past three
years. Elavon is one of the largest (credit and debit) card processor in the United States; with
more than 1.2 million merchants using its services. In FY 2019, the City’s total credit card
expense, including Elavon’s fee, was $1.3 million.
The annual net general banking services cost (gross banking fees less earning credit and
rebates) for the last three years ranged from $13,200 to $17,500. The current Palo Alto U.S.
Bank fees compared to City of Mountain View and City of Santa Clara is 77.3 percent lower and
U.S. Bank’s recent fee proposal to the City of Livermore is 27 percent higher than Palo Alto
current costs. This supports U.S. Bank’s assertion that Palo Alto is receiving their lowest pricing.
For the Dakota Pipeline Project (DAPL), per Wells Fargo, they were one of 17 banks with
commitments to the $2.5 billion DAPL credit facility. Wells Fargo’s loan represented less than 5
percent of the total financing for the project. Wells Fargo represented the DAPL project was
evaluated by an independent engineer to be compliant with the Equator Principles, a
framework adopted by Wells Fargo in 2005 that is designed to determine, assess, and manage
social and environmental risks and impacts of projects. The DAPL term loan was refinanced in
the private placement market in March 2019, ahead of its August maturity, and Wells Fargo no
longer has a direct lending relationship to DAPL.
Staff is recommending that the banking and merchant services contract with U.S. Bank and
Elavon be extended for the next three years with the same terms which will provide the
services the City requires and continuing the current pricing structure.
City of Palo Alto Page 6
2) Lockbox Services:
This services contract outsources the processing of utility check payments. As with banking and
merchant services, lockbox services are provided by many financial institutions, including the
U.S. Bank. However, Wells was selected in the last RFP since they were the lowest bidder. The
cost, based on the past three-year activity level, ranges from $25,500 to $35,500 annually (net
cost after earning credit ranges for the same period from $20,300 to $23,700). Wells has
proposed to reduce the current contract cost by 10 percent. A comparison to City of Mountain
View and City of Livermore shows the current contract prices, before the proposed 10 percent
cost reduction, to be lower by 39.4 percent and 30.1 percent respectively.
Staff recommends the lockbox services contract be extended for three years with Wells Fargo
Bank.
3) Investment Safekeeping (Custodial) Services:
Safekeeping or custodial services include taking custody of investment securities purchased by
the City; paying interest and principal due from securities; and providing monthly statements
which show the book, par and market values of securities in the City’s portfolio.
In the last two RFPs, performed in FY 2014 and FY 2005, Union Bank had the lowest cost.
Annual actual cost the last three years ranged from $27,300 to $32,300. Service and online
portals are similar among the banks. The City has been receiving excellent service from Union
Bank for over three decades and it has been the lowest cost provider for that duration. A
comparison to City of Santa Clara shows average quarterly cost to be 35.6 percent lower. Union
Bank offered to extend the current pricing for only two years.
Renewal of the contract with Union Bank for two years, for custodial (safekeeping) services is
recommended.
4) Purchase Card (aka P-Card) Services:
The purchasing card program is cloud-based payment solution that helps the City reduce costs
and simplifies the procure-to-pay process. It solidifies purchasing controls while allowing the
flexibility to purchase goods and general services, the City to leverage transaction data for more
informed decisions and better vendor management, paperless transaction processing and
statement review, and a more complete picture of spending patterns. As a result, employees
are spending less time authorizing, tracking and processing expense transactions.
Over the years P-Card charges went from $0.2 million in FY 2005 to $8.7 million in FY 2019 and
the current fiscal year (2020) is forecasted to decline to $7.5 million. At the same time, A/P
check issuances went from a high of 25,600 to estimated 8,200 for the FY 2020 resulting in
improved efficiency and savings. Approximately 321 City purchasing cards are in use generating
$158,400 in revenue during calendar year 2019 calculated based on the following consortium
table at a rate of 1.68 percent.
City of Palo Alto Page 7
During the last RFP, of all firms responding, JP Morgan (the then existing service provider) had
the highest rebate which has increased 16.3 percent over the last three years and having a
robust system that allows directly attaching store receipts to a transaction on JP Morgan’s on-
line portal. The latter streamlines the internal approval process and record retention. This
makes the current paperless system possible. The higher rebate is attributable to the City
joining JP Morgan’s payment solution consortium, an option that become available to California
municipalities, originated by the City of Fort Worth (Texas). The consortium’s revenue (rebate)
rate takes into consideration the total consortium and individual member charges volume as
shown in the following table.
Annual
Consortium
Combined
Total Charge
Volume
Combined Total Charge Volume of Individual Participant
$500,000 to
$999,999
$1,000,000 to
$7,999,999
$8,000,000 to
$19,999,999
$20,000,000 to
$39,999,999
$40,000,000 or
more
Volume Rebate
Rate @ 29-day
Average File Turn
Volume Rebate
Rate @ 29-day
Average File Turn
Volume Rebate
Rate @ 29-day
Average File Turn
Volume Rebate
Rate @ 29-day
Average File Turn
Volume Rebate
Rate @ 29-day
Average File Turn
$25,000,000 0.80% 1.50% 1.53% 1.56% n/a
$75,000,000 0.85% 1.55% 1.58% 1.61% 1.64%
$150,000,000 0.90% 1.57% 1.60% 1.63% 1.66%
$200,000,000 0.95% 1.59% 1.62% 1.65% 1.68%
$300,000,000 1.00% 1.60% 1.63% 1.66% 1.69%
$400,000,000 1.02% 1.60% 1.64% 1.68% 1.72%
$500,000,000 1.02% 1.61% 1.66% 1.70% 1.75%
$600,000,000 1.02% 1.61% 1.68% 1.72% 1.77%
$800,000,000 1.02% 1.62% 1.69% 1.73% 1.78%
$1,000,000,000+ 1.02% 1.62% 1.70% 1.74% 1.79%
For the above reasons, staff recommends JP Morgan Chase Bank P-Card contract be extended
for three years.
Timeline and Resource Impact
These two or three-year contracts are from July 1, 2020 to June 30, 2022 or 2023 for; (1)
banking and merchant services, (2) lockbox services, (3) investment safekeeping (custodial)
services, and (4) purchase (credit) card (p-card) services. Staff is requesting a departure from
the “not-to-exceed limit” on these contracts, as they are based on specific services, fixed prices,
and City control over transactions. The contract has specific fixed durations and/or termination
clauses. Finally, there are provisions for caps on future cost increases where appropriate. Caps
do not apply to revenue-based contracts such as the purchase card agreement. Staff will closely
monitor costs on a regular basis. All the current providers agreed to extend the current low
prices except Well Fargo Bank which is lowering the cost by 10 percent.
City of Palo Alto Page 8
Table 1
3-Yr. Avg.
Gross Actual
Expenses
(Annually)
3-Yr. Avg.
Earnings /
Rebates
(Annually)
Net Avg.
(Expenses) /
Rebates
(Annually)
Total Actual
(Net Expenses)
/ Revenues for
the Last 3-Yrs.
1) Banking Services Expense (U.S. Bank)(50,212)$ 35,939$ (14,273)$ (42,818)$
2)Merchant (credit and debit card) Services Expense (9,509) - (9,509) (19,019)
(Bank costs only; excludes credit card network fee)
(Elavon)
3)Lockbox Service Expense (Wells Fargo)(30,768) 9,008 (21,760) (65,279)
4)Investment Safekeeping Service Expense (Union Bank)(28,977) - (28,977) (86,931)
5) Purchase Card (P-Card) Service Revenue (Rebate)- 148,497 148,497 445,492
(JP Morgan Chase Bank)
Net Actual (Expenses) / Revenues (119,466)$ 193,444$ 73,978$ 231,444$
Banking and Related Services
Historical Contracts Expenses and Revenues
As stated, Table 1 expenses and rebates or revenues are based on the past three years of actual
activity level and current contract (fee or revenue) rates with future actuals and corresponding
expenses and revenues fluctuations depending on the activity level generated by the City. The
merchant service cost cited above only represents the bank’s portion of the fee. Majority of
credit card fees charged to the City are attributed to the credit card networks (e.g. VISA,
MasterCard). FY 2019 total credit card fees (citywide) were $1.3 million; the budget for these
expenses is included in the proposed FY 2021 budget.
1) U.S. Bank and its wholly owned subsidiary, Elavon, for general banking and merchant
services. Actual past three years net average annual costs (gross banking fees less earning
credit and rebates) for banking and bank portion of merchant fee (excludes VISA and
MasterCard network or interchange fees) were $14,300 and $9,500, respectively. Over the
last three years, total actual net costs, for general banking and bank merchant fees, were
$42,800 and $19,000, respectively. U.S. Bank and Elavon have agreed to continue the same
low transaction prices for the next three years that they agreed to six years ago, which
effectively means U.S. Bank will be keeping the same transaction prices for a total of nine
years. (Attachment A)
2) Wells Fargo (Wells), for lockbox services, actual past three years net average annual costs
were $21,800 and over the past three years actual total costs were $65,300. Wells has
City of Palo Alto Page 9
agreed to reduce the lockbox transaction cost by 10 percent over the current contract
prices; an average annual savings of $3,100. (Attachment B)
3) Union Bank (Union) for investment safekeeping (custodial) services. The actual past three-
year average net annual costs were $29,000 per year, with three-year total costs of
$86,900. Union has also agreed to continue the same low transaction prices for the next
two years that as agreed to in 2014. (Attachment C)
4) JP Morgan Chase Bank’s (JP Morgan) cloud-based and paperless purchase card services (aka
P-Card). This is a revenue (rebate) contract where there are no service fees. In the prior
three years, rebate revenue has increased 16.3 percent due to higher activity level by the
City and higher rebate rate offered by JP Morgan. (Attachment D)
The preceding Table 1 summarizes the last three years of actual contracts expenses and
revenues. For the four contracts, the City earned a net rebate or revenue of $231,400 and the
net average annual revenue was $74,000. Similar results are forecasted for the next two or
three years should the recommended contract extensions be approved.
The proposed contract extension term for each provider is two or three years, starting July 1,
2020 to June 30, 2022 or 2023, with the exception of the agreement with JP Morgan that does
not contain a contract end term. In each contract, the City and the banking services provider
each retains the option to terminate the contract upon 30-day notice.
Stakeholder Engagement
For the duration of these contracts, Administrative Services staff have coordinated with City
staff to resolve any issues. Most of these have been routine reconciliation, confirming a validity
of a transaction, and/or information inquiries to clarify an activity so, as a whole, it’s known the
organizations satisfaction with these services has been high. The expectation is this will
continue with the proposed contract extensions.
Environmental Review
The award of a banking services agreement is not considered a project under the California
Environmental Quality Act; therefore, an environmental review is not required.
.
City of Palo Alto (ID # 11489)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 9/21/2020
City of Palo Alto Page 1
Summary Title: Appeal of a Director's Interpretation Regarding Seismic
Rehabilitation
Title: Consideration of an Appeal of a Director's Interpretation Made
Pursuant to Palo Alto Municipal Code Section 18.01.025 and Related to
Seismic Rehabilitation. The Project is Exempt from the California
Environmental Quality Act (CEQA) in Accordance With CEQA Guidelines
15061(b)(3).
From: City Manager
Lead Department: Planning and Development Services
Recommendation
Staff recommends the City Council uphold the director’s determination on the consent
calendar, thereby denying the appeal.
Executive Summary
This report provides background information in support of the director’s interpretation,
presents the appellant’s arguments for the appeal and concludes that the City’s public safety
interests justify the director’s action.
Background
The City’s zoning and building codes incentivize downtown area property owners to rehabilitate
seismically vulnerable buildings by offering a floor area bonus of 2,500 square feet (or greater)
in exchange for mitigating the seismic risk. Staff’s original implementation of this program
granted the bonus following the complete removal or demolition of these at-risk buildings.
However, several years ago for an unrelated matter, the City Council directed staff to strictly
interpret the zoning code. This direction followed Council review of a number of development
projects where it disagreed on appeal with some staff interpretations. Accordingly, while
previously allowing for demolition of buildings to receive the floor area bonus, staff
subsequently required owners to retain and rehabilitate the building instead of demolishing it.
The Design Within Reach building on University Avenue is one example of how this code
City of Palo Alto Page 2
provision has more recently been applied.
On December 7, 2015, the City Council amended the zoning code to authorize the director to
make interpretations of the zoning code and established a process to post formal
interpretations on the City’s website.1 No prior determinations have been made in reliance on
this code provision.
The subject director’s interpretation attempts to implement the intent of the code to promote
public health and allows a property owner to receive a floor area bonus when demolition is the
only feasible means to eliminate the seismic risk.
In accordance with the municipal code, this interpretation was posted online2 and as a courtesy
emailed to known interested community members. On July 13, 2020, a timely appeal was filed
by three former Councilmembers (Attachment B). To accept the director’s interpretation and
deny the appeal the matter can be approved on consent with an affirmative vote. To consider
the appeal three Councilmembers would need to pull the item from consent whereupon a
future noticed public hearing would be scheduled.
Discussion
In the 1980s the City established a seismic hazards identification program that required owners
of buildings constructed before a certain period to submit engineering reports evaluating the
building’s structural systems and present solutions to remedy any deficiencies. There are other
requirements to the program but upgrading the building to meet contemporary seismic
standards was voluntary. The downtown commercial district has an incentive that grants a floor
area bonus of 25% of the existing floor area or 2,500 square feet, whichever is greater, to
owners that seismically rehabilitate their buildings. This floor area bonus can be used onsite or
sold to a qualifying interested party.
These ordinances were established in recognition of Palo Alto’s proximity to the San Andreas
1 Palo Alto Municipal Code Section 18.01.025 (Zoning Code Interpretation) sets forth the provision: Whenever in
the opinion of the Planning and Community Environment Director (PCE Director) there is any question regarding
the interpretation of the Comprehensive Plan or the planning and land use provisions of Titles 16, 18 or 21 to any
specific case or situation, the PCE Director shall have the authority to interpret such planning codes. When in the
opinion of the PCE Director a formal written decision is warranted, the Director shall make the written decision
available to the public by posting on the City’s website. The interpretation shall become effective fourteen
consecutive calendar days from the date of posting unless appealed under this section. The interpretation shall
become the standard interpretation for future application of that provision of this Chapter unless changed by the
Council on appeal. In accordance with the provisions of Section 18.77.070(f), any person may appeal the PCE
Director’s written interpretation prior to its effective date. All final written interpretations made under this section
shall be made publicly available on the City’s website. Staff shall prepare a quarterly Information Report to the
Council summarizing all final interpretations made under this section.
2 https://www.cityofpaloalto.org/gov/depts/pln/current/pds_director_interpretations.asp
City of Palo Alto Page 3
and Hayward faults and to promote public safety by identifying those buildings that exhibit
structural deficiencies and the extent to which these buildings have the potential for causing
loss of life or injury.
While this program was progressive when adopted and resulted in many buildings being
upgraded, it does not reflect contemporary standards that blend voluntary and mandatory
regulations to improve the safety of the City’s older building inventory. In fact, many buildings
have not been updated, including some of the more vulnerable building typologies, such as
unreinforced masonry buildings.
The City Council has directed staff to update the seismic ordinance and progress has been made
on this endeavor. However, the next steps require additional consultant work. A request for
funding was dropped by staff when City departments needed to make budget reductions in
response to the current downturn in the economy. When funding is available and staff is able
to secure a consultant, it will take about 12 months of effort before hearings can be scheduled,
but this project is currently unfunded and will likely be delayed several years.
Director’s Interpretation
The subject interpretation attempts to balance the Council’s direction to strictly interpret the
zoning code with the public interest in remediating buildings that are seismically vulnerable and
more susceptible to causing loss of life, injury or property damage within the parameters of an
incentive program designed to encourage owners of such buildings to upgrade and make safer
those buildings.
The code section being interpreted is Palo Alto Municipal Code Section 18.18.070(a)(2) and is
excerpted below:
A building that is in Seismic Category I, II, or III, and is undergoing seismic
rehabilitation, but is not in Historic Category 1 or 2, shall be allowed to increase
its floor area by 2,500 square feet or 25% of the existing building, whichever is
greater, without having this increase count toward the FAR, subject to the
restrictions in subsection (b). Such increase in floor area shall not be permitted
for buildings that exceed a FAR of 3.0:1 in the CD-C subdistrict or a FAR of 2.0:1
in the CD-N or CD-S subdistricts. This bonus area must be fully parked. In
addition to any applicable parking provisions, this bonus may be parked by the
payment of in lieu parking fees under Section 18.18.090.
The formal director’s interpretation is provided in Attachment A. There has been discussion in
the past about the term “rehabilitation” in the context of granting floor area bonuses to
property owners that upgrade seismically vulnerable buildings. Under this provision, City staff
routinely granted the bonus to seismically vulnerable buildings that were demolished and
City of Palo Alto Page 4
replaced with new construction, as that eliminated the identified seismic risk. During a City
Council meeting in 2014/15, one or two Councilmembers commented on staff’s application of
the code to development projects and offered a perspective that demolition was inconsistent
with the plain reading of the code. Since then, projects have been required to retain and
upgrade the seismically vulnerable structure to qualify for the bonus. In 2015, staff sought to
codify this approach in the zoning code, but the matter was deferred by the Planning and
Transportation Commission and not acted upon by the City Council.
While staff generally accepts the notion that rehabilitation is not demolition, the proposed
interpretation bridges the historical application of the code section with a strict reading of the
text to carve out a rare exception in the interest of protecting life and limiting property
damage. The proposed interpretation does not simply return to staff’s historical application of
the code; rather, it would apply only to a very narrow set of circumstances.
The project that precipitated the interpretation is the Mills Florist building at 233 University
Avenue. This project has received Architectural Review Board approval and was designed with
the intent to seismically upgrade portions of the building. The approved project largely retains
the look and character of the existing building and will reuse the existing brick façade on the
new building.3 However, when preparing construction drawings and engaging structural
engineers on the project, the applicant learned of concerns that made it impractical to retain
the existing walls. An engineer’s report found that the existing brick and masonry walls have
low strength and expected dangerous brittle failure – i.e. in any redevelopment scenario, this
wall would need to be rebuilt. Further, to construct the project, existing flooring and roof
diaphragms would need to be removed creating the potential for increased instability and
requiring supplemental bracing and greater excavation to keep the remaining walls in place.
Retaining and strengthening the unreinforced masonry building requires considerably more
effort, results in a less safe construction site, prolongs the time and expense of construction,
and achieves no measurable benefit to the City or the owner. Conversely, allowing for
demolition in this case not only addresses the noted concerns, it improves compliance with
building separation requirements (from the adjoining structure) and once constructed will have
an aesthetic that reflects the character of the existing building by cleaning and reusing the
existing bricks that are visible from University Avenue and Ramana Street.
Moreover, staff is under the impression that the project would not go forward without the
seismic floor area bonus, which would be used to help finance the project. This is a less
favorable outcome as unreinforced masonry buildings are particularly susceptible to collapse
during a seismic event. While staff recognizes this relies on the applicant’s representation as to
the future redevelopment of this property – and that it is the owner’s responsibility for
maintaining a safe building for its occupants and pedestrians – the City’s current seismic
3 The subject property has been evaluated and determined ineligible as an historic resource.
City of Palo Alto Page 5
policies do not compel property owners to upgrade seismically vulnerable buildings. Any such
policy change is several years from completion, if ultimately endorsed by the City Council.
Nevertheless, the engineer’s report and potential outcome of foregoing the necessary
remediation of the seismic risk prompted the director’s action.
The interpretation is anticipated to have limited applicability and only applies in the downtown
area. The interpretation is written to cover Seismic Category I, II, and III buildings, however, it is
the unreinforced masonry buildings, Seismic Category I, that face the greatest challenge for
rehabilitation when adding floor area because of the lack of existing structural systems to
support the building. Due to the risk factors associated with this building typology, it is
appropriate to use the City’s incentive program to aggressively mitigate these buildings. While
it is certainly the case that unreinforced masonry buildings can be strengthened to reduce this
risk, the project referenced above was able to demonstrate to the city’s building official that
there was no practical means to do so in this instance. Documentation provided by the
applicant is included with this report (Attachment C) and was peer reviewed before the building
official concurred with the analysis.
If the interpretation stands after appeal, other requests for demolition would similarly require
an engineer’s report to be prepared by the applicant and peer reviewed. The building official in
consultation with the department director would similarly need to conclude, based on the
supporting documentation that it is not practical to retain and strengthen a building in order to
mitigate a seismic risk and, in the downtown, receive a floor area bonus as an incentive for
abating that risk.
Appeal Statement
The appeal filed by three former Councilmembers is included with this report as Attachment B.
The appellants assert the director’s action is not an interpretation of the code, but rather
establishes new policy through a ministerial process. The appellants argue that a text
amendment is required to implement the director’s interpretation and requires public hearings
before the Planning and Transportation Commission and ultimately to the City Council, which is
the legislative body responsible for establishing policy. The appellant’s also object to the
practicality standard for determining whether rehabilitation is feasible noting it is undefined
and relies on the developer’s assertions as opposed to the plain reading of the code. There is
also a suggestion that the interpretation conflicts with regulations concerning historic
rehabilitations and that the interpretation itself is at odds with comments made by the director
in prior public meetings.
Staff Response
The appellants argue that the subject interpretation improperly establishes new City policy as
opposed to a clarifying interpretation of the existing policy. Staff’s perspective is that the
interpretation applies existing code, prioritizing the City’s interest to promote public safety over
City of Palo Alto Page 6
a narrow reading of the zoning code, which may forestall the removal of seismically vulnerable
buildings.
Accordingly, in this context, the appeal is principally about process. If the interpretation is
viewed as establishing new policy – its application is improper, and a text amendment is the
appropriate course of action. If the interpretation is viewed as a clarification of the intent of
existing code or applies the code to a unique circumstance, then the interpretation is an
acceptable means to address the issue. As noted above, the use of the word rehabilitation in
combination with other City policies inform one’s perspective on the issue.
The City’s comprehensive plan includes a number of policies and programs related to
minimizing the exposure of people and structures to seismic hazards; continuing to provide
incentives for seismic upgrades; and, using the results of the City’s seismic hazards
identification program and inventory to establish priorities and incentives to encourage
structural retrofits. Attachment D includes an excerpt from the City’s comprehensive plan
listing policies and programs related to earthquakes and natural hazards. More information is
also available online detailing the purpose and regulations related to the seismic hazards
identification program4 and process for approving floor area bonus for seismic rehabilitation.5
Beyond the process question, the appellants express concern that the term “infeasibility” is
undefined. Infeasibility is frequently used as a standard without express definition, relying
instead on reasonable, professional judgment. By way of example, documentation reviewed by
the City’s building official for the referenced property at 233 University Avenue is provided in
Attachment C. Included in this material are calculations the building official required to further
analyze the seismic systems and structural integrity of the building. These calculations were
prepared by the owner’s consultant and reviewed by City/contract staff before the building
official reviewed the data and concluded that keeping the building and seismically
strengthening it to support the approved project was infeasible. This example shows the extent
to which staff seeks to retain and strengthen buildings, but upon a finding of infeasibility, would
rather promote the City’s public safety interests and allow for the demolition of an
unreinforced masonry building known to be seismically insufficient to withstand a strong
earthquake. This conclusion stands in contrast to the arguments in the appeal statement that
the interpretation one-dimensionally addresses property owners’ objectives and not the
objectives of the code. Mitigating the seismic risk of buildings is in the City’s interest particularly
in areas with a lot of pedestrians.
4 Palo Alto Municipal Code Chapter 16.42
http://library.amlegal.com/nxt/gateway.dll/California/paloalto_ca/title16buildingregulations*/chapter1642seismic
hazardsidentificationp?f=templates$fn=default.htm$3.0$vid=amlegal:paloalto_ca$anc=JD_Chapter16.42
5 Palo Alto Municipal Code Section 18.18.070(b)
http://library.amlegal.com/nxt/gateway.dll/California/paloalto_ca/title16buildingregulations*/chapter1642seismic
hazardsidentificationp?f=templates$fn=default.htm$3.0$vid=amlegal:paloalto_ca$anc=JD_Chapter16.42
City of Palo Alto Page 7
The appellants also suggest the interpretation undermines the City’s interests in historic
preservation. The examples cited in the appeal statement ignores other City and state
regulations concerning historic resources and by inference exaggerates the limited scope of the
interpretation, which specifically states that all other municipal code requirements are
unchanged by the interpretation. Lastly, with respect to comments made previously by the
director regarding this code section, in 2015 staff did recommend a zoning amendment to
prohibit demolition as a means of qualifying for rehabilitation. This amendment was in
response to prior comments articulated by one or more Councilmembers prior to this time and
attempted to offer clarity as to what constituted rehabilitation. The Planning and
Transportation Commission and later the City Council both deferred making any change to the
municipal code, however.
Unreinforced masonry buildings are particularly vulnerable to partial or total collapse during a
strong seismic event. While the interpretation would permit demolition over seismically
strengthening the building, it does so in rare circumstances and only after preparation of
professional analysis, which is peer reviewed by a licensed structural engineer. Central to the
interpretation is whether demolition is ever an appropriate solution to mitigate a seismic risk
and whether such action is intended to convey a floor area bonus incentive to downtown area
property owners.
Policy Implications
The interpretation itself presents a policy consideration for the City Council and the argument
offered by the appellants is that the interpretation improperly establishes new policy as
opposed to interpets existing policy. If the Council agrees with this conclusion then the appeal
should be upheld. If the intepretation is a proper implementation of PAMC 18.01.025, then the
subsequent consideration for Council is whether demolition should be allowed in certain
circumstances to achieve the City’s public safety goals, which also results in downtown area
property owners receiving a floor area incentive bonus.
Resource Impact
There are no significant fiscal or budegatary impacts associated with the recommendation in
this report.
Timeline
If this item is pulled from the consent calendar it will be scheduled for a future public hearing
likely around late October or November.
Stakeholder Engagement
The interpretation was posted online as required by the municipal code and sent to known
interested parties.
City of Palo Alto Page 8
Environmental Review
Council action to deny or uphold the appeal is exempt from the California Environmental
Quality Act (CEQA) in accordance with Section 15061(b)(3).
Attachments:
Attachment A: Director's Interpretation (Seismic Rehabilitation)
Attachment B: Appeal Statement
Attachment C: 233 University Seismic Information
Attachment D: Comprehensive Plan Natural Hazards Excerpt
CITY OF PALO ALTO | 250 HAMILTON AVENUE, PALO ALTO, CA. 94301 | 650-329-2100
DATE: June 29, 2020
TO: Planning & Development Services Staff and Interested Community Members
FROM: Jonathan Lait, Director
SUBJECT: Director’s Interpretation Related to Seismic Rehabilitation and Floor Area Bonuses
Authority
Palo Alto Municipal Code Section 18.01.025 conveys authority to the Director of Planning and
Development Services to interpret planning and land use provisions of Title 16, 18, and 21. When
warranted, a formal written determination may be prepared and shared with the public by posting on
the City’s website.1 Written decisions shall be effective fourteen days following posting unless appealed
to the City Council in accordance with PAMC 18.77.070.
Director’s Interpretation
A floor area bonus in accordance with PAMC 18.18.070 (a)(2) shall be available to qualifying Seismic
Category I, II or III buildings in instances where seismic rehabilitation is determined infeasible by the
Chief Building Official. The Building Official may require an engineering analysis or other studies
appropriate to validate any claims of infeasibility.
Applicable Code Sections
Chapter 16.42 (Seismic Hazards Identification Program)
Section 18.18.070(a)(2) Available Floor Area Bonuses / Seismic Rehabilitation Bonus
Section 18.18.070(d)(1) Procedure for Granting Floor Area Bonuses
Discussion
Palo Alto is vulnerable to strong or moderate earthquakes due to its proximity to the San Andreas and
Hayward Faults and may experience loss of life or serious injury as a result from damage to or collapse
of buildings (PAMC 16.42.010). City regulations encourage seismic upgrades to particularly vulnerable
buildings, including unreinforced masonry buildings, which pose a significant localized risk. To
incentivize safer buildings, the City offers a floor area bonus up to 25% of the building floor area or 2,500
square feet, whichever is greater, for qualifying seismically rehabilitated buildings.
1 This determination is available online at: https://www.cityofpaloalto.org/pdsinterpretations
Formal Zoning
Interpretation
DocuSign Envelope ID: 6174EB45-F2CC-479C-AB13-886CB6139690
In the recent past, several buildings in Palo Alto were allowed to be completely demolished as a means
to correct the seismically vulnerable building and received a seismic bonus.2 A closer review of the
municipal code, however, suggests that to qualify for the bonus floor area, the building must be
seismically rehabilitated, or retained and strengthened to contemporary structural standards. This later
interpretation has been the approach followed by staff for the past several years.
Recently, a project applicant demonstrated to the satisfaction of the City’s Chief Building Official that
structurally rehabilitating the building at 233 University Avenue (Mills Florist) was not practical. While
technical rehabilitation compliance could be documented, the effort to do so was determined not
feasible nor safe by an engineering analysis.
In this instance, the plain reading of the municipal code and floor area bonus does not provide sufficient
incentive to encourage seismic strengthening of a building type known to be hazardous to building
occupants and pedestrians. Allowing replacement of the building – new building construction – would
remedy the seismic hazard. Moreover, the project as previously approved, retains the existing exterior
masonry brick (restored and reapplied), which preserves the look and character of the building.
Based on the foregoing and to support overriding public health interests, this interpretation would allow
qualifying buildings (Seismic Category I, II or III), the opportunity to rebuild as new construction upon a
finding by the City’s Chief Building Official that rehabilitation is not practical. All other municipal code
requirements are unaffected or unchanged by this interpretation.
_______________________________
Jonathan Lait, Director
Planning and Development Services
Posted on Website: June 29, 2020
Appeal Deadline: July 13, 2020
2 657 Alma St. (101 Forest Ave.); 901 Alma St.; 431 Florence St.; 820 Ramona St.; 150 University Ave.; 171 University Ave.; 201
University Ave.; 270 University Ave.; 274 University Ave.; 380 University Ave.; and, 416/428 University Ave.
DocuSign Envelope ID: 6174EB45-F2CC-479C-AB13-886CB6139690
July 13, 2020
To: Planning Director Jonathan Lait
Mayor Adrian Fine, Vice Mayor Tom DuBois, City Council members
Re: Appeal of the Director’s Interpretation Related to Seismic Rehabilitation and Floor Area Bonuses.
The code establishing bonus square footage and TDRs (Transferrable Development Rights) for
Seismic buildings is clear:
Municipal Code Section 18.18.070 Floor Area Bonuses (a) (2) Seismic
Rehabilitation Bonus:
“A building that is in Seismic Category I, II, or III, and is undergoing
seismic rehabilitation (emphasis added) but is not in Historic
Category 1 or 2, shall be allowed to increase its floor area by 2,500
square feet or 25% of the existing building, whichever is greater…”
The staff, via an “Interpretation”, is proposing to use a ministerial process to establish city policy and
change the code to allow bonus square footage for demolished buildings. This interpretation is
counter to what staff itself writes in the Interpretation: “A closer review of the municipal code,
however, suggests that to qualify for the bonus floor area, the building must be seismically
rehabilitated, or retained and strengthened to contemporary structural standards.” (Emphasis
added). Demolished buildings by definition are not rehabilitated buildings.
Further, the Interpretation suggests replacing a clear and simple zoning law with a completely
undefined process that considers “financial infeasibility” or “impracticality” based on a developer’s
assertion of it being so. With no substantiating evidence, the Interpretation speculates “the plain
reading of the municipal code and floor area bonus does not provide sufficient incentive to
encourage seismic strengthening of a building type known to be hazardous…”. The Interpretation
thereby only addresses owners’ objectives and not the objective of the code: to incentivize the
rehabilitation of hazardous buildings. The code allows for on-site bonus square footage of a
rehabilitated building OR sale of qualified TDRs resulting from the rehabilitation. In other words,
owners’ objective may not be accomplished on site, but they may be otherwise incented to conduct
the seismic rehabilitation via TDR sale/s.
Furthermore, staff’s assertion that the “plain reading’ of the current code does not provide an
adequate incentive for developers or property owners, which is a clear acknowledgement that staff
believes there should be a change in policy and code, but has chosen to use a ministerial tool to
establish policy, thereby bypassing the PTC, City Council and public review.
This interpretation also carries with it an inherent conflict regarding historic buildings that are in need
of seismic retrofit. Will the new “Interpretation” extend to historic rehabilitations and the President’s
Hotel or the Post Office be vulnerable to the wrecker’s ball if an applicant is successful in convincing
the Building Official of some undefined “financial infeasibility” or “impracticality” if a similar
Interpretation determines the fate of such buildings? The PTC, City Council and the public must not
be circumvented by such an Interpretation as they are with the June 29 Interpretation.
The Interpretation includes that bonus square footage has been allowed for several demolished
seismic buildings. This runs counter to the code, counter to staff plain reading of the code, counter to
comments by the Director in the October 28, 2015 Planning Commission minutes and counter to
information in the December 7, 2015 CMR…all indicating that the code and the Council intentions
were that seismic bonus square footage are to be granted only for rehabilitated buildings.
In summary, this proposal is a significant code change and should not be subject to a Director’s
Interpretation, resulting in an expensive appeal process rather than normal and proper public
hearings for zoning code changes.
Submitted by:
Karen Holman, former Mayor, Councilmember
Greg Schmid, former Vice-Mayor, Councilmember
Pat Burt, Former Mayor, Councilmember
“T i m e l y S o l u t i o n s B a s e d O n T i m e l e s s P r i n c i p l e s”
HOHBACH-LEWIN,INC.STRUCTURAL & CIVIL ENGINEERS
E U G E N ES A N F R A N C I S C OP A L O A L T O P A S A D E N A
260 Sheridan Ave, Ste 150 Palo Alto, CA 94306 (650) 617-5930
PRINCIPALS:
DOUGLAS HOHBACH
DAN LEWIN
JOAQUIM ROBERTS
ANTHONY LEE
VIKKI BOURCIER
SAM SHIOTANI
LES TSO
ASSOCIATE PRINCIPALS:
KEVIN MORTON
STUART LOWE
MICHAEL RESCH
SENIOR ASSOCIATES:
VICKY RUNDORFF
GREG RODRIGUES
EDDIE HUI
MIKE DAVIES
STACY GADDINI
ASSOCIATES:
BRIAN HO
PHYLLIS MAK
MICHAEL MORGAN
MOHAMED IBRAHIM
MOLLY SOUKHASEUM
CE DEPT MANAGER:
BILL HENN
S.E.
S.E.
S.E.
S.E.
S.E.
S.E.
S.E.
S.E.
S.E.
S.E.
S.E.
S.E.
S.E.
S.E.
S.E.
S.E.
S.E.
P.E.
S.E.
S.E.
June 11, 2020
Revised June 16, 2020
Mills Family, LLC cc: Ken Hayes
c/o Ms. Leslie Mills Hayes Group Architects
PO Box 44
Palo Alto, CA 94301
Project: 233 University Avenue Seismic Evaluation
Palo Alto, CA 94301
Hohbach-Lewin Project No. 12929.2B
Dear Ms. Mills:
As you know, we are structural consultants to Hayes Group Architects for the
reconstruction of your building at 233 University Avenue. The existing building on the
site reportedly dates from the early 1900s, is rectangular, one-story with a partial
mezzanine, a partial basement and with a wood framed roof and floor and perimeter
unreinforced masonry walls. The rear portion of the building is an addition and is
constructed with hollow clay tiles, while the original construction is brick. The footprint of
the building is approximately 4,300 square feet.
You have copied us on communication to Ken Hayes from George Hoyt, the Chief
Building Official of Palo Alto, regarding the building. Mr. Hoyt has requested that we
review the strength of materials testing data and the historical structural analyses for the
building and utilize this information to prepare a detailed analysis, that will include the
calculation of Demand/Capacity ratios in accordance with PAMC 16.42.050 for the two
walls that are proposed to remain, as shown in the most recent Hayes Group Architect’s
documents.
Historical Seismic Information
You have provided us the following historical analyses, listed below in chronological
order:
1935-36 Earthquake Hazard Survey prepared by the City of Palo Alto Board of Public
Work, 233-235 University Avenue excerpt – this document notes that the mortar in the
face brick is very soft and thus the originally provided anchors in the mortar joints
connecting the walls to the roof framing will likely be ineffective. This survey also
contains several useful sections showing the construction at the framing connections to
both the University Avenue and Ramona Street walls.
Per PAMC Chapter 16.42, Seismic Hazards Identification Program, dating from 1986,
the subject building has been identified as subject to an engineering report requirement,
based on the unreinforced masonry walls as well as the vintage and number of
occupants of the building. The required engineering report is intended to determine if the
building has the capability to resist the seismic forces codified in the 1973 Uniform
Building Code without collapse or partial collapse. If the building is not shown to have
E U G E N ES A N F R A N C I S C OP A L O A L T O P A S A D E N A
260 Sheridan Ave, Ste 150 Palo Alto, CA 94306 (650) 617-5930 Fax (650) 617-5932
this capability, a retrofit solution sufficient to “substantially eliminate a potential collapse
failure” is to be included in the report, described in sufficient detail to allow for a
construction cost estimate to be made. There is no requirement to implement the
retrofit.
The November 29, 1986 letter from Anthony J. Angelo, P.E. to Frank Mills was
apparently written to fulfill this requirement for an engineering report. Mr. Angelo had
visited the subject building and found the bracing of the unreinforced masonry walls to
be seriously deficient and the University Avenue wall to contain no bracing elements,
and stated his professional opinion that “any proposed scheme of reconstruction to meet
the requirements of the Seismic Hazard Reduction Program would involve such
extensive reworking of the existing structural components as to make complete
replacement a more logical course of action.”
In 2004, the Stanford Theatre Gallery Building was constructed adjacent to the subject
property at 227 University Avenue. Apparently, the concrete property line wall of the
previous building at 227 University was constructed utilizing the wall of 233 University as
a backside form, thus when this wall was demolished some portions of the 233
University wall needed to be repaired. Also of interest was the new wall at 227
University was reportedly constructed 4” in board from the property line in order to create
a seismic separation between the buildings. This information was provided in a
December 9, 2004 letter by Meserve Engineering. This letter also provides results for
brick shear tests taken at various locations of this property line wall, which range from a
low of 18 psi to a high of 148 psi, with an average of 73 psi.
As part of the effort to utilize portions of the existing building in a future remodel, testing
of key structural materials in the building was performed a couple of years ago. The May
8, 2018 Structural Investigation report by CEL Consulting Inc., which includes a
Concrete Coring Inspection Report, a Concrete Compression Core Test Report, a
Ground Penetrating Radar Scanning Report to determine reinforcing steel in the
concrete and a Brick In-planar Mortar Strength Shear Report summarizes the test
results. Of particular interest is the brick shear test #3, which tested a portion of the
University Avenue frontage wall and found the net mortar strength to be 20 psi, a very
low value.
The most recent seismic information is contained in a letter to you dated February 25,
2020 from Rick Lennen, P.E. of AKC Engineering, Inc. It provides a recap of the
technical issues that were presented at a meeting you had on 2/13/20 with the City of
Palo Alto. He references the current proposal to substantively build a new building at
233 University but keep two of the unreinforced masonry walls. He makes several
statements addressing the deficiencies of unreinforced masonry buildings in general and
recommends removing all of the existing unreinforced masonry walls.
Seismic Analysis
We have completed a basic seismic assessment of the subject property in its existing
condition based on information obtained from field measurements and testing results
and other info referenced above.
As noted, the building is of archaic construction, utilizing unreinforced masonry walls to
support gravity loads as well as provide lateral resistance. This is no longer permitted by
E U G E N ES A N F R A N C I S C OP A L O A L T O P A S A D E N A
260 Sheridan Ave, Ste 150 Palo Alto, CA 94306 (650) 617-5930 Fax (650) 617-5932
the California Building code, thus the building needs to be evaluated and any retrofit
designed, per a standard appropriate for existing buildings. Currently the standard of
practice is to utilize ASCE 41-17,Seismic Evaluation and Retrofit of Existing Buildings.
The seismic performance goal delineated in the PAMC Chapter 16.42 Seismic Hazards
Identification Program, is to resist the seismic forces codified in the 1973 Uniform
Building Code without collapse or partial collapse. A similar performance criterion is
passing a Tier 1 life safety analysis per ASCE 41-13,Seismic Evaluation and Retrofit of
Existing Buildings when subjected to a BSE-1 earthquake ground motion.We have
analyzed the building per this criterion and this is expected to be deemed equivalent to
the Chapter 16.42 criterion by the Palo Alto Building Department.
We have prepared calculations to determine the mass of the building, the seismic
pseudo-forces that will be induced by a BSE-1 event and the demand-capacity ratios
comparing the in-plane shear strength of the key structural elements in the University
Avenue wall to the seismic demand. These calculations are attached.
Quickly summarizing, even with the most optimistic assumptions regarding the existing
brick mortar properties, the demand-capacity ratio of the piers in the University Avenue
wall is in excess of 10, compared to a maximum allowed value of 3. This indicates that
the building is indeed a potential collapse failure as defined by Chapter 16.42. Thus,
any new construction will need to provide a completely new lateral force resisting
element in the plane of this wall, with the wall being converted to a decorative veneer.
We did not perform calculations for the property line wall, however based on the
approximately 75 foot length of the brick front portion of the wall, we expect that the
front brick portion of the wall will have an acceptable in-plane shear demand-capacity
ratio. The approximately 25 foot length of the hollow clay tile rear portion of the wall
however will have an unacceptable in-plane shear demand capacity ratio and thus is a
definite collapse risk. In addition, the entire wall, including in particular the parapet, is
not currently adequately braced out of plane and is expected to be significantly damaged
in the evaluated seismic event.
Recommendation
In our professional opinion, the most straightforward approach to meet the intent of
PAMC Chapter 16.42 and mitigate the risk of collapse of the subject unreinforced
masonry walls in a seismic event is to demolish them when the balance of the building is
demolished for the proposed new construction. None of the existing masonry walls are
suitable for use as part of the new construction and if retained, will add seismic mass
and irregularity to the building. In addition, the hollow clay tile portion of the wall will
need to be rebuilt in any case, due to its low strength and expected dangerous brittle
failure mode.
In addition, we are concerned about the practicality of retaining these two walls during
the course of construction of the new building, since they will be unstable when the
existing floor and roof diaphragms are removed and will need to be braced by
supplemental bracing. The need to deepen the basement to make it reasonable to
occupy will require the underpinning of the foundations of these walls, again creating a
potential instability that will need to be carefully addressed in the course of construction.
E U G E N ES A N F R A N C I S C OP A L O A L T O P A S A D E N A
260 Sheridan Ave, Ste 150 Palo Alto, CA 94306 (650) 617-5930 Fax (650) 617-5932
In any case, we recommend that these walls not be maintained in place during
construction, to create a safer construction site and allow construction to be completed
more expeditiously. From our perspective it is difficult to perceive any reason to preserve
the property line wall, due to its concealed location and its potential to make the
renovated building less seismically safe. Also an advantage to demolishing the property
line wall is that a code compliant separation between the new building and the building
at 227 University could be constructed.
We hope that the Palo Alto Building Department finds this letter to be informative.
Please contact me with any questions or comments.
Sincerely,
Douglas Hohbach, S.E. S3131
Principal
Attachment: 233 University Calculations
HOHBACH-LEWIN INC.
S T R U C T U R A L E N G I N E E R S
260 Sheridan Avenue, Suite 150
Palo Alto, CA 94306
(650) 617-5930 Fax:(650) 617-5932
Structural Calculations
For
233 University Ave
Palo Alto, CA 94301
June 10 2020
Project No: 12929.2F
001
002
003
004
005
006
007
008
009
010
011
012
013
AKC Engineering Inc.
1200 Industrial Road, Suite 13
San Carlos, CA 94070 (650) 591-3050
_______________________________________________________________________________________________
1
Mills Family LLC
P.O. Box 44
Palo Alto, CA 94302
Date: February 25, 2020
Re: 233/235 University Avenue, Palo Alto, CA
Unreinforced Masonry Components
Proj: OSNC2646
Attn: Leslie Mills
This letter provides a recap of the technical issues we presented during our meeting on
2/13/20 at the City of Palo Alto. Any non-technical, permit related or planning issues are
beyond the scope of our comments.
It is proposed that the building at 233/235 University Avenue be fully renovated while
keeping two of the existing unreinforced masonry (URM) walls. One wall is at the front
along the sidewalk and the other is along the adjacent building (movie theatre).
For structural reasons as noted below we recommend removing all of the existing URM
walls.
1. CODE CRITERIA: URM buildings have been deemed unsafe and the Uniform
Code for Building Conservation, 1991 Edition was developed to reduce risk but
not eliminate it: its crucial to understand that it does not provide the level of life
safety provided by current standards. The lesser standards were intended to
balance safety with economics since the State of California took the rare step of
mandating that URM buildings be upgraded even though they were in compliance
when first built.
2. URM AS VENEER: Once the renovation is complete the building will no longer
be URM and the remaining brick walls will act as a very thick veneer. The
repurposed veneer will have much of the same characterizes of the original URM
walls. During an earthquake the URM veneer will try to pull away from the
structural frame. Normally the veneer is secured with mechanical anchors and
bolts. With consideration of the weak mortar, minimum spacing of anchor bolts,
depth of walls, property lines and the adjacent building; it is not possible to
AKC Engineering Inc.
1200 Industrial Road, Suite 13
San Carlos, CA 94070 (650) 591-3050
_______________________________________________________________________________________________
2
adequately secure all of the existing URM veneer and there will be a significant
risk to life safety.
3. STIFFNESS COMPADABILITY: Earthquake forces in a building will go the
stiffest elements but not necessarily the strongest. The URM wall along the
adjacent building is very long and thick and will take most all of the loading
unless isolated from the structure. The paradox is that it needs to be supported by
the new structural system and can’t be fully isolated.
4. STORE FRONT: Having field checked numerous similar buildings over the
years, we expect substandard grouting and very little structural continuity in the
URM of the at the store front. There is no engineering reason to risk the front
URM parapet peeling away from the structural frame and falling on to the
sidewalk along University Avenue.
It is our opinion that there is no technical reason to accept a lesser life safety standard for
any major remodel.
The conclusions and recommendations presented herein are in accordance with the
current standards of structural engineering practice and no warranty is expressed or
implied. We trust this letter provides the information required at this time. If you have
any questions, please call.
Sincerely
AKC Engineering
Rick Lennen, P.E.
Principal
STRUCTURAL INVESTIGATION
233 UNIVERSITY
233 University Avenue, Palo Alto, CA 94301
Performed for
Mills Family, LLC
Palo Alto, California
by: CEL Consulting
Anil Nethinsinghe, P.E.
Structural Investigation Manager
May 8th, 2018
Report Number 180430-S CEL Project No. 50-53563-S
Attachments: Coring Inspection Report Compression Test Report Ground Penetrating Radar Scanning Report Brick-Shear Report
1. INTRODUCTION
The purpose of this testing program is to provide the structural condition of existing construction.
2. SCOPE OF TESTING
The scope of the testing program was to perform tests based on the Recommended Testing Scope
dated March 27th, 2018, by Hohbach-Lewin, INC.
1. Sampling and testing of (5) concrete cores for compressive strength and unit weight
testing per ASTM C42 and ASTM C39. The unit weight of samples were calculated by
dividing the saturated-surface-dry weight by the measured volume.
2. Scanning of concrete walls and one column at (2) locations using ground penetrating
radar to determine reinforcing steel layout and orientation.
3. Testing of (4) brick walls to determine the average in-planar mortar strength per IFBC
2012 Section A106.
3. TEST RESULTS
See attached reports for results of testing.
Report #:180430S
Day:IR#:
Reported to .
Material being cored includes:
Cored a total of locations.
Core locations include:
Technicians reviewed core locations with prior to leaving the jobsite.
Samples were returned to the lab for the following tests:
Additional Comments:
Date:
233 University Avenue
5
50-53563-S
Hohback-Lewin, INC
Coring Inspection Report
Please note that additional sample was taken from locations C-2 and C-3 due
to poor consolidation. The original samples were compromised in the
extraction process.
withRichard Cody
Four concrete walls and one column.
Compression Test.
See attached pages titled "Test Locations".
See attached for compression test report, map of core locations, and pictures of cores for additional
information.
Project Name:
Date:
Location:
233 University
CEL Project #:
Thurs and Mon4/26 and 4/30
Signature:
Print Name:
Alex Cuevas
Alex Cuevas, Jose Jacobo
4/26/2018
Project Name:Mix #:Date Prepared:
CEL #:Design Strength:Time Prepared:
Report #:Nom. Agg Size:Date Tested:
Sampled By:Placement Date:Time Tested:
Tested By:Sample Date:Test Age:
Sample
#
Average
Length (in)
Average
Diameter
(in)
Break
Type
1 5.97 3.76 2
2 6.46 3.74 3
3 5.93 3.76 5
4 5.73 3.75 3
5 5.91 3.74 3
6
7
8
9
10
11
12 Maxim Break Types: Type 1 Type 2 Type 3 Type 4 Type 5 Type 6
2ACI 318 requires the average strength of three cores to be at least 85% of the specified strength and no single
core strength less than 75% of the specified strength.
3Date and time prepared indicates when samples were last in contact with moisture after being wet sawed and
sealed in plastic.
1Testing in accordance with ASTM C42, ASTM C39 and ACI 318.
233 University
50-53563-S
180430S
Jose Jacobo and Alex Cuevas
J. B.
C-4 (Wall)Horizontal 139.0 5.98 0.97 1,410
C-5 (Column)Horizontal 146.5 6.25 0.97 3,650
C-2 (Wall)Horizontal 142.9 6.87 0.99 1,680
C-3 (Wall)Horizontal 137.6 6.20 0.97 1,800
Compression Test Report
C-1 (Wall)Horizontal 140.9 6.20 0.97 3,530
Table #1 - Compression Test Data (ASTM C42)
Core ID Core
Orientation
Calculated
Density
(lb/ft3)
Average
Length
After Cap
(in)
Correction
Factor
Corrected
Compressive
Strength
(psi)
5/2/2018
11:00 AM
5/7/2018
12:00 PM
28+ days
N/A
N/A
N/A
N/A
4/30/2018
Rebar size for S1 location
Location S1: Scan area at roof for rebar spacing and size. Rebar at
12" O.C. E.W. Bar size is #4 round with deformation.
Report #:180430S
Day:IR#:
Reported to .
Tested a total of locations.
Technicians reviewed test locations with
Testing was performed in accordance to:
Bricks were
Additional Comments:
Date:Signature:
Print Name:
Jose Jacobo
J. Jacobo, A. Cuevas, J. Bayless
5/2/2018
4
50-53563-S
Cody Brock Commercial Builders
left in place
Four (4) Test locations on the existing brick walls was performed to
determine the average in-plane mortar strength of
the wall.
withEd Paul
See attached for test result, map of test locations, and/or pictures of test locations for additional
IEBC 2012 Section A106
Ed Paul prior to leaving the jobsite.
for client after testing.
In Situ Masonry Mortar Shear Strength Report
Project Name:
Date:
Location:
233 University
CEL Project #:
Monday4/30/2018
233 University Ave, Palo Alto, CA 94301
Project Name:Test Date:
CEL #:Tested By:
Report #:
Test #
Wall Height
Above Test
(ft)
Estimated
Wall
Thickness
(in)
Collar Joint
Cover (%)
Load at
First
Flaking
(lbs)
Motar
Strength
(psi)
Net Motar
Strength (psi)
1 12.00 N/A 50 8885 135 123
2 11.00 N/A 70 6808 103 92
3 9.00 4.00 0 1912 29 20
4 1.00 12.00 30 963 15 14
Table Test 1Testing in accordance with IEBC 2012 Section A106
Table #1 - In-Place Masonry Testing Result
Bedded Area
(sq in)Location Interior /
Exterior
Level 2- 12' from North Wall (Ramona St) Interior
Roof Level- 5' from South Wall Exterior
233 University
50-53563-S
180430S
4/30/2018
J. Jacobo, A. Cuevas, J. Bayless
In Situ Masonry Mortar Shear
Strength Report
66.0
66.0
Level 1- 4' from East wall (University Ave) Interior 66.0
Level 1- 60' from East wall (University
Ave)Interior 66.0
E U G E N ES A N F R A N C I S C OP A L O A L T O P A S A D E N A
260 Sheridan Ave, Ste 150 Palo Alto, CA 94306 (650) 617-5930
“T i m e l y S o l u t i o n s B a s e d O n T i m e l e s s P r i n c i p l e s”
HOHBACH-LEWIN,INC.STRUCTURAL & CIVIL ENGINEERS
PRINCIPALS:
DOUGLAS HOHBACH
DAN LEWIN
JOAQUIM ROBERTS
ANTHONY LEE
VIKKI BOURCIER
SAM SHIOTANI
LES TSO
ASSOCIATE PRINCIPALS:
KEVIN MORTON
SENIOR ASSOCIATES:
VICKY RUNDORFF
GREG RODRIGUES
BILL DALEY
STUART LOWE
EDDIE HUI
MICHAEL RESCH
ASSOCIATES:
MIKE DAVIES
STACY GADDINI
BRIAN HO
TJ WU
SENIOR STRUCTURAL
ENGINEERS:
MOHAMED IBRAHIM
CE DEPT MANAGER:
BILL HENN
S.E.
S.E.
S.E.
S.E.
S.E.
S.E.
S.E.
S.E.
S.E.
S.E.
S.E.
S.E.
S.E.
S.E.
S.E.
S.E.
S.E.
S.E.
.
S.E.
March 27, 2018
The Hayes Group
Terrence Murphy
2657 Spring Street
Redwood City, CA 94063
Project: 233 University Avenue
Palo Alto, CA
Hohbach-Lewin, Inc. Project No. 12929E
Subject: Recommended Testing Scope
Dear Terrence:
The purpose of this letter is to summarize our recommendations for third party testing of the
existing construction. These recommendations are based on the site visit performed on March
26, 2018 in addition to the review of the preliminary architectural drawings prepared by the Hayes
Group dated July 15, 2017. The information we would like verified includes the following:
Concrete compressive strength of the existing perimeter basement walls. This can likely
be achieved using a Schmidt hammer in lieu of coring.
Thickness of the existing perimeter basement walls
Vertical and horizontal reinforcement size and spacing at the perimeter basement walls.
We recommend this be obtained via radiographic (x-ray) or similar methodology.
Footing width and thickness at the perimeter basement walls. We recommend one
location at each of the 4 perimeter basement walls.
Push test on the existing brick walls to determine the average in-plane mortar strength of
the wall. This would require removing one brick at each testing locations in order to
install the jack. We recommend testing in a minimum of three locations. One location at
the front elevation and one location at each of the side walls.
Please contact me with any questions or comments.
Sincerely,
Hohbach-Lewin, Inc.
Michael Resch, S.E.
Senior Associate
PALO ALTO COMPREHENSIVE PLAN
SAFETY ELEMENT
150
POWER
Policy S-1.13 Support the development of an independent, redundant power grid with local generation in Palo Alto, in order
to ensure energy resiliency in the event of natural disasters or other threats.
Program S1.13.1 Identify solutions to add an additional power line to Palo Alto to ensure redundancy.
Program S1.13.2 Explore incentives to adopt emerging, residential off-grid capabilities and technologies,
including back-up power sources vital in the event of natural disasters or other threats.
Program S1.13.3 Continue citywide efforts to underground utility wires to limit injury, loss of life and damage
to property in the event of human-made or natural disasters.
Program S1.13.4 Enhance the safety of City-owned natural gas pipeline operations. Work with customers,
public safety officials and industry leaders to ensure the safe delivery of natural gas
throughout the service area. Provide safety information to all residents on City-owned natural
gas distribution pipelines.
Program S1.13.5 Provide off-grid and/or backup power sources for critical City facilities to ensure
uninterrupted power during emergencies and disasters.
NATURAL HAZARDS
GOAL S-2 Protection of life, ecosystems and property from natural hazards and disasters, including
earthquake, landslide, flooding, and fire.
GENERAL SAFETY MEASURES
Policy S-2.1 Incorporate the City’s Local Hazard Mitigation and
Adaptation Plan (LHMP), as periodically adopted by
the City Council and certified by the Federal
Emergency Management Agency (FEMA), into the
Safety Element. In the event of any conflict between
the provisions of the LHMP and any other provision
of the Safety Element, the LHMP shall control.
Policy S-2.2 Focus efforts to reduce exposure to natural hazards in areas of the city identified as vulnerable to the greatest
risks, as shown on the maps in this Element.
Policy S-2.3 Implement public safety improvements, such as access roads and other infrastructure, in a manner that is
sensitive to the environment.
PALO ALTO COMPREHENSIVE PLAN
SAFETY ELEMENT
151
EARTHQUAKES AND GEOLOGIC HAZARDS
Policy S-2.4 Expand citizen awareness of seismic and geologic
hazards through public education and
preparedness.
Policy S-2.5 Minimize exposure of people and structures to
geologic hazards, including slope stability,
subsidence and expansive soils, and to seismic
hazards including groundshaking, fault rupture,
liquefaction and landslides.
Program S2.5.1 Periodically review and update
the City’s Seismic Hazard
Ordinance.
Program S2.5.2 Continue to provide incentives for
seismic retrofits of structures
throughout the city, particularly
those building types that would affect the most people in the event of an earthquake.
Policy S-2.6 Promote seismic rehabilitation and renovation of existing buildings, particularly those whose loss would have
the greatest community impacts, using incentives as a way to ensure safe and structurally sound buildings.
Program S2.6.1 Encourage efforts by individual neighborhood or block-level groups to pool resources for
seismic retrofits.
Program S2.6.2 Continue to use a seismic bonus and a Transfer of Development Rights (TDR) Ordinance for
seismic retrofits for eligible structures in the Commercial Downtown (CD) zone.
Program S2.6.3 Evaluate the TDR Ordinance so that transferred development rights may be used for
residential development on the receiver sites.
Program S2.6.4 Study the possibility of revising the TDR program to encourage seismic retrofits.
Program S2.6.5 Explore the use of Community Development Block Grants, Palo Alto Housing Funds and
other sources of funding to support owners of lower income and senior housing to retrofit
seismically-unsafe construction.
Policy S-2.7 Encourage property owners, business owners and the PAUSD to evaluate their vulnerability to earthquake
hazards and take appropriate action to minimize their risk.
PALO ALTO COMPREHENSIVE PLAN
SAFETY ELEMENT
152
Program S2.7.1 As part of the construction permitting process for proposed new and redeveloped buildings
in areas of identified hazard shown on Map S-2, require submittal to the City of a geotech-
nical/seismic report that identifies specific risks and appropriate mitigation measures.
Program S2.7.2 Review and update, as appropriate, City code requirements for excavation, grading, filling and
construction to ensure that they conform to currently accepted and adopted State standards.
Program S2.7.3 Utilize the results of Palo Alto’s Seismic Hazards Identification Program and inventory of
potentially seismically vulnerable building types to establish priorities and consider incentives
to encourage structural retrofits.
FLOOD HAZARD AND MITIGATION
Policy S-2.8 Minimize exposure to flood hazards by protecting existing development from flood events and adequately
reviewing proposed development in flood prone areas.
Program S2.8.1 Implement flood mitigation requirements of FEMA in Special Flood Hazard Areas as
illustrated on the Flood Insurance Rate Maps.
Program S2.8.2 Continue participating in FEMA’s Community Rating System to reduce flood insurance for
local residents and businesses and strive to improve Palo Alto’s rating in order to lower the
cost of flood insurance.
Program S2.8.3 Collaborate with the San Francisquito Creek Joint Powers Authority and the Santa Clara Valley
Water District on environmentally-sensitive efforts to stabilize, restore, maintain and provide
one percent (100-year) flood protection adjacent to San Francisquito Creek.
Program S2.8.4 Work with East Palo Alto, Santa Clara Valley Water District and San Francisquito Creek Joint
Powers Authority on efforts to increase the flows within the San Francisquito Creek possible
solutions include replacing the City-owned Newell Road Bridge and District-owned Pope
Chaucer Street Bridge.
Policy S-2.9 Partner with appropriate agencies to expand flood zones as appropriate due to sea level rise, changes in creek
channels, street flooding or storm drain overload due to increased likelihood of extreme storm events caused by
climate change.
Policy S-2.10 Prohibit new habitable basements in the development of single-family residential properties within 100-year
flood zones of the FEMA-designated Special Flood Hazard Area.
Program S2.10.1 Keep basement restrictions up to date with changing flood hazard zones.
City of Palo Alto (ID # 11511)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 9/21/2020
City of Palo Alto Page 1
Summary Title: PSN Contract Funding 2020-2025
Title: Approval of a Contract Between Project Safety Net, Inc. for Youth
Mental Health Support in the Amount of $100,000 per Year; a One-time
Transfer of $21,604 in Donations, for a Not-to-Exceed Amount of $521,604
for the Term of September 21, 2020 Through June 30, 2025; and Approval of
a Budget Amendment in the Public Services Donation Fund by a 2/3 Vote
From: City Manager
Lead Department: Community Services
Recommendation
Staff recommends that Council approve:
1. A contract between Project Safety Net, Inc. and the City of Palo Alto for youth
mental health support in the amount of $100,000/year, as well as a one-time
transfer of $21,604 in donations that Project Safety Net received from various
sources, for a not-to-exceed amount of $521,604, for the term of September 21,
2020 through June 30, 2025; and
2. An amendment of the Fiscal Year 2021 budget appropriation for the Public
Services Donation Fund, by a 2/3 vote, by:
a. Increasing the expense appropriation for Project Safety Net by $5,404;
and
b. Decreasing the ending fund balance by $5,404.
Background
Project Safety Net (PSN) is a collaborative community network formed in response to
the tragic teen suicide clusters the Palo Alto community experienced between May 2009
and January 2010. PSN’s mission is to mobilize community support and resources in
Palo Alto for youth suicide prevention and mental wellness.
PSN is a coalition working on community education, outreach, and training; access to
quality youth mental health services; and policy advocacy. PSN’s vision is “young people
are empowered, in partnership with the whole community, to advocate for themselves
and their peers. Youth suicide is ended. Stigma is non-existent, and high-quality mental
health services are culturally relevant, accessible, and well-utilized. A community where
City of Palo Alto Page 2
youth and young adults feel safe, supported, and accepted.” The PSN Collaborative
includes mental health organizations, nonprofits, youth organizations, faith-based
organizations, individuals, Palo Alto Unified School District and City of Palo Alto staff.
Additional information on Project Safety Net background, strategic road map, and
resources can be found on their website at www.PSNPaloAlto.com.
Discussion
Beginning Fiscal Year (FY) 2021, (July 1, 2020) Project Safety Net, Inc. (PSN, Inc.)
operates as a separate entity. Project Safety Net, Inc. became registered as an
incorporated nonprofit with the State of California on April 23, 2020. The next step is to
obtain 501(c)3 tax exemption status. The application for tax exempt status is expected
to be submitted by the end of September 2020.
The City’s financial support will continue at a level of $100,000 for a period of five years
beginning in FY 2021 through June 30, 2025. PSN, Inc. will also retain office space at
Cubberley Community Center through a new month-to-month, low cost lease
agreement, and will have access to meeting space to hold partner meetings, trainings,
and community events. Transitioning to a nonprofit model will provide PSN, Inc. with a
sustainable business model that can continue to operate while reducing reliance on the
City.
PSN, Inc. will continue to provide the Palo Alto community with valuable youth mental
health support and resources for youth suicide prevention and mental wellness through
education, outreach, training, ensuring access to quality mental health services, and
advocacy. The scope of services is included Attachment A. The goals of PSN, Inc. as
described in the scope of services include:
PROGRAM GOALS
1. To maintain a well-informed and diverse representation of community partners
who will collectively work towards youth resiliency, well-being and suicide
prevention as a COLLABORATION CONVENOR.
2. To improve youth well-being by providing culturally tailored MENTAL HEALTH
AND SUICIDE PREVENTION GATEKEEPER TRAININGS to diverse
stakeholders (e.g. LGBTQ+, immigrant, underserved, transitional age youth,
disabilities).
3. To CIVICALLY ENGAGE YOUNG PEOPLE to develop a policy agenda that will
ensure a continuum of mental health care for the most vulnerable youth,
advances youth wellbeing promotion, and prevents youth suicides.
4. To establish EVALUATION & SHARED MEASUREMENT infrastructure that
measures collective impact towards achieving common agenda and coalition’s
effectiveness.
City of Palo Alto Page 3
Timeline
Services shall commence on September 21, 2020 and continue through June 30, 2025.
Semiannual progress reports shall be completed and submitted to the City on the
fifteenth day after each six-month period.
Resource Impact
The FY 2021 contract amount of $100,000 is budgeted within the Community Services
Department as part of the FY 2021 Operating Budget. Funding for future fiscal years is
subject to City Council approval through the annual budget process.
Prior to Project Safety Net’s transition to a separate entity on July 1, 2020, the
collaborative was housed under the Community Services Department and was managed
by City staff. During their time as a City entity, PSN received donation funds from
various sources and spent those donations on the program. As of July 1, 2020, there is
$21,604 in remaining unspent donated funding. Staff recommends including the
remaining $21,604 as a one-time payment in FY 2021, in addition to the annual
$100,000 payment. With this payment of all remaining donated funds to PSN, staff
recommends eliminating all budgeted expenses and revenues in the Public Services
Donation Fund for PSN, as all future donations can be collected by PSN, Inc. and future
annual City support will be budgeted in the Community Services Department of the
General Fund.
Policy Implications
The 2030 Comprehensive Plan includes policies related to access to mental health
programs, including:
Policy C-5.2 Promote access to programs that enhance and increase the
physical and mental health, well-being, recreation, safety and cultural
opportunities of all residents and visitors.
Policy C-5.5 Encourage the continuation and development of mental health
programs that center on education, depression, isolation, stress, suicide
prevention and intervention strategies.
Stakeholder Engagement
PSN, Inc.’s Board of Directors is meeting regularly to discuss and deliberate on Board
Officer positions, finalizing by-laws, developing a year-one operating budget,
fundraising, and developing financial systems. Communication to partner agencies and
organizations is at the core of this work.
Environmental Review
This action is not considered a Project under the California Environmental Quality Act
(CEQA).
Attachments:
City of Palo Alto Page 4
• Attachment A: C21180082 Project Safety Net
Professional Services Rev. April 23, 2020 1
CITY OF PALO ALTO CONTRACT NO. C21180082
AGREEMENT BETWEEN THE CITY OF PALO ALTO AND PROJECT SAFETY NET INC. FOR PROFESSIONAL SERVICES
This Agreement is entered into on this 21st day of September, 2020, (“Agreement”) by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and PROJECT SAFETY NET INC, a non-profit organization, located at 4000 Middlefield Road, Bldg. T2, Palo Alto, CA 94303 ("CONSULTANT").
RECITALS The following recitals are a substantive portion of this Agreement.
A. CITY intends to provide youth and teens mental wellness support (“Project”) and desires
to engage a consultant to provide services in connection with the Project (“Services”). B. CONSULTANT has represented that it has the necessary professional expertise, qualifications, and capability, and all required licenses and/or certifications to provide the Services.
C. CITY in reliance on these representations desires to engage CONSULTANT to provide the Services as more fully described in Exhibit “A”, attached to and made a part of this Agreement. NOW, THEREFORE, in consideration of the recitals, covenants, terms, and conditions, in
this Agreement, the parties agree:
AGREEMENT SECTION 1. SCOPE OF SERVICES. CONSULTANT shall perform the Services described at
Exhibit “A” in accordance with the terms and conditions contained in this Agreement. The
performance of all Services shall be to the reasonable satisfaction of CITY. SECTION 2. TERM. The term of this Agreement shall be from the date of its full execution through June 30, 2025
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.
DocuSign Envelope ID: 87C5448D-0466-48F6-837F-A2EDF46EE391
Professional Services Rev. April 23, 2020 2
SECTION 4. NOT TO EXCEED COMPENSATION. The compensation to be paid to
CONSULTANT for performance of the Services described in Exhibit “A” (“Basic Services”), and
reimbursable expenses, shall not exceed One Hundred Thousand Dollars per fiscal year ($100,000.00/year), for a not-to-exceed amount of Five Hundred Thousand Dollars ($500,000.00) during the term of this Agreement. CONSULTANT agrees to complete all Basic Services, including reimbursable expenses, within this amount. In addition, City shall make a one-time
transfer of Twenty One Thousand Six Hundred Four Dollars ($21,604.00) in donations previously
received by the City for Project Safety Net to CONSULTANT. The total amount of this Agreement shall not exceed Five Hundred Twenty One Thousand Six Hundred Four Dollars ($521,604.00). 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 annual invoices to the CITY describing the services performed and the applicable charges as described in
Exhibit B (“SCHEDULE OF PERFORMANCE”) to this Agreement.
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 of
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Professional Services Rev. April 23, 2020 3
such errors and omissions, any change order markup costs, or costs arising from delay caused by the errors and omissions or unreasonable delay in correcting the errors and omissions.
SECTION 9. COST ESTIMATES. If this Agreement pertains to the design of a public works project, CONSULTANT shall submit estimates of probable construction costs at each phase of design submittal. If the total estimated construction cost at any submittal exceeds the CITY’s stated construction budget by ten percent (10%) or more, CONSULTANT shall make
recommendations to CITY for aligning the PROJECT design with the budget, incorporate CITY
approved recommendations, and revise the design to meet the Project budget, at no additional cost to CITY. SECTION 10. INDEPENDENT CONTRACTOR. It is understood and agreed that in
performing the Services under this Agreement CONSULTANT, and any person employed by or
contracted with CONSULTANT to furnish labor and/or materials under this Agreement, shall act as and be an independent contractor and not an agent or employee of CITY. SECTION 11. ASSIGNMENT. The parties agree that the expertise and experience of
CONSULTANT are material considerations for this Agreement. CONSULTANT shall not assign
or transfer any interest in this Agreement nor the performance of any of CONSULTANT’s obligations hereunder without the prior written consent of the city manager. Consent to one assignment will not be deemed to be consent to any subsequent assignment. Any assignment made without the approval of the city manager will be void.
SECTION 12. SUBCONTRACTING. 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.
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 Mary Gloner to have supervisory responsibility for the performance, progress, and execution of the Services and to represent CONSULTANT during the day-to-day work on the Project. If circumstances cause
the substitution of the project director, project coordinator, or any other key personnel for any
reason, the appointment of a substitute project director and the assignment of any key new or replacement personnel will be subject to the prior written approval of the CITY’s project manager. CONSULTANT, at CITY’s request, shall promptly remove personnel who CITY finds do not perform the Services in an acceptable manner, are uncooperative, or present a threat to the adequate
or timely completion of the Project or a threat to the safety of persons or property.
CITY’s project manager is Kristen O’Kane, Community Services Department, 1305 Middlefield, Palo Alto, CA 94301, Telephone: (650) 463-4908. The project manager will be CONSULTANT’s point of contact with respect to performance, progress and execution of the Services. CITY may
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Professional Services Rev. April 23, 2020 4
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 pertaining to matters covered by this Agreement. CONSULTANT further agrees to maintain and
retain such records for at least three (3) years after the expiration or earlier termination of this
Agreement. SECTION 16. INDEMNITY.
16.1. To the fullest extent permitted by law, CONSULTANT shall protect,
indemnify, defend and hold harmless CITY, its Council members, officers, employees and agents (each an “Indemnified Party”) from and against any and all demands, claims, or liability of any nature, including death or injury to any person, property damage or any other loss, including all costs and expenses of whatever nature including attorneys fees, experts fees, court costs and
disbursements (“Claims”) resulting from, arising out of or in any manner related to performance
or nonperformance by CONSULTANT, its officers, employees, agents or contractors under this Agreement, regardless of whether or not it is caused in part by an Indemnified Party. 16.2. Notwithstanding the above, nothing in this Section 16 shall be construed to
require CONSULTANT to indemnify an Indemnified Party from Claims arising from the active
negligence, sole negligence or willful misconduct of an Indemnified Party. 16.3. The acceptance of CONSULTANT’s services and duties by CITY shall not operate as a waiver of the right of indemnification. The provisions of this Section 16 shall survive
the expiration or early termination of this Agreement.
SECTION 17. WAIVERS. The waiver by either party of any breach or violation of any covenant, term, condition or provision of this Agreement, or of the provisions of any ordinance or law, will not be deemed to be a waiver of any other term, covenant, condition, provisions,
ordinance or law, or of any subsequent breach or violation of the same or of any other term,
covenant, condition, provision, ordinance or law. SECTION 18. INSURANCE.
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Professional Services Rev. April 23, 2020 5
18.1. CONSULTANT, at its sole cost and expense, shall obtain and maintain, in full force and effect during the term of this Agreement, the insurance coverage described in Exhibit
"D". CONSULTANT and its contractors, if any, shall obtain a policy endorsement naming CITY
as an additional insured under any general liability or automobile policy or policies. 18.2. All insurance coverage required hereunder shall be provided through carriers with AM Best’s Key Rating Guide ratings of A-:VII or higher which are licensed or
authorized to transact insurance business in the State of California. Any and all contractors of
CONSULTANT retained to perform Services under this Agreement will obtain and maintain, in full force and effect during the term of this Agreement, identical insurance coverage, naming CITY as an additional insured under such policies as required above.
18.3. Certificates evidencing such insurance shall be filed with CITY concurrent-
ly with the execution of this Agreement. The certificates will be subject to the approval of CITY’s Risk Manager and will contain an endorsement stating that the insurance is primary coverage and will not be canceled, or materially reduced in coverage or limits, by the insurer except after filing with the Purchasing Manager thirty (30) days' prior written notice of the cancellation or
modification. If the insurer cancels or modifies the insurance and provides less than thirty (30)
days’ notice to CONSULTANT, CONSULTANT shall provide the Purchasing Manager written notice of the cancellation or modification within two (2) business days of the CONSULTANT’s receipt of such notice. CONSULTANT shall be responsible for ensuring that current certificates evidencing the insurance are provided to CITY’s Chief Procurement Officer during the entire term
of this Agreement.
18.4. The procuring of such required policy or policies of insurance will not be construed to limit CONSULTANT's liability hereunder nor to fulfill the indemnification provisions of this Agreement. Notwithstanding the policy or policies of insurance,
CONSULTANT will be obligated for the full and total amount of any damage, injury, or loss
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.
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19.4. Upon such suspension or termination by CITY, CONSULTANT will be
paid for the Services rendered or materials delivered to CITY in accordance with the scope of
services on or before the effective date (i.e., 10 days after giving notice) of suspension or termination; provided, however, if this Agreement is suspended or terminated on account of a default by CONSULTANT, CITY will be obligated to compensate CONSULTANT only for that portion of CONSULTANT’s services which are of direct and immediate benefit to CITY as such
determination may be made by the City Manager acting in the reasonable exercise of his/her
discretion. The following Sections will survive any expiration or termination of this Agreement: 14, 15, 16, 19.4, 20, and 25. 19.5. No payment, partial payment, acceptance, or partial acceptance by CITY
will operate as a waiver on the part of CITY of any of its rights under this Agreement. SECTION 20. NOTICES. All notices hereunder will be given in writing and mailed, postage prepaid, by
certified mail, addressed as follows:
To CITY: Office of the City Clerk City of Palo Alto Post Office Box 10250
Palo Alto, CA 94303
With a copy to the Purchasing Manager To CONSULTANT: Attention of the project director
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.
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SECTION 22. NONDISCRIMINATION. As set forth in Palo Alto Municipal Code section 2.30.510, CONSULTANT certifies that in the performance of this Agreement, it shall not
discriminate in the employment of any person due to that person’s race, skin color, gender, gender
identity, age, religion, disability, national origin, ancestry, sexual orientation, pregnancy, genetic information or condition, housing status, marital status, familial status, weight or height of such person. CONSULTANT acknowledges that it has read and understands the provisions of Section 2.30.510 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the
penalties for violation thereof, and agrees to meet all requirements of Section 2.30.510 pertaining
to nondiscrimination in employment. SECTION 23. ENVIRONMENTALLY PREFERRED PURCHASING AND ZERO WASTE REQUIREMENTS. CONSULTANT shall comply with the CITY’s Environmentally
Preferred Purchasing policies which are available at CITY’s Purchasing Department, incorporated
by reference and may be amended from time to time. CONSULTANT shall comply with waste reduction, reuse, recycling and disposal requirements of CITY’s Zero Waste Program. Zero Waste best practices include first minimizing and reducing waste; second, reusing waste and third, recycling or composting waste. In particular, CONSULTANT shall comply with the following
zero waste requirements:
(a) All printed materials provided by CCONSULTANT 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
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of Palo Alto and the Palo Alto Municipal Code. This Agreement will terminate without any penalty (a) at the end of any fiscal year in the event that funds are not appropriated for the following
fiscal year, or (b) at any time within a fiscal year in the event that funds are only appropriated for
a portion of the fiscal year and funds for this Agreement are no longer available. This section shall take precedence in the event of a conflict with any other covenant, term, condition, or provision of this Agreement.
SECTION 26. PREVAILING WAGES AND DIR REGISTRATION FOR PUBLIC WORKS CONTRACTS 26.1 This Project is not subject to prevailing wages. CONSULTANT is not required to pay prevailing wages in the performance and implementation of the Project in
accordance with SB 7 if the contract is not a public works contract, if the contract does not include
a public works construction project of more than $25,000, or the contract does not include a public works alteration, demolition, repair, or maintenance (collectively, ‘improvement’) project of more than $15,000.
SECTION 27. MISCELLANEOUS PROVISIONS. 27.1. This Agreement will be governed by the laws of the State of California.
27.2. In the event that an action is brought, the parties agree that trial of such
action will be vested exclusively in the state courts of California in the County of Santa Clara, State of California. 27.3. The prevailing party in any action brought to enforce the provisions of this
Agreement may recover its reasonable costs and attorneys' fees expended in connection with that
action. The prevailing party shall be entitled to recover an amount equal to the fair market value of legal services provided by attorneys employed by it as well as any attorneys’ fees paid to third parties.
27.4. This document represents the entire and integrated agreement between the
parties and supersedes all prior negotiations, representations, and contracts, either written or oral. This document may be amended only by a written instrument, which is signed by the parties. 27.5. The covenants, terms, conditions and provisions of this Agreement will
apply to, and will bind, the heirs, successors, executors, administrators, assignees, and consultants
of the parties. 27.6. If a court of competent jurisdiction finds or rules that any provision of this Agreement or any amendment thereto is void or unenforceable, the unaffected provisions of this
Agreement and any amendments thereto will remain in full force and effect.
27.7. All exhibits referred to in this Agreement and any addenda, appendices, attachments, and schedules to this Agreement which, from time to time, may be referred to in any duly executed amendment hereto are by such reference incorporated in this Agreement and will
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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 Agreement 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 [Reserved]
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.
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CONTRACT No. C21180082 SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have by their duly authorized representatives
executed this Agreement on the date first above written.
CITY OF PALO ALTO
____________________________
City Manager
APPROVED AS TO FORM:
__________________________ City Attorney or designee
PROJECT SAFETY NET INC.
By:
Name:
Title: Executive Director
Attachments: EXHIBIT “A”: SCOPE OF SERVICES
EXHIBIT “B”: SCHEDULE OF PERFORMANCE
EXHIBIT “C”: COMPENSATION EXHIBIT “D”: INSURANCE REQUIREMENTS
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Mary Cheryl B. Gloner
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EXHIBIT “A” SCOPE OF SERVICES
I. PROGRAM SERVICES
CONSULTANT shall provide services to youth and teens through mental health support and
suicide prevention services. Project Safety Net (PSN) provides resources and support for
youth suicide prevention and mental wellness through education, outreach, training, quality
mental health services, and advocacy.
II. PROGRAM GOALS
1. To maintain a well-informed and diverse representation of community partners who will
collectively work towards youth resiliency, well-being and suicide prevention as a
COLLABORATION CONVENOR.
2. To improve youth well-being by providing culturally tailored MENTAL HEALTH AND
SUICIDE PREVENTION GATEKEEPER TRAININGS to diverse stakeholders (e.g. LGBTQ+,
immigrant, underserved, transitional age youth, disabilities).
3. To CIVICALLY ENGAGE YOUNG PEOPLE to develop a policy agenda that will ensure a
continuum of mental health care for the most vulnerable youth, advances youth
wellbeing promotion, and prevents youth suicides.
III. PROGRAM OBJECTIVES
For Goal #1 – COLLABORATION CONVENOR
1. Convene quarterly community meetings reaching a total of 120 community partners to
engage in conversation, share information, cultivate relationships, build skills, network,
respond to community occurrences, and advance action plans.
Outcome Measures:
- 50% of participants report that will collaborate with other meeting participants to
advance youth wellbeing and suicide prevention.
- 80% of participants report will apply what experienced at community meetings into
their work, studies, or personal life.
For Goal #2 – MENTAL HEALTH AND SUICIDE PREVENTION GATEKEEPER TRAININGS
1. Lead a minimum of two mental health first aid certification trainings reaching 50
participants.
Outcome Measure:
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- 95% of participants successfully complete certification training.
- 70% as participants self-report increase knowledge to recognize the signs of mental
health/substance use challenges, crisis (particularly suicide), and to seek assistance.
For Goal #3 – CIVICALLY ENGAGE YOUNG PEOPLE
1. Convene a coalition of at least twelve youth representing local organizations, teen
groups, and community at large to shape Project Safety Net’s youth mental health and
suicide prevention policy agenda.
2. Support youth coalition to plan and host a youth mental health and suicide prevention
policy forum for the community with a minimum of 50 members in attendance.
Outcome Measures:
- 75% of youth coalition members will self-report they increased their skills in
- 80% of policy forum attendees report will identify at least one policy action they will
commit to take within the next three months of forum.
IV. METHODS
1. Serve as a central point and repository for youth mental health and suicide prevention
resources, services, programs, and partners (in person and virtually).
2. Integrate youth engagement at all levels of collaborative (governance, workgroups,
partners, community meetings)
3. Cultivate and broaden PSN membership to advance collective impact of PSN’s mission.
4. Transition Leadership Team body into a Partners Council to respond to community
priorities and advance PSN’s mission through coordination of strategic roadmap.
5. Involve youth in education, training, and outreach programming, which includes
trainings, speaker events, community conversations, youth connections, and services.
6. Coordinate, implement, and evaluate trainings in collaboration with schools/districts,
youth serving organizations (especially those that employ young professionals), the faith
community, and County of Santa Clara County Behavioral Health Department.
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7. Inform community members, including young people, of current youth mental health
and suicide prevention policies; provide opportunities to shape policies; educate on
advocacy skills, and mobilize to educate policymakers.
8. Partner with academic institutions to evaluate program’s process, impact, and
outcomes.
V. DELIVERABLES
1. Consultant shall provide semi-annual activity reports relating to this Scope of Services
for the periods ending December 31, 2020; June 30, 2021; December 31, 2021; June 30,
2022; December 31, 2022; June 30, 2023; December 31, 2023; June 30, 2024; December
31, 2024; June 30, 2025; within fifteen days after these dates.
2. Each report shall cover the preceding six months and such other information as the
Program Manager may request. The final report shall focus on the preceding six months
but shall also provide information on contract services for the entire year. The
additional summary report shall cover the period for the entire contract period up to
the date prior to submission. Each report shall be prepared in the form agreed upon by
the Program Manager and the Consultant.
VI. TIME SCHEDULE
• Services shall commence on September 21, 2020 and continue through June 30, 2025.
• Semiannual progress reports shall be completed and submitted to the City on the
fifteenth day after each six-month period.
VII. REQUIREMENTS
• The City of Palo Alto requires mention of its name in all materials that acknowledge
donors in any public announcements or publicity regarding funded programs.
• CONSULTANT shall comply with the Americans with Disabilities Act (ADA) of 1990.
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EXHIBIT “B” SCHEDULE OF PERFORMANCE
CONSULTANT shall perform the Services within the terms of this Agreement and as detailed in Exhibit A. 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.
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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 Exhibit A, Scope of Services. Compensation shall not exceed the budget amount set forth below.
The first annual payment and transfer of existing donations shall be submitted to CONSULTANT
within 45 days of execution of this Agreement. For subsequent years, CONSULTANT shall issue an annual invoice to City together with its submission of the semi-annual report for the period ending June 30th of each year. City shall pay the invoice within 45 days of the City’s Project Manager’s approval for completeness of the semi-annual report.
Total Annual Basic Services $100,000 per fiscal year Additional Services (Not to Exceed) $0.00
Transfer of Existing Donations $21,604 (one time) Maximum Total Compensation: $521,604 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: none.
All requests for payment of expenses shall be accompanied by appropriate backup information. Any expense anticipated to be more than $0 shall be approved in advance by the CITY’s project manager. 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. 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.
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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 CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR CONTRACTOR’S AGREEMENT TO INDEMNIFY CITY. 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. B. CROSS LIABILITY THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER THE POLICY SHALL
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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
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Certificate Of Completion
Envelope Id: 87C5448D046648F6837FA2EDF46EE391 Status: Completed
Subject: Please DocuSign: C21180082 Project Safety Net - final08272020.pdf
Source Envelope:
Document Pages: 17 Signatures: 1 Envelope Originator:
Certificate Pages: 2 Initials: 0 Terry Loo
AutoNav: Enabled
EnvelopeId Stamping: Enabled
Time Zone: (UTC-08:00) Pacific Time (US & Canada)
250 Hamilton Ave
Palo Alto , CA 94301
Terry.Loo@CityofPaloAlto.org
IP Address: 199.33.32.254
Record Tracking
Status: Original
8/27/2020 12:59:19 PM
Holder: Terry Loo
Terry.Loo@CityofPaloAlto.org
Location: DocuSign
Security Appliance Status: Connected Pool: StateLocal
Storage Appliance Status: Connected Pool: City of Palo Alto Location: DocuSign
Signer Events Signature Timestamp
Mary Cheryl B. Gloner
psnexecutivedirector@gmail.com
Security Level: Email, Account Authentication
(None)
Signature Adoption: Pre-selected Style
Using IP Address: 98.248.53.171
Sent: 8/27/2020 1:01:52 PM
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Signed: 8/27/2020 1:06:38 PM
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Erin Perez
Erin.Perez@CityofPaloAlto.org
City of Palo Alto
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Sent: 8/27/2020 1:06:40 PM
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Kristen O’Kane
Kristen.O'Kane@CityofPaloAlto.org
Assistant Director Community Services
City of Palo Alto
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Sent: 8/27/2020 1:06:41 PM
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City of Palo Alto (ID # 11523)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 9/21/2020
City of Palo Alto Page 1
Summary Title: Bicycle and Electric Scooter Share Pilot Program
Title: Adoption of a Resolution to Extend the Bicycle and Electric Scooter
Share Pilot Program for 18 Months
From: City Manager
Lead Department: Transportation Department
Recommendation
Staff recommends that Council adopt a resolution (Attachment A) approving an 18-month
extension of the bicycle and electric scooter share pilot program through September 30, 2022.
Background
Bicycle and electric scooter sharing programs are emerging technologies for improving mobility,
first/last mile connections, as well as reducing emission and traffic congestion. The City of Palo Alto
adopted a one-year bicycle and electric scooter sharing pilot program in March 2018 (CMR #8546)
and developed permit guidelines for vendors to operate within the City of Palo Alto. The pilot
program was extended by Council in 2019 (Resolution #9822) and subsequently in 2020
(Resolution #9882). The pilot program implementation was initially delayed due to staff resources
and delayed further as a result of the COVID-19 pandemic. A timeline for returning to normalcy is
uncertain. Therefore, the current expiration date of March 31, 2021 will likely discourage
providers’ interest given that a successful application could only yield a few months of operations.
To account for the dynamic situation, staff recommends extending the pilot program for an
additional 18 months to test the concept of private bicycle and electric scooter sharing systems
in Palo Alto. The pilot program will assist the City in assessing the quality of various service
providers to meet service requirements and interest from the community. If extended, the one-
year bicycle and electric scooter pilot program will expire on September 30, 2022. Following the
pilot program, staff anticipates returning to Council for action on adoption of permanent
regulations and requirements.
Discussion
Across the nation, the pandemic is forcing a change of perspective on alternative transportation
modes. Despite a lack of data documenting transmission via these shared modes, there are
safety concerns regarding public transit, ride hailing, taxis, and micromobility. Micromobility
City of Palo Alto Page 2
has been promoted to be a safer choice for travel as it enables physical distancing and is not
enclosed. However, as a result of economic challenges, along with increasing sanitization
protocols, providers have completely withdrawn or significantly reduced services to only
operate in areas with most need. Additionally, with nearly half of our daytime, weekday
population of in-commuters now absent, the pandemic hinders potential vendors’ ability to
conduct the inclusive community engagement required by the program, as well as prevents an
accurate reading of community interest and device use.
Fortunately, literature suggests that micromobility, which is an open-air mode, could be one of
the top transportation solutions to aid in the City’s recovery plan. Staff will continue to monitor
the situation and revise the City’s regulations (Attachment B) to reflect any applicable
operations and safety procedures.
As we carefully bring back small degrees of normalcy, staff will determine a practical program
announcement and implementation timeframe.
Policy Implications
Development of the bicycle and electric scooter sharing systems is consistent with the following
Comprehensive Plan 2030 and Bicycle + Pedestrian Transportation Plan goals, policies, and
projects:
Comprehensive Plan 2030:
• Program T1.6.1: Collaborate with transit providers, including Caltrain, bus operators and
rideshare companies, to develop first/last mile connection strategies that boost the use
of transit and shuttle service for local errands and commuting.
• Policy T-1.16: Promote personal transportation vehicles as an alternative to cars (e.g.
bicycles, skateboards, roller blades) to get to work, school, shopping, recreational
facilities and transit stops.
• Program T1.19.4: Encourage the use of bicycle sharing, and the provision of required
infrastructure throughout Palo Alto, especially at transit stations and stops, job centers,
community centers and other destinations.
Bicycle + Pedestrian Transportation Plan:
• PR-5 Bicycle Share Program
Additionally, bicycle sharing systems are consistent with goals outlined in the Sustainability and
Climate Action Plan (S/CAP) and are strategies on improving and supporting non-automobile-
based mobility. Electric scooter sharing systems also improve and support non-automobile-
based mobility, however the maximum 3-month life cycle (the average is 1 month) for shared
electric scooters create more GHG emissions, waste, and resource depletion due to the need to
constantly replace the shared electric scooters. While scooter use is cleaner than automobile
use, vendors are working to increase the scooter lifecycle and reduce the carbon footprint of
City of Palo Alto Page 3
their programs by building improved devices, purchasing carbon offsets, and employing green
vehicles to rebalance devices. Carbon footprint selection criteria can be included in a future
permanent program when greener devices and systems may be available.
Resource Impact
Under the proposed pilot program, minimal costs are anticipated primarily for staff time
reviewing applications, issuing permits, data analysis, and monitoring compliance. The funding
for this program is available in the Fiscal Year 2021 Adopted Operating Budget. If the program
continues beyond the pilot phase, funding for subsequent years of the program will be subject
to approval through the annual budget development process.
Timeline
Upon City Council approval, staff will continue to monitor the situation and announce the
application process through our pilot program website when suitable. The application process is
anticipated to remain open for three weeks.
The successful and timely deployment of devices is heavily reliant on vendors’ application
completeness, community engagement process, and staff resources for reviewing applications
and issuing permits. A targeted timeframe for deployment of devices is four weeks from permit
issuance.
Environmental Review
Amendment of the adopted resolution for a bicycle and electric scooter share pilot program
extension is exempt from the provisions of the California Environmental Quality Act (CEQA)
pursuant to CEQA Guidelines Section 15061(b) (3) because it can be seen with certainty that the
project will have no significant effect on the environment.
Attachments:
• Attachment A: Resolution Bicycle and E-Scooter Share Extension
• Attachment B: Bike Scooter Share Pilot Permit Regulations
*NOT YET APPROVED*
1 209_20200806_ts-24
Resolution No. ___
Resolution of the Council of the City of Palo Alto Extending
the Pilot Program for Bicycle and E-Scooter Sharing Systems
for 18-Months Through September 30, 2022
The Council of the City of Palo Alto RESOLVES as follows:
SECTION 1. Findings and Declarations.
A. On March 18, 2019, the Council of the City of Palo Alto adopted Resolution No. 9822,
authorizing the City Manager to implement a pilot program to permit the operation of
bicycle and electric scooter (“e-scooter”) sharing system, including stationless or
“free-floating” sharing systems, for use by Palo Alto residents, workers, and visitors.
B. On March 2, 2020, the Council of the City of Palo Alto adopted Resolution No. 9882,
approving a one-year extension of the pilot program through March 31, 2021.
C. Bicycle and e-scooter sharing programs are emerging technologies for improving
mobility and first/last mile connections, as well as reducing emission and traffic
congestion.
D. With the emergence of stationless sharing technologies, the absence of a pilot
permitting program is likely to result in cluttered and obstructed sidewalks, uneven
and inequitable distribution of bicycles and e-scooters, or other threats to public
health and safety.
E. By contrast, a pilot program allows the City to develop permit regulations for vendors
to operate within the City of Palo Alto in a way that is most responsive to the needs of
Palo Alto residents, workers, and visitors.
F. No permits have been issued to-date. Several bicycle and e-scooter sharing systems
operators have expressed an interest in participating in the one-year pilot program
authorized by Resolution No. 9822 and extended by Resolution No. 9882.
G. The uncertainties with the COVID-19 pandemic present challenges for a timeline for
returning to normalcy, implementing inclusive community engagement, and accurately
capturing interest.
H. The extension of the pilot program will allow the City to consider and process
applications that may be submitted, and collect and analyze data and assess the quality
of various service providers.
*NOT YET APPROVED*
2 209_20200806_ts-24
SECTION 2. Pilot Program Regulations.
A. The City Manager or his designee is hereby authorized to adopt, and from time to time
amend, regulations governing the operation of bicycle and e-scooter sharing systems
within the City of Palo Alto. Such regulations shall address, at a minimum, the following
topics:
1. Bicycle and e-scooter safety;
2. Bicycle and e-scooter fleet deployment, including the total number of bicycles
and e-scooters permitted as well as their distribution throughout the City, in
order to avoid nuisances or unwanted encroachments into the public right of
way;
3. Permitted areas for bicycle and e-scooter parking; and
4. Additional measures to ensure efficient and effective deployment of bicycle and
e-scooter sharing systems in the City.
B. Any violation of regulations adopted pursuant to this section by a bicycle or e-scooter
sharing system operator may result in revocation of any permit issued to the
operator pursuant to the pilot program.
C. The pilot program authorized by Resolution No. 9822, extended by Resolution No.
9882 and this resolution shall terminate upon the earlier of September 30, 2022 or the
adoption of an ordinance regulating bicycle and e-scooter sharing systems by the Palo
Alto City Council.
SECTION 3. Environmental Review.
The Council finds that the adoption of this resolution is exempt from review under the
California Environmental Quality Act because it can be seen with certainty that there is no
possibility of a significant effect on the environment as a result of the Bicycle and E-Scooter
Sharing System pilot program.
//
//
//
//
*NOT YET APPROVED*
3 209_20200806_ts-24
SECTION 4. This resolution shall be effective immediately upon City Council approval.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
__________________________ _____________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
__________________________ _____________________________
Deputy City Attorney City Manager
_____________________________
Chief Transportation Official
_____________________________
Director of Public Works
Page 1 of 15
DOCKLESS BICYCLE, ELECTRIC-ASSIST BICYCLE, AND ELECTRIC SCOOTER SHARE
PILOT PROGRAM PERMIT REGULATIONS
APPROVED ON DATE
I. Statement of Purpose
The purpose of these regulations is to govern the operation of a dockless bicycle, electric‐assist
bicycle, and/or electric scooter sharing pilot program within the City of Palo Alto. A key to the
pilot program’s success is to ensure that such mobility sharing systems are consistent with the
safety and well‐being of bicyclists, pedestrians, and all other users of the public right‐of‐way.
II. Scope and Applicability
These regulations apply to the application process, deployment, and wind-down of bicycle,
electric‐assist bicycle, and/or electric scooter sharing systems within the City of Palo Alto’s
jurisdictional boundaries. (Stanford University’s academic campus is not within Palo Alto). All
operators of electric‐assist bicycle, and/or electric scooter sharing systems shall be required to
comply with these regulations, as they may be amended from time to time.
III. Duration of Pilot
The duration of this pilot is set by City Council resolution. As of the date of these regulations, the
pilot is authorized until DATE per Resolution XX. Permittees shall cease operations to the public
and remove their full fleet and any other signs or fixtures from the City by DATE.
IV. Authority
a. The City Manager is authorized pursuant to Council Resolution Nos. 9822, 9882, and XX
to establish regulations governing the operation of bicycle, electric‐assist bicycle, and/or
electric scooter sharing programs.
b. The City Manager designates the Chief Transportation Official to: (1) act on his behalf to
adopt and amend these regulations at the Chief Transportation Official’s discretion; and
(2) carry out all powers and duties in these regulations, including those attributed to the
City Manager.
c. A valid permit is required to operate electric‐assist bicycle, and/or electric scooter sharing
systems in the City.
d. The City Manager is authorized to issue, suspend, and revoke permits to allow, limit, or
suspend operation of electric‐assist bicycle, and/or electric scooter sharing systems
within the City in accordance with applicable City Council resolutions and these
regulations.
PERMIT APPLICATION REGULATIONS
Page 2 of 15
I. Application Procedures
a. Application Submission
Applications must be completed and submitted electronically by 5:00pm on DATE. By
submitting an application, applicants acknowledge that they have read, understand, and
agree, if selected, to all regulations. A completed application package must include the
following components:
i. Signed Application Cover Sheet in Appendix A
ii. Application materials listed in Section II of these permit application regulations
Please submit one searchable format application via email and five hard copies by mail to
the City of Palo Alto Office of Transportation.
Email: Micromobility@CityofPaloAlto.org
Mail: City of Palo Alto, Office of Transportation
250 Hamilton Ave, 5th Floor
Palo Alto, CA 94301
Re: Dockless Bicycle and Electric Scooter Sharing Pilot Program
As of DATE, there is no fee to submit an application for this pilot program.
Note: Vendors with a fixed place of business in Palo Alto are required to register with
the City in accordance with the City’s municipal code. Please see the Palo Alto Business
Registry website:https://www.cityofpaloalto.org/business/business_registry/default.asp
b. Selection Process
i. The City anticipates initially selecting a limited number of operators.
ii. The City will evaluate applications based on the criteria shown in Appendix B.
iii. In the case where operators received the same evaluation total, the selection will
be prioritized as follows:
1. Operator who scored higher in the Operations category.
2. Operator who scored higher, on average, in the Experience and
Qualification, Community Engagement, and Customer Service categories.
Note: If operators receive the same evaluation total and score the same in the
above, the permit will be granted to the operator with the early application
submission time stamp via email.
iv. After application submission but before selection, applicants may be contacted to
provide additional information or documentation.
Page 3 of 15
v. Selected applicants will be allowed to obtain an encroachment permit to operate
from the Office of Transportation conditioned on compliance with these
regulations and any other conditions established by the City including, revisions
to applicant’s proposed fleet size and community engagement plan. As of DATE,
there is no fee to obtain a permit. Only applicants selected by the Office of
Transportation shall be eligible to obtain an encroachment permit from the Office
of Transportation. No person shall operate a bicycle, electric‐assist bicycle, and/or
electric scooter share program within the city except pursuant to such permit.
vi. Selected applicants shall conduct their community outreach process after permit
issuance but prior to deployment of any devices. Selected applicants shall notify
via e-mail completion of their Community Engagement Plan along with a summary
memo, and all supporting documents (e.g. sign-in sheets, flyers, questionnaires,
presentations) to the Office of Transportation. Applicants shall deploy their
devices upon receiving a letter of authorization from the City. The Community
Engagement Plan summary memo shall include at a minimum the following:
1. Date, time, and location
2. Audience (e.g. schools, community centers)
3. Engagement format
4. Major themes and key takeaways
Email: Micromobility@CityofPaloAlto.org
II. Application Materials
The applicant shall include the listed information described below in a searchable format. The
applicant shall be responsible for including all information that demonstrates compliance with
these requirements.
a. Experience and Qualification
Provide a description of the individual, firm, or entity that is anticipated to become the
operator of the Palo Alto Bicycle, Electric-Assist Bicycle, and Electric Scooter Share
Program. Description shall include but shall not be limited to the following:
i. Experience operating micro-mobility devices.
ii. List of cities in which you are currently operating and have operated. If you are
operating in and/or have operated in neighboring cities of Palo Alto, include the
following (if applicable):
1. Dates of operation.
2. Total number of devices in service.
3. The average active fleet size in your first six months of operation.
4. Total trips provided in your first six months of operation.
iii. Citations or suspensions from local authorities.
Page 4 of 15
b. Operations and Maintenance Plan
Operators must have a system operations strategy that provides an equitable distribution
of devices. Devices shall be available and accessible throughout neighborhoods,
commercial areas, and key destinations citywide. The applicant shall submit an operations
and maintenance plan that includes at a minimum the following:
i. General operations, service area, and availability, including hours of operations,
pricing structure, proposed deployment locations, proposed fleet size at each
deployment location, geofencing capabilities, recharging or devices, and storage
of devices during non-operational hours.
ii. Data justification for the proposed fleet size.
iii. Provide information about hiring, including the descriptions of hired staff and
contractors for operation and maintenance of your sharing systems, , staffing
levels and training provided to them.
iv. Methods for deployment and rebalancing.
v. Speed reduction and deactivation strategies as appropriate.
vi. Permittee shall propose incentivized parking areas, with justification, for key
destinations, such as:
1. Downtown Avenue business districts, as defined in the City of Palo Alto
Comprehensive Plan 2030 Map L-3, p.21
2. Palo Alto Caltrain Station
3. California Avenue Caltrain Station
4. Stanford Shopping Center
5. Town & Country Village
6. Palo Alto Libraries – Children’s Library, College Terrace Library, Downtown
Library, Mitchell Park Library and Rinconada Library
7. Large Community Parks – Rinconada Park, Mitchell Park and Greer Park
vii. For incentivized parking areas, explain the use of geofencing technology.
viii. Methods for parking verification, notification, reporting, and enforcement.
ix. Describe the approach to inspection, maintenance, cleaning, and repairing, as well
as procedures for customers to notify the operator of a safety or maintenance
issue.
In addition to compliance with all federal, state, and local laws, the Operations and
Maintenance Plan shall clearly describe compliance with all regulations
Note: Selected applicants will be conditioned on compliance with these regulations and
any other conditions established by the City including, revisions to applicant’s proposed
fleet size and community engagement plan.
c. Community Engagement Plan
The outreach process shall be oriented to the community at large to reach both users and
non-users of the program. Engagement shall include virtual, physical, and in-person
methods, as well as use of effective and creative techniques. The plan shall describe at a
minimum the following:
Page 5 of 15
i. Methods of conveying information about safety rules and regulations, as well as
associated penalties, including those related to wearing helmets, riding on
sidewalks and/or roadways, and parking.
ii. Partnerships with local businesses or other organizations to promote the use of
the program.
iii. Any fines, consequences, and user accountability measures to encourage and
monitor compliance with applicable laws and regulations. Specify methods to
address users who are noncompliant.
iv. A list of planned communication materials, events and activities with residents,
business groups, community organizations, neighborhood associations, the
Transportation Management Association, and other key stakeholders within the
City. Outreach materials shall be made available in English, Spanish and/or
Chinese.
Note: Selected applicants will be conditioned on compliance with these regulations and
any other conditions established by the City including, revisions to applicant’s proposed
fleet size and community engagement plan.
d. Personal Data and Privacy Plan
i. Provide any privacy policies, user agreements, and/or terms of service in a
searchable format for review, including the method for obtaining user
acknowledgement and/or agreement.
ii. Define the extent of personal information collected about users, how it is being
used, and for how long.
e. Description of Devices
Provide devices’ specifications and safety measures including but not limited to the
following:
i. Type of bicycles, electric-assist bicycles, and/or scooters including accompanying
hardware – warning bells, lights, and other relevant components.
ii. Technology for location-based speed regulation, deactivation, and parking
restriction.
iii. Describe devices’ geofencing technology.
iv. Propose approaches to ensure user compliance with laws and regulations –
including those related to wearing helmets, riding on sidewalks and/or roadways,
parking locations.
v. Describe devices’ capabilities to accommodate a range of users.
f. Description of Mobile Application
Provide mobile application’s capabilities including but not limited to the following:
i. Provide information of the mobile application and the website to be used.
ii. Clarify if using a third-party mobile application or website.
Page 6 of 15
iii. Propose technology to be used to ensure user compliance with laws and
regulations – including those related to wearing helmets, riding on sidewalks
and/or roadways, parking locations, and other relevant safety rules.
iv. Describe mobile application’s customer interface to accommodate multilingual
users and necessary interface to enhance customer service and educate users
about safe riding and rules of the road.
The mobile application and other customer interface technology must be fully accessible
to persons with disabilities and accessible to screen readers and must comply with Section
508 of the United States Workforce Rehabilitation Act of 1973.
g. Proof of Insurance
Attach certificates of insurance per requirements set forth in the operational
regulations.
OPERATIONAL REGULATIONS
I. Parameters of the Program
The City Manager reserves the right to:
a. Determine the type and number of devices to operate within the City of Palo Alto. The
City Manager can restrict the type of devices to operate even after issuing permit or after
deploying devices in the city.
b. Set a maximum on the number of bicycles, electric‐assist bicycles, and/or electric scooters
parked in specific areas of the city (e.g., the Downtown or California Avenue business
districts, as defined in the City of Palo Alto Comprehensive Plan 2030).
c. Limit or deny the use and/or parking of bicycles, electric-assist bicycles, and/or electric
scooters in specific areas of the city to maintain equal distribution and prevent congestion
on the public right of way.
d. Set the total number of bicycles, electric‐assist bicycles, and/or electric scooters and total
number of operators permitted under this pilot program,
II. General
a. Permittees must comply with all applicable federal, state, and local laws, including but
not limited to, the Palo Alto Municipal Code, the California Vehicle Code (CVC), and local
wage requirements.
b. Permittees shall be responsible for educating their users regarding all applicable federal,
state, and local laws governing safe operations and parking of bicycles, electric-assist
bicycles, and/or electric scooters.
c. Permittees shall not transfer or assign permits issued under this program to a substitute
provider, a successor in interest, or a purchaser of the permit, without the advance
written consent and approval of City.
d. Permittees shall maintain a staffed operations center within the San Francisco Bay Area,
as defined by the Metropolitan Transportation Commission.
Page 7 of 15
e. Permittees shall provide to the City a record of all public feedback received during the
marketing and community outreach process. Permittees shall obtain confirmation of
receipt by the City of such document prior to deployment of any devices.
f. Permittees shall roll out their permitted full fleet within four weeks of permit approval by
the City. Permittees shall include the proposed fleet size in their application.
g. Permittees interested in adjusting their fleet size must submit a written request to the
City with recent and relevant supporting data. The City reserves the right to approve or
deny the request at its discretion. Supporting data shall reflect at a minimum 30 day fleet
utilization levels within the city. Data from the first 30 days of the pilot program shall be
included but will not be considered as supporting data for the adjustment request.
h. The City will monitor permittees’ compliance with these regulations and reserves the right
to suspend or revoke a permit.
III. Operating and Maintenance
a. All bicycles and electric-assist bicycles shall meet the safety standards outlined in ISO
43.150 – Cycles, as well as the standards outlined in Code of Federal Regulations Title 16,
Chapter II, Subchapter C, Part 1512 – Requirements for Bicycles. In addition, all bicycles
and electric-assist bicycles shall meet the standards established in California Vehicle Code
(CVC) Section 21201, including for lighting during operation in darkness.
b. Electric‐assist bicycles shall be “Class 1” or “Class 2” electric bicycles only, as defined in
CVC Section 312.5.
c. Electric scooters shall comply within the meaning of devices as defined in CVC Section
407.5 (a) and must meet specifications set forth in CVC Sections 21220 – 21235.
d. Permittees shall provide easily visible contact information, including toll‐free phone
number and e‐mail address, on each bicycle, electric‐assist bicycle, and/or electric scooter
for members of the public to make relocation requests or to report other issues with
devices. This information shall be in a font at least 1” tall.
e. Permittees shall provide notice to all users by means of signage and through a mobile or
web application that:
i. Helmets should be worn by all users as defined in the California Vehicle Code
(CVC).
ii. Electric scooter users must have a valid Driver’s License as defined in the CVC
Section 21235.
iii. All users operating a bicycle, electric‐assist bicycle, and/or electric scooter must
obey all rules of the road, traffic laws, and all applicable federal, state, and local
laws.
f. Electric-assist bicycles and electric scooters shall not operate, propel, or leave standing
on park or open space land, as defined in Palo Alto Municipal Code (PAMC) Chapter 22.04.
g. Electric scooters shall not operate greater than 15 mph speed. The City Manager reserves
the right to revise the speed limit based on collision and injury data recommended by
Office of Transportation, City of Palo Alto.
h. Permittees shall make efforts to reduce landfill e-waste and follow local and state law
requirements for disposal or recycling of all types of batteries and other toxic materials
at an appropriate recycling facility.
Page 8 of 15
i. Bicycles, electric-assist bicycles and electric scooters shall not create excessive,
unnecessary and unreasonable noises in violation of Palo Alto Municipal Code (PAMC)
Chapter 9.10.
j. Permittees shall maintain a customer service phone number and mobile application
interface for the public to report safety concerns, complaints, or to ask questions twenty-
four hours a day, seven days a week.
k. Permittees shall issue a “ticket number” for each issue and provide a response to the
complaining party within three business days.
l. In the event a safety or maintenance issue is reported for a specific device, that bicycle,
electric‐assist bicycle, and/or electric scooter shall immediately be made unavailable to
users and shall be removed within the timeframes provided below. Any inoperable or
unsafe device shall be repaired before it is put back into service.
m. Permittees shall provide a direct contact to a representative who is capable of responding
to requests from the public and City for rebalancing, reports of incorrectly parked devices,
or reports of unsafe/inoperable devices by relocating, re‐parking, or removing the
bicycles, electric‐assist bicycles, and/or electric scooters, as appropriate, within the
following timeframes:
i. From 6:00 am to 6:00 pm on weekdays, not including holidays: within two hours
of receiving notice.
ii. All other times: within 10 hours of receiving notice.
n. In the event a bicycle, electric‐assist bicycle, and/or electric scooter is not relocated, re-
parked, or removed within the timeframes specified above, or a device is parked in one
location for more than seventy-two hours, it may be removed by the City. Permittees shall
compensate costs the City incurs to relocate, remove and store devices at a rate of $130
per device and shall reimburse the City within 30 days of receipt of an invoice detailing
such costs. Permittees shall provide a direct contact to handle invoicing from the City and
to pick up impounded devices by the City respectively.
o. Permittees not in good standing with payment and retrieval of impounded devices will
risk suspension or revocation of their permits.
IV. Parking
a. The City Manager reserves the right to determine certain block faces where free‐floating
bicycle, electric‐assist bicycle, and/or electric scooter parking is prohibited or to create
geofenced areas where bicycles, electric-assist bicycles, and/or electric scooters shall be
parked.
b. Free‐floating bicycles, electric‐assist bicycles, and/or electric scooters shall be parked
upright on flat and hard surfaces in the landscape/furniture zone of the sidewalk, at a
bicycle rack, or in another area specifically designated for bicycle parking.
c. Bicycles, electric‐assist bicycles, and/or electric scooters shall not be parked within 5’-15’
of a crosswalk or curb ramp.
d. Parking along sidewalks or blocks without sidewalks (passageways by or between
buildings) shall not impede into travel lanes and must maintain a 6’ clear path for
pedestrians.
Page 9 of 15
e. Bicycles, electric‐assist bicycles, and/or electric scooters shall not be parked in the
landscape/street furniture zone in such a manner as to impede other street uses or
obstruct pedestrians, including at transit stops, in loading or disabled parking zones, or
blocking access to buildings, driveways, curb ramps, and other street features that
requires pedestrian and/or emergency access (e.g. benches, parking pay stations, bus
shelters, transit information signs, fire hydrants, call boxes, utility poles, etc.).
f. Bicycles, electric‐assist bicycles, and/or electric scooters shall not be parked in such a
manner as to impede or interfere with the regular flow of travel in the public right-of-
way, clearance on sidewalks needed for ADA compliance, or within reasonable use of any
commercial window display or access to or from any building.
g. Permittees shall institute geofencing around incentivized parking areas and implement
in-app technology to direct users to incentivized parking areas as appropriate.
h. No device shall be parked in one location for more than seventy-two hours.
i. To the extent a permittee proposes to park bicycles, electric‐assist bicycles, and/or
electric scooters in areas other than the public right‐of‐way (e.g. parks, plazas, parking
lots, private property or transit stations), the permittee must first obtain the right to do
so from the appropriate City department, property owner, or public agency and shall
communicate this right to users through signage approved by the respective entity and/or
through a mobile or web application.
V. Data Sharing
a. Permittees shall provide data to the City in an editable spreadsheet on their entire Palo
Alto fleet. The City may request permittees to provide real-time information through a
documented application program interface (API). As such, permittees are directly
responsible for obtaining an API key from the City’s Office of Transportation to which they
will publish the data described below. The data to be published to the City’s API will
include the following information in real time for every bicycle, electric-assist bicycle and
electric‐scooter parked in the city’s operational areas:
i. Point location
ii. Bicycle/electric-assist bicycle/electric scooter identification number
iii. Type of bicycle (standard or electric-assist)
iv. Fuel level (if electric)
v. Incentivized parking area
The City is permitted to display real‐time data provided via the API to the public.
b. Permittees shall provide the following anonymized data for each trip record to inform and
support safe and effective management of the system and for transportation planning
efforts. Data shall be submitted in an editable spreadsheet and via City’s API when
requested by the City. The daily and weekly fleet average number of rides per day per
device shall be reported to the City monthly.
Page 10 of 15
Field Name Format Description
Company name [Company name] n/a
Type of device Bicycle, electric-assist bicycle
or electric scooter
n/a
Trip record number xxx0001, xxx0002, xxx0003,… 3-letter company acronym +
consecutive trip number
Trip duration MM:SS n/a
Trip distance Feet n/a
Start date MM,DD,YYYY n/a
Start time HH:MM:SS n/a
End date MM, DD, YYYY n/a
End time HH:MM:SS n/a
Start location Census block n/a
End location Census block n/a
Device ID number xxxx1, xxxx2, xxxx3,… Unique identifiers for every
device
Trip route n/a Only in API format
Trip cost total $ per trip n/a
c. Permittees shall provide the following device availability data for oversight of parking
compliance and device distribution by minutes. Data should be submitted in an editable
spreadsheet and via City’s API within three business days if requested by the City.
Field name Format Description
Device ID number xxxx1, xxxx2, xxxx3,… Unique identifiers for every
device
GPS coordinate X,Y n/a
Trip parking verification Compliant, non-
compliant
Parked location
Availability start date MM, DD, YYYY n/a
Availability start time HH:MM:SS n/a
Unavailability start date MM, DD, YYYY n/a
Unavailability start time HH:MM:SS n/a
Availability duration Minutes n/a
d. Permittees shall generate a “ticket number” for each complaint, provide the ticket
number to the person who reported the issue, and provide a response to the complaining
party within three business days. The ticket numbers, complaint information, and
provided responses shall be sent to the City monthly and at any time within three business
days if requested by the City.
Page 11 of 15
e. Permittees shall keep a record of maintenance activities and reported safety issues and
collisions, including but not limited to device identification number and maintenance
performed. These records shall be sent to the City monthly and at any time within three
business days if requested by the City.
f. Permittees shall report the aggregated breakdown of customers by gender and age.
Gender must be reported as male, female, and non‐binary. Age must be reported using
these eight age groups: under 5, 5‐17, 18‐24, 25‐34, 35‐44, 45‐54, 55‐64, 65 and over. This
report shall be sent to the City monthly and at any time within three business days if
requested by the City.
VI. User Enrollment
a. Permittees must comply with all relevant federal, state and local laws regarding age
requirements for use of electric-assist bicycles and electric scooters.
b. Permittees shall implement technology-based measures to verify age requirements,
including state law requirements, before giving membership to users.
VII. User Privacy
a. Permittees must keep all financial data from users in a secure manner that complies with
the Payment Card Industry Data Security Standards (PCI DSS), and accessible to
authorized personnel only.
b. Permittees shall provide a privacy policy that complies with the California Online Privacy
Protection Act (CalOPPA) that safeguards customers’ personal, financial and travel
information and usage.
c. Permittees shall clearly communicate to the public and to the City what personal data will
be accessed and provide an explanation why such access is needed, and for how long.
VIII. Insurance
During the term of this pilot program, permittee, and each of its contractors and agents shall
maintain in full force the following insurance amounts and coverages:
a. Comprehensive General Liability in a minimum amount of two million dollars ($2,000,000)
per occurrence (bodily injury and property damage) and four million dollars ($4,000,000)
aggregate. The City of Palo Alto is to be named as an additional insured, including its
Council members, officers, employees and agents.
b. Comprehensive Automobile Liability insurance in a minimum amount of one million
dollars ($1,000,000) per occurrence.
c. Worker’s Compensation and Employer’s Liability in a minimum amount of one million
dollars ($1,000,000) per occurrence (accident, injury, or illness).
d. Performance Bond of $130 per device, in a form approved by the City.
Page 12 of 15
IX. Notices to Cure, Suspension and Revocation of Permit
If there is a violation of this pilot program’s regulations or any federal, state, and local laws, or if
there is a risk posed to public safety, health, or welfare, the Chief Transportation Official is
authorized to issue a notice to cure by email or any other written means to the permittee. The
notice to cure shall identify issue(s) that the permittee must address within a specified time.
Alternatively, if there is a violation of this pilot program’s regulations or any federal, state, and
local laws; or if there is a risk posed to public safety, health, or welfare; or if there is incomplete
or non-compliance with a notice to cure; or repeated notice to cures on the same or different
issues, the Chief Transportation Official may suspend or revoke the permit. If a permit is
suspended, the Chief Transportation official shall designate the duration of suspension and/or
any conditions for reinstatement. If a permit is revoked, the permittee shall cease operations on
the date of revocation and shall remove its full fleet (and all other signs or fixtures) from the City
within 14 days from the date of the notice of revocation.
Any request for reconsideration of revocation shall be submitted in writing to the City Manager
within 30 days from the date of the notice of revocation with all supporting materials.
X. End of Pilot
By the end of the term of the permit or by the end of pilot program (currently set to expire DATE
per Resolution XX), whichever occurs first, permittees shall immediately cease operations to the
public and remove their full fleet and any other signs or fixtures, from the City by DATE.
APPROVED:
Ed Shikada Date
City Manager
Philip Kamhi Date
Chief Transportation Official
Page 13 of 15
APPENDIX A – APPLICATION COVER SHEET
DOCKLESS BICYCLE, ELECTRIC-ASSIST BICYCLE, AND ELECTRIC SCOOTER SHARE
PILOT PROGRAM
APPLICATION COVER SHEET
Application Date: _______________
The Dockless Bicycle, Electric-Assist Bicycle, and Electric Scooter Share Pilot Program allows
permitted operators to operate bicycles, electric‐assist bicycles, and/or electric scooters within
the City of Palo Alto.
The City of Palo Alto Office of Transportation will review completed application packages and
evaluate applications according to regulations and requirements described in the pilot program
permit regulations.
I. General Applicant Information (Please Print)
Company Name:
Mailing Address:
Physical Address (If
different than above):
Contact Person, Title:
Applicant’s Email:
Applicant’s Phone
Number:
Company Website:
II. Application Agreement
By signing this application, the applicant verifies on behalf of the Bicycle, Electric-Bicycle, and
Electric-Scooter Share Operator that all the information provided is true and that if issued a
permit, the applicant agrees to comply with all regulations and requirements set forth in the
bicycle, electric-bicycle and electric-scooter share program regulations.
Printed Name, Title:
Authorized Signature:
Date:
Page 14 of 15
APPENDIX B – APPLICATION SELECTION CRITERIA
DOCKLESS BICYCLE, ELECTRIC-ASSIST BICYCLE, AND ELECTRIC SCOOTER SHARE
PILOT PROGRAM
APPLICATION SELECTION PROCESS
I. Initial Screening
The application will be rejected if there are missing application materials, and if provided
information is not sufficient to meet all requirements and regulations.
☐ Signed Application Cover Sheet
☐ Experience and Qualification
☐ Operations and Maintenance Plan
☐ Community Engagement Plan
☐ Personal Data and Privacy Plan
☐ Description of Devices
☐ Description of Mobile Application
☐ Proof of Insurance
II. Evaluation Process
Criteria will be scored as follows:
• “1” to responses that include basic level of commitment and ability with typical
approaches to solving known challenges and concerns, meeting the minimum
requirement.
• “2” to responses that include moderate level of commitment and ability with detailed
approaches to solving known challenges and concerns, exceeding the minimum.
• “3” to responses that include higher level of commitment and ability with robust and
innovative approaches to solving known challenges and concerns.
Page 15 of 15
Category Criteria Points Weight
Experience and
Qualification
Knowledge and experience operating a shared
micromobility program of similarly sized North
American cities.
15%
Operations Staffing for scale of proposed operations;
Methods of deploying, recharging, and
redistributing devices; Plans for proper riding
and parking.
20%
Maintenance Ability to respond to maintenance, cleaning,
and repair of devices; Description of safety
check protocols.
10%
Pricing Model Availability of special offers and alternative
forms of payment for users without smart
phones, bank accounts, or credit cards; Plans
for incentivized proper riding and parking.
10%
Community
Engagement
Demonstration of a socially sensitive
marketing and education plan tailored to
different audiences within the city; Local
partnerships; Innovative strategies to
maximize reach and engagement.
15%
Data Sharing Demonstration of accurate and timely
reporting.
10%
Devices Demonstration of commitment to ensure
devices are safe for operations.
5%
Customer Service Demonstration of commitment to ensure
responsiveness to customer complaints and
inquiries.
15%
TOTAL 100%
City of Palo Alto (ID # 11533)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 9/21/2020
City of Palo Alto Page 1
Summary Title: Resolution Approving Agreements Related to Letter of Credit
with US Bank
Title: Approval of a Resolution Approving and Authorizing the City Manager
or Designee to Execute the Continuing Reimbursement Agreement for Letters
of Credit With US Bank National Association at an Estimated Cost of $35,000
Per Year, in Connection With the City’s Market Purchase Program Agreement
With NCPA, and Authorizing the Execution and Delivery of all Documents
Relating to the Letters of Credit
From: City Manager
Lead Department: Utilities
Recommendation
Staff recommends that the City Council approve a resolution (Attachment A) authorizing the
City Manager or their designee to execute the Continuing Reimbursement Agreement for
Letters of Credit with US Bank National Association with an estimated commitment fee of
$35,000 per year, in connection with the City’s Market Purchase Program Agreement with
Northern California Power Agency and authorizing the execution and delivery of all documents
relating to the Letters of Credit.
Background and Discussion
The City has long utilized services provided by the Northern California Power Agency (NCPA) to
effectively manage the City’s electric utility and lower operating costs. In June 2020 the Council
authorized the City Manager to execute the Market Purchase Program (MPP) Agreement with
NCPA, to further enable the City to utilize NCPA staff and resources to purchase and sell market
power, resource adequacy capacity products, and renewable energy credits to support the
City’s medium-term electric portfolio planning and trading functions, functions that are
currently carried out in-house (Resolution 9866, Staff Report #11086).
To participate in the MPP, NCPA requires the City of Palo Alto to maintain financial reserves at
NCPA sufficient to cover the cost of the City’s MPP Agreement transactions for the highest
three months of purchases, which is estimated currently at $4 to $8 million. Approval of the
attached resolution allows the City to provide a letter of credit to meet its obligation, to be
City of Palo Alto Page 2
issued by US Bank National Association (“US Bank”), as described in the Continuing
Reimbursement Agreement for Letters of Credit (“the Reimbursement Agreement”, attached as
Exhibit A to the resolution). The City will pledge the gross revenues of its electric system
towards the City’s payment obligations under the Reimbursement Agreement.
Timeline
Upon approval of the attached resolution, the City antcipates entering into the Reimbursement
Agreement by executing it and all related documents, including the Closing and Incumbency
Certificate and Irrevocable Standy Letter of Credit, to provide to US Bank, which will then
provide the letter of credit to NCPA to permit NCPA to begin transacting under the MPP
agreement in October 2020.
Resource Impact
The commitment fee, which is the annual cost of securing the Letter of Credit via the
Reimbursement Agreement, is estimated at $35,000 per year, in addition to a one-time initial
set up fee of $25,000, which will be paid by the City’s Electric Supply Operations Fund. If the
Letter of Credit amount increases above $7 million, the commitment fee would be 0.50% per
year.
In Resolution 9866, the City Council authorized the City’s participation in the MPP Agreement
until the end of 2040.
Policy Implications
Entering into the Reimbursement Agreement to facilitate the City’s participation in the MPP
agreement with NCPA is consistent with the Utilities Department’s Strategic Plan mission
statement of “providing safe, reliable, environmentally sustainable, and cost-effective services.”
Stakeholder Engagement
Executing the reimbursement agreement is an administrative task to enable contracting for
energy supply through the MPP agreement and hence there was no public engagement in this
regard.
Environmental Review
The Council’s adoption of a resolution authorizing the City Manager to execute the Continuing
Reimbursement Agreement does not require review under the California Environmental Quality
Act, because this action is not a project under section 21065 of Public Resources Code and
section 15378(b)(5) of CEQA Guidelines, as an administrative governmental activity which will
not cause a direct or indirect physical change in the environment.
Attachments:
• Attachment A: Resolution
*Not Yet Passed*
6055411 1
Resolution No. ____
Resolution of the Council of the City of Palo Alto Approving and Authorizing the
City Manager or Their Designee to Execute the Continuing Reimbursement
Agreement for Letters of Credit with US Bank National Association at an
Estimated Cost of $35,000 Per Year, in Connection with the City’s Market
Purchase Program Agreement with NCPA, and Authorizing the Execution and
Delivery of All Documents Relating to the Letters of Credit
R E C I T A L S
A.On June 22, 2020, the Council of the City of Palo Alto Adopted Resolution No.
9866 Approving the Amended and Restated Market Purchase Program Agreement (“MPP
Agreement”) with the Northern California Power Agency, Authorizing the City Manager or Their
Designee to Authorize NCPA to Purchase and Sell Electricity and Related Products Under the
MPP Agreement, and Approving Revisions to the City’s Energy Risk Management Policy to
recognize NCPA’s role in carrying out these transactions under the MPP Agreement.
B.In order to participate in the Market Purchase Program, NCPA requires the City
of Palo Alto to maintain financial reserves at NCPA sufficient to cover the cost of MPP
Agreement transactions for the highest three months of purchases, which is estimated
currently at $4 to $8 million.
C.The City wishes to provide a letter of credit to meet this obligation, to be issued
by US Bank National Association, as described in the Continuing Reimbursement Agreement for
Letters of Credit (“the Reimbursement Agreement”, attached as Exhibit A).
D.The cost of securing the Letter of Credit via the Reimbursement Agreement
includes a commitment fee of $35,000 per year for an amount up to $7 million, in addition to a
one time initial set up fee of $25,000, which will be paid by the City’s Electric Supply Operations
Fund. In Resolution 9866, the City Council authorized the City’s participation in the MPP
Agreement until the end of 2040.
NOW THEREFORE, the Council of the City of Palo Alto hereby RESOLVES as follows:
SECTION 1. Each of the above recitals is true and correct and is adopted by the
Council of the City of Palo Alto.
SECTION 2. The City is a chartered city and municipal corporation organized and
existing under the constitution and laws of the State of California, and is duly empowered as a
chartered city to exercise the powers reserved to it under said constitution with respect to
municipal affairs.
SECTION 3. As an exercise of such powers, the City has adopted Chapter 12.28 of the
Palo Alto Municipal Code (the “Act”) under which, along with the Revenue Bond Law of 1941,
Attachment A
6055411 2
the City Council may, by the adoption of a resolution, provide for the issuance of obligations
payable exclusively from enterprise fund revenues for the purpose of providing funds for the
acquisition, construction, improving or financing of an enterprise, including any or all expenses
incidental thereto or connected therewith.
SECTION 4. Under the Reimbursement Agreement, the City will pledge all revenues,
which include all charges received for and all other income and receipts derived by the City
from the operation of the City’s Electric System or arising from the Electric System received by
the City from the services, facilities, energy and distribution of electric energy by the City,
including income from investments, but excluding (a) all reimbursement charges and deposits
to secure service and (b) any charges collected by any person to amortize, or otherwise relating
to the payment of, the uneconomic portion of costs associated with assets and obligations
(“stranded costs”) of the Electric System or of any joint powers agency in which the City
participates which the City has dedicated to the payment of obligations other than the Credit,
the payment of which obligations will reduce or retire outstanding obligations of the City or any
joint powers agency in which the City participates relating to such “stranded costs” to the
extent they are the responsibility of the City, (the “Gross Revenues”) to the City’s payment
obligations under the Reimbursement Agreement. Said pledge is valid and binding in
accordance with the terms the Act and this Resolution, and the Gross Revenues shall
immediately be subject to such pledge, and such pledge shall constitute a lien and security
interest which shall immediately attach to the Gross Revenues and be effective, binding, and
enforceable against the City, its successors, creditors, and all others asserting the rights therein,
to the extent set forth in the Reimbursement Agreement, and in accordance with the Act and
this Resolution, irrespective of whether those parties have notice of the pledge and without the
need for any physical delivery, recordation, filing, or further act. Notwithstanding anything to
the contrary herein, the obligations of the City under the Reimbursement Agreement are
payable solely from the Gross Revenues. These obligations shall constitute “Maintenance and
Operations Costs” for purposes of the City’s October 1, 2007 Indenture of Trust, relating to the
City’s $1,500,000 Electric Utility Clean Renewable Energy Tax Credit Bonds, 2007 Series A (“the
2007 Indenture”), which mature in December 2021 and shall constitute maintenance and
operation costs in calculating any net revenues pledged with respect to any future
indebtedness of the Electric System.
SECTION 5. Section 5.02 of the 2007 Indenture permits the City to enter into long-
term contracts to finance supplies of electric energy, payments which are accounted for as
Maintenance and Operations Costs under Section 1.01 of the 2007 Indenture, and which
include the City’s costs associated with participating in the MPP Agreement and the
Reimbursement Agreement.
SECTION 6. The Reimbursement Agreement is hereby approved for execution by
the City Manager or their designee.
6055411 3
SECTION 7. The additional documents related to the Reimbursement Agreement,
including the Closing and Incumbency Certificate of the City of Palo Alto, the Irrevocable
Standby Letter of Credit, and the City Attorney opinion are hereby approved for execution by
the City Manager or their designee, as well as the Director of Utilities, the Director of
Administrative Services, and the City Attorney, as applicable, in each case, acting singly (each an
“Authorized Officer”).
SECTION 8. The covenants set forth in the Reimbursement Agreement to be
executed in accordance with this resolution are hereby approved, shall be deemed to be
covenants of the Council of the City, and shall be complied with by the City and its officers.
SECTION 9. Each Authorized Officer and the other officers and staff of the City
responsible for the fiscal affairs of the City are hereby authorized and directed to take any
actions and execute and deliver any and all documents and certificates as are necessary to
accomplish and to consummate the transactions contemplated by the Reimbursement
Agreement.
SECTION 10. This resolution shall be effective upon the date of its adoption.
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6055411 4
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SECTION 11. The Council finds that its authorization of the Reimbursement
Agreement and related documents does not constitute a project requiring review under the
California Environmental Quality Act (CEQA) or CEQA Guidelines. This action does not meet the
definition of a project under Public Resources Code Section 21065 and CEQA Guidelines Section
15378(b)(5), because it is an administrative governmental activity which will not cause a direct
or indirect physical change in the environment.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSENT:
ABSTENTIONS:
ATTEST:
_________________________ ______________________________
City Clerk Mayor
APPROVED AS TO FORM: APPROVED:
__________________________ ______________________________
Assistant City Attorney City Manager
______________________________
Director of Utilities
______________________________
Director of Administrative
Services Department
CHAPMAN DRAFT OF 8/7/20
Exhibit A.docx
4329116
Continuing Reimbursement Agreement rev. 1/11
CONTINUING REIMBURSEMENT AGREEMENT
FOR LETTERS OF CREDIT
This Continuing Reimbursement Agreement for Letters of Credit is made effective this [___] day of August, 2020 by and between U.S. BANK
NATIONAL ASSOCIATION (“Bank”) and THE CITY OF PALO ALTO (“Applicant”).
In consideration of the issuance by Bank or an affiliate of Bank (each such affiliated issuer, an “Other Issuer”) of one or more Credits (as defined
below), Applicant agrees that the following terms shall apply to each Application (as defined below) and each Credit issued by Bank or any Other Issuer. With respect to Credits issued by any Other Issuer, such Other Issuer shall have the same rights and obligations under this agreement as
Bank.
1.The Credit.
(a)From time to time, Applicant may request Bank to issue (or request one of its subsidiaries or affiliates to issue) one or more letters of credit
(each, a “Credit”) substantially in accordance with the terms of any application (each, an “Application”) submitted to Bank by Applicant. All Credits will
be deemed irrevocable unless otherwise stated in an Application. Bank may issue any Credit or request any Other Issuer to issue any Credit. Each Credit shall be issued in the sole discretion and at the sole option of Bank. Bank may sell, assign or participate in all or any part of its rights and
obligations under this Agreement, the Application and any Credit without the consent of Applicant. Without limiting the foregoing, any Other Issuer
may sell a participation in all or any part of its rights and obligations under this Agreement and any Credit to Bank.
(b)Bank is hereby authorized to set forth in each Credit the terms appearing in the Application, with such modifications as Bank in its discretion
may determine are appropriate or necessary and are not materially different from the terms appearing in the Application.
(c)All communications from Applicant relating to any Credit will be sent at Applicant’s risk. Bank shall have no responsibility for any inaccuracy
of translation, or any error or delay in transmission or delivery by mail, telecommunication or any other method outside of Bank’s reasonable control,
including all communications made through a correspondent.
(d)Neither Bank nor its correspondents shall be in any way responsible for the performance of any beneficiary’s obligations to Applicant or for
the form, sufficiency, accuracy, genuineness, authority of person signing, falsification or legal effect of any documents required by any Credit if such
documents appear in order on their face. Whether documents conform to the terms of any Credit and whether any demand is timely and in proper
form shall be independently determined by Bank in its sole discretion, which determination shall be final and binding on Applicant.
(e)Subject to Section 7(b), Bank may in its discretion honor Applicant’s request to increase the amount of any Credit, extend the time for
making and honoring of demands under any Credit and otherwise modify the terms and conditions governing any Credit. In the event of any
modification of a Credit at the request or with the consent of Applicant, this Agreement shall be binding upon Applicant with regard to (i) the Credit as
modified, (ii) drafts, documents and property covered thereby, (iii) any action taken by Bank or Bank’s correspondents in accordance with such
modification, and (iv) any draft paid by Bank or any of Bank’s correspondents which is dated on or before the expiration of any time limit expressed
in the Credit, regardless of when drawn or presented for payment and when or whether negotiated, provided the required documents are presented
in accordance with the terms of the Credit as amended.
(f)[Reserved].
(g)If any Credit’s terms and conditions provide that Bank give the beneficiary a notice of pending expiration, Applicant agrees that it will notify
Bank in writing at least thirty (30) days prior to the last day specified in the Credit by which Bank must give such notice of the pending expiration date.
In the event Applicant fails to so notify Bank and the Credit is extended, Applicant’s obligations under this Agreement shall continue in effect and be
binding upon Applicant with regard to the Credit as so extended.
(h)Applicant shall promptly review all information, documents and instruments delivered to Applicant from time to time by Bank, including all
Credits upon issuance, any amendments, and all related presentations and negotiations, and shall notify Bank within five banking days after receipt
if Applicant claims that Bank has failed to comply with Applicant’s instructions or Bank’s obligations with respect to any Credit, has wrongfully honored
or dishonored any presentation under any Credit or claims any other irregularity. If Applicant does not so notify Bank within such time period, Applicant
shall be conclusively deemed to have waived and shall be precluded from asserting such claim(s).
2.Reimbursement Obligations. Applicant promises to pay Bank on demand, at the address specified in the Application or as otherwise directed
by Bank, the following amounts:
(a)The amount of each draft or other request for payment (hereinafter called a “draft”) drawn under any Credit in accordance with the terms
of such Credit. For amounts payable in United States currency, Applicant agrees to reimburse Bank in United States currency. For amounts payable
in other currencies, Applicant agrees to reimburse Bank an equivalent amount in (i) United States currency at Bank’s then current selling rate for such
foreign currencies , (ii) in such other currency by sending the foreign currency amount due Bank by wire transfer to the account and location designated
by Bank, or (iii) in any other currency, place, form and manner agreed to by Bank and Applicant. Upon request, Applicant will pay Bank in advance,
in United States currency, all sums necessary for Bank to pay all such drafts upon presentation whether payable in United States currency or
otherwise. If the draft is a time draft, Applicant shall make payment without demand sufficiently in advance of its maturity to enable Bank to arrange
for funds to reach the place of payment when due.
(b)Applicant shall pay the Bank a commitment fee with respect to each Credit in an amount equal to either (i) $35,000 per annum for a
commitment amount up to and including $7,000,000 or (ii) 0.50% per annum for a commitment amount exceeding $7,000,000 which, shall be payable
from time to time at such intervals as Bank may require and shall be nonrefundable, whether or not the Credit is drawn upon, reduced in time
Exhibit A
[!ljbank.
Continuing Reimbursement Agreement 2 rev. 1/11
or amount or otherwise modified. Applicant also agrees to pay all of Bank’s other standard fees and charges related to Credits. Applicant shall pay
on demand all out-of-pocket costs and expenses of the Bank incurred in connection with the preparation, execution, delivery and performance of this
Agreement, including, without limitation, the fees and expenses of Chapman and Cutler LLP, as special counsel to the Bank, up to a maximum
amount of $25,000.
(c) Subject to Section 6, all taxes, levies, imposts, duties, charges, fees, deductions or withholdings of any nature whatsoever paid or
incurred by Bank in connection with this Agreement, the Credit or any related transactions, and any liability with respect to the foregoing (including
but not limited to interest, penalties and expenses).
(d) Interest on all amounts drawn under a Credit (to the extent not reimbursed on the date of drawing) and on all other amounts due
under this Agreement from the applicable due date until paid will accrue at a rate equal to the Default Rate. Interest shall be calculated on the basis
of a 360-day year and the actual number of days elapsed. Interest accrued hereunder shall be due and payable on the first day of each calendar
month.
(e) Without limiting Applicant’s obligations to any Other Issuer, but without duplication, Applicant promises to pay Bank on demand, at the
location designated by Bank, an amount equal to all amounts which Bank pays or becomes obligated to pay to any Other Issuer with respect to the
Credit, whether as a participant in any Credit or otherwise.
(f) Notwithstanding any other provision of this Agreement, Applicant’s obligation to make any payment hereunder to any Other Issuer shall,
to the extent of such payment, be satisfied by payment to Bank as set forth in this Agreement.
(g) Applicant instructs Bank to automatically deduct from any account of Applicant held by the Bank or any of the Bank’s affiliates all amounts
which become due under the Agreement. Applicant will pay all fees on the account which result from the automatic deductions, including any
overdraft/NSF charges. If for any reason Bank does not charge the account for any amount due, or if an automatic deduction is reversed, the
amount due is still owing to Bank as set forth herein.
3. Security and Insurance; Pledge of Gross Revenues.
(a) As security for payment of any and all of Applicant’s obligations to Bank and any Other Issuer under this Agreement, any Credit or any
other indebtedness of Applicant to Bank and any Other Issuer, Applicant hereby grants Bank a continuous and continuing interest in the Revenue
Fund established and held by the Director of Administrative Services pursuant to Section 4.02 of that certain Indenture of Trust, dated as of October 1,
2007 (the “2007 Indenture”), by and between Applicant and U.S. Bank National Association, as trustee, relating to City of Palo Alto $1,500,000 Electric
Utility Clean Renewable Energy Tax Credit Bonds, 2007 Series A (the “2007 Bonds”). In addition to all other rights which Bank may have, Applicant
hereby authorizes Bank to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by Bank to or for the credit or the account of Applicant against any and all of the obligations of Applicant
now or hereafter existing under this Agreement, irrespective of whether Bank shall have made any demand under this Agreement and although
such deposits, indebtedness or obligations may be unmatured or contingent.
(b) If at any time Bank requires collateral (or additional collateral), Applicant will, on demand, assign and deliver to Bank as security for any
and all obligations of Applicant now or hereafter existing under this Agreement collateral of a type and value satisfactory to Bank or make such cash
payment as Bank may require and execute, and shall deliver to Bank such security agreements, pledge agreements, or other documents requested
by Bank covering such collateral.
(c) Bank is authorized to file any financing statements and other documents as Bank may require to perfect the security interests granted or
contemplated hereunder. At Bank’s request, Applicant will execute or endorse and deliver to Bank such documents, agreements and instruments,
and will take or cause to be taken such further actions as may be required by law or which Bank may reasonably request to carry out the terms and
conditions of this Agreement and to ensure the perfection and priority of the security interest created or intended hereby, all in form and substance
reasonably satisfactory to Bank, and all at the expense of Applicant.
(d) For commercial credits, Applicant shall keep any property described in the Credit adequately covered by insurance satisfactory to Bank,
issued by companies satisfactory to Bank, and at Bank’s request will furnish certificates or evidence thereof and will assign insurance policies or
certificates to Bank and make losses, adjustments or proceeds payable to Bank. If any such policy procured by Applicant fails to provide for payment
of the loss thereunder, Applicant hereby makes the loss payable to Bank under such policy and assigns to Bank all proceeds of such policy and
agrees to accept proceeds of all insurance as Bank’s agent and to hold same in trust for Bank, and forthwith to deliver the same to Bank, with
Applicant’s endorsement where necessary, and
(e) Bank or any of Bank’s officers are hereby irrevocably empowered, with power of substitution, to endorse any check in the name of Applicant
received in payment of any loss or adjustment.
(f) Bank shall not be liable for any failure to collect or demand payment of, or to protest or give any notice of non -payment of, any collateral
or any part thereof or for any delay in so doing, nor shall Bank be under any obligation to take any action whatsoever with respect to the collateral or
any part thereof. Bank shall use reasonable care in the custody and preservation of the collateral in Bank’s possession but need not take any steps
to preserve rights against prior parties or to keep the collateral identifiable. Bank shall have no obligation to comply with any recording, re-recording,
filing, re-filing or other legal requirement necessary to establish or maintain the validity, priority or enforceability of, or Bank’s right in and to, the
collateral, or any part thereof. Bank may exercise any right of Applicant with respect to any collateral. Bank may endorse Applicant’s name on any
and all notes, checks, drafts, bills of exchange, money orders or commercial paper included in the collateral or representing the proceeds thereof.
(g) To secure the payment of Applicant’s obligations hereunder, Applicant hereby pledges and places a lien upon the Gross Revenues of the
electrical system of Applicant, comprising all facilities for the generation, transmission and distribution of electric energy (the “Electric System”). Said
pledge is valid and binding in accordance with the terms of Chapter 12.28 of the Municipal Code of the City (the “Act”) and Resolution No. ____ of
the City Council of the City (the “Resolution”), and the Gross Revenues shall immediately be subject to the pledge, and the pledge shall constitute a
lien and security interest which shall immediately attach to the Gross Revenues and be effective, binding, and enforceable against the City, its
successors, creditors, and all others asserting the rights therein, to the extent set forth in the Reimbursement Agreement, and in accordance with the
Act and the Resolution, irrespective of whether those parties have notice of the pledge and without the need for any physical delivery, recordation,
filing, or further act. Notwithstanding anything to the contrary herein, the obligations of the City under the Reimbursement Agreement are payable
solely from the Gross Revenues.
Continuing Reimbursement Agreement 3 rev. 1/11
For purposes of this Section, “Gross Revenues” means all revenues, which include all charges received for and all other income and receipts
derived by Applicant from the operation of the Electric System or arising from the Electric System received by Applicant from the services, facilities,
energy and distribution of electric energy by Applicant, including income from investments, but excluding (a) all reimbursement charges and deposits
to secure service and (b) any charges collected by any person to amortize, or otherwise relating to the payment of, the uneconomic portion of costs
associated with assets and obligations (“stranded costs”) of the Electric System or of any joint powers agency in which Applicant participates which
Applicant has dedicated to the payment of obligations other than the Credit, the payment of which obligations will reduce or retire outstanding
obligations of Applicant or any joint powers agency in which Applicant participates relating to such “stranded costs” to the extent they are the
responsibility of Applicant.
4. Default and Remedies.
(a) Time is of the essence in this Agreement. The occurrence of any of the following shall be an event of default hereunder:
(i) Default in payment or performance of any of Applicant’s obligations hereunder or under any promissory note or other agreement
between Bank and Applicant;
(ii) Default under any security documents securing Applicant’s obligations hereunder, whether executed by Applicant or any other
person;
(iii) Levy or proceeding against any property of Applicant or any guarantor of Applicant’s obligations hereunder (“Guarantor”);
(iv) Death, dissolution, termination of existence, insolvency or business failure of, appointment of a receiver for any part of the property
of, assignment for the benefit of creditors by, commencement of any proceeding under any bankruptcy or insolvency laws by or against, or
entry of judgment against, Applicant or any Guarantor;
(v) Any warranty, representation or statement made or furnished to Bank by Applicant or any Guarantor proves to have been false in
any material respect when made or furnished;
(vi) Any event which gives the holder of any debt obligation of Applicant or any Guarantor the right to accelerate its maturity, whether or
not such right is exercised;
(vii) Any guaranty of Applicant’s obligations hereunder ceases to be, or is asserted by any person not to be, in full force and effect;
(viii) Any material adverse change in the financial condition or management of Applicant or any Guarantor;
(ix) Reserved;
(x) Default in payment or performance of Applicant’s obligations or covenants under the 2007 Indenture;
(xi) Non-payment of any debt obligation of Applicant, if such non-payment is not cured within any applicable notice-and-right-to-cure
period; or
(xii) The occurrence of a default under other debt agreements/indentures due to Applicant’s draw (and subsequent payment) under a Credit.
(b) Upon the occurrence of any event of default under Section 4(a)(iv), (i) the amount for which all Credits were issued and any other amounts
owing hereunder shall immediately become due and payable without any election or action on the part of Bank and (ii) Applicant will be and becomes
thereby unconditionally obligated, without any further notice, act or demand, to pay to Bank an amount in immediately available funds equal to 105%
of the amount available to be drawn on all Credits then outstanding, which funds shall be held in a special collateral account pursuant to arrangements
satisfactory to Bank (the “LC Collateral Account”), in the name of Applicant but under the sole dominion and control of Bank and in which such
Applicant shall have no interest.
(c) Upon the occurrence of any other event of default and at any time thereafter, Bank at its option and in addition to all other rights of Bank
under this Agreement, any related agreement and applicable law, may (i) without notice or demand declare the amount for which all Credits were
issued and any other amounts owing hereunder immediately due and payable; and (ii) make demand on Applicant to pay, and Applicant will, forthwith upon such demand and without any further notice or act pay to Bank an amount in immediately available funds equal to 105% of the amount available
to be drawn on all Credits then outstanding, which funds shall be held in the LC Collateral Account.
(d) Bank may at any time or from time to time after funds are deposited in the LC Collateral Account apply such funds to the payment of any
amounts owing to Bank hereunder. At any time while any event of default is continuing, neither Applicant nor any person claiming on behalf of or
through Applicant shall have any right to withdraw any of the funds held in the LC Collateral Account. After all of the obligations of Applicant under this Agreement have been indefeasibly paid in full, any funds remaining in the LC Collateral Account shall be returned by Bank to Applicant or paid
to whomever may be legally entitled thereto at such time. In addition, to the extent Applicant has pledged collateral securing its obligations hereunder,
upon the occurrence of any event of default Bank may exercise any and all rights and remedies of a secured party under the Uniform Commercial
Code and other applicable law.
(e) Upon the occurrence of an Event of Default, Applicant shall pay a Default Rate in replacement of the Commitment Fee described in Section
2(b). The Default Rate shall be calculated as (i) the Base Rate plus (ii) 3.00%.
(f) The Base Rate shall be calculated as the highest of (i) U.S. Bank Prime Rate plus 2.00%, (ii) Federal Funds Rate plus 3.00%, and (iii)
7.50%.
5. Representations and Warranties.
Applicant represents and warrants to Bank the following:
Continuing Reimbursement Agreement 4 rev. 1/11
(a) All information, certificates or statements given to Bank in connection with or pursuant to this Agreement are and will be true and complete
when given.
(b) This Agreement is the legal, valid and binding obligation of Applicant, enforceable against Applicant in accordance with its terms. The
execution, delivery and performance of the Agreement and any Application (i) are within Applicant’s power; (ii) have been duly authorized by all appropriate entity action; (iii) do not require the approval of any governmental agency; and (iv) will not violate any law, agreement or restriction by
which Applicant is bound. If Applicant is not an individual, Applicant is an entity duly and properly incorporated or formed, validly existing and (to the
extent such concept applies to such entity) in good standing under the laws of its jurisdiction of incorporation or organization, and has all requisite
authority to conduct its business in each jurisdiction in which its business is conducted. There is no litigation or administrative proceeding threatened
or pending against Applicant which would, if adversely determined, have a material adverse effect on Applicant’s ability or authority to perform its
obligations hereunder.
(c) Any Credit, and transactions related thereto, shall be in compliance with any federal, state, local and foreign laws, regulations, treaties or
customs applicable to Bank or Applicant.
(d) Applicant will procure promptly all necessary licenses for the export, import, shipping or warehousing of, or payment for property covered
by any Credit and will comply with all foreign and U.S. laws, rules and regulations (including exchange control regulations) now or hereafter applicable
to the transaction related to any Credit or applicable to the execution, delivery and performance by Applicant of this Agreement.
(e) Applicant and each and all entities 50% or more owned, directly or indirectly, by Applicant (“Subsidiaries”), and their respective officers,
employees, directors and agents are and at all times will be in compliance with the following: (A) all laws, rules, and regulations of any jurisdiction
applicable to Applicant or its Subsidiaries from time to time concerning or relating to bribery or corruption (“Anti-corruption Laws”), (B) economic or
financial sanctions or trade embargoes imposed, administered or enforced from time to time by the U.S. government (“Sanctions”), including those administered by the U.S. Department of Treasury’s Office of Foreign Assets Control or successor (“OFAC”) and the U.S. Department of State or
successor, and (C) the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), the Trading with the Enemy Act, as
amended, or any of the foreign assets control regulations of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V) and any
enabling legislation or executive order relating thereto or successor statute thereto (“Anti -terrorism Laws”), all as may be amended from time to time.
(f) The Credits issued hereunder comply with, and neither the Credits issued nor the use of the proceeds of such Credits will violate, any Anti-
corruption Laws, Sanctions or Anti-terrorism Laws.
(g) None of Applicant, any Subsidiary or any of their respective directors, officers or employees is (A) listed in any Sanctions-related list of
designated persons maintained by OFAC or the U.S. Department of State, (B) operating, organized or resident in a country or territory which is itself
the subject or target of any comprehensive Sanctions (“Sanctioned Country”), (C) an agency, political subdivision or instrumentality of the government
of a Sanctioned Country, or (D) 50% or more owned, directly or indirectly, by any of the above
(h) Applicant shall, and shall cause each Subsidiary to, provide such information and take such actions as are reasonably requested by Bank
in order to assist Bank in maintaining compliance with Anti-corruption Laws, Sanctions and the PATRIOT Act.
(i) Applicant represents and warrants that granting a security interest in the collateral contemplated by Section 3 hereof will not violate and, is
not otherwise prohibited by, indenture agreements of Applicant or any other agreement to which Applicant is a party.
(j) Applicant represents and warrants that no drawing under a Credit (and subsequent demand for repayment by the Bank) would result in
any default or cross-default under any of Applicant’s agreements or contracts.
(k) Applicant represents and warrants that reimbursement of draws under a Credit constitute “Maintenance and Operation Costs” for purposes
of the 2007 Indenture. Applicant further represents and warrants that reimbursement of draws under a Credit shall constitute maintenance and
operation costs in calculating any net revenues pledged with respect to any future indebtedness of the Electric System. Applicant shall not pledge
Gross Revenues to secure any future indebtedness of Applicant without the prior written consent of the Bank.
6. Changes to Regulations.
If there shall occur any adoption or implementation of, or change to, any Regulation, or interpretation or administration thereof, which shall have the
effect of imposing on Bank (or Bank’s holding company) any increase or expansion of or any new: tax (excluding taxes on its overall income and
franchise taxes), charge, fee, assessment or deduction of any kind whatsoever, or reserve, capital adequacy, special deposits or similar requirements
against credit extended by, and/or against Credits issued by, assets of, deposits with or for the account of Bank or other conditions affecting the extensions of credit and/or issuance of Credits under this Agreement, then Applicant shall pay to Bank such additional amount as Bank deems
necessary to compensate Bank for any increased cost to Bank attributable to the extension(s) of credit and/or issuance of Credits under this
Agreement and/or for any reduction in the rate of return on Bank’s capital and/or Bank’s revenue attributable to such extension(s) of credit and/or
issuance of Credits. As used above, the term “Regulation” shall include any federal, state or international law, governmental or quasi - governmental
rule, regulation, policy, guideline or directive (including but not limited to the Dodd -Frank Wall Street Reform and Consumer Protection Act and
enactments, issuances or similar pronouncements by the Bank for International Settlements, the Basel Committee on Banking Regulations and
Supervisory Practices or any similar authority and any successor thereto) that applies to Bank. Bank’s determination of the additional amount(s) due
under this paragraph shall be binding in the absence of manifest error, and such amount(s) shall be payable within 15 days of demand and, if
recurring, as otherwise billed by Bank.
7. General Terms and Conditions.
(a) Each Application shall be subject to all terms and conditions of this Agreement. In addition, this Agreement shall apply to each Credit issued
by Bank at the request of Applicant, including, without limitation, all Credits (if any) previously opened and outstanding on the date hereof.
Notwithstanding the foregoing, if any Credit is issued pursuant to a loan agreement or other separate agreement, then, to the extent of any conflict
between such other agreement and this Agreement, the terms of such other agreement shall control.
(b) Notwithstanding any other term hereof, Applicant understands and agrees that any Credit can be revoked or amended only with the consent of the beneficiary of the Credit, Bank and any confirming bank.
Continuing Reimbursement Agreement 5 rev. 1/11
(c) If Applicant requests Bank to issue a Credit for the account of a third party, whether affiliated with Applicant or otherwise (the “Account
Party”), the Account Party shall have no rights against Bank. Bank may deal with Applicant as if Applicant were the named Account Party.
(d) Applicant shall give Bank prior written notice of any change of name, address, place of business or state of incorporation or organization.
Any notice of any nature by Applicant to Bank must be given at the place for notification provided by Bank.
(e) The singular includes the plural. If Applicant consists of more than one person, the obligations of Applicant hereunder are joint and several
and are binding upon any marital community of which any Applicant is a member. This Agreement shall be binding on Applicant, its successors and
assigns, and shall inure to the benefit of Bank or Bank’s successors, transferees and assignees. Notwithstanding the foregoing, Applicant may not
assign its rights under this agreement without Bank’s prior written consent. Any change of control of Applicant shall require Bank’s prior written
consent.
(f) Notwithstanding the title appearing on any Credit, the rights and obligations of Bank and Applicant with respect to the Credit shall be as set
forth herein.
(g) Any Application or Credit will set forth which rules or customs apply to the corresponding Credit. Such rules and customs may include, but
are not limited to, the International Standby Practices, as published by the International Chamber of Commerce (“ISP”) or the Uniform Customs and
Practice for Documentary Credits, as published by the International Chamber of Commerce (“UCP”). In any event, the rules or practices set forth in
the Credit are incorporated herein and shall govern the Credit. Each Credit shall be governed by the internal laws of the State in the United States of
America in which the Credit is issued without regard to such State’s conflict of laws principles (the “Governing Laws”) and the federal laws of the
United States of America, except to the extent such laws are inconsistent with the rules adopted in the Application as set forth above. This Agreement
shall be governed in accordance with the laws governing the Credit(s) in conjunction with which it is being interpreted. If it is being interpreted
independently of any Credit, it shall be governed by the laws of the location of the Bank to which it was delivered.
(h) When possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective to the extent of such
prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement.
(i) Applicant hereby indemnifies and agrees to defend and hold harmless Bank, its officers, directors, agents, successors and assignees, from
and against any and all liabilities, claims, demands, losses and expenses, arising from or in connection with this Agreement, any Credit or any related transaction. Applicant agrees to pay all reasonable attorney fees and other costs and expenses incurred by Bank in collecting overdue amounts or
construing or enforcing any provision of this Agreement or any Credit, including but not limited to reasonable attorney fees at trial, in any arbitration,
appellate proceeding, proceeding under the bankruptcy code or receivership and post-judgment attorney fees incurred in enforcing any judgment.
(j) Any action, inaction or omission taken or suffered by Bank or by any of Bank’s correspondents under or in connection with any Credit or
any related drafts, documents or property, if in good faith and in conformity with foreign or United States laws, regulations or customs applicable
thereto, shall be binding upon Applicant and shall not place Bank or any of Bank’s correspondents under any resulting liability to Applicant. Without
limiting the generality of the foregoing, Bank and Bank’s correspondents may act in reliance upon any oral, telephonic, telegraphic, electronic or
written request or notice believed in good faith to have been authorized by Applicant, whether or not in fact given or signed by an authorized person.
(k) Bank’s waiver of any right on any occasion shall not be construed as a bar or waiver of such right on any other occasion, or of any other
right. Applicant hereby waives and agrees not to assert any defense under any applicable statute of limitations, to the fullest extent permitted by law.
(l) Without notice to any Applicant and without affecting Bank’s rights or Applicant’s obligations, Bank may deal in any manner with any person
who at any time is liable for, or provides any collateral for, any obligations of Applicant to Bank. Without limiting the foregoing, Bank may impair,
release (with or without substitution of new collateral) and fail to perfect a security interest in, any collateral provided by any person; and sue, fail to
sue, agree not to sue, release, and settle or compromise with, any person.
(m) Except as otherwise provided herein or in any Credit, all notices and other communications required or permitted to be given to any party hereto shall be in writing or an electronic medium that is retrievable in a perceivable form and shall be deemed given when delivered by hand,
electronically, by overnight courier, or when deposited in the United States mail, postage prepaid, addressed as set forth in the Application.
(n) This Agreement is a continuing agreement and shall remain in effect until terminated, amended or replaced. This Agreement may be
terminated by Applicant or Bank by giving notice of termination to the other party and may be amended or replaced by a written agreement signed
by Applicant and accepted by Bank. No termination shall alter or affect the undertaking of Applicant or Bank with respect to any Credit already issued, or committed to, prior to such termination. Any amendment or replacement shall supersede this Agreement with respect to Credits already issued or
committed to, unless such amendment or replacement states otherwise.
(o) This Agreement, as supplemented by the laws, rules and customs incorporated herein by subpart (g) to this part, and as supplemented by
the terms of any Application, constitutes the entire understanding between Bank and Applicant with respect to the matters treated herein, and
specifically supersedes any prior or contemporaneous oral agreements.
(p) Bank is authorized, but not obligated, to record electronically or otherwise any telephone and other oral communications between Bank
and Applicant. Any phone number Applicant provides may be used to contact Applicant. By providing a mobile number, Applicant consents to receiving
communications at that number that may include prerecorded or artificial voice message calls, text messages, and calls made by an automatic
telephone dialing system from Bank and our affiliates and agents. These calls and messages may incur access fees from your cellular provider.
(q) All terms and conditions on the attached Schedule 1, and any replacement Schedule 1 are hereby incorporated herein. Applicant may
change the provisions of Schedule 1 by executing and delivering a new Schedule 1 to Bank.
(r) In the event Applicant submits an Application or other instruction by facsimile transmission, or by email or other electronic transmission
(each, an “Imaged Document”), Applicant agrees: (i) each Imaged Document shall be deemed to be an original document and shall be effective for
all purposes as if it were an original; (ii) Applicant shall retain the original of any Imaged Document and shall deliver it to Bank upon request; (iii) if
Applicant sends Bank a manually signed confirmation of an Imaged Document, Bank shall have no duty to compare it to the previously received Imaged Document nor shall it have any liability or duty to act should the contents of the written confirmation differ therefrom; (iv) any manually signed
confirmation of an Imaged Document must be conspicuously marked “Previously transmitted”, and Bank will not be liable for issuance of duplicate
Continuing Reimbursement Agreement 6 rev. 1/11
Credits or amendments thereto that result from Bank’s receipt of confirmations not so marked; and (v) because Bank cannot always determine
whether a particular facsimile, email or electronic request is valid, Applicant shall have sole responsibility for the security of using facsimile, email or
electronic transmissions and for any authorized or unauthorized Imaged Document received by Bank, purportedly on behalf of Applicant.
Notwithstanding the above, Bank is under no obligation to accept any Application or instruction sent by facsimile, email or other electronic
transmission.
(s) If Applicant elects to send or receive instructions or reports to or from Bank via unsecured electronic means, including, without limitation,
facsimile transmission, voicemail, unsecured e-mail or other unsecured electronic or telephonic methods (“Electronic Transmission”), Applicant
acknowledges that such Electronic Transmissions are an inherently insecure communication method due to the possibility of error, delay and
observation or receipt by unauthorized personnel. Bank may rely in good faith on Applicant’s instructions regarding how and to what number or e-
mail address Electronic Transmissions from Bank should be sent and may rely on any Electronic Transmission that it reasonably believes to have
been initiated by the Applicant. Should Applicant elect to send or receive unsecured Electronic Transmissions to or from Bank, Applicant assumes
all risks, and Bank shall not be liable for any loss that results from the non-receipt, disclosure, alteration or unauthorized access of any such unsecured
Electronic Transmission.
(t) To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain,
verify, and record information that identifies each person who opens an account. Bank will ask each person in a financial transaction their name,
address and other information that will allow Bank to identify such person. Bank may also ask to see other documents that substantiate a person’s
identity.
(u) This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute
an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this
Agreement by facsimile or portable document format (.pdf) shall be effective as delivery of a manually executed counterpart of this Agreement.
(v) The Applicant shall deliver to the Bank, no later than 180 days after its fiscal year end, annual audited financial statements, in form and
substance reasonably satisfactory to the Bank.
(w) The Applicant shall deliver to the Bank a copy of its annual budget, no later than 45 days after its adoption, in form and substance reasonably
satisfactory to the Bank.
(x) The Applicant shall deliver to the Bank, no later than 15 days after the end of each calendar month, statements confirming valuation of the
collateral on a marked to market basis.
8. Jury Trial Waiver. To the fullest extent permitted by law, Bank and Applicant hereby waive trial by jury in any judicial proceeding involving,
directly or indirectly, any matter (whether in tort, contract or otherwise) in any way arising out of, related to or connected with any Credit or this
Agreement. Bank and Applicant represent and warrant to each other that this jury trial waiver is knowingly, willingly and voluntarily given.
Continuing Reimbursement Agreement 7 rev. 1/11
9. IMPORTANT NOTICE. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM
ENFORCING PREPAYMENT OF A DEBT INCLUDING VERBAL PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE.
Applicant acknowledges receipt of a completed copy of this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed and delivered as of the day and year first above written.
APPLICANT: BANK:
THE CITY OF PALO ALTO U.S. BANK NATIONAL ASSOCIATION
By: By:
Name: Ed Shikada Name:
Title: City Manager Title:
THE CITY OF PALO ALTO
By:
Name: Kiely Nose
Title: Administrative Services Director
THE CITY OF PALO ALTO
By:
Name: Dean Batchelor
Title: Utilities Director
APPROVED AS TO FORM:
THE CITY OF PALO ALTO
By:
Name: Amy Bartell
Title: Assistant City Attorney
Continuing Reimbursement Agreement rev. 1/11
SCHEDULE 1
AUTHORIZATION
CONTINUING REIMBURSEMENT AGREEMENT
FOR LETTERS OF CREDIT
The provisions of this Schedule 1 are hereby incorporated into and made a part of the Continuing Reimbursement Agreement for Letters of Credit
(“Agreement”) executed by and between U.S. BANK NATIONAL ASSOCIATION, (“Bank”) and THE CITY OF PALO ALTO (“Applicant”), dated
August [___], 2020. Capitalized terms not otherwise defined herein shall have the meanings assigned to them in the Agreement.
1. In addition to those authorized through U.S. Bank Global Trade or other electronic letter of credit application system offered by Bank, if applicable, any one of the persons whose name, title and signature appears below is authorized to give instructions to Bank and to execute and/or
transmit Applications, requests for amendments, requests for extensions and other communications of any nature regarding any Credit issued by
Bank for Applicant.
NAME TITLE SIGNATURE
___________________________ ___________________________ ___________________________
___________________________ ___________________________ ___________________________
___________________________ ___________________________ ___________________________
___________________________ ___________________________ ___________________________
2. In addition to those authorized through U.S. Bank Global Trade or other electronic letter of credit application system offered by Bank, if
applicable, the following persons are entitled to waive discrepancies contained in documents presented under a Credit. (Applicant understands that
upon any such waiver, Applicant is obligated to reimburse Bank to the same extent as if the documents fully complied with the terms of the Credit.):
NAME TITLE TELEPHONE NUMBER
___________________________ ___________________________ ___________________________
___________________________ ___________________________ ___________________________
___________________________ ___________________________ ___________________________
___________________________ ___________________________ ___________________________
3. This Schedule 1 shall be effective upon receipt by Bank. Bank may rely on this Schedule I until it has been revoked in writing by
Applicant and Bank has a reasonable opportunity to act on any such revocation.
APPLICANT: BANK:
THE CITY OF PALO ALTO U.S. BANK NATIONAL ASSOCIATION
By: By:
Name: Name:
Title: Title:
City of Palo Alto (ID # 11491)
City Council Staff Report
Report Type: Rail Communications Update Meeting Date: 9/21/2020
City of Palo Alto Page 1
Summary Title: Connecting Palo Alto Rail Update
Title: Connecting Palo Alto Rail Grade Separation: Receive an Update From
the Expanded Community Advisory Panel (XCAP)
From: City Manager
Lead Department: Transportation Department
Staff is providing this cover memo as additional information for the City Council as part
of the Expanded Community Advisory Panel (XCAP) Update for September 21, 2020.
The report from XCAP Chairperson is included as Attachment A.
Tentative Timeline
The XCAP is currently working toward their goal of completing a report to the City
Council with grade separation recommendations by the end of October.
XCAP Deliberations:
• September 16, 2020 – XCAP Regular Meeting, 4:00 – 7:00 pm (Begin
Deliberations – Meadow-Charleston)
• September 21, 2020 – City Council meeting when XCAP Update is scheduled to
be presented
• September 23, 2020 – XCAP Special Meeting, 4:00 – 7:00 pm (Continue
Deliberations – Meadow-Charleston)
• September 30, 2020 – XCAP Special Meeting, 3:30 – 6:00 pm (Continue
Deliberations – Meadow-Charleston)
• October 7, 2020 – XCAP Regular Meeting, 4:00 – 7:00 pm (Continue
Deliberations – Meadow-Charleston- if needed or Conclusion)
XCAP Report to Council: October 2020
Subject to XCAP completing their report, staff will work with the XCAP Chair/Vice Chair
to schedule sessions for the Council to receive and be fully briefed on the report and
recommendations. It can be anticipated that this will require several city council
City of Palo Alto Page 2
sessions to walk through the issues and dimensions of the XCAP review.
Council Deliberations following XCAP Report: Fall/Winter 2020
Attachments:
• Attachment A: XCAP Update to City Council #6
To: City Council
From: Nadia Naik, Chair of Expanded Community Advisory Panel (XCAP)
Date: September 21, 2020
Re: Update #6 to City Council (Amended September 10, 2020)
Executive Summary:
Since XCAP’s last update to City Council on 6/4/20, we have been continuing to receive
technical information from AECOM necessary to continue our deliberations. In light of the
delays to the schedule related to COVID, XCAP reviewed the committee’s continued
commitment and ability to adhere to the rigorous schedule to achieve the assignment by the
City Council. The committee recognized that while the need for grade separations is less
imminent than it once was, it remains a priority and something Palo Alto must prepare for in
the future. XCAP voiced their continued commitment to completing the task, agreed to an
aggressive timeline and the new completion date is now targeted to be October 2020.
At the February 26, 2020 meeting, XCAP voted unanimously to eliminate from further
consideration the two South Palo Alto tunnel options (with and without freight) from our
deliberations due to cost and the complexity of technical issues associated with the
alternatives. At the September 3, 2020 meeting, XCAP voted 6-3 (No votes: Phil Burton, Keith
Reckdahl and Nadia Naik) to recommend Closure with mitigations for the Churchill/Alma
intersection. Details are still being deliberated – including the mitigations and the options for
bike/ped tunnel design. For South Palo Alto, the remaining alternatives for the Meadow/Alma
and Charleston/Alma intersections that XCAP will be deliberating on are: viaduct, hybrid,
trench, and underpasses.
Completed Tasks:
• AECOM created and XCAP reviewed Factsheets, Exhibits and 3D renderings for the
newest alternatives (Meadow Underpass, Charleston Underpass and Churchill Partial
Underpass).
• AECOM created and XCAP reviewed existing Factsheets with updated information
available from the Noise/Vibration report and the Final Traffic report.
• AECOM and XCAP reviewed and updated the Matrix – Summaries of Evaluations with
City Council Adopted Criteria document to improve readability and reflect updated
technical information
• XCAP generated their own “Dynamic Matrix” for internal use in deliberations
• Discussion with Sebastian Petty of Caltrain
• Noise & Vibration Report
• Hexagon Final Traffic Report
• Draft chapters of the XCAP final report were shared with XCAP by the sub-committees
• Received update from Staff on Virtual Town Hall (vrpaloalto.com)
Discussion:
XCAP Team Update:
XCAP member Adina Levin of Friends of Caltrain and numerous other public transportation
advocacy groups left XCAP to focus on her advocacy given the impacts to transportation
funding due to COVID.
Schedule Changes and Community Engagement:
Since the last update, XCAP met every two weeks and has now switched to weekly meetings
during deliberations to achieve the October target.
XCAP continues to have a strong number of attendees (~30 per meeting) and receives
consistent public comment. There is, however, significant repetition both from many of the
same people who live near the impacted areas, particularly around Churchill and along
Embarcadero, as well as in the substance of the comments received.
AECOM and Staff have developed a Virtual Town Hall (vrpaloalto.com) which runs from August
19th – Sept 7th. The majority of the exhibits in the Town Hall are the result of documents
created for XCAP’s deliberations.
Business Community Outreach:
To date, XCAP has not received any feedback from the business community on either existing or
new alternatives since the PA Chamber’s representative on XCAP (Judy Kleinberg) left the
committee in Jan 2020.
PAUSD Outreach:
The Staff is the point of contact for PAUSD since the departure of their representative from
XCAP last year. As reported previously, on 2/26/20 XCAP received a letter from the PAUSD
Superintendent regarding impacts from existing alternatives at the time (Churchill viaduct and
closure) which seemed to indicate they had not fully understood the alternatives to date. (The
district communicated concerns indicating that a closure of Churchill “may negatively impact
student safety related to bicycle commuters,” but the Churchill Closure would include one of
two bike/ped underpass alternatives that would improve bike/ped crossing in the Churchill
area.)
Staff reported to XCAP that they had presented to the City/School liaison committee but, we
have not received any feedback from them, the PAUSD school board, or the City School
Transportation Safety Committee (CSTSC). XCAP assumes that Staff will continue to
communicate with PAUSD and other partners to ensure they fully understand both the existing
and new alternatives and we encourage them to provide additional feedback before XCAP
finalizes deliberations. We also recommend the City work with the district to promote the
XCAP’s work and involve the parent community to the extent possible.
Bike/Pedestrian Outreach: Since the XCAP Chair presented to the Palo Alto Bicycle Coalition
(PABAC), we have received more feedback regarding bike/ped issues. PABAC, a highly
technically experienced advisory group, previously described the renderings and exhibits as
“very unclear” and expressed feeling like bike/ped design considerations had been “shoe
horned” into the work rather than being a focus from the beginning.
As noted above, in the Viaduct, Hybrid, Trench, Tunnel and closure alternatives, bike/ped
movement is relatively straight forward and is not usually analyzed in great detail at this stage
of development. The new alternatives, however, attempt to provide greater design flexibility
and, thus involve more complex bike/pedestrian designs. Palo Alto has made a commitment to
treat all modes (cars, bikes, peds, scooters, etc.) equally in their planning efforts, but XCAP has
run into some difficulty because, from the Staff and the Consultant’s perspective, the level of
detail sought by the committee and the community is beyond what is typical at this phase.
Many have expressed concern that it is difficult to make recommendations if we can’t evaluate
the details needed to achieve good bike/ped design and ensure we have addressed concerns
for all modes. The committee recognizes, however, that due to time and funding constraints,
there cannot be more work done on these alternatives at this time and that we will need to
make recommendations based on the information provided to date. XCAP has discussed the
possibility of including recommendations for future areas of study in their final report.
Workflow items:
Noise and Vibration Report: XCAP reviewed and received the final draft of the Noise and
Vibration Report. The subsequent technical information was used to update the Matrix and the
Factsheets for each alternative.
Website:
The Staff have been able to update the website with the following information.
Meeting Summaries – Meeting summaries are now available for each XCAP meeting that
include any official actions taken by XCAP.
Compilations of Public Comment – An email address was developed for XCAP such that
members of the public could email a single address with comments. Public comments are
collated and included in XCAP’s packet (similar to how City Council receives emails) such that
XCAP members have a succinct record of emails received and that the public both easily see the
emails they’ve sent to XCAP and read emails received by XCAP from other members of the
public. There have been some reports of emails being caught in SPAM and not being delivered
to XCAP members. Staff is looking into the issue.
Future Schedule and Work Plan:
XCAP approved that the Chair would assign sections of XCAP’s Final Report to various group
members to begin production of a final deliverable for the City Council. An outline of the report
and the assigned sections can be viewed here: https://connectingpaloalto.com/wp-
content/uploads/2020/02/Shared-at-Meeting-Item-4-Memo-re-XCAP-deliberation-Feb-
202020.pdf
XCAP members have begun releasing drafts of various sections. The Chair and Vice Chair are
editing and collating the received chapters and providing feedback for consistency. This work is
ongoing.
Caltrain Update – Sebastian Petty, Deputy Chief, Caltrain Planning
A summary of Mr. Petty’s presentation to XCAP is available here. Mr. Petty reviewed the
significant impacts that COVID19 has had on Caltrain operations. We highly recommend reading
the entire summary.
Highlights:
COVID:
• Operations have been impacted but grade separation projects remain active (funded with
outside funding sources like county sales taxes)
• Business plan paused - not cancelled; decisions the Board has made have not been voided
• Scenario planning will consider whether changes to travel patterns are significant and
lasting or more temporary and marginal
Corridor-wide Grade Separation Study
• Will begin Fall of 2020 (funding secured in this past year’s capital budget). Budget
authorized hiring a single point of contact to manage work broken up between multiple
contractors and phases. Phase 1: expected to take 6 months; entire study about 2.5 years.
• A corridor and community process, including all local jurisdictions on the corridor, regional
and state partners will work to develop and determine the scope, timeframe, contracting
method and how the study should be governed. Focus will be policy framework, not specific
grade separation or crossing designs.
• Phase 2: Will echo what was heard and seek feedback from city representatives, especially
on standards and construction methods and why they’re needed to understand mutual
implications of all decisions.
• Will consider economies of scale, construction standards and design standards
comprehensively (so individual projects are not asked to go through onerous design
exemption processes) and how construction contracting and sequencing approaches can be
used to keep costs and impacts under control. And, will include organization analysis and
governance around project delivery vs. operations and corridor management, structure for
decision making on issues that span multiple jurisdictions and impact both cities and rail
operations and structure for administering funding.
Four Track Sections/Grade Separations:
• Caltrain Board adopted a long-range service vision within the context of the business plan.
and a Rail Corridor Use Policy (RCUP) giving direction to Staff to be careful of permanently
encumbering any land they own because they might need it for a small four track section to
accommodate HSR.
• Work needs to be done with PA and MV to narrow down the area where that infrastructure
could realistically fit.
• On Caltrain-owned corridor, assumption: if HSR comes, they would operate at 110mph
blended with Caltrain’s service (FRA requires a grade separation for operating speed of
125mph or higher).HSR plans do not include grade separations, but instead are looking at
quad gates and other kinds of safety improvements. Caltrain is pushing back on this HSR
assumption through HSR EIR process.
• At a corridor level, standards like what is an acceptable grade will need to be evaluated
rather than taking a case by case exception approach to ensure Union Pacific is comfortable.
Funding Grade Separations:
• Costs are rising in the Bay Area and because railroad is getting more complicated with
electrified infrastructure, positive train control and more complex systems. Construction
methodology and standards are also challenging and increase cost.
• Interest in grade separations has increased without realistic levels of funding to complete
projects.
• Currently, there are no grade separation funding programs outside of local tax measures
and no meaningful Federal programs. State funding has been fairly miniscule relative to size
of the projects. Corridor as a whole needs to be involved with representation from the
region and the state to fund grade separations.
• Caltrain has no money for grade separations and no dedicated money to support grade
separation engineering on a case- by-case basis. Currently, if cities have funding for grade
separations, Caltrain can’t analyze city plans until the city submits them and can front
Caltrain money to hire consultants to do the analysis. Usually there is funding available to
support the railroad’s participation.
• As Palo Alto designs advance and move towards construction, the railroad will need to be
more heavily involved. This could be a service agreement with Palo Alto directly or a three-
party agreement with VTA and Palo Alto if they were contributing significant funding and
Caltrain to cover costs. Those costs would be higher if Caltrain needed to do work that is
looking at things outside of the normal standards that would generate a lot of work the
railroad needed to do. Note: As projects advance, costs increase because the level of design
and level of review necessary increases dramatically.
• Experts note the highest factor in prioritization of grade separations is how they can be
grouped together for contracting purposes. Bundling multiple projects as a corridor to
advocate for creation of new funding sources or to articulate comprehensive project
benefits is likely to yield better results than cities relying on current county funding
schemes.
• Caltrain has seen a lack of success in going after Federal funding for individual grade
crossings. Sequencing of grade separation projects can have implications for service
patterns to accommodate multiple construction projects – and projects that cross
jurisdictions, add to the complexity.
Summary
Despite all the impacts of the COVID19 emergency, the XCAP remains committed to providing
City Council with a final report of its findings and recommendations. XCAP remains confident
that despite the recent impacts to its operations, our region will recover and Caltrain will
eventually run a high volume of trains again. Although the time horizon has been extended by
some amount, traffic congestion and the issue of safety at the grade crossings will return to
Palo Alto, necessitating grade separations.
City of Palo Alto (ID # 11472)
City Council Staff Report
Report Type: Action Items Meeting Date: 9/21/2020
City of Palo Alto Page 1
Summary Title: Inclusionary Below Market Rate Feasibility Study
Title: Recommendation of the Planning and Transportation Commission (PTC)
to: (1) Discuss the Draft Economic Analysis Analyzing Potential Increases to
Inclusionary Housing Requirements; (2) Maintain the Inclusionary Housing
Requirements at 15 Percent for Ownership Housing and the Housing Impact
fee for Rental Housing; and (3) Authorize an Analysis of Specific Adjustments
Across the Spectrum of Zoning and Financial Factors that Would Support a 20
Percent Inclusionary Housing Requirement
From: City Manager
Lead Department: Planning and Development Services
Recommendation
Staff and the Planning and Transportation Commission (PTC) recommend that the City Council:
1. Discuss the draft economic analysis analyzing potential increases to inclusionary housing
requirements;
2. Maintain the inclusionary housing requirements at 15% for ownership housing units and
retain the housing impact fee for rental housing projects; and
3. Direct staff and the PTC to explore possible zoning amendments or other factors that
could support a future 20% inclusionary requirement for ownership and rental housing
while recognizing that such analysis will be constrained without funding for additional
consultant resources.
Executive Summary
This report transmits the Below Market Rate Policy Economic Analysis completed by the City’s
consultant, Strategic Economics. The consultant’s analysis is Attachment A. This staff report
serves as a high-level introduction of the study and provides guidance for the Council
discussion.
Background
City of Palo Alto Page 2
The City Council approved the Housing Work Plan on February 12, 2018.1 The Housing Work
Plan2 was prepared for City Council in response to a Colleagues Memorandum on November 6,
2017.3 The Housing Work Plan identifies specific policies and other actions staff should take in
order to address the housing needs of Palo Altans. The director of Planning and Development
Services presented an update regarding the Housing Work Plan on February 3, 2020.4
The Housing Work Plan identifies that the City should: “Explore increasing below-market-rate
percentage requirements in market-rate development up to 20% and implementing
inclusionary housing requirements for rental housing.”5 These projects were further reinforced
in the Colleagues’ Memorandum dated September 23, 2019.6 The action minutes from
September 23, 20197 reflect Council’s unanimous motion to prioritize a feasibility study for the
increase of inclusionary Below Market Rate requirements for ownership housing and the
feasibility of applying the inclusionary requirement to new rental residential development.
The City hired a consultant, Strategic Economics, to determine the feasibility of development
should the City increase inclusionary requirements for ownership and rental housing units. This
report transmits the study for Council consideration and staff direction.
Discussion
The BMR Housing Program Analysis (Analysis) studied five different prototypes of residential
development that would likely occur in Palo Alto. The prototypes include 3 areas of the City,
including El Camino Real, California Avenue, and Downtown Palo Alto. The City’s 2030
Comprehensive Plan identifies these as suitable areas for new residential and mixed-used
development.
Each of the prototypes were studied with adjustments to five variables:
1) Retail: Reduced required ground-floor retail to 1500 square feet vs. preserving existing
retail square footage
2) Parking: Current parking requirements vs. a lower 1 unit, 1 parking space ratio
3) Tenancy: Rental versus ownership
4) Three different inclusionary requirements: 15%, 20%, and 25%
5) If applicable, applying the Housing Incentive Program (HIP) or State Density Bonus
1 Council staff report February 12, 2018: https://www.cityofpaloalto.org/civicax/filebank/documents/63393 and
Council meeting February 12, 2018 minutes: https://www.cityofpaloalto.org/civicax/filebank/documents/63832
2 Housing Work Plan: https://www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?t=52278.14&BlobID=70801
3 Colleagues Memo November 6, 2017: https://www.cityofpaloalto.org/civicax/filebank/documents/61770
4 Staff Report 2-3-2020:
https://www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?t=61922.54&BlobID=74930
5 Tasks 3.1 and 3.2 in the 2018 Housing Work Plan; Item 2 in the 2020 Housing Work Plan Update.
6 Colleagues Memo September 23, 2019: https://www.cityofpaloalto.org/civicax/filebank/documents/63832
7 9/23/19 minutes: https://www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?t=66804.19&BlobID=73927
City of Palo Alto Page 3
Analysis
The Analysis’ summary and introduction sections provide a concise summary of the various
prototypes that were evaluated, including the variants. This staff report does not unnecessarily
repeat the detailed findings.
In summary, the Analysis indicates that most prototypes are unlikely to support an increase in
BMR requirements without some adjustments to zoning requirements to decrease the costs of
development. The Analysis suggests, and staff support, adjusting parking and ground-floor
retail requirements to increase the likelihood that landowners and developers will pursue
multi-family housing projects in Palo Alto. The Analysis suggest that adjusting these two
variables can increase economic return on investments to levels that make housing
development more likely.
It is important to note that the Analysis was conducted prior to the onset of the COVID-19
pandemic and does not account for the severe economic impact of the pandemic. While it is
known that millions of California workers have filed for unemployment since mid-March, there
is insufficient data to assess the impacts on the real estate markets. Neither Strategic
Economics nor other economists can confidently predict the medium-term or long-term
outcomes on the economic feasibility of housing development. The need for the affordable
housing provided by BMR units is likely to increase, but it is not clear whether construction and
land costs will continue to rise and whether the demand for market-rate housing will remain
steady.
So, while the uncertainty of the market persists, staff feel confident that adjusting development
standards for retail and parking will decrease the costs associated with housing construction.
Decreasing the costs may not be enough to overcome the near-, medium-, and long-term
impacts of the economic recessionary period we are entering, but it is anticipated these
changes will increase the return on investment and thus increase the likelihood that additional
housing units will be produced. Once adjustments are made to the development standards, it
would be appropriate to revisit the inclusionary requirement, including possible increases to
rental housing impact fees.
Planning & Transportation Commission Discussion and Recommendation
The Planning and Transportation Commission (PTC) met on June 10, 2020. The staff report8 and
minutes9 for that meeting are available online.
The PTC voted 4-3 (Alcheck, Lauing, Summa voting no) to forward the staff recommendation to
keep the inclusionary housing requirements at 15% for ownership housing units and retain the
8 Staff report for June 10, 2020 PTC Meeting: https://www.cityofpaloalto.org/civicax/filebank/documents/77084
9 Minutes for June 10, 2020 PTC Meeting: https://www.cityofpaloalto.org/civicax/filebank/documents/77547
City of Palo Alto Page 4
housing impact fee for rental housing projects. While this recommendation did not achieve the
goal of providing more affordable housing through the inclusionary program, this
recommendation is consistent with the data provided by the study. With the current
development standards, 20% inclusionary housing can be difficult to realize in many areas of
Palo Alto, while 15% on-site inclusionary for-sale housing is more likely to be constructed.
The dissenting commissioners expressed disappointment that the recommended action
maintained the status quo and did not increase the inclusionary housing requirement.
Additionally, some dissenting commissioners expressed a desire to understand more about
potential adjustments in development standards that could facilitate an increase in the
inclusionary requirement. The study analyzed the impacts of adjusting retail requirements and
parking. The current project budget is unable to support analysis of additional development
standards.
The PTC also recommended that the Council extend the analysis in order to consider other
adjustments that would increase the likelihood that developers will pursue with both
ownership and rental projects with a 20% on-site inclusionary rate. By performing additional
analyses, the City may ascertain additional development standards that could be adjusted to
make it more likely that development will occur. Such standards might include floor area ratio
(FAR), residential density, or other standards. However, such extended analysis will be limited
to staff and commissioner engagement with community members and will not likely have the
benefit of technical consultant analysis as the Planning and Development Services department
does not have sufficient consultant funds to support this recommendation.
If the Council were interested in directing staff to make adjustments to the City’s parking and
retail standards in a manner consistent with the attached Analysis (reduce retail and parking
requirements) this can be accomplished with existing City resources and department funds.
Adjusting these standards increases the likelihood that development may occur and sustain a
20% inclusionary requirement.
The Council could choose to pursue both options. Additional study can continue while staff
bring forward parking and retail standard adjustments.
Regional Housing Needs Allocation
While the study has been underway, the Regional Housing Needs Allocation process has
proceeded. Reports from the Housing Methodology Committee indicate that the City of Palo
Alto will receive a four to five fold increase over its current 1,988 housing unit. Ultimately, the
City will develop a Housing Element that identifies opportunity sites for those housing units,
adjusts the zoning for those sites, and adjusts additional development standards to facilitate
housing production.
Stakeholder Engagement
The agenda for this item was posted online on the City’s website and the Daily Post.
City of Palo Alto Page 5
A noticed public hearing of the Planning and Transportation Commission was held on June 10,
2020. The PTC received written correspondence.
Resource Impact
The PTC’s recommendation to maintain the current inclusionary housing requirement does not
require any funds or staff time to implement. There is no budgetary impact of this
recommendation.
If Council directs staff to develop code changes to parking standards and/or ground floor retail
requirements, this work can be performed within the Department’s current, budgeted
resources.
The recommendation to explore zoning code modifications or other factors beyond parking
reductions and changes to the retail preservation ordinance to achieve the 20% inclusionary
requirement would require consultant services to prepare additional prototype, design and
proforma analysis. At present these funds are not available. At Council’s direction, staff could
engage the PTC and community members in a discussion to explore possible changes to the
zoning code, but ultimately progress on this effort would be constrained pending assignment of
consultant funds to the Planning and Development Services department to prepare the
necessary technical analysis.
Timeline
Should Council support additional study of inclusionary housing requirements, staff may return
before the end of FY 2020 with a budget adjustment.
Should Council choose to advance adjustments to parking and/or retail development standards,
staff anticipate to bring adjustments to the PTC in early 2021.
Environmental Review
The recommendation in this report does not result in any action that would qualify as a project
as defined by the California Environmental Quality Act and therefore is exempt from
environmental review.
Attachments:
Attachment A: Below Market Rate Draft Financial Feasibility Report (PDF)
STRATEGIC ECONOMICS | 2991 SHATTUCK AVE. BERKELEY, CA. 94705 | 510.647.5291
MEMORANDUM
To: Jonathan Lait and Rachael Tanner, City of Palo Alto
From: Sujata Srivastava and Jesse Brown, Strategic Economics
Date: June 4, 2020
Project: Palo Alto Below Market Rate Housing Program Analysis
Subject: Draft Financial Feasibility Report
I. INTRODUCTION
The City of Palo Alto retained Strategic Economics in 2018 to evaluate the economic feasibility of
potential changes to the Below Market Rate (BMR) Housing Program requirements for ownership and
rental housing. This report summarizes the financial feasibility of BMR requirements on housing
development projects in order to understand the economic viability of changing the City’s
requirements.
The City of Palo Alto has an existing citywide BMR program that requires residential ownership
development projects to provide 15 percent of units on-site for moderate-income households.1 For
rental development projects, the City charges an affordable housing impact fee, set at $20.87 per net
residential square foot.2 This requirement may also be satisfied by providing an equivalent number of
on-site affordable units or other alternative compliance options.
Background
Since 2009, when the Palmer/Sixth Street Properties L.P. v. City of Los Angeles (Palmer) case was
decided, the City of Palo Alto has not imposed an inclusionary requirement on rental properties. Palmer
precluded California cities from requiring long term rent restrictions or inclusionary requirements on
rental units. In 2017, Governor Brown signed AB 1505 to restore cities' and counties' ability to require
on-site affordable units within rental projects, and the law became effective on January 1, 2018. Under
AB 1505, cities can impose inclusionary requirements on rental residential developments provided
that: (1) the requirements are imposed in the zoning ordinance; (2) if more than 15 percent of rental
units are required to be affordable to low-income households, the State of California Department of
Housing and Community Development (HCD) may require that the requirement be justified by an
1 Palo Alto Municipal Code 16.65. For residential ownership development of three units or more, the inclusionary housing policy requires 15 percent of units to be targeted to households earning between 80 and 120 percent of the Area Median Income (AMI). Developers can apply for alternative compliance options, such as paying in-lieu fees or providing units off-site if the requirement is deemed financially infeasible. Two-thirds of affordable units must be set aside for households at 80-100% of AMI, and one-third for households at 100-120%. Different requirements apply for residential development sites larger than 5 acres.
2 Fees as of August 2019.
2
economic feasibility study under certain circumstances; and (3) alternatives to on-site compliance are
allowed.
Purpose
The purpose of this study is to examine the financial feasibility of potential changes to the City’s BMR
program, including:
• Studying the potential to increase the inclusionary requirements to 20 percent or higher for
ownership projects
• Studying the potential to require on-site 15 percent inclusionary BMR units for rental
developments, instead of the existing affordable housing in-lieu fee.
• Examining potential land use/zoning strategies to incentivize housing production that results
in a higher share of inclusionary BMR units on-site. This includes strategies such as increasing
allowable densities/FAR, reducing retail requirements, and reducing parking requirements.
It is important to note that the research and analysis for this study were completed in 2020, before
the onset of the COVID-19 pandemic.
Report Organization
The report summarizes the assumptions, methodology, and results of the financial feasibility analysis,
and is organized as follows:
• Section II: Summary of Findings
• Section III: Approach and Methodology
• Section V: Pro Forma Analysis and Detailed Results
• Appendix: The appendix to the report provides additional background data that informed the
analysis, including housing values, rents, land values, and city fees.
3
II. SUMMARY OF FINDINGS
This section summarizes the findings of the financial feasibility analysis under different BMR
requirements for residential development.
Many residential developments may face feasibility challenges, given the cost of development in Palo
Alto and the greater Bay Area. In the last five years, development costs have escalated significantly in
Palo Alto, as well as the greater Bay Area. While sales prices and apartment rents are high, they are
not rising at the same pace as the cost of construction. These factors have contributed to a slowdown
in the development of housing in many cities within the Bay Area.3
The analysis indicates that new ownership development projects are not likely to be able to support a
20% inclusionary BMR requirement under the City’s current zoning regulations. As shown in Figure 1
below, townhouse and condo developments with a 20% on-site inclusionary requirement do not
generate a return on cost that would be likely to attract development (18 percent for ownership
projects) with the City’s current zoning regulations for parking and ground-floor retail.
FIGURE 1: FEASIBILITY RESULTS OF OWNERSHIP HOUSING PROTOTYPES UNDER CURRENT ZONING REGULATIONS
Townhouse Downtown
Condo Flats Condo Flats
Zoning CS (with HIP) CD-C (with HIP) CS (with HIP)
Number of Units 16 26 20
Density (DU/Acre) 32 76 29
Ground-Floor Retail Sq. Ft. 3,000 3,750 9,035
Parking Spaces 47 53 78
Return on Cost 100% Market-Rate (No BMR Requirement) 20.79% 30.26% 9.95%
Scenario 1 (15% BMR Units On-Site) 8.68% 16.11% -2.36%
Scenario 2 (20% BMR Units On-Site) 5.08% 11.78% -6.17%
Scenario 3 (25% BMR Units On-Site) 1.47% 7.45% -9.98%
Scenario 4 (In-Lieu Fee) 13.87% 22.74% 4.64%
Source: Strategic Economics, 2020.
Highly Likely – Return on Cost is 18% or higher
Somewhat Likely – Return on Cost is over 15%
Less Likely – Net revenues are positive, but ROC is below 15%
Infeasible – Net revenues are negative
For ownership housing prototypes, it would be more likely that development could support a higher
inclusionary requirement of 20% if the City provided additional zoning incentives to reduce costs. The
analysis indicates that townhouse and condominium development projects are highly likely to feasibly
support the existing requirement of 15% and even a higher requirement of 20%, if the City lowered its
parking and ground-floor retail requirements. Limiting the required ground-floor retail to 1,500 square
3 UC Berkeley Terner Center for Housing Innovation https://ternercenter.berkeley.edu/construction-costs-series
4
feet and reducing the required parking to one space per unit makes it more likely that the ownership
prototypes can provide 15% and 20% BMR units.
FIGURE 2: FEASIBILITY RESULTS OF OWNERSHIP HOUSING PROTOTYPES WITH LOWER PARKING AND GROUND-FLOOR
RETAIL REQUIREMENTS
Townhouse Downtown
Condo Flats Condo Flats
Zoning CS (with HIP) CD-C (with HIP) CS (with HIP)
Number of Units 16 26 20
Density (DU/Acre) 32 76 29
Ground-Floor Retail Sq. Ft. 1,500 1,500 1,500
Parking Spaces 16 26 20
Return on Cost (ROC) 100% Market-Rate (No BMR Requirement) 35.88% 49.68% 37.96%
Scenario 1 (15% BMR Units On-Site) 22.26% 33.42% 22.52%
Scenario 2 (20% BMR Units On-Site) 18.20% 28.45% 17.74%
Scenario 3 (25% BMR Units On-Site) 14.14% 23.47% 12.96%
Scenario 4 (In-Lieu Fee) 27.19% 39.84% 29.72%
Source: Strategic Economics, 2020.
Highly Likely – Return on Cost is 18% or higher
Somewhat Likely – Return on Cost is over 15%
Less Likely – Net revenues are positive, but ROC is below 15%
Infeasible – Net revenues are negative
Rental development projects in the Downtown are somewhat likely to support a 15% or 20%
inclusionary BMR requirement under the City’s current zoning regulations. As shown in Figure 3 below,
apartments with a 15% or 20% on-site inclusionary requirement in the Downtown CD-C zone can
generate a yield on cost of between 4.75 percent and 5.0 percent under current zoning regulations
for parking and ground-floor retail. The Downtown CD-C apartment prototype is highly likely to be able
to generate impact fee revenues, generating a yield on cost of 5.17 percent.
In the lower density CS zone, rental apartments have a lower likelihood of development, even without
the BMR requirement. The CS zone apartment prototype generates a yield on cost of 4.38% without
BMR requirements. Therefore, lower density apartments in the CS zone are unlikely to support an on-
site inclusionary requirement or to be able to contribute the required housing impact fees per the City’s
existing BMR policy for rental development.
5
FIGURE 3: FEASIBILITY RESULTS OF RENTAL HOUSING PROTOTYPES UNDER CURRENT ZONING REGULATIONS
Downtown Apartments
CD-C Zone Apartments, CS Zone
Zoning CD-C (with HIP) CS (with HIP)
Number of Units 54 50
Density (DU/Acre) 157 73
Ground-Floor Retail Sq. Ft. 3,750 9,035
Parking Spaces 63 88
Yield on Cost (YOC)
Baseline (No Requirement) 5.30% 4.38%
Scenario 1 (15% BMR Units On-Site) 4.88% 4.04%
Scenario 2 (20% BMR Units On-Site) 4.77% 3.95%
Scenario 3 (25% BMR Units On-Site) 4.62% 3.84%
Scenario 4 (In-Lieu /Impact Fee) 5.17% 4.29%
Source: Strategic Economics, 2020.
Highly Likely – Yield on Cost is 5.0% or higher
Somewhat Likely – Yield on Cost is over 4.75%
Not Likely – Net revenues are positive but YOC is below 4.75%
Infeasible – Net revenues are negative
Reductions in the City’s requirements for parking and ground-floor retail would lower development
costs enough to make it more likely for a rental project to deliver 15% BMR units in the Downtown and
CS zones. The analysis shows that limiting the required ground-floor retail to 1,500 square feet and
reducing the required parking to one space per unit makes it highly likely that rental development
projects in the CS zone can feasibly provide 15% BMR units, achieving a return of over 5.0 percent.
Reductions in the parking and retail requirements also enhance the feasibility of downtown
apartments in the CD-C zone enough to enable the provision of up to 20% BMR units.
FIGURE 4: FEASIBILITY RESULTS OF RENTAL HOUSING PROTOTYPES WITH LOWER PARKING AND GROUND-FLOOR
RETAIL REQUIREMENTS
Downtown Apartments
CD-C Zone Apartments, CS Zone
Zoning CD-C (with HIP) CS (with HIP)
Number of Units 54 51
Density (DU/Acre) 157 74
Ground-Floor Retail Sq. Ft. 1,500 1,500
Parking Spaces 54 51
Yield on Cost (YOC)
Baseline (No Requirement) 5.62% 5.49%
Scenario 1 (15% BMR Units On-Site) 5.17% 5.07%
Scenario 2 (20% BMR Units On-Site) 5.05% 4.96%
Scenario 3 (25% BMR Units On-Site) 4.90% 4.82%
Scenario 4 (In-Lieu /Impact Fee) 5.47% 5.36%
Source: Strategic Economics, 2020.
Highly Likely – Yield on Cost is 5.0% or higher
Somewhat Likely – Yield on Cost is over 4.75%
Not Likely – Net revenues are positive but YOC is below 4.75%
Infeasible – Net revenues are negative
6
III. APPROACH AND METHODOLOGY
Strategic Economics worked closely with City staff to develop the approach and methodology for this
financial feasibility analysis. The following summarizes the steps undertaken in the analysis, followed
by additional information on the assumptions of revenues and costs.
Step 1. Develop Residential Prototypes
The initial step of the analysis was to create a series of residential prototypes. These are intended to
represent ownership and rental development that is likely to occur in the City of Palo Alto in the next
three to five years. Strategic Economics worked with City Staff to develop assumptions about the
zoning, parcel size, density, ground-floor retail, and other factors.
Step 2. Develop Assumptions about BMR Units
Strategic Economics also worked with City staff to determine the percentage of inclusionary units that
should be tested and the affordable sales prices and rents. Maximum sales prices and rents were
calculated using the method and parameters established by City policy and in coordination with Palo
Alto Housing’s BMR Program administrator.
Step 3. Collect Key Inputs and Build Pro Forma
The financial feasibility of each prototype is measured using a static pro forma model that calculates
profitability. The key inputs in the financial feasibility analysis are the revenues (rents/ sales prices),
development costs, and land costs. Strategic Economics collected and summarized data on these
inputs using the following data sources:
• Costar, a commercial real estate database that tracks rental multifamily properties and
property transactions.
• Interviews with local developers and brokers.
• Redfin and Polaris Pacific, real estate firms that collect data on residential sales prices.
• Review of pro formas from other projects and clients.
Step 4. Calculate Financial Feasibility
Once all the assumptions and inputs are added, the pro forma model sums up all development costs,
including land costs, hard costs (construction costs), soft costs, and financing costs. The pro forma
also adds up the project’s total value. The project’s total value is the sum of the estimated value of
the units (i.e. the average per unit sale price for ownership units or the capitalized value of rental units
multiplied by the number of units in the project).
The project’s profitability, or rate of return, is then calculated by dividing the project’s net revenue (i.e.
total value minus total development costs), by total development costs. To understand the potential
impact of BMR requirements on financial feasibility, the results are compared to developers’ typical
expectation of return. If the developer’s return for a project is within the range of the expected return,
the development project is highly likely to be developed. If the return is lower than the market
expectation, it is less likely to be built. Projects that achieve negative revenues (costs exceed values)
are not financially feasible.
7
Assumptions
RESIDENTIAL MIXED-USE DEVELOPMENT PROTOTYPES
Strategic Economics collaborated with City staff to develop five (5) distinct residential mixed-use
prototypes, summarized in Figure 7, that represent likely development projects in the next 3 to 5 years
in Palo Alto. The prototypes include ownership and rental options, to test the feasibility of both types
of development.
The prototypes vary based on the following characteristics:
• Ownership and Rental. Three of the prototypes include ownership units (Prototypes 1, 2, and
4) and two are rental developments (Prototypes 3 and 5).
• Zoning Districts: The development prototypes are in three zoning districts that accommodate
multi-family residential development: SOFA-II/RT 35, CD-C, and CS. The zoning code governs
height, density, and parking requirements.
In addition, the City’s Housing Incentive Program (HIP) was applied in the CD-C and CS zones
but not in the SOFA-II zone, where it is not permitted. HIP allows for an increase in floor-area-
ratio (FAR) in the CS zone, from 1.0 to 1.5, and in the CD-C zone, from 2.0 to 3.0, among other
variances to the code.
For each prototype, Strategic Economics tested the financial feasibility of the prototype under
two conditions: a) existing regulations, and b) more flexible zoning regulations that would
lower the amount of parking and ground-floor retail required in the project.
• Ground-floor retail: Each prototype contains some amount of ground-floor retail. The City’s
Retail Preservation Ordinance requires that new residential projects that replace commercial
uses retain the same amount of retail square footage that had previously existed on the site.
Prototypes that reflect the City’s current regulations (1a, 2a, 3a, 4a, 5a) include the amount
of retail that is currently on typical sites in those zoning districts. Prototypes 1b, 2b, 3b, 4b,
5b have reduced ground-floor retail to 1,500 square feet.
• Parking Requirements: Strategic Economics tested each prototype with the City’s existing
parking requirements, as well as reduced standards, as follows:
o Currently, the City of Palo Alto requires 1.0 parking spaces per studio, 1.0 spaces per
one-bedroom unit, and 2 spaces per unit for two-bedroom units and larger citywide.
Retail parking requirements vary by location. The City requires 1.0 space per 250
gross square feet of retail in the downtown district, and 1.0 space per 200 gross
square feet in other locations. Prototypes 1a, 2a, 3a, 4a, and 5a are all based on
these standards.
o Strategic Economics tested the feasibility of each prototype with reduced parking
assumptions based on a parking requirement of 1.0 parking space per residential
unit regardless of size, and zero parking requirements for ground-floor retail. For
Prototypes 1b, 2b, 3b, 4b, and 5b, Strategic Economics used these lower parking
ratios.
• Unit Mix and Size: Strategic Economics developed assumptions about the mix of units and
sizes (studio, one-bedroom, and two-bedrooms) based on recent development patterns in the
Silicon Valley region, which favors smaller, compact units. Ownership prototypes have a mix
8
of one-bedroom and two-bedroom units. One-bedroom units are approximately 1,000 square
feet in size, and two-bedroom units range in size from 1,250 to 1,500 square feet. Rental
prototypes have a mix of studio and one-bedroom units. Studios are 500 square feet in size,
and one-bedrooms are 750 to 800 square feet.
The following summarizes the development prototypes under existing regulations and under more
flexible regulations. Figure 7 provides more detail.
1. Townhouse ownership units, SOFA-II, RT 35 Zone: A 3-story building on a half-acre
site in the SOFA-II zoning district, with 16 ownership townhouse units over a podium
parking structure.
a) Prototype 1a includes 3,000 square feet of ground-floor retail and 47parking
spaces, all in a podium structure.
b) Prototype 2b has a similar density, but the amount of ground-floor retail is
reduced to 1,500 square feet, and the parking is reduced to 16 spaces (one
per unit) in a podium structure.
2. Downtown condominium ownership units, CD-C Zone with HIP: A three to four-story
building with 26 ownership condominium flats on a 1/3-acre site in Downtown Palo
Alto. The density is 76 units per acre.
a) Prototype 2a has 3,750 square feet of retail and 53 underground parking
spaces.
b) Prototype 2b has 1,500 square feet of retail and 26 underground parking
spaces.
3. Downtown rental apartments, CD-C Zone with HIP: A three to four-story rental
apartment building with 54 units on a 1/3-acre site in Downtown Palo Alto. The
density is 157 units per acre.
a) Prototype 3a has 3,750 square feet of retail, and 63 underground parking
spaces
b) Prototype 3b has 1,500 square feet of retail and 54 underground parking
spaces.
4. Condominiums ownership units, CS Zone with HIP: A three to four-story building with
20 ownership condominium flats on a 2/3-acre site on a commercial corridor in the
CS zone. The density is 29 units per acre.
a) Prototype 4a has 9,035 square feet of retail and 78 parking spaces in a mix
of surface and underground parking.
b) Prototype 4b has 1,500 square feet of retail and 20 parking spaces, all in a
podium garage.
5. Rental apartments, CS Zone with HIP: A three to four-story building with 50 to 51
rental apartments on a 2/3-acre site in the CS zone. The density is around 73 units
per acre.
a) Prototype 5a has 50 units, 9,035 square feet of retail, and 88 parking spaces
(surface and underground).
b) Prototype 5b has 51 units, 1,500 square feet of retail, and 51 parking spaces
(podium and surface).
9
FIGURE 5: OVERVIEW OF DEVELOPMENT PROTOTYPES
Prototype 1a Prototype 1b Prototype 2a Prototype 2b Prototype 3a Prototype 3b Prototype 4a Prototype 4b Prototype 5a Prototype 5b
Townhouse,
Retail, Fully
Parked
Townhouse,
Reduced
Retail,
Reduced
Parking
Downtown
Condo
Flats, Retail,
Fully
Parked
Downtown
Condo Flats,
Reduced Retail,
Reduced
Parking
Downtown
Apartments, Retail, Fully
Parked
Downtown
Apartments,
Reduced Retail,
Reduced
Parking
Condo
Flats,
Retail,
Fully
Parked
Condo Flats,
Reduced
Retail,
Reduced
Parking
Apartments,
Retail, Fully
Parked
Apartments,
Reduced
Retail,
Reduced
Parking
Overview
Zoning Designation SOFA-II,
RT 35
SOFA-II,
RT 35
CD-C
(with HIP)
CD-C
(with HIP)
CD-C
(with HIP)
CD-C
(with HIP)
CS
(with HIP)
CS
(with HIP)
CS
(with HIP)
CS
(with HIP)
Stories 3 3 3 to 4 3 to 4 3 to 4 3 to 4 3 to 4 3 to 4 3 to 4 3 to 4
Parcel Size (acres) 0.50 0.50 0.34 0.34 0.34 0.34 0.68 0.68 0.68 0.68
Total Floor Area
Ratio (FAR) 1.14 1.07 3.00 2.85 2.99 3.00 1.49 1.23 1.50 1.27
Residential Program
Studio 0 0 0 0 33 33 0 0 36 36
1-BD 0 0 8 8 21 21 0 0 14 15
2-BD 0 0 18 18 0 0 20 20 0 0
2-BD Townhome 16 16 0 0 0 0 0 0 0 0
Total Units 16 16 26 26 54 54 20 20 50 51
Dwelling Units
Per Acre 32 32 76 76 157 157 29 29 73 74
Weighted Average
Unit Size (sf) 1,250 1,250 1,346 1,346 647 647 1,500 1,500 606 609
Ground-Floor
Retail (sf) 3,000 1,500 3,750 1,500 3,750 1,500 9,035 1,500 9,035 1,500
Total Required
Parking Spaces 47 16 53 26 63 54 78 20 88 51
Parking Type Mix
Surface Spaces 0% 0% 0% 0% 0% 0% 22% 0% 19% 33%
Underground Spaces 0% 0% 100% 100% 100% 100% 78% 0% 81% 0%
Podium Spaces 100% 100% 0% 0% 0% 0% 0% 100% 0% 67%
Source: Strategic Economics, 2020.
10
BMR HOUSING PROGRAM ASSUMPTIONS
Strategic Economics tested each prototype under the existing BMR policy for ownership and rental projects,
and under scenarios that represent potential changes to the requirements.
For residential ownership development the City’s current inclusionary housing policy applies to projects with
three or more units and requires 15 percent of units be affordable to households with an income at or
below 120 percent AMI. Two-thirds of affordable units must be set aside for households at 80 percent to
100 percent of AMI, and one-third for households at 100 percent to 120 percent.
Developers of large sites of over five acres can apply for alternative compliance options, such as paying in-
lieu fees or providing units off-site if the requirement is deemed financially infeasible. The analysis excluded
sites of this size.
For residential rental development, an affordable housing impact fee payment is required, currently set at
$20.87 per net residential square foot. This requirement may also be satisfied by providing a number of
on-site affordable units that equals or exceeds the fee amount. Figure 8 and Figure 9 describe the assumed
BMR income limits and target pricing of units used in the analysis.
FIGURE 6: OWNERSHIP BMR INCOME LIMITS AND PRICING BMR UNITS, BASED ON CURRENT POLICY
100% AMI 120% AMI
Unit Household
Size
Household
Income
Approx. BMR
Sale Price
Household
Income
Approx. BMR
Sale Price
Studio 1 Person $92,000 $294,533 $101,200 $407,438
1BR 2 Persons $105,100 $351,274 $115,610 $480,255
2BR 3 Persons $118,250 $408,232 $130,075 $553,351
Source: City of Palo Alto, 2019; Strategic Economics, 2020.
FIGURE 7: RENTAL BMR INCOME LIMITS AND PRICING BMR UNITS, BASED ON CURRENT POLICY
Unit 60% AMI 80% AMI 100% AMI
Studio $1,391 $1,779 $2,260
1-BD $1,476 $1,892 $2,407
2-BD $1,761 $2,261 $2,878
Source: HCD, 2019; HUD, 2019; Strategic Economics, 2020.
11
OWNERSHIP DEVELOPMENT
Using the BMR price per unit assumptions, Strategic Economics tested the economic feasibility of the
development of ownership housing under five different policy scenarios for the BMR requirements:
• Scenario 0 (No Requirements): This scenario assumes that the project is 100 percent
market-rate, with no affordable units and no in-lieu fees required.
• Scenario 1 (Existing BMR Policy of 15% On-Site Inclusionary): This scenario mirrors the City’s
existing inclusionary housing requirement for ownership projects. The development projects
must provide at least 15 percent BMR units, with 10% targeting households earning 100%
AMI and 5% targeting households at 120% percent AMI.
• Scenario 2 (20% On-Site Inclusionary): This scenario requires new ownership projects to
include at least 20% BMR units, targeting households earning between 80 and 120% AMI.
• Scenario 3 (25% On-Site Inclusionary): This scenario requires new ownership projects to
include at least 25 percent BMR units, targeting households earning between 80 and 120%
AMI.
• Scenario 4 (In-Lieu Fees): This scenario assumes that the development is required to pay
the existing in-lieu fees of $52.18 per net residential square foot for attached ownership
housing (condos and single-family attached/townhomes) instead of providing affordable
units on-site.
These scenarios are summarized in Figure 10.
FIGURE 8: OWNERSHIP DEVELOPMENT INCLUSIONARY HOUSING SCENARIOS TESTED
Scenario 0: No
Requirements
Scenario 1:
15% On-Site (a)
Scenario 2:
20% On-Site
Scenario 3:
25% On-Site
Scenario 4:
In-Lieu Fee
60% AMI 0% 0% 0% 0% 0%
80% AMI 0% 0% 0% 0% 0%
100% AMI 0% 10% 10% 10% 0%
120% AMI 0% 5% 10% 15% 0%
Market Rate 100% 85% 80% 75% 100%
In-Lieu Fee Payment No No No No Yes
(a) Scenario 1 models the City of Palo Alto’s existing inclusionary policy, which applies to ownership development.
Source: City of Palo Alto, 2019; Strategic Economics, 2020.
RENTAL DEVELOPMENT
While rental development in the City of Palo Alto is currently only subject to an affordable housing impact
fee, Strategic Economics also tested the economic feasibility of the development of rental housing under
five different inclusionary scenarios:
• Scenario 0 (No Requirements): This scenario assumes that the project is 100 percent
market-rate, with no affordable units and no in-lieu fees required.
• Scenario 1 (15% On-Site Inclusionary): This scenario requires new projects to include at
least 15 percent of the units at levels affordable to low and moderate-income households.
Five percent is affordable to households earning 60 percent AMI; five percent is affordable
to households earning 80 percent AMI; and five percent is affordable to households earning
100 percent AMI.
12
• Scenario 2 (20% On-Site Inclusionary): This scenario requires new projects to include at
least 20 percent BMR units, targeting low and moderate-income households. Five percent
is affordable to households earning 60 percent AMI; five percent is affordable to households
earning 80 percent AMI; and 10 percent is affordable to households earning 100 percent
AMI.
• Scenario 3 (25% On-Site Inclusionary): This scenario has a higher inclusionary requirement
of 25 percent and targets low and moderate-income households. Five percent is affordable
to households earning 60 percent AMI; 10 percent is affordable to households earning 80
percent AMI; and 10 percent is affordable to households earning 100 percent AMI.
• Scenario 4 (Impact Fees): This scenario assumes that the development is required to pay
the existing housing impact fees of $20.87 per net residential square foot for rental
apartments, instead of providing affordable units on-site.
These scenarios are summarized in Figure 11 below.
FIGURE 9: RENTAL DEVELOPMENT INCLUSIONARY HOUSING SCENARIOS TESTED
Scenario 0: No
Requirements
Scenario 1:
15% On-Site (a)
Scenario 2:
20% On-Site
Scenario 3:
25% On-Site
Scenario 4:
In-Lieu Fee (b)
60% AMI 0% 5% 5% 5% 0%
80% AMI 0% 5% 5% 10% 0%
100% AMI 0% 5% 10% 10% 0%
120% AMI 0% 0% 0% 0% 0%
Market Rate 100% 85% 80% 75% 100%
Impact Fee Payment No No No No Yes
(a) The City of Palo Alto’s existing inclusionary housing policy only applies to ownership residential development. Rental development is
currently subject to an affordable housing impact fee.
(b) Scenario 4 essentially models the City of Palo Alto’s existing policy of imposing an affordable housing impact fee on rental
development of $20.87/sf.
Source: City of Palo Alto, 2019; Strategic Economics, 2020.
Financial Feasibility Methodology
This section describes the method used to measure financial feasibility and the major cost and revenue
assumptions underlying the analysis.
MEASURING FINANCIAL FEASIBILITY
The financial feasibility of each prototype is measured using a static pro forma model that solves for the
profit to the developer. However, it is important to note that individual development projects may be less
or more profitable than these prototypes, depending on the specifics of the development program,
development costs (construction and land), sources of financing, and other factors. Furthermore, because
it is a static model reflecting market conditions as of June 2019, the pro forma analysis does not factor
future changes in prices/rents, construction costs, or financing.
For the purposes of measuring financial feasibility in this analysis, developer profit was measured by using
one of two metrics:
• Return on cost (ROC) for ownership housing. ROC is a common measure of project profitability for
residential ownership development. The pro forma model tallies all development costs, including
13
land costs, hard costs (construction costs), soft costs, and financing costs. The pro forma also adds
up the project’s total value. The project’s total value is the sum of (1) the estimated value of the
condominiums (i.e. the average per unit sale price multiplied by the number of units), and (2) if
applicable, the capitalized value of retail. The project’s ROC is then calculated by dividing the
project’s net revenue (i.e. total value minus total development costs), by total development costs.
• Yield on cost (YOC) for rental housing. YOC is a common measure of profitability for income-
generating projects, such as residential rental development. The pro forma model tallies all
development costs (land costs, hard costs, soft costs, and financing costs). The pro forma also
estimates total revenues: the project’s net annual operating income is the stabilized income from
the property (i.e. rental income generated from both the residential and retail uses), minus
operating expenses and an allowance for vacancy. The YOC is estimated by dividing the total annual
net operating income by total development costs.
RETURN THRESHOLDS
To understand the potential impact of inclusionary requirements on financial feasibility, the ROC and YOC
results for each prototype and inclusionary housing scenario are compared to developers’ typical
expectation of return. These return expectations are summarized in Figure 12 and discussed below:
• For ownership prototypes, the target ROC threshold is ] 18 percent, based on developer interviews
and recent pro forma models for new projects in Northern Santa Clara County. Ownership projects
that meet or exceed an 18 percent return are highly likely to be developed. Projects that achieve a
return of between 15 and 18 percent are somewhat likely to be built, because they fall slightly short
of the target return. Projects with a return of under 15 percent are less likely to be developed.
Finally, projects that have negative net revenues (costs exceed values) are infeasible.
• For rental prototypes, the target YOC threshold is 5.0 percent. According to the developers
interviewed for this study, and a review of recent development project pro formas, the minimum
YOC for a new multi-family development project should usually be 1.0 to 1.5 points higher than the
published capitalization rate (cap rate).
The current cap rate for multifamily properties in the San José Metropolitan Area is between 4.00
to 4.25%.4 The cap rate, measured by dividing the net operating income generated by a property by
the total project value, is a commonly used metric to estimate the value of an asset. Cap rates rise
and fall along with interest rates. In a climate of rising interest rates, it is important to set the
expectations of YOC at a conservative level, to allow for a margin between the cap rate and the rate
of return. It is also important to consider that investors consider a wide range of factors to determine
if a development project makes financial sense, and some investors may have different levels of
risk tolerance than others.
Rental projects that meet or exceed a yield on cost of over 5.0 percent are highly likely to be
developed. Projects that achieve a return of between 4.75 and 5.0 percent are somewhat likely to
be built. Projects with a return of under 4.75 percent are not likely to be developed. Finally, projects
that have negative net revenues (costs exceed values) are infeasible.
4 CBRE Investor’s Cap Rate Survey (H1, 2019).
14
FIGURE 10: DEVELOPER RETURN ASSUMPTIONS
Ownership Prototypes Rental Prototypes
Developer Interviews 18-20% (ROC) 5.0-6.0% (YOC)
Cap Rate Survey N/A 4.0-4.25%
Target Return Used in Analysis 18% (ROC) 5.00% (YOC)
Source: Developer interviews and project pro formas, 2018 and 2019; CBRE Cap Rate Survey, 2019; Strategic Economics, 2020.
REVENUE ASSUMPTIONS
MARKET RATE RESIDENTIAL
There is significant pent-up housing demand in Santa Clara County and the broader Bay Area region, as
housing development has not kept up with employment and regional population growth. Between 2010
and 2015, Santa Clara County added over 170,000 new jobs, but only 29,000 new housing units.5
Apartment rents accelerated beginning in 2011, as the economy emerged from the Great Recession, and
continued growing at an average annual rate of nearly eight percent until 2015. Since then rents have
continued to grow at a slower pace of about four percent.
Sales prices in Palo Alto and Santa Clara County have been escalating at a rapid rate over the last five
years. In Palo Alto, the median sales price for a single-family home increased from $2.4 million in 2014 to
$3.2 million in 2018.6 Similarly, the median sales price for a condominium climbed from $1.25 million in
2014 to $1.7 million in 2018.7
The market-rate sale prices and rents assumed for each prototype are summarized in Figure 13. The values
are calculated as a weighted average to reflect that different types of units have different unit values. Sales
prices for condominium projects were based on recent sales and re-sales in Palo Alto as reported by Redfin
and Polaris Pacific. The Appendix to this report (Figure A-1) includes detailed information on the comparable
projects used to inform these estimates.
Because of the limited number of recently built apartment projects in Palo Alto, the rental rate estimates
for apartment units were based in part on developer interviews, a review of rents at existing apartment
projects in Palo Alto, as well as comparable newly built apartment projects in Los Altos and Mountain View,
as reported by Costar. Figure A-2 in the Appendix includes detailed information on the comparable projects
used to inform these estimates.
5 SPUR, “Room for More: Housing Agenda for San José,” August 2017.
6 Santa Clara County Association of Realtors, 2014 and 2018. https://www.sccaor.com/pdf/stats/2014.pdf https://www.sccaor.com/pdf/stats/2018.pdf. 7 Ibid
15
FIGURE 11: MARKET-RATE RESIDENTIAL SALES PRICES AND RENTS, BY PROTOTYPE
Unit Size
Sale Price/
Monthly Rent
Per Sq. Ft.
Sale Price/
Monthly Rent
Per Unit
OWNERSHIP
Townhouse, SOFA-II
2-BD Townhouse 1,250 $1,100 $1,375,000
Downtown Condos, CD-C
1-BD Flat 1,000 $1,100 $1,100,000
2-BD Flat 1,500 $1,200 $1,800,000
Condos, CS
2-BD Flat 1,500 $1,200 $1,800,000
RENTAL
Downtown Apartments, CD-C
Studio Flat 550 $6.50 $3,575
1-BD Flat 800 $5.75 $4,600
Apartments, CS
Studio Flat 550 $6.50 $3,575
1-BD Flat 750 $5.75 $4,313
Source: Strategic Economics 2020.
The value of market-rate units is summarized in Figure 14 for ownership units, and in Figure 15 for rental
units. For the ownership prototypes, the total project value is obtained by multiplying the per unit sale price
by the total number of units. For the rental prototypes, an income capitalization approach is used. This
approach first estimates the annual net operating income (NOI) of the prototype, which is the difference
between project income (annual rents) and project expenses (operating costs and vacancies). The NOI is
then divided by the current cap rate to derive total project value.8
8 As mentioned above, the CBRE Investor’s Cap Rate Survey estimates the cap rate for infill multifamily Class A in San José Metro Area to range
from 4.0 to 4.25%.
16
FIGURE 12: OWNERSHIP MARKET-RATE HOME VALUE
Prototype 1a/1b Prototype 2a/2b Prototype 4a/4b
Townhouse
SOFA II-RT 35 Downtown Condo C-DC Condo Flats
CS
Sales Value (per unit) $1,375,000 $1,584,615 $1,800,000
Total Units 16 26 20
Total Residential Value $22,000,000 $41,200,000 $36,000,000
Source: Redfin, 2019; Polaris Pacific, 2019; Strategic Economics, 2020.
FIGURE 13: RENTAL MARKET RATE RESIDENTIAL VALUE CALCULATION BY PROTOTYPE
Prototype 3a/3b Prototype 5a Prototype 5b
Downtown Apartments
CD-C
Apartments
CS
Apartments
CS
Monthly Rent (per unit) $3,973.61 $3,781.50 $3,791.91
Annual Rent (per unit) $47,683.33 $45,378.00 $45,502.94
Vacancy Allowance 5.0% 5.0% 5.0%
Operating Expenses (% of gross revenue) 30.0% 30.0% 30.0%
Annual Net Operating Income (per nsf) $30,994.17 $29,495.70 $29,576.91
Capitalization Rate (a) 4.25% 4.25% 4.25%
Capitalized Value (per unit) $729,275 $694,016 $695,927
Total Units 54 50 51
Total Residential Value $39,380,824 $34,700,824 $35,492,294
1 Based on the CBRE H1 2019 Cap Rate Survey. Cap rates for the San José Metropolitan Area were between 4.00% and 4.25% for infill multifamily Class A.
Source: CBRE, 2019; CoStar, 2019; Strategic Economics, 2020.
17
BELOW MARKET RESIDENTIAL
BMR residential values at different AMI levels are summarized in Figure 16 for ownership units and Figure
17 for rental units. Maximum sales prices and rents for the BMR units were provided by Palo Alto Housing,
the City’s BMR program administrator. Maximum rents were calculated by Strategic Economics based on
the 2019 income limits for Santa Clara County, as provided by the State of California Department of Housing
and Community Development (HCD). An income capitalization approach is also applied to BMR units to
derive total residential value.
FIGURE 14: WEIGHTED AVERAGE PER UNIT SALES PRICES FOR BMR UNITS
Prototype 1a/1b Prototype 2a/2b Prototype 4a/4b
Townhouse
SOFA II-RT 35
Downtown Condo
C-DC
Condo Flats
CS
100% AMI $408,232 $390,706 $408,232
120% AMI $553,351 $530,860 $553,351
Note: All values are weighted averages, according to each prototype’s unit mix. Affordable sale prices were provided by the City of Palo Alto
and Palo Alto Housing, 2019.
Source: City of Palo Alto, 2019; Palo Alto Housing, 2019; Strategic Economics, 2020.
FIGURE 15: WEIGHTED AVERAGE RENT PRICES FOR BMR UNITS
Prototype 3a/3b Prototype 5a Prototype 5b
Downtown Apartments
CD-C
Apartments
CS
Apartments
CS
60% AMI $1,424 $1,415 $1,416
80% AMI $1,823 $1,810 $1,812
100% AMI $2,317 $2,301 $2,303
120% AMI $2,790 $2,770 $2,773
Note: All values are weighted averages, according to each prototype’s unit mix. Affordable rents were calculated by Strategic Economics
based on the 2019 Santa Clara County income and rent limits, published by HCD, and the 2019 Santa Clara County maximum utility allowance, published by HUD.
Source: Costar, 2019; HCD, 2019; Strategic Economics, 2020.
RETAIL COMMERCIAL
For mixed-use projects, the ground-floor retail spaces are usually not factored into the developer’s pro
forma. This is because the amount of retail included is fairly modest and tenanting the spaces can be
challenging. For the purposes of this analysis, retail revenues and the retail capitalized value was assumed
to not contribute to the total sale or capitalized value of the prototypes.
18
DEVELOPMENT COST ASSUMPTIONS
The development costs incorporated into the pro forma analysis include land costs, hard costs (construction
materials and labor), soft costs, and financing costs. Cost assumptions are summarized in Figure 12 and
described below.
LAND COSTS
A critical factor for development feasibility is the cost of land. To determine the market value of sites zoned
for residential use in Palo Alto, Strategic Economics interviewed developers and reviewed recent pro formas
for similar development projects in Palo Alto, Los Altos, and Mountain View. Land value estimates ranged
from approximately $10 million to $15 million per acre. Assuming land values were highest in the
downtown, this analysis used the upper end of estimates for the downtown site in the CD-C zoning district,
valuing land at $15 million per acre ($344 per square foot). For other prototypes in the SOFA-II and CS
zoning districts, Strategic Economics estimated the value of land based on recent transactions in Palo Alto
and neighboring communities, which was approximately $12 million ($275 per square foot).
Note that these values are approximations for the purposes of the feasibility analysis; in reality, the value
of any particular site is likely to vary based on its location, amenities, and property owner expectations.
HARD COSTS
Hard costs are based on Strategic Economics’ review of pro formas for similar development projects, as
well as interviews with developers active in Palo Alto and surrounding cities. The assumptions for hard
costs, shown in Figure 12, include estimates for basic site improvements and construction costs for
residential areas, retail areas, and parking structures. For underground parking, Strategic Economics
estimated a higher cost for Downtown sites, which tend to be more physically constrained and require more
excavation, than for sites in the SOFA-II and CS zones.
It should be noted that construction costs have been escalating rapidly in the Bay Area in the last several
years; 9 project feasibility is highly sensitive to changes in construction cost assumptions.
SOFT COSTS AND FINANCING COSTS
Soft costs include items such as architectural fees, engineering fees, insurance, taxes, legal fees,
accounting fees, marketing costs, developer overhead, and city fees, as shown in Figure 12. City fees and
other development impact fees were calculated for the individual prototypes based on data provided by
City staff and recently published fee rates from various city departments and public agencies. Detailed fee
calculations broken down to cost per unit are included in the Appendix (see Figure A-4). Other soft costs
were estimated based on standard industry ratios, calculated as a percentage of hard costs.
9 Terner Center for Housing Innovation, UC Berkeley. Understanding the Drivers of Rising Construction Costs in California (Ongoing Research),
https://ternercenter.berkeley.edu/construction-costs.
19
FIGURE 16: DEVELOPMENT COST ASSUMPTIONS
Metric Estimate
Land Costs
Downtown site per acre $15,000,000
All other sites per acre $12,000,000
Hard Costs
Site Demolition and Prep per site sf $25
Residential Building Area Townhomes (Type V) per gross sf $270
Stacked Condominiums, Type V per gross sf $320
Stacked Apartments, Type V per gross sf $300
Retail Building Area (a) per gross sf $175
Surface Parking per space $10,000
Podium Parking per space $40,000
Underground Parking (SOFA-II and CS sites) per space $70,000
Underground Parking (Downtown sites) per space $100,000
Soft Costs
City Permits/Fees (b) Townhouse, SOFA II-RT 35 Prototype 1a per unit $53,232
Townhouse, SOFA II-RT 35 Prototype 1b per unit $47,572
Downtown Condo, CD-C Prototype 2a per unit $52,398
Downtown Condo, CD-C Prototype 2b per unit $47,464
Condo Flats, CS Prototype 3a per unit $38,887
Condo Flats, CS Prototype 3b per unit $36,844
Downtown Apartments, CD-C Prototype 4a per unit $65,570
Downtown Apartments, CDC Prototype 4b per unit $50,545
Apartments, CS Prototype 5a per unit $41,973
Apartments, CS Prototype 5b per unit $35,964
Affordable Housing In-Lieu/Impact Fee (c) Townhomes/Single-Family Attached per net sf $52.18
Condominiums per net sf $52.18
Apartments per net sf $20.87
Other Soft Costs
Architectural, Engineering, Consulting % of hard costs 6%
Taxes, Insurance, Legal, Accounting % of hard costs 3%
Other and Marketing % of hard costs 3%
Contingency % of hard costs 5%
Developer Overhead and Fees % of hard costs 4%
Total Other Soft Costs % of hard costs 21%
Financing Costs
Financing Costs % of hard + soft costs 6.00%
(a) Includes a tenant improvement allowance.
(b) Includes fees paid on the ground floor retail component of the prototypes. Detailed information on how city fees were estimated is provided
in Figure A-4. (c) The additional affordable housing in-lieu/impact fees are only included in total development costs when testing Scenario 4 (see Figure
13 – 16)
Sources: Costar, 2019; Developer interviews, 2018; City of Palo Alto, 2019; Palo Alto Unified School District, 2019; Strategic Economics,
2020.
20
IV. FEASIBILITY ANALYSIS RESULTS BY PROTOTYPE
This section shows the detailed results of the financial feasibility analysis under different inclusionary
housing scenarios for each prototype. Figures 17 through 21 show the results for each prototype. The
complete pro formas for each prototype are presented in Figures 22-31. Figure 32 and Figure 33
summarize the results for ownership and rental prototypes, respectively.
Currently, a mixed-use townhouse development project in the SOFA-II district is more likely to support an
increased inclusionary requirement of 20% BMR units if there were reductions in the retail and parking
requirements. As shown in Figure 17, the current retail replacement and parking policies make it less likely
for a townhouse project to feasibly contribute 20% BMR units. With the current retail and parking
requirements, the townhouse project is well below the target return of 18%. However, with reduced retail
of 1,500 square feet and a lower parking ratio of one space per unit, the townhouse prototype in the SOFA-
II district is more likely to be able to provide up to 20% BMR units on-site.
FIGURE 17: SUMMARY RESULTS FOR TOWNHOUSE, SOFA-II, RT-35 (PROTOTYPE 1A/1B)
Prototype 1a Prototype 1b
Townhouse,
Retail, Fully
Parked
Townhouse,
Reduced Retail,
Reduced Parking
Density (DU/Acre) 32 32
Floor-Area-Ratio (FAR) 1.14 1.07
Return on Cost
Baseline (No Requirement) 20.79% 35.88%
Scenario 1 (15% On-Site) 8.68% 22.26%
Scenario 2 (20% On-Site) 5.08% 18.20%
Scenario 3 (25% On-Site) 1.47% 14.14%
Scenario 4 (In-Lieu Fee) 13.87% 27.19%
Source: Strategic Economics, 2020.
Highly Likely – Return on Cost is 18% or higher
Somewhat Likely – Return on Cost is over 15%
Less Likely – Net revenues are positive, but ROC is below 15%
Infeasible – Net revenues are negative
A mixed-use condominium prototype in the Downtown CD-C zoning district (Prototype 2) under current
zoning regulations is highly likely to support the payment of housing in-lieu fees and somewhat likely to
support 15% BMR units on-site, but less likely to be able to provide 20% BMR units on-site. As shown in
Figure 18, Prototype 2 does not achieve the target return on cost with BMR inclusionary units, but it is
somewhat likely to be able to provide 15% BMR units on-site and it is highly likely to be able to contribute
housing in-lieu fees. However, a downtown condominium project is highly likely to provide up to 25% BMR
units on-site if the City’s requirements for parking and retail were lowered, because of the cost savings
associated with building fewer underground parking spaces and retail space.
21
FIGURE 18: SUMMARY RESULTS FOR CONDOMINIUMS, CD-C WITH HIP (PROTOTYPE 2A/2B)
Prototype 2a Prototype 2b
Downtown Condo
Flats, Retail, Fully
Parked
Downtown Condo
Flats, Reduced
Retail, Reduced
Parking
Density (DU/Acre) 76 76
Floor-Area-Ratio (FAR) 3.00 2.85
Return on Cost
Baseline (No Requirement) 30.26% 49.68%
Scenario 1 (15% On-Site) 16.11% 33.42%
Scenario 2 (20% On-Site) 11.78% 28.45%
Scenario 3 (25% On-Site) 7.45% 23.47%
Scenario 4 (In-Lieu Fee) 22.74% 39.84%
Source: Strategic Economics, 2020.
Highly Likely – Return on Cost is 18% or higher
Somewhat Likely – Return on Cost is over 15%
Less Likely – Net revenues are positive, but ROC is below 15%
Infeasible – Net revenues are negative
The downtown rental apartment prototype (Prototype 3) is somewhat likely to be able to provide 20%
inclusionary BMR units with the City’s existing requirements for parking and replacement retail. Because
the prototype has a high density of 157 units per acre, it get closer to achieving sufficient revenues to offset
the cost of providing the required ground-floor retail and parking in an underground garage. If the retail and
parking requirements were reduced for this prototype, it is more likely to provide 20 percentage inclusionary
BMR units.
FIGURE 19: SUMMARY RESULTS FOR APARTMENTS, CD-C WITH HIP (PROTOTYPE 3A/3B)
Prototype 3a Prototype 3b
Downtown
Apartments,
Retail, Fully
Parked
Downtown
Apartments,
Reduced Retail,
Reduced Parking
Density (DU/Acre) 157 157
Floor-Area-Ratio (FAR) 2.99 3.00
Return on Cost
Baseline (No Requirement) 5.30% 5.62%
Scenario 1 (15% On-Site) 4.88% 5.17%
Scenario 2 (20% On-Site) 4.77% 5.05%
Scenario 3 (25% On-Site) 4.62% 4.90%
Scenario 4 (In-Lieu Fee) 5.17% 5.47%
Source: Strategic Economics, 2020.
Highly Likely – Yield on Cost is 5.0% or higher
Somewhat Likely – Yield on Cost is over 4.75%
Not Likely – Net revenues are positive but YOC is below 4.75%
Infeasible – Net revenues are negative
The condominium flats in the CS zone (Prototype 4) are not likely to be built with inclusionary on-site units,
in part because of the retail required to be replaced. Most sites in the CS zone have a significant amount
22
of retail, and this prototype assumes that the retail preservation ordinance would require the construction
of over 9,000 square feet of retail. This requirement, along with the high parking ratio, creates a significant
cost to developers. Reducing the retail requirement to 1,500 square feet and the parking ratio to just one
space per unit allows condominium projects in the CS zone to be much more likely to provide inclusionary
BMR units.
FIGURE 20: SUMMARY RESULTS FOR CONDOMINIUMS, CS WITH HIP (PROTOTYPE 4A/4B)
Prototype 4a Prototype 4b
Condo Flats,
Retail, Fully
Parked
Condo Flats,
Reduced Retail,
Reduced Parking
Density (DU/Acre) 29 29
Floor-Area-Ratio (FAR) 1.49 1.23
Return on Cost
Baseline (No Requirement) 9.95% 37.96%
Scenario 1 (15% On-Site) -2.36% 22.52%
Scenario 2 (20% On-Site) -6.17% 17.74%
Scenario 3 (25% On-Site) -9.98% 12.96%
Scenario 4 (In-Lieu Fee) 4.64% 29.72%
Source: Strategic Economics, 2020.
Highly Likely – Return on Cost is 18% or higher
Somewhat Likely – Return on Cost is over 15%
Not Likely – Net revenues are positive, but ROC is below 15%
Infeasible – Net revenues are negative
The lower density rental apartment prototype in the CS zone (Prototype 5) is not likely to be built under
current zoning regulations, or to contribute BMR units. Without any BMR requirements, the lower density
rental prototype achieves a yield on cost of 4.3%, below the target of 5.0%, as shown in Figure 21. This
lower density rental prototype is also burdened by the requirement to provide 9,000 square feet of ground-
floor retail, in addition to the cost of parking. However, an apartment project in the CS zone is more likely
to provide close to 15% on-site BMR units if it could reduce the amount of parking to one space per unit,
and the ground-floor retail space to 1,500 square feet.
23
FIGURE 21: SUMMARY RESULTS FOR APARTMENTS, CS WITH HIP (PROTOTYPE 5A/5B)
Prototype 5a Prototype 5b
Apartments,
Retail, Fully
Parked
Apartments,
Reduced Retail,
Reduced Parking
Density (DU/Acre) 73 74
Floor-Area-Ratio (FAR) 1.50 1.27
Return on Cost
Baseline (No Requirement) 4.38% 5.49%
Scenario 1 (15% On-Site) 4.04% 5.07%
Scenario 2 (20% On-Site) 3.95% 4.96%
Scenario 3 (25% On-Site) 3.84% 4.82%
Scenario 4 (In-Lieu Fee) 4.29% 5.36%
Source: Strategic Economics, 2020.
Highly Likely – Yield on Cost is 5.0% or higher
Somewhat Likely – Yield on Cost is over 4.75%
Not Likely – Net revenues are positive but YOC is below 4.75%
Infeasible – Net revenues are negative
24
FIGURE 22: FINANCIAL FEASIBILITY RESULTS: PROTOTYPE 1A (TOWNHOUSE, SOFA-II RT 35)
Baseline Scenario:
No Requirements
Scenario 1:
15% On-Site
Scenario 2:
20% On-Site
Scenario 3:
25% On-Site
Scenario 4:
In-Lieu Fee
Revenues
Residential Capitalized Value $22,000,000 $19,795,852 $19,138,533 $18,481,214 $22,000,000
Retail Capitalized Value $0 $0 $0 $0 $0
Total Capitalized Value $22,000,000 $19,795,852 $19,138,533 $18,481,214 $22,000,000
per unit $1,375,000 $1,237,241 $1,196,158 $1,155,076 $1,375,000
Development Costs
Land Costs
Total Land Cost $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000
per unit $375,000 $375,000 $375,000 $375,000 $375,000
Hard Costs
Site Prep $544,500 $544,500 $544,500 $544,500 $544,500
Residential Building Area $5,869,565 $5,869,565 $5,869,565 $5,869,565 $5,869,565
Retail Building Area (Including TIs) $525,000 $525,000 $525,000 $525,000 $525,000
Parking $1,880,000 $1,880,000 $1,880,000 $1,880,000 $1,880,000
Subtotal Hard Costs $8,819,065 $8,819,065 $8,819,065 $8,819,065 $8,819,065
per unit $551,192 $551,192 $551,192 $551,192 $551,192
per gross residential sf $406 $406 $406 $406 $406
Soft Costs
City Permits and Fees (a) $851,715 $851,715 $851,715 $851,715 $851,715
Affordable Housing In-Lieu Fees $0 $0 $0 $0 $1,043,600
Other Soft Costs $1,852,004 $1,852,004 $1,852,004 $1,852,004 $1,852,004
Subtotal Soft Costs $2,703,718 $2,703,718 $2,703,718 $2,703,718 $3,747,318
Financing Costs
Total Financing Costs $691,367 $691,367 $691,367 $691,367 $753,983
Total Development Costs
Total Development Costs $18,214,151 $18,214,151 $18,214,151 $18,214,151 $19,320,367
per unit $1,138,384 $1,138,384 $1,138,384 $1,138,384 $1,207,523
per gross residential sf $838 $838 $838 $838 $889
Financial Feasibility
Net Revenue (b) $3,785,849 $1,581,701 $924,382 $267,063 $2,679,633
Return on Cost (c) 20.79% 8.68% 5.08% 1.47% 13.87%
(a) Excluding affordable housing in-lieu fee payment. (b) Net revenue is the project total revenue minus total development costs. (c) Return on cost is the net revenue, divided by total
development costs.
Source: Strategic Economics, 2020.
25
FIGURE 23: FINANCIAL FEASIBILITY RESULTS: PROTOTYPE 1B (TOWNHOUSE, SOFA-II RT 35, REDUCED RETAIL AND REDUCED PARKING)
Baseline Scenario:
No Requirements
Scenario 1:
15% On-Site
Scenario 2:
20% On-Site
Scenario 3:
25% On-Site
Scenario 4:
In-Lieu Fee
Revenues
Residential Capitalized Value $22,000,000 $19,795,852 $19,138,533 $18,481,214 $22,000,000
Retail Capitalized Value $0 $0 $0 $0 $0
Total Capitalized Value $22,000,000 $19,795,852 $19,138,533 $18,481,214 $22,000,000
per unit $1,375,000 $1,237,241 $1,196,158 $1,155,076 $1,375,000
Development Costs
Land Costs
Total Land Cost $6,000,000 $6,000,000 $6,000,000 $6,000,000 $6,000,000
per unit $375,000 $375,000 $375,000 $375,000 $375,000
Hard Costs
Site Prep $544,500 $544,500 $544,500 $544,500 $544,500
Residential Building Area $5,869,565 $5,869,565 $5,869,565 $5,869,565 $5,869,565
Retail Building Area (Including TIs) $262,500 $262,500 $262,500 $262,500 $262,500
Parking $640,000 $640,000 $640,000 $640,000 $640,000
Subtotal Hard Costs $7,316,565 $7,316,565 $7,316,565 $7,316,565 $7,316,565
per unit $457,285 $457,285 $457,285 $457,285 $457,285
per gross residential sf $337 $337 $337 $337 $337
Soft Costs
City Permits and Fees (a) $761,154 $761,154 $761,154 $761,154 $761,154
Affordable Housing In-Lieu Fees $0 $0 $0 $0 $1,043,600
Other Soft Costs $1,536,479 $1,536,479 $1,536,479 $1,536,479 $1,536,479
Subtotal Soft Costs $2,297,633 $2,297,633 $2,297,633 $2,297,633 $3,341,233
Financing Costs
Total Financing Costs $576,852 $576,852 $576,852 $576,852 $639,468
Total Development Costs
Total Development Costs $16,191,050 $16,191,050 $16,191,050 $16,191,050 $17,297,266
per unit $1,011,941 $1,011,941 $1,011,941 $1,011,941 $1,081,079
per gross residential sf $745 $745 $745 $745 $796
Financial Feasibility
Net Revenue (b) $5,808,950 $3,604,802 $2,947,483 $2,290,164 $4,702,734
Return on Cost (c) 35.88% 22.26% 18.20% 14.14% 27.19%
(a) Excluding affordable housing in-lieu fee payment. (b) Net revenue is the project total revenue minus total development costs. (c) Return on cost is the net revenue, divided by total
development costs.
Source: Strategic Economics, 2020.
26
FIGURE 24: FINANCIAL FEASIBILITY RESULTS: PROTOTYPE 2A (DOWNTOWN CONDOMINIUMS, CD-C WITH HIP)
Baseline Scenario:
No Requirements
Scenario 1:
15% On-Site
Scenario 2:
20% On-Site
Scenario 3:
25% On-Site
Scenario 4:
In-Lieu Fee
Revenues
Residential Capitalized Value $41,200,000 $36,725,955 $35,356,073 $33,986,191 $41,200,000
Retail Capitalized Value $0 $0 $0 $0 $0
Total Capitalized Value $41,200,000 $36,725,955 $35,356,073 $33,986,191 $41,200,000
per unit $1,584,615 $1,412,537 $1,359,849 $1,307,161 $1,584,615
Development Costs
Land Costs
Total Land Cost $5,165,289 $5,165,289 $5,165,289 $5,165,289 $5,165,289
per unit $198,665 $198,665 $198,665 $198,665 $198,665
Hard Costs
Site Prep $375,000 $375,000 $375,000 $375,000 $375,000
Residential Building Area $13,176,471 $13,176,471 $13,176,471 $13,176,471 $13,176,471
Retail Building Area (Including TIs) $656,250 $656,250 $656,250 $656,250 $656,250
Parking $5,300,000 $5,300,000 $5,300,000 $5,300,000 $5,300,000
Subtotal Hard Costs $19,507,721 $19,507,721 $19,507,721 $19,507,721 $19,507,721
per unit $750,297 $750,297 $750,297 $750,297 $750,297
per gross residential sf $474 $474 $474 $474 $474
Soft Costs
City Permits and Fees (a) $1,362,353 $1,362,353 $1,362,353 $1,362,353 $1,362,353
Affordable Housing In-Lieu Fees $0 $0 $0 $0 $1,826,300
Other Soft Costs $4,096,621 $4,096,621 $4,096,621 $4,096,621 $4,096,621
Subtotal Soft Costs $5,458,974 $5,458,974 $5,458,974 $5,458,974 $7,285,274
Financing Costs
Total Financing Costs $1,498,002 $1,498,002 $1,498,002 $1,498,002 $1,607,580
Total Development Costs
Total Development Costs $31,629,985 $31,629,985 $31,629,985 $31,629,985 $33,565,863
per unit $1,216,538 $1,216,538 $1,216,538 $1,216,538 $1,290,995
per gross residential sf $768 $768 $768 $768 $815
Financial Feasibility
Net Revenue (b) $9,570,015 $5,095,969 $3,726,087 $2,356,205 $7,634,137
Return on Cost (c) 30.26% 16.11% 11.78% 7.45% 22.74%
(a) Excluding affordable housing in-lieu fee payment. (b) Net revenue is the project total revenue minus total development costs. (c) Return on cost is the net revenue, divided by total
development costs.
Source: Strategic Economics, 2020.
27
FIGURE 25: FINANCIAL FEASIBILITY RESULTS: PROTOTYPE 2B (DOWNTOWN CONDOMINIUMS, CD-C WITH HIP, REDUCED RETAIL AND REDUCED PARKING)
Baseline Scenario:
No Requirements
Scenario 1:
15% On-Site
Scenario 2:
20% On-Site
Scenario 3:
25% On-Site
Scenario 4:
In-Lieu Fee
Revenues
Residential Capitalized Value $41,200,000 $36,725,955 $35,356,073 $33,986,191 $41,200,000
Retail Capitalized Value $0 $0 $0 $0 $0
Total Capitalized Value $41,200,000 $36,725,955 $35,356,073 $33,986,191 $41,200,000
per unit $1,584,615 $1,412,537 $1,359,849 $1,307,161 $1,584,615
Development Costs
Land Costs
Total Land Cost $5,165,289 $5,165,289 $5,165,289 $5,165,289 $5,165,289
per unit $198,665 $198,665 $198,665 $198,665 $198,665
Hard Costs
Site Prep $375,000 $375,000 $375,000 $375,000 $375,000
Residential Building Area $13,176,471 $13,176,471 $13,176,471 $13,176,471 $13,176,471
Retail Building Area (Including TIs) $262,500 $262,500 $262,500 $262,500 $262,500
Parking $2,600,000 $2,600,000 $2,600,000 $2,600,000 $2,600,000
Subtotal Hard Costs $16,413,971 $16,413,971 $16,413,971 $16,413,971 $16,413,971
per unit $631,307 $631,307 $631,307 $631,307 $631,307
per gross residential sf $399 $399 $399 $399 $399
Soft Costs
City Permits and Fees (a) $1,234,057 $1,234,057 $1,234,057 $1,234,057 $1,234,057
Affordable Housing In-Lieu Fees $0 $0 $0 $0 $1,826,300
Other Soft Costs $3,446,934 $3,446,934 $3,446,934 $3,446,934 $3,446,934
Subtotal Soft Costs $4,680,991 $4,680,991 $4,680,991 $4,680,991 $6,507,291
Financing Costs
Total Financing Costs $1,265,698 $1,265,698 $1,265,698 $1,265,698 $1,375,276
Total Development Costs
Total Development Costs $27,525,948 $27,525,948 $27,525,948 $27,525,948 $29,461,826
per unit $1,058,690 $1,058,690 $1,058,690 $1,058,690 $1,133,147
per gross residential sf $668 $668 $668 $668 $716
Financial Feasibility
Net Revenue (b) $13,674,052 $9,200,007 $7,830,124 $6,460,242 $11,738,174
Return on Cost (c) 49.68% 33.42% 28.45% 23.47% 39.84%
(a) Excluding affordable housing in-lieu fee payment. (b) Net revenue is the project total revenue minus total development costs.(c) Return on cost is the net revenue, divided by total
Source: Strategic Economics, 2020.
28
FIGURE 26: FINANCIAL FEASIBILITY RESULTS: PROTOTYPE 3A (DOWNTOWN APARTMENTS, CD-C WITH HIP)
Baseline Scenario:
No Requirements
Scenario 1:
15% On-Site
Scenario 2:
20% On-Site
Scenario 3:
25% On-Site
Scenario 4:
In-Lieu Fee
Revenues
Residential Net Operating Income $1,673,685 $1,539,802 $1,504,916 $1,459,617 $1,673,685
Retail Net Operating Income $0 $0 $0 $0 $0
Total Net Operating Income $1,673,685 $1,539,802 $1,504,916 $1,459,617 $1,673,685
Total Capitalized Value $39,380,824 $36,230,644 $35,409,779 $34,343,936 $39,380,824
per unit $729,275 $670,938 $655,737 $635,999 $729,275
Development Costs
Land Costs
Total Land Cost $4,132,231 $4,132,231 $4,132,231 $4,132,231 $4,132,231
per unit $76,523 $76,523 $76,523 $76,523 $76,523
Hard Costs
Site Prep $375,000 $375,000 $375,000 $375,000 $375,000
Residential Building Area $12,335,294 $12,335,294 $12,335,294 $12,335,294 $12,335,294
Retail Building Area (Including TIs) $656,250 $656,250 $656,250 $656,250 $656,250
Parking $6,300,000 $6,300,000 $6,300,000 $6,300,000 $6,300,000
Subtotal Hard Costs $19,666,544 $19,666,544 $19,666,544 $19,666,544 $19,666,544
per unit $364,195 $364,195 $364,195 $364,195 $364,195
per gross residential sf $478 $478 $478 $478 $478
Soft Costs
City Permits and Fees (a) $2,099,881 $2,099,881 $2,099,881 $2,099,881 $2,099,881
Affordable Housing In-Lieu Fees $0 $0 $0 $0 $729,407
Other Soft Costs $4,129,974 $4,129,974 $4,129,974 $4,129,974 $4,129,974
Subtotal Soft Costs $6,229,855 $6,229,855 $6,229,855 $6,229,855 $6,959,262
Financing Costs
Total Financing Costs $1,553,784 $1,553,784 $1,553,784 $1,553,784 $1,597,548
Total Development Costs
Total Development Costs $31,582,415 $31,582,415 $31,582,415 $31,582,415 $32,355,586
per unit $584,860 $584,860 $584,860 $584,860 $599,178
per gross residential sf $768 $768 $768 $768 $787
Financial Feasibility
Net Revenue (b) $7,798,409 $4,648,229 $3,827,364 $2,761,522 $7,025,238
Yield on Cost (c) 5.30% 4.88% 4.77% 4.62% 5.17%
(a) Excluding affordable housing in-lieu fee payment. (b) Net revenue is the project total revenue minus total development costs. (c) Yield on cost is the total project net operating income
divided by total development costs.
Source: Strategic Economics, 2020.
29
FIGURE 27: FINANCIAL FEASIBILITY RESULTS: PROTOTYPE 3B (DOWNTOWN APARTMENTS, CD-C WITH HIP, REDUCED RETAIL AND REDUCED PARKING)
Baseline Scenario:
No Requirements
Scenario 1:
15% On-Site
Scenario 2:
20% On-Site
Scenario 3:
25% On-Site
Scenario 4:
In-Lieu Fee
Revenues
Residential Net Operating Income $1,673,685 $1,539,802 $1,504,916 $1,459,617 $1,673,685
Retail Net Operating Income $0 $0 $0 $0 $0
Total Net Operating Income $1,673,685 $1,539,802 $1,504,916 $1,459,617 $1,673,685
Total Capitalized Value $39,380,824 $36,230,644 $35,409,779 $34,343,936 $39,380,824
per unit $729,275 $670,938 $655,737 $635,999 $729,275
Development Costs
Land Costs
Total Land Cost $4,132,231 $4,132,231 $4,132,231 $4,132,231 $4,132,231
per unit $76,523 $76,523 $76,523 $76,523 $76,523
Hard Costs
Site Prep $375,000 $375,000 $375,000 $375,000 $375,000
Residential Building Area $12,335,294 $12,335,294 $12,335,294 $12,335,294 $12,335,294
Retail Building Area (Including TIs) $262,500 $262,500 $262,500 $262,500 $262,500
Parking $5,400,000 $5,400,000 $5,400,000 $5,400,000 $5,400,000
Subtotal Hard Costs $18,372,794 $18,372,794 $18,372,794 $18,372,794 $18,372,794
per unit $340,237 $340,237 $340,237 $340,237 $340,237
per gross residential sf $447 $447 $447 $447 $447
Soft Costs
City Permits and Fees (a) $1,989,585 $1,989,585 $1,989,585 $1,989,585 $1,989,585
Affordable Housing In-Lieu Fees $0 $0 $0 $0 $729,407
Other Soft Costs $3,858,287 $3,858,287 $3,858,287 $3,858,287 $3,858,287
Subtotal Soft Costs $5,847,872 $5,847,872 $5,847,872 $5,847,872 $6,577,278
Financing Costs
Total Financing Costs $1,453,240 $1,453,240 $1,453,240 $1,453,240 $1,497,004
Total Development Costs
Total Development Costs $29,806,137 $29,806,137 $29,806,137 $29,806,137 $30,579,308
per unit $551,966 $551,966 $551,966 $551,966 $566,283
per gross residential sf $725 $725 $725 $725 $744
Financial Feasibility
Net Revenue (b) $9,574,686 $6,424,507 $5,603,641 $4,537,799 $8,801,515
Yield on Cost (c) 5.62% 5.17% 5.05% 4.90% 5.47%
(a) Excluding affordable housing in-lieu fee payment. (b) Net revenue is the project total revenue minus total development costs. (c) Yield on cost is the total project net operating income
divided by total development costs.
Source: Strategic Economics, 2020.
30
FIGURE 28: FINANCIAL FEASIBILITY RESULTS: PROTOTYPE 4A (CONDOMINIUMS, CS WITH HIP)
Baseline Scenario:
No Requirements
Scenario 1:
15% On-Site
Scenario 2:
20% On-Site
Scenario 3:
25% On-Site
Scenario 4:
In-Lieu Fee
Revenues
Residential Capitalized Value $36,000,000 $31,969,815 $30,723,166 $29,476,517 $36,000,000
Retail Capitalized Value $0 $0 $0 $0 $0
Total Capitalized Value $36,000,000 $31,969,815 $30,723,166 $29,476,517 $36,000,000
per unit $1,800,000 $1,598,491 $1,536,158 $1,473,826 $1,800,000
Development Costs
Land Costs
Total Land Cost $8,217,080 $8,217,080 $8,217,080 $8,217,080 $8,217,080
per unit $410,854 $410,854 $410,854 $410,854 $410,854
Hard Costs
Site Prep $745,700 $745,700 $745,700 $745,700 $745,700
Residential Building Area $11,294,118 $11,294,118 $11,294,118 $11,294,118 $11,294,118
Retail Building Area (Including TIs) $1,581,125 $1,581,125 $1,581,125 $1,581,125 $1,581,125
Parking $4,417,250 $4,417,250 $4,417,250 $4,417,250 $4,417,250
Subtotal Hard Costs $18,038,193 $18,038,193 $18,038,193 $18,038,193 $18,038,193
per unit $901,910 $901,910 $901,910 $901,910 $901,910
per gross residential sf $511 $511 $511 $511 $511
Soft Costs
City Permits and Fees (a) $1,311,400 $1,311,400 $1,311,400 $1,311,400 $1,311,400
Affordable Housing In-Lieu Fees $0 $0 $0 $0 $1,565,400
Other Soft Costs $3,788,020 $3,788,020 $3,788,020 $3,788,020 $3,788,020
Subtotal Soft Costs $5,099,421 $5,099,421 $5,099,421 $5,099,421 $6,664,821
Financing Costs
Total Financing Costs $1,388,257 $1,388,257 $1,388,257 $1,388,257 $1,482,181
Total Development Costs
Total Development Costs $32,742,950 $32,742,950 $32,742,950 $32,742,950 $34,402,274
per unit $1,637,147 $1,637,147 $1,637,147 $1,637,147 $1,720,114
per gross residential sf $928 $928 $928 $928 $975
Financial Feasibility
Net Revenue (b) $3,257,050 -$773,135 -$2,019,784 -$3,266,433 $1,597,726
Return on Cost (c) 9.95% -2.36% -6.17% -9.98% 4.64%
(a) Excluding affordable housing in-lieu fee payment. (b) Net revenue is the project total revenue minus total development costs. (c) Return on cost is the net revenue, divided by total
development costs.
Source: Strategic Economics, 2020.
31
FIGURE 29: FINANCIAL FEASIBILITY RESULTS: PROTOTYPE 4B (CONDOMINIUMS, CS WITH HIP, REDUCED RETAIL AND REDUCED PARKING)
Baseline Scenario:
No Requirements
Scenario 1:
15% On-Site
Scenario 2:
20% On-Site
Scenario 3:
25% On-Site
Scenario 4:
In-Lieu Fee
Revenues
Residential Capitalized Value $36,000,000 $31,969,815 $30,723,166 $29,476,517 $36,000,000
Retail Capitalized Value $0 $0 $0 $0 $0
Total Capitalized Value $36,000,000 $31,969,815 $30,723,166 $29,476,517 $36,000,000
per unit $1,800,000 $1,598,491 $1,536,158 $1,473,826 $1,800,000
Development Costs
Land Costs
Total Land Cost $8,217,080 $8,217,080 $8,217,080 $8,217,080 $8,217,080
per unit $410,854 $410,854 $410,854 $410,854 $410,854
Hard Costs
Site Prep $745,700 $745,700 $745,700 $745,700 $745,700
Residential Building Area $11,294,118 $11,294,118 $11,294,118 $11,294,118 $11,294,118
Retail Building Area (Including TIs) $262,500 $262,500 $262,500 $262,500 $262,500
Parking $800,000 $800,000 $800,000 $800,000 $800,000
Subtotal Hard Costs $13,102,318 $13,102,318 $13,102,318 $13,102,318 $13,102,318
per unit $655,116 $655,116 $655,116 $655,116 $655,116
per gross residential sf $371 $371 $371 $371 $371
Soft Costs
City Permits and Fees (a) $1,010,906 $1,010,906 $1,010,906 $1,010,906 $1,010,906
Affordable Housing In-Lieu Fees $0 $0 $0 $0 $1,565,400
Other Soft Costs $2,751,487 $2,751,487 $2,751,487 $2,751,487 $2,751,487
Subtotal Soft Costs $3,762,392 $3,762,392 $3,762,392 $3,762,392 $5,327,792
Financing Costs
Total Financing Costs $1,011,883 $1,011,883 $1,011,883 $1,011,883 $1,105,807
Total Development Costs
Total Development Costs $26,093,672 $26,093,672 $26,093,672 $26,093,672 $27,752,996
per unit $1,304,684 $1,304,684 $1,304,684 $1,304,684 $1,387,650
per gross residential sf $739 $739 $739 $739 $786
Financial Feasibility
Net Revenue (b) $9,906,328 $5,876,143 $4,629,494 $3,382,845 $8,247,004
Return on Cost (c) 37.96% 22.52% 17.74% 12.96% 29.72%
(a) Excluding affordable housing in-lieu fee payment. (b) Net revenue is the project total revenue minus total development costs. (c) Return on cost is the net revenue, divided by total
development costs.
Source: Strategic Economics, 2020.
32
FIGURE 30: FINANCIAL FEASIBILITY RESULTS: PROTOTYPE 5A (APARTMENTS, CS WITH HIP)
Baseline Scenario: No Requirements Scenario 1: 15% On-Site Scenario 2: 20% On-Site Scenario 3: 25% On-Site Scenario 4: In-Lieu Fee
Revenues
Residential Net Operating Income $1,474,785 $1,361,326 $1,332,458 $1,294,021 $1,474,785
Retail Net Operating Income $0 $0 $0 $0 $0
Total Net Operating Income $1,474,785 $1,361,326 $1,332,458 $1,294,021 $1,474,785
Total Capitalized Value $34,700,824 $32,031,196 $31,351,949 $30,447,558 $34,700,824
per unit $694,016 $640,624 $627,039 $608,951 $694,016
Development Costs
Land Costs
Total Land Cost $8,217,080 $8,217,080 $8,217,080 $8,217,080 $8,217,080
per unit $164,342 $164,342 $164,342 $164,342 $164,342
Hard Costs
Site Prep $745,700 $745,700 $745,700 $745,700 $745,700
Residential Building Area $10,694,118 $10,694,118 $10,694,118 $10,694,118 $10,694,118
Retail Building Area (Including TIs) $1,581,125 $1,581,125 $1,581,125 $1,581,125 $1,581,125
Parking $5,117,250 $5,117,250 $5,117,250 $5,117,250 $5,117,250
Subtotal Hard Costs $18,138,193 $18,138,193 $18,138,193 $18,138,193 $18,138,193
per unit $362,764 $362,764 $362,764 $362,764 $362,764
per gross residential sf $509 $509 $509 $509 $509
Soft Costs
City Permits and Fees (a) $2,098,641 $2,098,641 $2,098,641 $2,098,641 $2,098,641
Affordable Housing In-Lieu Fees $0 $0 $0 $0 $632,361
Other Soft Costs $3,809,020 $3,809,020 $3,809,020 $3,809,020 $3,809,020
Subtotal Soft Costs $5,907,662 $5,907,662 $5,907,662 $5,907,662 $6,540,023
Financing Costs
Total Financing Costs $1,442,751 $1,442,751 $1,442,751 $1,442,751 $1,480,693
Total Development Costs
Total Development Costs $33,705,685 $33,705,685 $33,705,685 $33,705,685 $34,375,988
per unit $674,114 $674,114 $674,114 $674,114 $687,520
per gross residential sf $946 $946 $946 $946 $964
Financial Feasibility
Net Revenue (b) $995,138 -$1,674,489 -$2,353,736 -$3,258,128 $324,836
Yield on Cost (c) 4.38% 4.04% 3.95% 3.84% 4.29%
(a) Excluding affordable housing in-lieu fee payment. (b) Net revenue is the project total revenue minus total development costs. (c) Yield on cost is the total project net operating income
divided by total development costs.
Source: Strategic Economics, 2020.
33
FIGURE 31: FINANCIAL FEASIBILITY RESULTS: PROTOTYPE 5B (APARTMENTS, CS WITH HIP, REDUCED RETAIL AND REDUCED PARKING)
Baseline Scenario:
No Requirements
Scenario 1:
15% On-Site
Scenario 2:
20% On-Site
Scenario 3:
25% On-Site
Scenario 4:
In-Lieu Fee
Revenues
Residential Net Operating Income $1,508,423 $1,392,170 $1,362,558 $1,323,178 $1,508,423
Retail Net Operating Income $0 $0 $0 $0 $0
Total Net Operating Income $1,508,423 $1,392,170 $1,362,558 $1,323,178 $1,508,423
Total Capitalized Value $35,492,294 $32,756,935 $32,060,200 $31,133,594 $35,492,294
per unit $695,927 $642,293 $628,631 $610,463 $695,927
Development Costs
Land Costs
Total Land Cost $8,217,080 $8,217,080 $8,217,080 $8,217,080 $8,217,080
per unit $161,119 $161,119 $161,119 $161,119 $161,119
Hard Costs
Site Prep $745,700 $745,700 $745,700 $745,700 $745,700
Residential Building Area $10,958,824 $10,958,824 $10,958,824 $10,958,824 $10,958,824
Retail Building Area (Including TIs) $262,500 $262,500 $262,500 $262,500 $262,500
Parking $1,530,000 $1,530,000 $1,530,000 $1,530,000 $1,530,000
Subtotal Hard Costs $13,497,024 $13,497,024 $13,497,024 $13,497,024 $13,497,024
per unit $264,648 $264,648 $264,648 $264,648 $264,648
per gross residential sf $369 $369 $369 $369 $369
Soft Costs
City Permits and Fees (a) $1,834,188 $1,834,188 $1,834,188 $1,834,188 $1,834,188
Affordable Housing In-Lieu Fees $0 $0 $0 $0 $648,014
Other Soft Costs $2,834,375 $2,834,375 $2,834,375 $2,834,375 $2,834,375
Subtotal Soft Costs $4,668,563 $4,668,563 $4,668,563 $4,668,563 $5,316,576
Financing Costs
Total Financing Costs $1,089,935 $1,089,935 $1,089,935 $1,089,935 $1,128,816
Total Development Costs
Total Development Costs $27,472,601 $27,472,601 $27,472,601 $27,472,601 $28,159,496
per unit $538,678 $538,678 $538,678 $538,678 $552,147
per gross residential sf $752 $752 $752 $752 $771
Financial Feasibility
Net Revenue (b) $8,019,693 $5,284,333 $4,587,598 $3,660,993 $7,332,799
Yield on Cost (c) 5.49% 5.07% 4.96% 4.82% 5.36%
(a) Excluding affordable housing in-lieu fee payment. (b) Net revenue is the project total revenue minus total development costs. (c) Yield on cost is the total project net operating income
divided by total development costs.
Source: Strategic Economics, 2020.
34
FIGURE 32: FEASIBILITY RESULTS FOR OWNERSHIP PROTOTYPES
Prototype 1a Prototype 1b Prototype 2a Prototype 2b Prototype 4a Prototype 4b
Townhouse, Retail,
Fully Parked
Townhouse,
Reduced Retail,
Reduced Parking
Downtown Condo
Flats, Retail, Fully
Parked
Downtown Condo
Flats, Reduced Retail,
Reduced Parking
Condo Flats,
Retail, Fully
Parked
Condo Flats, Reduced
Retail, Reduced
Parking
Zoning SOFA-II, RT 35 SOFA-II, RT 35 CD-C (with HIP) CD-C (with HIP) CS (with HIP) CS (with HIP)
Density (DU/Acre) 32 32 76 76 29 29
Floor-Area-Ratio (FAR) 1.14 1.07 3.00 2.85 1.49 1.23
Return on Cost
Baseline (No Requirement) 20.79% 35.88% 30.26% 49.68% 9.95% 37.96%
Scenario 1 (15% On-Site) 8.68% 22.26% 16.11% 33.42% -2.36% 22.52%
Scenario 2 (20% On-Site) 5.08% 18.20% 11.78% 28.45% -6.17% 17.74%
Scenario 3 (25% On-Site) 1.47% 14.14% 7.45% 23.47% -9.98% 12.96%
Scenario 4 (In-Lieu Fee) 13.87% 27.19% 22.74% 39.84% 4.64% 29.72%
Source: Strategic Economics, 2020.
FIGURE 33: FEASIBILITY RESULTS FOR RENTAL PROTOTYPES
Prototype 3a Prototype 3b Prototype 5a Prototype 5b
Downtown Apartments,
Retail, Fully Parked
Downtown Apartments,
Reduced Retail,
Reduced Parking
Apartments,
Retail, Fully
Parked
Apartments, Reduced
Retail, Reduced
Parking
Zoning CD-C (with HIP) CD-C (with HIP) CS (with HIP) CS (with HIP)
Density (DU/Acre) 157 157 73 74
Floor-Area-Ratio (FAR) 2.99 3.00 1.50 1.27
Yield on Cost
Baseline (No Requirement) 5.30% 5.62% 4.38% 5.49%
Scenario 1 (15% On-Site) 4.88% 5.17% 4.04% 5.07%
Scenario 2 (20% On-Site) 4.77% 5.05% 3.95% 4.96%
Scenario 3 (25% On-Site) 4.62% 4.90% 3.84% 4.82%
Scenario 4 (In-Lieu Fee) 5.17% 5.47% 4.29% 5.36%
Source: Strategic Economics, 2020.
Highly Likely
Somewhat Likely
Less Likely
Infeasible
35
APPENDIX
The appendix includes additional information on:
• Recent condominium re-sales in Palo Alto and surrounding cities (Figure A-1)
• Recent rental project comparables in Palo Alto and surrounding cities (Figure A-2)
• Recent land sale transactions, used to inform the land cost assumptions (Figure A-3)
• Detailed calculation of city fees per unit (Figure A-4)
36
FIGURE A-1: RESIDENTIAL OWNERSHIP PROJECT COMPARABLES IN PALO ALTO, MOUNTAIN VIEW AND LOS ALTOS, SOLD IN 2018 AND 2019
Project Name Product City Year Built Sale Price Per Unit Unit Size (Sq. Ft.) Price Per Sq. Ft.
1 BD 2 BD 1 BD 2 BD 1 BD 2 BD
Echelon
Townhome-
style condos Palo Alto 2008 $1,775,000 1,130 1,131 $1,571
325 Channing Ave #105 Condo/Co-op Palo Alto 2004 $3,400,000 2,114 $1,608
3282 Berryessa St Townhouse Palo Alto 2010 $1,713,000 1,519 $1,128
1101 W El Camino Real #405 Condo/Co-op Mountain View 2017
161 Jordan Ct Condo/Co-op Mountain View 2007 $1,240,000 1,236 $1,003
108 Bryant St #29 Condo/Co-op Mountain View 2000 $1,355,000 1,078 $1,257
174 Jordan Ct Condo/Co-op Mountain View 2007 $1,300,000 1,594 $816
Peninsula Real
Stacked
Condos Los Altos 2008 $990,000 $1,400,833 787 1,200 $1,258 $1,167
4388 El Camino Real #130 Condo/Co-op Los Altos 2009 $1,227,000 1,200 $1,023
100 1st St #108 Condo/Co-op Los Altos 2015 $1,420,000 1,132 $1,254
889 N San Antonio Rd Condo/Co-op Los Altos 2017 $1,405,000 1,124 $1,250
100 First Condo/Co-op Los Altos 2015 $1,194,833 $2,666,000 1,136 1,552 $1,052 $1,718
4388 El Camino Real Condo/Co-op Los Altos 2009 $1,227,000 1,200 $1,023
4388 El Camino Real #168 Condo/Co-op Los Altos 2009 $1,410,000 1,200 $1,175
4388 El Camino Real #228 Condo/Co-op Los Altos 2009 $1,465,000 1,200 $1,221
Average $1,201,611 $1,650,736 $1,018 $1,351 $1,188 $1,199
Note: All transaction data from 2018 to 2019
Source: Polaris Pacific, Silicon Valley, 2019; Redfin, 2019; Strategic Economics, 2020.
37
FIGURE A-2: RESIDENTIAL RENTAL PROJECT COMPARABLES IN PALO ALTO AND MOUNTAIN VIEW, LEASING IN 2019
Unit Mix Unit Size (Sq. Ft.) Rent Per Unit
Project Name City Year Built Total
Units Studios 1-BD 2-BD Studios 1-BD 2-BD Studios 1-BD 2-BD
Montage Apartments Palo Alto 1998 46 N/A
34
12
700
1,000 $2,395 $4,328 $4,026
Park Plaza Palo Alto 2016 82
20
58
843
1,046 $3,645 $4,075
Elan Mountain View Mountain View 2018 164
12
129
20
571
748
1,112 $3,639 $4,041 $5,311
Avalon Towers on the
Peninsula Mountain View 2002 211
84
121
826
1,116 $4,102 $4,728
Montrose Mountain View 2016 228
148
80
739
1,154 $3,957 $5,318
Verve Mountain View 2017 155
70
85
884
1,302 $4,158 $5,647
Gemello Village Mountain View 2000 52
20
20
729
1,123 $3,295 $3,970
Domus on the Boulevard Mountain View 2015 193
125
68
791
1,048 $3,833 $5,304
Madera Apartments Mountain View 2013 203
114
89
849
1,181 $4,247 $5,302
Park Place South Mountain View 2000 120
61
56
773
1,055 $3,653 $4,272
100 Moffett Mountain View 2016 184
140
44
791
1,233 $4,211 $5,540
The Village Residences Mountain View 2013 330
41
223
66
574
798
1,257 $3,596 $4,639 $5,441
Weighted Average
573
797
1,160 $3,507 $4,111 $5,137
Source: Costar, 2019; Strategic Economics, 2020.
38
FIGURE A-3: RECENT MULTIFAMILY AND MIXED-USE RESIDENTIAL LAND SALE TRANSACTIONS IN PALO ALTO, MOUNTAIN VIEW, AND LOS ALTOS
Address
Land
(Acres) Land (sf) Sale Price Price per Acre Price
per sf
Sale
Year Proposed Use Proposed
Units
Proposed
Dwelling
Units/Acre
Price per Unit
(if available)
410 Sierra Vista Ave,
Mountain View 0.3 14,461 $5,514,257 $16,609,208 $381 2019 14 row-houses 14 42 $1,102,851
1950 Montecito Ave,
Mountain View 1.9 80,586 $22,500,000 $12,162,162 $279 2019 33 row-houses 33 18 $661,764
257-259 Calderon,
Mountain View 0.6 27,482 $10,900,000 $17,276,906 $397 2019 Unknown Unknown Unknown $1,557,142
2005 Rock St, Mountain
View 0.6 25,264 $8,800,000 $15,172,414 $348 2019 15 townhomes 15 26 $488,888
2044-2054 Montecito Ave,
Mountain View 2.8 121,096 $37,450,000 $13,471,223 $309 2018 Unknown Unknown Unknown $720,192
1540 Miramonte Ave, Los
Altos 0.3 13,400 $2,050,000 $6,612,903 $153 2017 Four rental units
and retail 4 13 $512,500
1960 Colony St, Mountain
View 0.4 16,553 $3,200,000 $8,421,053 $193 2017 Multifamily unknown unknown unknown
1020 Terra Bella Ave,
Mountain View 0.5 22,080 $3,200,000 $6,274,510 $145 2017 Multifamily unknown unknown unknown
950 W El Camino Real,
Mountain View 0.6 26,314 $8,088,000 $13,480,000 $307 2017 71 below-market
rate rental units 71 118 $113,915
788 San Antonio Rd, Palo
Alto 1.0 43,996 $11,500,000 $11,386,139 $261 2018 Multifamily 37 36 $314,430
319 Sierra Vista Ave,
Mountain View 0.9 40,511 $10,050,000 $10,806,452 $248 2017 15 townhomes 15 16 $670,000
1100 La Avenida Ave,
Mountain View 1.0 41,817 $6,300,000 $6,562,500 $151 2018 Multifamily unknown unknown unknown
2515 El Camino Real, Palo
Alto 1.0 41,277 $23,000,000 $24,210,526 $557 2016
13 residential
condos; office;
retail
13 14 $1,769,231
333 Rengstorff Ave,
Mountain View 1.8 79,187 $22,500,000 $12,362,637 $284 2018
Mutlifamily
ownership
condominiums
unknown unknown unknown
2700 W El Camino Real,
Mountain View 2.3 98,933 $30,511,000 $13,440,969 $308 2018
Land is fully
entitled for 221
apartment units
221 97 $138,059
Source: Costar, 2019; Strategic Economics, 2020.
39
FIGURE A-4: DETAILED CALCULATION OF THE PALO ALTO’S PERMITS AND FEES FOR EACH PROTOTYPE (PER UNIT)
Prototype 1a Prototype 1b Prototype 2a Prototype 2b Prototype 3a Prototype 3b
Townhouse, Retail,
Fully Parked
Townhouse,
Reduced Retail,
Reduced Parking
Downtown
Condo Flats,
Retail, Fully
Parked
Downtown Condo
Flats, Reduced Retail,
Reduced Parking
Downtown
Apartments, Retail,
Fully Parked
Downtown
Apartments,
Reduced Retail,
Reduced Parking
Building Permit Fees1
Building Permit Fee $59,917 $59,917 $97,366 $97,366 $202,221 $202,221
Building Plan Check Fee $44,938 $44,938 $73,024 $73,024 $151,666 $151,666
C&D Commercial/Multifamily > 25k & all Demo $342 $342 $342 $342 $342 $342
City Tree Inspection - Res over 100K or Demo $162 $162 $162 $162 $162 $162
Comprehensive Plan Maintenance Fee $4,354 $4,354 $7,076 $7,076 $14,695 $14,695
Fire Plan Check - Commercial and Multifamily $32,355 $32,355 $52,577 $52,577 $109,199 $109,199 Landscape Inspection Fee $213 $213 $213 $213 $213 $213 Landscape Plan Check - Commercial and Multifamily $2,176 $2,176 $2,176 $2,176 $2,176 $2,176 Multifamily New Building (4 or more attached units) $1,709 $1,709 $1,709 $1,709 $1,709 $1,709 Public Works Plan Check Fee $26,364 $26,364 $42,841 $42,841 $88,977 $88,977
Records Retention $645 $645 $645 $645 $645 $645
SB 1473 Mandated Fee $160 $160 $260 $260 $540 $540
SMIP Residential $519 $519 $844 $844 $1,753 $1,753
Zoning Plan Check Fee $20,971 $20,971 $34,078 $34,078 $70,777 $70,777
Subtotal $194,826 $194,826 $313,313 $313,313 $645,076 $645,076
Public Works2
Grading and Street Paving $11,513 $11,513 $11,513 $11,513 $11,513 $11,513
Utilities3
Gas, Water, Wastewater, Storm Drain $103,000 $103,000 $158,000 $158,000 $312,000 $312,000
School District Fees4
Residential Development $82,391 $82,391 $156,059 $156,059 $155,836 $155,836 Commercial Development $1,830 $915 $2,288 $915 $2,288 $915 Subtotal $84,221 $83,306 $158,346 $156,974 $158,123 $156,751 Residential Development Impact Fees5
Community Facilities
Parks $130,256 $130,256 $179,466 $179,466 $222,264 $222,264
Community Centers $33,952 $33,952 $46,764 $46,764 $57,834 $57,834
Libraries $10,784 $10,784 $15,092 $15,092 $19,980 $19,980
Public Safety Facilities $13,840 $13,840 $22,490 $22,490 $46,710 $46,710
General Government Facilities $17,424 $17,424 $28,314 $28,314 $58,806 $58,806
Citywide Transportation Impact Fee $78,247 $78,247 $127,151 $127,151 $264,083 $264,083
Public Art Fee $88,191 $73,166 $195,077 $164,140 $196,665 $183,728
Parkland Dedication $0 $0 $0 $0 $0 $0 Affordable Housing In-Lieu Fee6 $0 $0 $0 $0 $0 $0 Subtotal $372,693 $357,668 $614,354 $583,417 $866,342 $853,405 Commercial Development Impact Fees
Community Facilities7 $21,681 $10,841 $27,101 $10,841 $27,101 $10,841
Commercial Linkage Fee $63,780 $0 $79,725 $0 $79,725 $0
Subtotal $85,461 $10,841 $106,826 $10,841 $106,826 $10,841
Per Unit Total $53,232 $47,572 $52,398 $47,464 $38,887 $36,844
(see notes and sources on next page)
40
1 Building permit fee amounts for each prototype were provided by the City of Palo Alto, August 2019 and Strategic Economics calculated per unit amounts
2 Public work fee amounts were estimated by Strategic Economics based on fee amount of the most recent and comparable Palo Alto residential development project (2500 El Camino
Real) 3 Utilities fee amounts were estimated by Strategic Economics based on data the City of Palo Alto provided for similar prototypes
4 School district fees are collected by the Palo Alto Unified School District, as described on the following website: https://www.pausd.org/business-services/school-impact-fees
5 Palo Alto's development impact fees (updated August 20, 2019) are publicly available at the following website: https://www.cityofpaloalto.org/civicax/filebank/documents/27226
6 Because this analysis is testing the impact of different inclusionary/in-lieu fee scenarios, the affordable housing in-lieu fees are calculated separately. 7 Includes: Parks, Community Centers, Libraries, Public Safety Facilities, and General Government Facilities.
Source: City of Palo Alto, 2019; Strategic Economics, 2020.
41
FIGURE A-4: CONTINUED
Prototype 4a Prototype 4b Prototype 5a Prototype 5b
Condo Flats, Retail, Fully Parked Condo Flats, Reduced Retail, Reduced Parking Apartments, Retail, Fully Parked Apartments, Reduced Retail, Reduced Parking
Building Permit Fees1 Building Permit Fee $74,897 $74,897 $187,242 $190,987
Building Plan Check Fee $56,173 $56,173 $140,431 $143,240
C&D Commercial/Multifamily > 25k & all Demo $342 $342 $342 $342
City Tree Inspection - Res over 100K or Demo $162 $162 $162 $162
Comprehensive Plan Maintenance Fee $5,443 $5,443 $13,607 $13,879
Fire Plan Check - Commercial and Multifamily $40,444 $40,444 $101,111 $103,133
Landscape Inspection Fee $213 $213 $213 $213
Landscape Plan Check - Commercial and Multifamily $2,176 $2,176 $2,176 $2,176
Multifamily New Building (4 or more attached units) $1,709 $1,709 $1,709 $1,709
Public Works Plan Check Fee $32,955 $32,955 $82,386 $84,034
Records Retention $645 $645 $645 $645
SB 1473 Mandated Fee $200 $200 $500 $510
SMIP Residential $649 $649 $1,623 $1,655
Zoning Plan Check Fee $26,214 $26,214 $65,535 $66,845
Subtotal $242,221 $242,221 $597,681 $609,530
Public Works2
Grading and Street Paving $11,513 $11,513 $11,513 $11,513
Utilities3
Gas, Water, Wastewater, Storm Drain $125,000 $125,000 $290,000 $295,500
School District Fees4
Residential Development $133,765 $133,765 $135,102 $138,446
Commercial Development $5,511 $915 $5,511 $915
Subtotal $139,276 $134,680 $140,614 $139,361
Residential Development Impact Fees5
Community Facilities
Parks $162,820 $162,820 $205,800 $209,916
Community Centers $42,440 $42,440 $53,550 $54,621
Libraries $13,480 $13,480 $18,500 $18,870
Public Safety Facilities $17,300 $17,300 $43,250 $44,115
General Government Facilities $21,780 $21,780 $54,450 $55,539
Citywide Transportation Impact Fee $97,808 $97,808 $244,521 $249,412
Public Art Fee $180,382 $131,023 $181,382 $134,970
Parkland Dedication $0 $0 $0 $0
Affordable Housing In-Lieu Fee6 $0 $0 $0 $0
Subtotal $536,010 $486,652 $801,453 $767,443
Commercial Development Impact Fees
Community Facilities7 $65,296 $10,841 $65,296 $10,841
Commercial Linkage Fee $192,084 $0 $192,084 $0
Subtotal $257,380 $10,841 $257,380 $10,841
Per Unit Total $65,570 $50,545 $41,973 $35,964
(see notes and sources on next page)
42
1 Building permit fee amounts for each prototype were provided by the City of Palo Alto, August 2019 and Strategic Economics calculated per unit amounts 2 Public work fee amounts were estimated by Strategic Economics based on fee amount of the most recent and comparable Palo Alto residential development project (2500 El Camino
Real)
3 Utilities fee amounts were estimated by Strategic Economics based on data the City of Palo Alto provided for similar prototypes
4 School district fees are collected by the Palo Alto Unified School District, as described on the following website: https://www.pausd.org/business-services/school-impact-fees 5 Palo Alto's development impact fees (updated August 20, 2019) are publicly available at the following website: https://www.cityofpaloalto.org/civicax/filebank/documents/27226 6 Because this analysis is testing the impact of different inclusionary/in-lieu fee scenarios, the affordable housing in-lieu fees are calculated separately.
7 Includes: Parks, Community Centers, Libraries, Public Safety Facilities, and General Government Facilities.
Source: City of Palo Alto, 2019; Strategic Economics, 2020.
City of Palo Alto (ID # 11478)
City Council Staff Report
Report Type: Action Items Meeting Date: 9/21/2020
City of Palo Alto Page 1
Summary Title: Planned Home Zoning (PC Zoning) Affordability Requirements
Title: Discussion and Direction to Staff on Housing Affordability
Requirements for Projects Proposed Under the Planned Home Zoning
(Planned Community Zoning). This Action is Exempt from the California
Environmental Quality Act (CEQA) in Accordance with CEQA Guidelines
15061(b)(3).
From: City Manager
Lead Department: Planning and Development Services
Recommendation
Staff recommends that Council endorse an approach that offers a menu of options to home
builders to meet the 20% inclusionary requirement for “planned home zoning”1 projects and
affirm direction regarding the calculation for determining the number of housing units required
to offset net new jobs created by a planned home zoning project.
Executive Summary
On February 3, 2020, Council approved a motion (7-0) to allow residential and mixed-use
housing projects that meet certain criteria to propose a planned home zone (PHZ) change.2 At
the hearing, Council indicated PHZ projects needed to include 20% below market rate (BMR)
units across a range of area median income (AMI) levels and ensure more housing units are
produced than net new commercial jobs.
Council’s action generated interest from a wide variety of developers and landowners to
explore the potential for housing on sites across the City. Staff have met with interested parties
to communicate Council’s direction and obtain feedback on conceptual designs and anticipated
1 Referred to in this report as "Planned Home Zone" to emphasize the focus on housing as the benefit to the
community. Still, PAMC Section 18.38, which outlines the requirement and process for Planned Community (PC)
Zoning remains the underlying code supporting application of this policy.
2 Minutes from February 3, 2020 Council Meeting: https://tinyurl.com/Feb-3-2020-Council-Minutes
City of Palo Alto Page 2
barriers to development of various parcels. However, the ability to move forward is somewhat
constrained by a lack of clarity on the inclusionary requirements and jobs/housing factor to be
used for these projects. This memo presents some options to better define these requirements.
Background
On February 3, 2014 the City Council voted to place a “time-out” on Planned Community (PC)
zoned projects to allow an examination of potential alternatives and reforms.3 Since that date,
no re-zonings for PCs have been approved in Palo Alto.
Two years ago, the City Council adopted a housing work plan.4 Staff prepared the plan in
response to a City Council Colleagues’ Memorandum.5 The Colleagues’ Memorandum stated
the desire for zoning updates to encourage diverse housing near jobs, transit, and services. The
memo presented several specific concepts, many of which were also identified in the City’s
Housing Element (adopted November 2014) and the updated Comprehensive Plan (adopted
November 13, 2017).
Since that time, Council approved several zoning updates designed to encourage housing
production and took other measures to curb office development in favor of housing production.
These actions stimulated some housing development; however, the City continues to have a
high jobs-to-housing ratio. At the current rate, the City is not on target to meet its expressed
Comprehensive Plan goal of producing between 3,545 and 4,420 new housing units between
2015 and 2030. The lack of housing affordable at all income levels contributes to other impacts
experienced in Palo Alto. These impacts relate to traffic congestion, higher vehicle miles
traveled, greater greenhouse gas emissions, and diminished housing opportunities, among
other quality of life issues.
On February 3, 2020, staff presented an update on the Housing Work Plan. At this hearing staff
conveyed the conclusion that additional measures would likely be needed to generate near-
term housing production that meets the City’s expressed targets. In response, Council approved
a motion6 to allow for housing projects to be rezoned under the PHZ. Unlike the previous PC
zoning, the City would not seek community benefits from proposed projects. Instead, the
housing itself, especially the required BMR units, serves as the primary community benefit.
Discussion
3 Minutes from February 3, 2014 Council Meeting: https://tinyurl.com/Feb-3-2014-Council-Minutes
4 City of Palo Alto Housing Work Plan: https://tinyurl.com/Housing-Work-Plan-PA
5 Colleagues Memo Regarding Zoning Updates to Encourage Diverse Housing Near Jobs, Transit, and Services,
dated November 6, 2017: https://tinyurl.com/Colleagues-Memo-Housing
6 February 3, 2020 City Council Minutes:
https://www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?t=69999.18&BlobID=75525
City of Palo Alto Page 3
The PHZ conversation occurred approximately six weeks prior to City Council’s declaration of a
local emergency due to the COVID-19 pandemic. The impacts of COVID-19 on many aspects of
our local community, the region, nation, and the world remain unknown. It is anticipated,
however, that this pandemic and the unfolding economic recession will impact real estate
supply as well as demand.
At the time of this report’s writing, it remains to be seen how demand for housing and supply of
new housing units will be impacted by COVID-19. On one hand, the region’s severe shortage of
housing developed over several decades, during which housing production did not keep pace
with housing demand. On the other hand, job loss, remote work, layoffs, and possible changes
to employee density in office buildings may lead to less demand for housing. The magnitude of
such departures may not be known immediately. That said, the regional population would need
to decrease significantly to impact the housing shortage. The need for more housing—and
more affordable housing—is unlikely to be significantly abated. The state and region plan to
issue revised regional housing needs allocations (RHNA) to regions and jurisdictions later this
year; Palo Alto’s RHNA numbers are expected to increase significantly with more recent
estimates ranging from 8,500 – 10,250.7
Despite the pandemic, staff continues to be approached by developers interested in pursuing
housing development. In fact, Council heard a pre-screening request on June 22 for a proposed
PHZ and staff anticipates that there will be additional requests for pre-screenings this fall for
other proposed PHZ projects. Thus, while the impacts of the pandemic will continue to unfold,
there is a need now to provide more certainty around the inclusionary requirement and affirm
the appropriate factor to use when assessing the net new jobs to housing unit requirement.
20% Inclusionary Housing Requirement
When discussing the 20% inclusionary requirement, individual Council members had a range of
suggestions on how this should be achieved. Some favored promoting the need for lower
income units, others favored a spread across all income levels (which is reflected in the final
motion) and offered suggestions on how that could be achieved. Still, others expressed an
interest in addressing the need for more workforce housing or units in the range between
above moderate and market rate housing.
One Council member suggested the benefits of PHZ be provided at the current 15% inclusionary
requirement8 in recognition that the City is not producing the number of housing units it is
7 The City Council received an update on Plan Bay Area 2050 and the regional housing needs assessment (RHNA)
on August 10, 2020: https://www.cityofpaloalto.org/civicax/filebank/blobdload.aspx?t=57836.5&BlobID=77913
8 The fifteen percent (15%) requirement applies to ownership housing, not rental. Rental housing projects are
assessed a $20.87 fee per square foot of residential floor area.
City of Palo Alto Page 4
trying to achieve even at this level. A recent report9 presented to the Planning and
Transportation Commission and shared with the City Council provides some insight into the
economic challenges of producing on-site BMR housing based on current codes. Moreover, the
City’s inclusionary requirement for ownership housing is not distributed across all income levels
and provides that 10% of the units be deed restricted at 100% of area median income (AMI) for
Santa Clara County and 5% restricted at 120% of AMI. Requiring more units to be deed
restricted at the lower income level means greater concessions from the zoning code to home
builders will be required.
The Council’s direction also reflects the perspective that, unlike prior planned community
zoning, the Council does not want to engage in a negotiation about the affordability
requirements or various concessions required for a project. Staff was directed to engage with
home builders on these topics and have the potential applicant present a concept plan to the
Council to receive non-binding comments on a conceptual plan. In light of this direction and in
recognition that each parcel’s site constraints and property owner expectations, motivations
and tolerance for risk vary, staff recommends the City Council support a menu approach to
address the inclusionary requirement.10 Four options are presented below – the Council may
decide to endorse all four options, select only its preferred options, or direct staff to consider
an alternative approach.
Option 1: 20% Deed Restricted; Balanced Across Affordable and Workforce Housing
This option equally distributes the 20% inclusionary requirement across four income levels. Five
percent of a project’s deed restricted units would be provided at each of the following income
levels: 50%, 80%, 120%, and 140% AMI. Units at or below 120% AMI qualify as below market
housing in accordance with the City’s municipal code; units between 120% and 150% are
defined as workforce housing. 11
9 June 10, 2020 PTC report regarding below market housing feasibility study:
https://www.cityofpaloalto.org/civicax/filebank/documents/77084
10 For PHZ applications – staff proposes that fractional units not be rounded for all Options. Compliance with
minimum requirements are met with using whole numbers, for instance, 19.9% would not meet the 20%
inclusionary standard.
11 For the purpose of PHZ applications, qualifying projects dedicating units toward workforce housing could not
exceed 140% AMI across all options.
City of Palo Alto Page 5
Table 1: 20% at BMR and Workforce Housing Income Levels
Income Level Area Median
Income
Example 100
Unit Project
Income-
Restricted
Units
Below
Market Rate
Units
Very-low Income 31-50% 5 5%
Low Income 51%-80% 5 5%
Moderate Income 81%-120% 5 5%
Workforce
Housing
Above Moderate
Income
121% - 140% 5 5%
Market Rate Above Moderate
Income
141% and above 80 80%
Total 100 100%
This option meets the Council’s goal to distribute the deed restricted units across all income
levels and dedicates five percent of the units toward workforce housing. It also requires more
lower income units than required by the City’s current inclusionary requirement, which requires
units affordable to households at 100% and 120% AMI.
Option 2: 20% Weighted Value BMR Units (Minimum 15% Actual BMR Units)
This option encourages more lower income units and assigns a value to these units. A home
builder must meet a weighted value of 20% inclusionary housing and no less than 15% actual
inclusionary housing units in the project.
Very low income units cost about the same to produce in mixed income housing project, but do
not generate the same return on investment and therefore, when provided, are more heavily
subsidized. Non-profit home builders often use federal tax credits, local housing funds and
other sources in order to build lower income housing units. The City’s local implementation of
the state density bonus law also aligns this relationship between deeply subsidized units and
the number of zoning waivers offered to developers when providing very low income units
onsite. This option is generally guided by that principle and gives more weight to very low and
low income units while less weight is given to moderate and workforce housing.
City of Palo Alto Page 6
Table 2: 20% Weighted Value
Income Level Area Median Income Weighted Value
Below Market Rate
Units
Very-low Income 31-50% 1.9
Low Income 51%-80% 1.2
Moderate Income 81%-120% .6
Workforce Housing Above Moderate
Income
121% - 140% .3
Market Rate Above Moderate
Income
141% and above 0
A home builder may choose to toggle the number of units provided onsite based on a number
of factors related to the density of the project, unit size, constraints of the site, length of
holding, whether the units are for sale or rental, expected returns on costs, and a multitude of
other considerations.
Below are several examples to illustrate this option. The first example is compared to Option 1;
the others show other possible means of compliance.
Example 1: Option 2 Using Option 1 Inputs
Income Level Area Median
Income
Weighted
Value
% of Actual
Units
Weighted %
Below
Market
Rate Units
Very-low Income 31-50% 1.9 5% 9.5%
Low Income 51%-80% 1.2 5% 6%
Moderate
Income
81%-120% .6 5% 3%
Workforce
Housing
Above Moderate
Income
121% - 140% .3 5%
1.5%
Total 20% 20%
City of Palo Alto Page 7
Example 2: Possible Compliance Inputs
Income Level Area Median
Income
Weighted
Value
% of Actual
Units
Weighted %
Below
Market
Rate Units
Very-low Income 31-50% 1.9 3% 5.7%
Low Income 51%-80% 1.2 12% 14.4%
Moderate
Income
81%-120% -- -- --
Workforce
Housing
Above Moderate
Income
121% - 140% .3 --
--
Total 15% 20.1%
Example 3: Possible Compliance Inputs
Income Level Area Median
Income
Weighted
Value
% of Actual
Units
Weighted %
Below
Market
Rate Units
Very-low Income 31-50% 1.9 10% 19%
Low Income 51%-80% 1.2 -- --
Moderate
Income
81%-120% .6 -- --
Workforce
Housing
Above Moderate
Income
121% - 140% .3 5%
1.5%
Total 15% 20.5%
Example 4: Possible Compliance Inputs
Income Level Area Median
Income
Weighted
Value
% of Actual
Units
Weighted %
Below
Market
Rate Units
Very-low Income 31-50% 1.9 -- --
Low Income 51%-80% 1.2 17% 20.4%
Moderate
Income
81%-120% .6 -- --
Workforce
Housing
Above Moderate
Income
121% - 140% .3 --
--
Total 17% 20.4%
City of Palo Alto Page 8
Example 5: Possible Compliance Inputs
Income Level Area Median
Income
Weighted
Value
% of Actual
Units
Weighted %
Below
Market
Rate Units
Very-low Income 31-50% 1.9 -- --
Low Income 51%-80% 1.2 -- --
Moderate
Income
81%-120% .6 34% 20.4
Workforce
Housing
Above Moderate
Income
121% - 140% .3 --
--
Total 34% 20.4%
This option provides maximum flexibility to determine how to comply with the inclusionary
requirement and, if elected, would tend to generate more low and very-low income units than
would otherwise be produced – or a greater number of income restricted units if a developer
chooses units in the moderate or workforce housing range.
Option 3: 10% Very-Low Income Inclusionary Housing and Plus Payment of Housing Impact Fees
Unlike the previous two options, staff proposes that this option would only apply to rental
projects – not ownership units. For sale units generally can support a higher inclusionary
standard, but the yield on cost for a rental product is narrower. Therefore, the more
inclusionary requirements imposed on rental housing, the more difficult it is to build.
Moreover, most market rate home builders would prefer to pay a fee or, if inclusionary units
are required, have the fewest number of restricted units. This option recognizes this interest
and imposes a reasonable 10% inclusionary requirement for very low income housings units
(50% AMI) and full payment of the housing impact fees. Using the weighting proposed in
Option 2, this option is approximately equivalent to a 25% inclusionary requirement.
Payment of the housing impact fee will help restore the City’s housing funds, which are typically
used by non-profit, low income housing projects. Non-profit housing typically also provides
supportive programs that low income households can use to find jobs, help with school work,
connect with social services and other programs; these services are not generally provided in
market rate housing projects.
For a hypothetical 100,000 square foot rental housing project with 100 units, this option would
result in 10 very low income units and payment of approximately two million dollars in housing
impact fees.
Option 4: Off Site Housing
At least one developer has approached staff with the interest in providing the inclusionary units
City of Palo Alto Page 9
offsite resulting in two projects, a 100% market rate development and, in conjunction, a 100%
affordable housing development in a nearby location. Under this scenario, the units in the
combined developments would still need to meet the necessary income level range, based on
Council’s direction regarding the options above. Off-site compliance would be subject to similar
requirements as those outlined in PAMC Sections 16.65.075 and 16.65.080 with respect to the
equivalency of the units to those provided in the market rate development (i.e. the size, type,
location of the units in the affordable housing development would need to be equivalent to
those provided in the market rate development). Also, the affordable units would need to be
available to the public before the market rate units are made available. Developers have
expressed that allowing off-site development of the inclusionary units could allow them to not
only finance the market rate development more easily, but also provide more BMR units than
required as part of a 100% affordable housing development.
Unless othewise directed by Council, this option would be available to PHZ applicants.
Jobs / Housing Ratio
One additional requirement for a PHZ project is the need to provide more net new housing
units than net new jobs created for a mixed use project. The purpose for including this
discussion is to ensure staff and Council are aligned on how this factor will be determined for
PHZ projects.
The Valley Transportation Authority Congestion Management Program provides information
estimating the number of jobs per thousand square feet for different land uses.
Profession Jobs/1,000 SF
Retail 1.75
Office 3.4
Hotel 2
Research and Development 2.5
To determine the number of housings units required for each job produced, staff would divide
the number of jobs created by the number of employed residents per household. Most recent
data on the number of employed residents per households comes from the American Census
Survey from 2018 and for Palo Alto is 32,287 employed residents and 26,212 households.
Accordingly, Palo Alto has an employed residents per household ratio of 1.23.
City of Palo Alto Page 10
The following illustrates for a hypothetical project how many net new housing units would be
required to off-set net new commercial jobs created:
Unless Council determines that different sources and ratios should be used, staff would use the
above calculation to assess the minimum number of housing units required.
Policy Implications
Council’s decision may modify or otherwise clarify Council’s policy related to the PHZ and
expectations for inclusionary requirements. This section summarizes how the options described
above would help to address goals and policies identified in the Comprensive Plan, Housing
Work Plan, and Council’s expressed priorities.
Meeting Housing Needs of Palo Altans
In February 2020, the City Council selected Housing, with a focus on affordable housing, as a
Council priority for the year. The Council heard from residents responding to an Open Town
Hall Survey that housing was a top priority for residents. Likewise, the National Citizen Survey
indicated that only 5% of Palo Altans rated the availability of quality affordable housing as
excellent or good. By authorizing PHZs, the City Council seeks to address the needs of Palo
Altans by encouraging property owners and home builders to construct housing projects.
Insisting on a significant and meaningful proportion of inclusinary housing units, the Council
seeks to ensure the new housing serves a wide range of Palo Altans. Under each of the
proposed options, the Council can promote these goals.
Option 1 would assist the City in meeting it’s RHNA allocation at all income levels, including
those at the deepest level of affordability as well as the workforce housing levels to address the
“missing middle.” Option 2 provides flexibility to a home builder and places greater value on
lower income units that would likley only be achieved through a non-profit housing
development. Option 3 similarly places greater value on the lowest income levels while also
collecting housing impact fees that could be used by a future non-profit organization to provide
low income housing and supportive services.
All of these options are economically feasible based on analysis of a hypothetical project
Land Use Total
Floor Area
Jobs/1KSF # of Jobs Created Employed
Resident/Household
# of Net New
Housing Units
Retail 5,000 SF 1.75 1.75(5,000/1,000)
= 8.75 jobs
1.23 7.11
Office 35,000 3.4 3.4(35,000/1,000)
= 119 jobs
1.23 96.74
Minimum Number of Net New Housing Units Required (rounded) 104 units
City of Palo Alto Page 11
downtown and along El Camino Real. The options are presented as a menu for a home builder
to choose, but the City Council may determine that one or more are not appropraite and direct
staff accordingly.
Comprehensive Plan & Housing Element
The City has issued building permits for 565 of the 1988 units identified under its RHNA
allocation. To meet this goal, the City would need to permit an additional 1,423 units in the
next two years. In addition, the City has an expressed Comprehensive Plan goal of producing
between 3,545 and 4,420 new housing units from 2015 through 2030. The City is not on target
to achieve this expressed Comprehensive Plan goal. An additional 343 units would need to be
permitted each year to remain on track to meet its middle range housing production target.
Further, the California Housing and Community Development Department (HCD) has released
its regional housing needs determination for the Bay Area concluding 441,176 more housing
units are required for the upcoming housing cycle ending in 2030. The Association of Bay Area
Governments is the authority charged with distributing those units throughout the region. Palo
Alto is expected to receive a four to five fold increase in its regional housing needs allocation
for the upcoming housing element cycle (2022-2030) which will place more pressure on the City
to plan for and produce more housing units in the near future.
The City’s ability to meet its above-moderate (market rate) regional housing needs allocation
influences whether projects in Palo Alto benefit from state-mandated streamlined permitting
processes. Senate Bill 35 adopted in 2017 requires ministerial approval for qualifying housing
and mixed use projects when the state determines a local jurisdiction has failed to meet its
market rate housing units. A ministerial process is one that is reviewed by staff within a
specified timeframe, such as 90 days, and does not include review by the City’s Architectural
Review Board, Planning and Transportation Commission, or City Council. At the end of the
current housing element cycle in 2022, and every four years thereafter, if the City does not
meet its market rate housing targets, under SB 35, housing and mixed use projects will require
ministerial review and will only need to comply with the objective standards in the municipal
code. Currently, qualifying housing projects that propose 50 percent of the units at low-income
housing levels qualify for streamlined review because the City has not met its targets in the past
for providing units at the low and very-low income levels. If the City does not meet its above-
moderate numbers by 2022 or in the new housing element cycle, streamlining will apply to
projects with 10 percent on-site affordability.12
12 State code requires 10% on-site affordability for qualifying projects, however, the City of Palo Alto has a local
objective standard of 15% that would also need to be met. No more than 15% would be required for any qualifying
project under current rules.
City of Palo Alto Page 12
Resource Impact
This report transmits options for Council’s consideration regarding inclusionary requirements
for housing projects proposing a planned home zoning change. Council’s direction would not
have a direct resource impact on the City. Council’s direction would provide clarity,
streamlining staff time in processing future applications.
Stakeholder Engagement
Staff has participated in conversations with approximately a dozen developers interested in
pursuing projects under a PHZ. Overall, Council’s consideration of PHZs has stirred interest;
however, developers have requested greater clarity on expectations before pursuing projects
further.
Environmental Review
This project is exempt from the California Environmental Quality Act (CEQA) under State CEQA
Guidelines Section which 15061(b)(3) because it can be seen with certainty that the proposed
action will not have the potential for causing a significant effect on the environment. The city
would evaluate any future proposed development in accordance with CEQA.
City of Palo Alto (ID # 11268)
City Council Staff Report
Report Type: Informational Report Meeting Date: 9/21/2020
City of Palo Alto Page 1
Summary Title: Surveillance Policy Report
Title: Surveillance Technology Reports for Fiscal Years 2019 and 2020
From: City Manager
Lead Department: City Manager
Recommendation
This is an informational report and no City Council action is required. Staff recommends that
Council receive an information report about the use of surveillance technology and acquisition
in Palo Alto through Fiscal Year 2020.
Background
In September 2018, Council adopted the Surveillance and Privacy Protection Ordinance (“the
Ordinance”) outlining procedures and reporting requirements for protecting personal privacy
and use of surveillance technologies (CMR #8834). The Ordinance is codified in the Municipal
Code at Chapter 2.30, Part 6A. The Ordinance establishes a reporting and approval process
intended to increase transparency without compromising public safety or operational
effectiveness.
This report covers fiscal years 2019 and 2020.
Discussion
Pursuant to the approved ordinance, the following departmental activities are reported out as
part of the ordinance requirements:
• Community Services Department
Pets in Need (PIN), the animal shelter operator, installed “doorbell” and home security
cameras inside and outside of the animal shelter in FY20. The cameras were paid for by
PIN (not the City) and are maintained by PIN. These types of “doorbell” and home
security cameras are not prohibited in lease agreements. Where City employees do not
access or use gathered data, it is unclear whether acquisition and use of surveillance
technology by a contracted service provider falls under the Ordinance. It is reported
here in the interests of broad disclosure. No complaints have been received.
CITY OF
PALO
ALTO
City of Palo Alto Page 2
• Office of Emergency Services
During FY20, OES decommissioned an existing camera on one of our command vehicles
that was previously used for wildfire detection and, with the permission of the City
Manager, obtained a replacement camera (the old model was obsolete and not ideally
suited to the function) that we placed on the top of the Civic Center as a start to a "test
bed" for novel technologies for early fire detection. To simplify the recording and data
retention aspects, this camera was connected to the existing Intrusion Detection System
(IDS) video management system (VMS) that has a nominal 30-day recording period. The
IDS was already submitted to City Council with the provision for adding additional
cameras and sensors - and this fire detection camera can also see smoke/fire along the
Caltrain Right-of-Way in areas not currently covered by the pole-mounted IDS cameras.
The camera is on the City's internal network and is only monitored by OES or other
public safety staff (including sometimes shared with EOC via MS Teams, etc.) when
conditions dictate and when staff are available.
The field of view of this fire detection camera is "far field,” meaning, it overlooks our
wildland urban interface in the foothills without resolution to practicably view any
personally identifiable information (PII) - in other words, it looks for plumes of smoke or
other such unsafe conditions. This camera and future fire detection cameras may later
be made viewable by the public, for example, through this resource:
http://www.alertwildfire.org/. No complaints have been received.
• Office of Transportation
The Office received a free pilot test, ending in February 2020, of StreetLight Data in
FY20, during which City staff and other cities tested the system. The data gathering uses
smartphones for mobility measurement, counting how many phones pass through an
intersection, for example. No equipment remains from this pilot. Because no
personally identifiable information is collected in this system, the Ordinance does not
apply to its acquisition or use. It is reported here in the interests of broad disclosure. No
complaints have been received.
• Police
In FY20, the Department had an emergency incident in which a drone (brought over and
used by Sunnyvale Dept. of Public Safety) and a robot (brought over and operated by
the Santa Clara County Sheriff’s Office) were obtained and used through mutual aid.
The drone recorded activities related to the incident; the recording was sent to the Palo
Alto Police Department as evidence in the case and is not stored by the owning agency.
The robot took still photographs of the incident; the photos were also sent to PD as
evidence and are not stored by the owning agency.
No complaints have been received. Because this was an unusual situation, timeliness
precluded Council approval; should any similar technologies be considered in the future
City of Palo Alto Page 3
as a regular acquisition, these purchases would require Council approval, per the
Ordinance.
Public Record Act (PRA) Requests
Since the Ordinance was approved by Council in September 2018, three PRA requests that
include topics related to surveillance technologies have been received by the City, for fiscal
years 2019 and 2020. Prior to approval of the Ordinance, one PRA was received. None were
received for the specific uses noted above.
Stakeholder Engagement
Presenting this information to the public, parallel to its transmittal to the City Council, ensures
that stakeholders throughout the community remain apprised of the City’s ongoing acquisition
and work in the area of surveillance technologies and privacy protections.
Environmental Review
This informational report is not a project under the California Environmental Quality Act
(CEQA).