Loading...
The URL can be used to link to this page
Your browser does not support the video tag.
Home
My WebLink
About
2019-10-28 City Council Agenda Packet
City Council 1 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. Monday, October 28, 2019 Special Meeting Council Chambers 5:00 PM Agenda posted according to PAMC Section 2.04.070. Supporting materials are available in the Council Chambers on the Thursday 11 days preceding the meeting. PUBLIC COMMENT Members of the public may speak to agendized items; up to three minutes per speaker, to be determined by the presiding officer. If you wish to address the Council on any issue that is on this agenda, please complete a speaker request card located on the table at the entrance to the Council Chambers, and deliver it to the City Clerk prior to discussion of the item. You are not required to give your name on the speaker card in order to speak to the Council, but it is very helpful. Public comment may be addressed to the full City Council via email at City.Council@cityofpaloalto.org. TIME ESTIMATES Time estimates are provided as part of the Council's effort to manage its time at Council meetings. Listed times are estimates only and are subject to change at any time, including while the meeting is in progress. The Council reserves the right to use more or less time on any item, to change the order of items and/or to continue items to another meeting. Particular items may be heard before or after the time estimated on the agenda. This may occur in order to best manage the time at a meeting or to adapt to the participation of the public. To ensure participation in a particular item, we suggest arriving at the beginning of the meeting and remaining until the item is called. HEARINGS REQUIRED BY LAW Applicants and/or appellants may have up to ten minutes at the outset of the public discussion to make their remarks and up to three minutes for concluding remarks after other members of the public have spoken. Call to Order Study Session 5:00-6:00 PM 1.Study Session With Assembly Member Marc Berman Closed Session 6:00-7:00 PM 2.CONFERENCE WITH CITY ATTORNEY-POTENTIAL LITIGATION Subject: Application From the International Association of Fire Fighters (IAFF), Local 1319, for Leave to sue in quo warranto Attorney General Case No. LA2019103723 Authority: Government Code Section 54956.9(d) (2) Agenda Changes, Additions and Deletions City Manager Comments 7:00-7:10 PM Oral Communications 7:10-7:25 PM Members of the public may speak to any item NOT on the agenda. Council reserves the right to limit the duration of Oral Communications period to 30 minutes. REVISED 2 October 28, 2019 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. Consent Calendar 7:25-7:30 PM Items will be voted on in one motion unless removed from the calendar by three Council Members. 3.Approval of Amendment Number 2 to Contract Number C18172676 With Dixon Resources to Extend the Term to June 2020 and Revise the Scope of Work for Parking Project Support With no Additional Costs 4.Policy and Services Committee Recommends the City Council Accept the Nonprofit Service Agreements Audit 5.Approval of Amendment Number 4 to Contract Number C15155208B With Mead & Hunt, Inc., and Approval of Amendment Number 7 to Contract Number C15155208A With C&S Engineers, Inc. for Contract Extensions to Complete Phase II of the Airport Apron Reconstruction Capital Improvements Program Project (AP-16000) 6.Adoption of a Resolution Approving an Updated Standard Form Master Renewable Energy Certificate (REC) Purchase and Sale Agreement, Approving Master REC Agreements With two Counter-parties, and Modifying the Approval Process for Future Individual REC Master Agreements, Thus Amending Section 2 and Recital J of Resolution Number 9652 (Continued From October 7, 2019) 6A. Approval of Amendment Number 1 to the Facilities Agreement Between the City of Palo Alto and the Friends of the Palo Alto Junior Museum and Zoo, and Budget Amendments in the Capital Improvement Fund and Community Center Impact Fund Action Items Include: Reports of Committees/Commissions, Ordinances and Resolutions, Public Hearings, Reports of Officials, Unfinished Business and Council Matters. 7:30-7:45 PM 7.Policy and Services Committee Recommends the City Council Accept the Auditor’s Office Quarterly Report as of June 30, 2019 7:45-8:30 PM 8.PUBLIC HEARING / QUASI-JUDICIAL. 874 Boyce Avenue [18PLN-00030]: Adoption of an Ordinance Amending Chapter 20.21 of Title 21 of the Palo Alto Municipal Code to Allow the Creation of a Flag Lot Where the Residence on the Front Portion of the Existing lot to be Subdivided Would be Protected Under an Historic Covenant; and Approval of a Preliminary Parcel Map to Create two Lots With an Exception Allowing: 1) a Narrower Than Standard Front lot in the R-1 Zone District (Single-family Residential); and 2) a 28-foot Longer Access Easement Than the 100-foot Long Easement Allowed Without Exception. Environmental Assessment: Exempt From the Provisions of the California Environmental Quality Act (CEQA) Pursuant to Guidelines Q&A Q&A 3 October 28, 2019 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. Section 15308 (Protection of the Environment) and 15332 (Infill Development) Rail Communications Update 9.Update From the Expanded Community Advisory Panel (XCAP) andPotential Community Engagement Efforts Planned State/Federal Legislation Update/Action Council Member Questions, Comments and Announcements Members of the public may not speak to the item(s) Adjournment AMERICANS WITH DISABILITY ACT (ADA) Persons with disabilities who require auxiliary aids or services in using City facilities, services or programs or who would like information on the City’s compliance with the Americans with Disabilities Act (ADA) of 1990, may contact (650) 329-2550 (Voice) 24 hours in advance. 4 October 28, 2019 MATERIALS RELATED TO AN ITEM ON THIS AGENDA SUBMITTED TO THE CITY COUNCIL AFTER DISTRIBUTION OF THE AGENDA PACKET ARE AVAILABLE FOR PUBLIC INSPECTION IN THE CITY CLERK’S OFFICE AT PALO ALTO CITY HALL, 250 HAMILTON AVE. DURING NORMAL BUSINESS HOURS. Additional Information Standing Committee Meetings Sp. City / School Committee Meeting October 31, 2019 Schedule of Meetings Schedule of Meetings Tentative Agenda Tentative Agenda Public Letters to Council Set 1 City of Palo Alto (ID # 10120) City Council Staff Report Report Type: Consent Calendar Meeting Date: 10/28/2019 City of Palo Alto Page 1 Council Priority: Transportation and Traffic Summary Title: Approve Contract Amendment for Dixon Resources to Extend Term and Update Scope Title: Approval of Amendment Number 2 to Contract Number C18172676 With Dixon Resources to Extend the Term to June 2020 and Revise the Scope of Work for Parking Project Support With no Additional Costs From: City Manager Lead Department: Transportation Recommendation: Staff recommends that Council adopt Amendment number two to Contract Number C18172676 with Dixon Resources to Extend the Term to June 2020 and Revise the Scope of Work for Parking Project Support with No Additional Costs. Background: In 2016 and 2017, Dixon Resources prepared detailed plans to implement paid parking after an extensive internal and public process. This was considered by the Planning and Transportation Commission (PTC) but did not move beyond PTC discussions at that time. The original contract is available online at: https://www.cityofpaloalto.org/civicax/filebank/documents/65672. On May 13, 2019, the City Council accepted a report about the Residential Preferential Parking (RPP) Program from the Municipal Resource Group (MRG). The report contained 35 recommendations for the City to consider. Recommendation #2 stated that the City should do the following: Recommendation 2: Conduct Downtown Parking Operational Study – A contract (amendment) should be approved that provides the information and specific steps needed to move the City forward from a parking program built around a rigid system of City of Palo Alto Page 2 pre-paid permits to a program built around the dynamic monitoring of usage and the application of pricing. It would also provide a roadmap to build community support for this effort. This contract is expected to be presented to the City Council in FY 2018-19. This current report brings forward a contract amendment to advance this recommendation. Discussion: The proposed contract amendment is intended to shift the third phase of the Dixon contract to be more responsive to current needs. Through this contract amendment, the Downtown Parking Action Plan (“Action Plan”) is intended to outline the recommended short, mid, and long-term implementation steps to establish an effective and efficient parking program in Palo Alto. This will be an easy to follow, step-by-step guide for the City. The recommendations will take into consideration stakeholder feedback, budget and costs, past data analysis, industry best practices, and the City’s overall goals and objectives. Each recommendation will be organized by phase into the plan with a list of detailed implementation steps. Any required follow up actions will also be highlighted in the Action Plan. The recommendations will address the current, upcoming and long-term challenges and needs of Palo Alto. Many of the recommendations will have an immediate impact on parking management and will establish the basis for future improvements. The contract amendment aligns with the RPP parking recommendations from the MRG report. The amendment contains two tasks as listed below with the list of anticipated deliverables: Task 1: Parking garage and lot occupancy indicators and data CITY desires real-time data about occupancy at its lots and garages. To achieve these goals, CITY has considered installing an APGS system, but would also like to examine current options for a system that is more cost effective and easy to implement. The purpose of this task is to finalize plans for this solution and lead the installation and evaluation of the equipment. • Step 1. Finalize plan for parking garage lot occupancy indicators and data o Deliverables ▪ Memo summarizing the scope, schedule, roles, responsibilities, performance measures, and costs for the equipment. ▪ Review Technology options and coordinate product demonstrations for the CITY. • Step 2. Implement parking garage and lot occupancy indicators and data o Deliverables ▪ Shepard the agreement with the equipment vendor(s) – approximately six weeks City of Palo Alto Page 3 ▪ Act as project manager for the implementation of the system – approximately four weeks ▪ Provide day-to-day oversight of the parking garage system vendor agreement for a period of up to eight months after the system is operational • Step 3. Evaluate parking garage and lot occupancy indicators and data and next steps o Deliverables ▪ Draft and final version memo summarizing performance of the system following the installlation and, if necessary, next steps to expand citywide. Task 2: Develop a Parking Action Plan that incorporates the 35 recommendations outlined within the RPP Program Review The Downtown Parking Action Plan (“Action Plan”) is intended to outline the recommended short, mid, and long-term implementation steps to establish an effective and efficient parking program in Palo Alto. The recommendations will take into consideration stakeholder feedback, budget and costs, past data analysis, industry best practices, and the CITY’s overall goals and objectives. Each recommendation will be organized by phase into the plan with a list of detailed implementation steps. Any required follow up actions will also be highlighted in the Action Plan. The recommendations will address the current, upcoming and long-term challenges and needs of CITY. Many of the recommendations will have an immediate impact on the parking management and will establish the basis for future improvements. Deliverables The following deliverables are envisioned as brief and simple summaries for an internal CITY audience framed as both summary and update to Dixon work in 2016/17. Building on work already completed, the CONSULTANT would work closely with CITY staff to provide: • Coordinate stakeholder engagement & outreach • Draft and final PAP • Draft and final resolution and/or ordinance language the CITY could formally adopt as the basis of implementing the PAP • Draft and final updated organizational plan • Parking permit management system implementation & oversight • Draft and final updated implementation plan • Draft and final communications plan • Develop communications materials as requested City of Palo Alto Page 4 • Develop draft and final council report and presentation Resource Impact: City Council approved funding for this contract as part of the FY 2019 Adopted Budget on June 18, 2018 and no additional funds are needed. Services will be provided to various parking districts in Palo Alto; therefore, the costs are proportionally split between the University Avenue Parking Permit Fund, California Avenue Parking Permit Fund, and Residential Preferential Parking (RPP) Program Funds. Environmental Review: The proposed actions are not a project under the California Environmental Quality Act (CEQA). Attachments: Amendment No. 2 - C18172676 Dixon (PDF) Revision July 20, 2016 AMENDMENT NO. 2 TO CONTRACT NO. C18172676 BETWEEN THE CITY OF PALO ALTO AND DIXON RESOURCES UNLIMITED This Amendment No. 2 to Contract No. C18172676 (“Contract”) is entered into June 24, 2019, by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and DIXON RESOURCES UNLIMITED, a California corporation, located at 3639 Midway Drive, Suite B345, San Diego, California 92110 ("CONSULTANT"). R E C I T A L S A. The Contract was entered into between the parties for the provision of support for the Transportation Division of Planning & Community Environment Department. B CITY intends to extend the term until June 30, 2020 and amend the SCOPE OF SERVICE. c. The parties wish to amend the Contract. NOW, THEREFORE, in consideration of the covenants, terms, conditions, and provisions of this Amendment, the parties agree: SECTION 1. Section 2. TERM is hereby amended to read as follows: “SECTION 2. TERM. The term of this Agreement shall be from the date of its full execution through June 30, 2020, unless terminated earlier pursuant to Section 19 or Section 25 of this Agreement.” SECTION 2. The following exhibit(s) to the Contract is/are hereby amended to read as set forth in the attachment(s) to this Amendment, which are incorporated in full by this reference: Exhibit “A” entitled “SCOPE OF SERVICE”. SECTION 3. Except as herein modified, all other provisions of the Contract, including any exhibits and subsequent amendments thereto, shall remain in full force and effect. DocuSign Envelope ID: E99076AB-8D9F-4131-AD43-FE653CD45610 Revision July 20, 2016 IN WITNESS WHEREOF, the parties hereto have by their duly authorized representatives executed this Agreement on the date first above written. City Attorney or designee Attachments: EXHIBIT "A": SCOPE OF SERVICE CITY OF PALO ALTO City Manager APPROVED AS TO FORM: DIXON RESOURCES UNLIMITED DocuSign Envelope ID: E99076AB-8D9F-4131-AD43-FE653CD45610 Julianne Dixon President Revision July 20, 2016 EXHIBIT “A” SCOPE OF SERVICES Task 1: Parking garage and lot occupancy indicators and data CITY desires real-time data about occupancy at its lots and garages. To achieve these goals, CITY has considered installing an APGS system, but would also like to consider a more cost effective and easy to implement. The purpose of this task is to finalize plans for this solution and lead the installation and evaluation of the equipment. Step 1. Finalize plan for parking garage lot occupancy indicators and data o Confirm and clarify CITY direction CONSULTANT will work with city to clarify goals of the system and installation CONSULTANT will prepare project plans and system design proposals for a parking guidance system (PGS) that displays real-time parking occupancy information. CONSULTANT will meet with vendors on new or proposed parking products and on proposed development activities. CONSULTANT will articulate performance measures that can be used to evaluate the performance of the vendor and the equipment. CONSULTANT will work with city staff to finalize scope, schedule, roles, responsibilities, and costs. o Deliverables Memo summarizing the scope, schedule, roles, responsibilities, performance measures, and costs for the equipment. Review Technology options and coordinate product demonstrations for the CITY. Step 2. Implement parking garage and lot occupancy indicators and data o Lead implementation: To the extent possible, the CITY would like the CONSULTANT team to handle all aspects of the implementation, operation, and contract management for the installation. o Deliverables Shepard the agreement with the equipment vendor(s) – approximately six weeks Act as project manager for the implementation of the system – approximately four weeks Provide day-to-day oversight of the parking garage system vendor agreement for a period of up to eight months after the system is operational Step 3. Evaluate parking garage and lot occupancy indicators and data and next steps o CONSULTANT will Provide memo summarizing the performance of the system and, if necessary, a roadmap for how the city could expand the service [IF IT IS NOT INSTALLED AT ALL LOCATIONS TO START] DocuSign Envelope ID: E99076AB-8D9F-4131-AD43-FE653CD45610 Revision July 20, 2016 o Deliverables Draft and final version memo summarizing performance of the system following the installlation and, if necessary, next steps to expand citywide. Task 2: Develop a Parking Action Plan that incorporates the 35 recommendations outlined within the RPP Program Review The Downtown Parking Action Plan (“Action Plan”) is intended to outline the recommended short, mid, and long-term implementation steps to establish an effective and efficient parking program in Palo Alto. This will be an easy to follow, step-by-step guide for the CITY. The recommendations will take into consideration stakeholder feedback, budget and costs, past data analysis, industry best practices, and the CITY’s overall goals and objectives. Each recommendation will be organized by phase into the plan with a list of detailed implementation steps. Any required follow up actions will also be highlighted in the Action Plan. The recommendations will address the current, upcoming and long-term challenges and needs of CITY. Many of the recommendations will have an immediate impact on the parking management and will establish the basis for future improvements. The following topics will be addressed in the Action Plan based upon the results of the site visits, stakeholder engagement, industry best practices, and the financial modeling workbook outputs: Ordinance and Policy Recommendations: Any necessary ordinance or policy adjustments that will be required for the implementation of recommendations in the Action Plan will be included. This will incorporate the results of any Ordinance and Policy review. Consideration will be made for immediate and upcoming program adjustments. Ongoing Outreach Plan: An ongoing education and outreach plan will be included within the Action Plan. This will allow the CITY to continually solicit stakeholder feedback and ensure that the community is adequately informed and prepared for program adjustments at every step in the process. DIXON will provide reference information and a step by step guide on how to successfully implement an education and outreach campaign in CITY. The parking solicitation will include levels of public outreach and marketing support. Successful campaigns in other municipalities have included social media pages, online video instructions, flyers, press releases and field parking ambassadors to assist with education and demonstrations. Parking Infrastructure and Technology: The Action Plan will identify the recommended infrastructure and technology to support the parking system. This will include consideration for the types of parking equipment, the estimated costs (including installation and ongoing), and the proposed installation locations. Financial Modeling Workbook: A summary of the financial modeling workbook results will be included in the Action Plan, along with the recommended rate structure(s) for each location. A recommended on and off-street paid parking and time limited locations will be identified in the Action Plan based on a short, mid, and long-term implementation schedule. This will include recommendations for time limits, hours of operation, as well as any adjustments to the residential DocuSign Envelope ID: E99076AB-8D9F-4131-AD43-FE653CD45610 Revision July 20, 2016 and employee permit programs. Consideration will be made for the necessary ongoing monitoring to ensure that the rate structure(s) continue to meet the changing needs of the CITY. Parking Enforcement: A parking program cannot be successful without adequate enforcement. The Plan will address the necessary enforcement staffing, beats/routes, policies, and technologies that will optimize the parking program. The CONSULTANT shall evaluate and recommend technologies that the CITY should consider. It is important to ensure efficiency, consistency and compliance. Any existing citation and permit management software will be assessed, and if necessary, the Action Plan will make recommendations for citation and permit management enhancements and procedural adjustments. Maintenance and Operations Requirements: The Action Plan will also consider the necessary maintenance, collections, and adjudication requirements that come along with the implementation of paid parking. The CITY will likely need an internal resource to handle Level 1 (preventative) maintenance, service calls, and, depending on the equipment configuration, paid parking revenue collections. The Action Plan will make recommendations based on the recommended meter technology and staffing resources. We will be able to develop a system for CITY that will incorporate revenue security and limit opportunities for shrinkage. Parking District: As necessary, the Action Plan will identify recommended adjustments to the Parking District. The Action Plan will explain any impacts to the District, including funding and legal impacts. The Action Plan will also identify any impacts on permit holders. Staffing Resources: The Action Plan will address staffing needs to support the recommended implementation of paid parking overtime. Staffing needs will vary depending on the CITY’s utilization of various technologies that can provide automation. The Action Plan will include potential enforcement staffing plans. The report will also make recommendations for overall departmental structure and management as necessary. Wayfinding Program: The Action Plan will make recommendations for a Wayfinding Program that will allow the CITY to better promote and direct drivers to designated parking locations. This will include consideration for signage branding, signage placement, and in-ground loop counters and/or sensors to display parking availability on signage or through a web application. An effective wayfinding program can improve the overall parking experience in CITY, and it can help maximize the use of any underutilized parking locations. Transportation Demand Management (TDM) Measures: Recommendations in the Action Plan will be developed with the intention of a comprehensive approach to TDM and encouraging alternative modes of transportation, including walking, biking, public transit, and ridesharing. DIXON will explore and recommend a variety of incentive programs and strategies to maximize the use of alternative modes of transportation. The Action Plan will make clear connections between parking management and TDM and outline strategies to implement various TDM initiatives. Consideration will be made for different user groups, such as downtown employees, visitors, and residents. Additionally, there is an opportunity to establish an advisory body or management authority that can improve the long-term management of the proposed strategies. The success of a parking program is often dependent on the supporting alternative modes of transportations being available, accessible, and affordable. DocuSign Envelope ID: E99076AB-8D9F-4131-AD43-FE653CD45610 Revision July 20, 2016 Revenue Management Plan: The Action Plan will include a proposed revenue management plan and distribution schedule. This will include consideration for ongoing revenue management, review, and potential allocations. Ideally, paid parking revenue will first be allocated to support the equipment and operating costs so that the program is self-sustaining. Then, the CITY will have a number of options for allocating the additional revenue. Program enhancements, such as technology upgrades, improved wayfinding, and additional enforcement resources will be considered. The Action Plan will also describe the benefits of reinvesting the parking revenue into downtown through a system such as a Parking Benefit District. A certain amount of discretionary funding could be allocated based on the recommendation of an advisory body and/or CITY Council. It is also expected that the ongoing stakeholder engagement will highlight certain areas that could be improved with the additional revenue overtime Support process to secure Council approval o Reassemble committee that worked on prior parking planning (the group assembled should be representative of the community) o Clarify what has already been accomplished and what will be accomplished near term (to show progress, e.g., parking garage guidance and wayfinding) o Presentations to designated CITY committees and/or commissions to review updated Action Plan and implementation roadmap o Develop staff report for council and presentation o Support CITY Attorney drafting of necessary legislative language Deliverables The following deliverables are envisioned as brief and simple summaries for an internal CITY audience framed as both summary and update to Dixon work in 2016/17. Building on work already completed, the CONSULTANT would work closely with CITY staff to provide: Coordinate stakeholder engagement & outreach Draft and final PAP Draft and final resolution and/or ordinance language the CITY could formally adopt as the basis of implementing the PAP Draft and final updated organizational plan Parking permit management system implementation & oversight Draft and final updated implementation plan Draft and final communications plan Develop communications materials as requested Develop draft and final council report and presentation DocuSign Envelope ID: E99076AB-8D9F-4131-AD43-FE653CD45610 CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR October 28, 2019 The Honorable City Council Palo Alto, California Policy and Services Committee Recommends the City Council Accept the Nonprofit Service Agreements Audit The Office of the City Auditor recommends acceptance of the Nonprofit Service Agreements Audit. At its meeting on September 10, 2019, the Policy and Services Committee approved and unanimously recommended that the City Council accept the report. The City Auditor’s report to the Policy and Services Committee and the transcript minutes are available on the City’s Policy and Services Committee website. Respectfully submitted, Don Rhoads, CPA Special Advisor to the Office of the City Auditor Management Partners ATTACHMENTS: • Attachment A: Audit of Nonprofit Service Agreements (PDF) Department Head: Don Rhoads, Special Advisor to the Office of the City Auditor Page 2 Audit of Nonprofit Service Agreements August 29, 2019 Office of the City Auditor Don Rhoads, Special Advisor for the Office of the City Auditor, Management Partners Yuki Matsuura, Performance Auditor I Attachment A Page intentionally left blank for double-sided printing Attachment A Office of the City Auditor ● 250 Hamilton Avenue, 7th Floor ● Palo Alto, CA 94301 ● 650.329.2667 Copies of the full report are available on the Office of the City Auditor website at: http://www.cityofpaloalto.org/gov/depts/aud/reports/performance/default.asp OFFICE OF THE CITY AUDITOR EXECUTIVE SUMMARY Audit of Nonprofit Service Agreements August 29, 2019 PURPOSE OF THE AUDIT The purpose of this audit was to: 1) Determine if the City's agreements with nonprofit organizations clearly state the outcomes the City expects from the funding it provides. 2) Determine if City departments monitor their nonprofit service agreements to ensure that the required services are performed. In instances where expected outcomes are clearly stated in the agreements, determine if City departments monitor the progress to ensure that the expected outcomes are achieved. REPORT HIGHLIGHTS Finding: The Office of Human Services effectively monitors contractor performance using an established process and tools, which can help other City departments better administer their nonprofit service agreements (Page 7) The Office of Human Services, which oversees more than half of the City’s nonprofit service agreements, has continuously improved its monitoring process and tools, and built certain requirements into the agreements to hold the contractors accountable for their performance. Some other departments we reviewed did not have such an established process or tools, resulting in undetected errors and noncompliance especially when there was staff turnover. The City can improve its oversight of nonprofit services agreements by adopting and making Human Services’ monitoring process and tools available to other departments. • Human Services’ contract templates help ensure that expected outcomes and required services are clearly stated in the agreement and closely monitored. • The City did not adjust Palo Alto Downtown Business and Professional Association’s Business Improvement District (BID) budget to reflect declining BID assessment revenues, resulting in a negative BID Fund balance of $32,000 in FY 2018. • The City did not ensure Palo Alto Transportation Management Association’s compliance with reporting requirements but has since strengthened its oversight. • The City has multiple agreements with Downtown Streets Team, requiring improved coordination among City departments to monitor overlapping scope of services. Key Recommendations to the City Manager: • Create a citywide template for nonprofit service agreements, and make it available to all City departments. The template should ensure that the City’s payments are tied to contractor performance. Attachment A • Renew the 2004 agreement with the Palo Alto Downtown Business and Professional Association. • Establish a procedure or desk manual to clarify roles and responsibilities for monitoring the BID Fund records in SAP, Palo Alto Downtown Business and Professional Association’s financial records, and MuniServices’ assessment collection data to ensure that accurate and complete financial data are provided to the City Council for informed budget and funding decisions. • Establish an overall monitoring method to ensure that nonprofit organizations with multiple agreements with the City are reviewed by all responsible departments to avoid redundancy while clarifying the goals, objectives, and performance measures to be tracked under each agreement. Attachment A TABLE OF CONTENTS Objective ................................................................................................................................................. 1 Background ............................................................................................................................................. 1 Scope ...................................................................................................................................................... 5 Methodology .......................................................................................................................................... 5 Finding: The Office of Human Services effectively monitors contractor performance using an established process and tools, which can help other City departments better administer their nonprofit service agreements ........................................................................................................................... 7 Recommendations ........................................................................................................................... 20 Appendix 1: The City’s Nonprofit Service Agreements for FY 2018 .................................................... 22 Appendix 2: The DST’s Cleaning and Maintenance Schedule in the Agreement ................................ 27 Appendix 3: City Manager’s Response ................................................................................................ 30 ABBREVIATIONS BID Palo Alto Downtown Business Improvement District CAFR Comprehensive Annual Financial Report CDBG Community Development Block Grant DST Downtown Streets Team TMA Palo Alto Transportation Management Association PADBPA Palo Alto Downtown Business and Professional Association Attachment A Page intentionally left blank for double-sided printing Attachment A Audit of Nonprofit Service Agreements 1 INTRODUCTION Objective The purpose of this audit was to: 1) Determine if the City's agreements with nonprofit organizations clearly state the outcomes the City expects from the funding it provides. 2) Determine if City departments monitor their nonprofit service agreements to ensure that the required services are performed. In instances where expected outcomes are clearly stated in the agreements, determine if City departments monitor the progress to ensure that the expected outcomes are achieved. Background The City contracts with many nonprofit organizations to provide social services to Palo Alto residents. As shown in Exhibit 1, the City had 38 nonprofit service agreements with a contract amount of $10,000 or more during FY 2018, providing over $4 million in services. The Community Services Department’s Office of Human Services (Human Services) oversees more than half of the City’s nonprofit service agreements (21 of the 38 agreements) providing about $1.6 million in services through nonprofits. Appendix 1 provides detail on the 38 agreements. EXHIBIT 1 The City’s Nonprofit Service Agreements for FY 2018 (For Agreements with a Contract Amount of $10,000 or More) Responsible Department Number of Agreements FY 2018 Contract Amount1 % of Total Community Services - Office of Human Services 21 $1,579,146 38% Others2 17 $2,529,209 62% Total 38 $4,108,355 100% 1 Some agreements do not specify yearly contract amounts, and may allow certain price adjustments in subsequent contract years. We estimated the contract amount for FY 2018 where the actual contract amount could not be determined. 2 Includes six agreements administered by other divisions of the Community Services Department, and two agreements monitored by multiple departments. SOURCE: City departments The City holds its departments and the assigned project managers responsible for monitoring contractor performance, as shown in Exhibit 2. Attachment A 2 Audit of Nonprofit Service Agreements EXHIBIT 2 Contract Administration Roles and Responsibilities SOURCE: Administrative Services Department Purchasing Division Procurement Fundamentals Training Guide Human Services Resource Allocation Process (HSRAP) Human Services oversees the Human Services Resource Allocation Process (HSRAP), a grant program open to organizations that deliver social services directly to Palo Alto residents. The primary goal of HSRAP is to meet the needs and improve the quality of life of the City’s low income and vulnerable populations. In FY 2018, the City distributed $503,213 to 17 nonprofit organizations. Human Services also oversees agreements with three other organizations that were previously part of the HSRAP: • Project Sentinel for landlord-tenant mediation services (removed from HSRAP in 2007) • Avenidas for senior services (removed from HSRAP in 2014) • Palo Alto Community Child Care (PACCC) for childcare subsidy management (removed from HSRAP in 2014) The City provided funding totaling $1,025,933 for these three services in FY 2018. Attachment A Audit of Nonprofit Service Agreements 3 Palo Alto Downtown Business and Professional Association (PADBPA) The City established the Palo Alto Downtown Business Improvement District (BID) in February 2004 to levy and collect an annual assessment from non-exempt businesses to fund improvements and activities within the BID. The City entered into an agreement with Palo Alto Downtown Business and Professional Association (PADBPA) in June 2004 to undertake and administer such improvements and activities, and required PADBPA to submit an annual report on or before May 1st proposing a budget and assessment for the following fiscal year. The City Council first approves or modifies the annual report in April or May, and holds a public hearing a few weeks later on the levy of proposed assessments before approving a resolution confirming the report and levying an assessment. The agreement assigns “the City’s Economic Development Manager or his or her designated representative” to administer the agreement. The City eliminated the Economic Development Manager position in FY 2018 upon a reorganization of the City Manager’s Office. The reorganization also eliminated the 1.75 Assistant City Manager positions, and added two Deputy City Manager and two Assistant to the City Manager positions. Staff from the City Manager’s Office and Development Services Department have co-administered the agreement since FY 2018. The City eliminated one Deputy City Manager position in FY 2020, offset by a creation of one Assistant City Manager position to better align organizational needs in the City Manager’s Office. Palo Alto Transportation Management Association (TMA) The City entered into an agreement with Palo Alto Transportation Management Association (TMA) in June 2016 to support TMA’s mission to reduce Single Occupancy Vehicle trips, traffic congestion and demand for parking in Palo Alto. The City amended the agreement three times to provide additional funding to TMA, as shown in Exhibit 3. Attachment A 4 Audit of Nonprofit Service Agreements EXHIBIT 3 The City’s Agreement with TMA and Funding Amount Agreement Approved Funding Amount FY 2017 FY 2018 FY 2019 Total Original Agreement Jun. 2016 $100,000 - - $100,000 Amendment No. 11 Feb. 2017 $100,000 $100,000 - $100,000 Amended and Restated Agreement1,2 Sep. 2017 - $480,000 - $480,000 Amendment No. 12,3 Dec. 2018 - - $480,000 $480,000 Total $200,000 $480,000 $480,000 $1,160,000 1 The September 2017 agreement increased the total funding to $680,000, of which the City had already paid $200,000 ($100,000 for the original agreement and $100,000 of the $200,000 in the February 2017 amendment). The remaining $480,000 was paid on a quarterly basis following the full execution of the agreement, which did not occur until February 2018. 2 The funding approved in the September 2017 agreement and the December 2018 amendment is provided through parking permit fee revenues in the University Avenue Parking Permit Fund. 3 The City Manager approved the amendment as authorized by the 2017 Amended and Restated Agreement, upon appropriation of additional funds for FY 2019 by the City Council. SOURCE: The City’s agreements with the TMA The Office of Transportation administers the TMA agreement and City funding. The office was originally created under the City Manager’s Office in June 2018 from the Planning and Community Environment Department’s Transportation and Parking Division, and has been established as a separate office in FY 2020. The TMA Board of Directors consists of representatives from employers in the downtown area, including the City. The City pays a large employer contribution of $10,000 annually to TMA. Downtown Streets Team (DST) Originally created by PADBPA and later incorporated as a nonprofit in 2005, Downtown Streets Team (DST) provides its volunteer team members who are homeless or at-risk of becoming homeless job opportunities and other resources they need to find permanent housing and employment. Team members sweep streets, perform janitorial work, and provide peer-to-peer outreach in downtown Palo Alto up to 20 hours per week in exchange for a non-cash stipend, counseling, transportation, and housing assistance. Team members who demonstrate their dedication and leadership skills can become a team lead, and then a team manager with supervising responsibilities. DST expanded into San Jose in 2011 and Sunnyvale in 2012, and operated in 10 other cities as of February 2019. Attachment A Audit of Nonprofit Service Agreements 5 Scope We reviewed the nonprofit service agreements the City had in place during FY 2018. We focused on agreements with an annual contract amount of $35,000 or more, and we further focused on nonprofit organizations providing senior or nutrition services. Methodology To accomplish our objective, we: • Obtained from each City department a list of its nonprofit service agreements and project managers, and compiled a citywide list. • Interviewed staff from the Administrative Services, Community Services, Development Services, Planning and Community Environment, and Public Works Departments, City Manager’s Office, and the Office of Transportation to understand how the City monitors its nonprofit service agreements and to identify enhancement opportunities. • Mapped relevant processes in coordination with City staff. • Conducted a risk assessment to prioritize agreements and judgmentally selected the agreements for review. • Obtained a copy of the executed agreements, reports submitted by the contractors, and departmental policies and procedures where available. • Reviewed relevant staff reports, Municipal Code sections, City Council resolutions and ordinances, and public meeting minutes to understand the City’s intent and expected outcome when approving the agreements and funding. • Reviewed the City’s Operating Budget to understand the organizational structure of the City functions administrating the nonprofit service agreements. • For each agreement selected, reviewed the agreement and other information to determine: o If the agreement clearly states the outcomes the City expects from the funding it provides. o If City departments monitor the nonprofit service agreements to ensure that the required services are performed. o In instances where expected outcomes are clearly stated in the agreements, if City departments monitor the Attachment A 6 Audit of Nonprofit Service Agreements progress to ensure that the expected outcomes are achieved. Sampling methodology We judgmentally selected a sample of 12 nonprofit service agreements for detailed review based on the type of services provided, contract amount, and our risk assessment results.1 The sample included nine agreements administered by the Office of Human Services, with focus on senior and nutrition services, and three that involved recent turnover in City staff administering the agreements. We chose this sample design to address areas that impact the most vulnerable population in our community based on input received from some City Council members and to assess how staffing issues may impact delivery of the required services. We reviewed the sampled agreements in detail to identify any deficiencies and to inform our conclusions. Because this was a judgmental sample, our conclusion cannot be projected to the total population of nonprofit services agreements. Compliance with government auditing standards We conducted this audit of nonprofit service agreements in accordance with our FY 2019 Annual Audit Work Plan and generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. We would like to thank management and staff in the Administrative Services, Community Services, Development Services, Planning and Community Environment, and Public Works Departments, City Manager’s Office, Office of Transportation, and Downtown Streets Team for their time, cooperation, and assistance during the audit process. 1 Judgmental sampling is a nonprobability sampling method where the samples selected are based on the auditor’s judgment to focus on certain items of specific interest. Because of the subjective nature of judgmental sampling, the results cannot be projected to the population, and instead, are generally used to determine if specific conditions exist. Attachment A Audit of Nonprofit Service Agreements 7 Finding The Office of Human Services effectively monitors contractor performance using an established process and tools, which can help other City departments better administer their nonprofit service agreements Summary The Office of Human Services, which oversees more than half of the City’s nonprofit service agreements, has continuously improved its monitoring process and tools, and built certain requirements into the agreements to hold the contractors accountable for their performance. Some other departments we reviewed did not have such an established process or tools, resulting in undetected errors and noncompliance especially when there was staff turnover. The City can improve its oversight of nonprofit services agreements by adopting and making Human Services’ monitoring process and tools available to other departments. Human Services’ contract templates help ensure that expected outcomes and required services are clearly stated in the agreement and closely monitored Human Services developed its own contract template with the Administrative Services Department’s Purchasing Division to ensure that goals and measurable objectives to achieve the goals are clearly stated in its agreements with nonprofit organizations. The contract template also incorporates Human Services’ standardized monitoring process and requires the contractors to: • Submit quarterly invoices on a form provided by the City, specifying actual expenditures directly related to the contract. • Submit all deliverables, including quarterly or semiannual reports approved by the City, before the City makes its final payment. Human Services also developed a semiannual program report template for contractors to use. Contractors are required to report performance measures to demonstrate their progress toward contract goals and objectives, and to provide an explanation for any unmet objectives. In addition, Human Services recently updated its contract template to include a site visit clause, which allowed it to start conducting site visits of the contractor’s facilities at least once during each contract period to verify the self-reported information. Attachment A 8 Audit of Nonprofit Service Agreements Stability and institutional knowledge of Human Services staff have allowed continuous improvement and collaboration The current Human Services Manager has administered the office’s agreements with nonprofit organizations since 2009, and has served as the staff liaison to the Human Relations Commission, which reviews HSRAP applications, since 2010. Another longtime Community Services employee joined the office in 2014. With their institutional knowledge and initiative, this two-person office was able to continuously improve its contract design and monitoring process based on past lessons learned. The office also uses the HSRAP application process as an opportunity to educate applicants. For example, it recently provided a presentation on setting effective goals and outcome measures for HSRAP applicants at a pre-bid meeting to encourage refinement in their HSRAP applications. Human Services maintains an updated HSRAP policy and procedure manual which would help minimize the loss of institutional knowledge in case of staff turnover. Because Human Services oversees the work of many nonprofit organizations, it is well-positioned to encourage collaboration. It has developed various methods to coordinate their efforts, such as requiring a specific number of new partnerships to be developed and monitoring their participation in local or regional meetings. The Human Services Manager also holds monthly meetings of the Homeless Senior Committee, comprised of the City’s homeless service providers, to identify and collectively work on projects or initiatives to assist homeless senior citizens in Palo Alto.2 The City did not adjust PADBPA’s BID budget to reflect declining BID assessment revenues, resulting in a negative BID Fund balance of $32,000 in FY 2018 The City outsourced invoicing and collection of the BID assessments to a contractor MuniServices, an Avenu Insights & Analytics company, in January 2016, which made some of the requirements in the 2004 agreement with PADBPA obsolete. The City entered into a new agreement with MuniServices in December 2018, combining the collection services for the City’s Business Registry and BID assessments. Despite these changes, the City has not amended the 2004 agreement to clarify the roles and responsibilities of the City and PADBPA. This, combined with turnover of the Economic Development Manager position responsible for the agreement, left the PADBPA’s noncompliance 2 Participants include Avenidas, La Comida, Downtown Streets Team, LifeMoves, Peninsula Healthcare Connection, Momentum for Mental Health, Heart & Home Collaborative, County of Santa Clara Office of Supportive Housing. Attachment A Audit of Nonprofit Service Agreements 9 and errors undetected for the past few years. As a result, the City Council did not receive accurate and complete financial information to make informed budget and funding decisions for the City’s BID Fund. BID assessment revenues are recorded in the BID Fund, and the City reimburses PADBPA for expenses included in the approved BID budget. As shown in Exhibit 4, actual assessment revenues have declined since FY 2016, while expenses have consistently exceeded the revenues. The BID Fund reached a negative fund balance of $32,000 in FY 2018, necessitating a $13,500 loan from the General Fund to cover a negative cash balance. Upon resignation of the PADBPA’s Executive Director in June 2018, the City and PADBPA worked together and decided not to fill the Executive Director position so that the salary savings can be used to rebuild the BID Fund balance and repay the General Fund. The position remained vacant as of May 2019 with one of the volunteer PADBPA Advisory Committee members serving as the Acting Executive Director. EXHIBIT 4 Business Improvement District Fund Actual Revenues and Expenditures FY 2015 FY 2016 FY 2017 FY 2018 Beginning Fund Balance $113,000 $44,000 $36,000 $25,000 Revenues Assessment Revenues $86,000 $100,000 $97,000 $72,000 Other Revenues $3,000 $3,000 ($1,000) - Total Revenues $89,000 $103,000 $96,000 $72,000 Total Expenditures $158,000 $111,000 $107,000 $129,000 Net Revenues (Expenditures) ($69,000) ($8,000) ($11,000) ($57,000) Ending Fund Balance $44,000 $36,000 $25,000 ($32,000) SOURCE: The City’s Comprehensive Annual Financial Report The City Council did not receive reliable financial information on BID The 2004 agreement requires PADBPA to submit its proposed BID budget and assessment fees for review and approval by the City Council. However, the City did not identify that PADBPA had overstated its budgeted assessment revenues for FY 2017 through FY 2019 by not subtracting the allowance for uncollectible assessments of $25,000 from the total estimated revenues, as shown in Exhibit 5. This caused the City to approve Attachment A 10 Audit of Nonprofit Service Agreements the PADBPA’s proposed expenses that would not be sufficiently covered by the projected revenues for three consecutive years. PADBPA fixed this error in its FY 2020 BID budget, and subtracted the allowance for uncollectible assessments of $25,000 from the estimated assessment revenue of $112,500. EXHIBIT 5 Summary of Business Improvement District Budget Prepared by Palo Alto Downtown Business and Professional Association FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Revenues Assessments $137,000 $125,000 $130,000 $130,000 $112,500 $112,000 Allowance for Uncollectible Assessments ($34,000) ($25,000) ($25,000) ($25,000) ($25,000) ($25,000) Other Revenue1 $25,000 $57,000 $54,000 $29,000 $21,000 $17,0005 Surplus Carryover2 $20,000 $36,200 $13,721 $5,024 - - Total Revenues $148,000 $193,200 $197,7213 $164,0243 $133,5003 $104,500 Total Expenses4 $148,000 $193,200 $197,721 $164,024 $133,500 $104,500 1 Revenues from non-assessment sources such as sponsorships for events and in-kind contributions for banners and services. 2 Estimated by PABDPA based on the revenue balance as of the date of budget preparation and expected expenses for the remainder of the fiscal year. 3 The total revenues were overstated by $25,000 because PADBPA did not subtract the Allowance for Uncollectible Assessments as was done through FY 2016. 4 The total expenses include the ones projected to be funded with the non-assessment revenue sources described in 1 above. 5 Represents the cost of invoicing and collecting BID assessments covered by the City’s General Fund through an operating transfer. SOURCE: PADBPA Annual Reports The City’s operating budget for the BID Fund also had not reflected the prior year actuals, as shown in Exhibit 6. The budgeted assessment revenues and expenses had remained the same since FY 2016 at $140,000 and $148,000, respectively, which allowed overspending of the BID Fund. Additionally, PADBPA is not required to submit its BID budget until May 1st of each year, which is after the proposed budget has already been presented to the City Council’s Finance Committee. Moving up the PADBPA’s submission due date would allow the City to review the PADBPA’s revenue projection before finalizing the City’s BID Fund budget. To address the issue in the meantime, the City amended the FY 2020 Budget Appropriation Ordinance for the BID Fund in June 2019 and adjusted its estimated revenues and expenses to match the PADBPA’s BID budget for FY 2020. Attachment A Audit of Nonprofit Service Agreements 11 EXHIBIT 6 Business Improvement District Fund Budgeted Revenues and Expenditures FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 20201 Estimated Beginning Fund Balance $83,000 $95,000 $9,000 $77,000 $32,000 $2,000 Estimated Revenues Assessment Revenues $153,000 $140,000 $140,000 $140,000 $140,000 $87,500 Other Revenues $2,000 $2,000 $2,000 $2,000 $2,000 $17,0002 Total Estimated Revenues $155,000 $142,000 $142,000 $142,000 $142,000 $104,500 Total Estimated Expenditures $173,000 $148,000 $148,000 $148,000 $148,000 $104,500 Net Revenues (Expenditures) ($18,000) ($6,000) ($6,000) ($6,000) ($6,000) - Estimated Ending Fund Balance $65,000 $89,000 $3,000 $71,000 $26,000 $2,000 1 In response to this audit, the City amended the FY 2020 Budget Appropriation Ordinance for the BID Fund on June 24, 2019 to align its original operating budget with the PADBPA’s BID budget. 2 Represents the cost of invoicing and collecting BID assessments covered by the City’s General Fund through an operating transfer. SOURCE: The City’s Adopted Operating Budgets MuniServices also provides the City with a BID reconciliation report showing the actual assessment collection status with each business’ information. A summary of the reconciliation report is shown in Exhibit 7. However, this information is mainly used by the Accounting Division for accounting purposes at year end, and has not been presented to the City Council. Reviewing this information would also assist the City Council in evaluating the proposed BID assessments and budget, and providing direction to address declining revenues. EXHIBIT 7 MuniServices Business Improvement District Assessment Collection Status by Assessment Year Assessment Year BID Assessments 2016 (as of 1/22/18) 2017 (as of 7/6/18) Paid $93,600 $70,012 Not Paid $33,400 $49,100 Total per City’s Taxpayer List $127,000 $119,112 SOURCE: MuniServices BID Reconciliation Report Another example of missing information in the BID budget is the cost of invoicing and collecting the assessments. PADBPA removed invoicing cost from the FY 2019 BID budget in its effort to reduce the budget, even though the agreement requires any invoicing costs incurred by the City or PADBPA to be included in Attachment A 12 Audit of Nonprofit Service Agreements the BID budget. PADBPA budgeted $8,500 for invoicing in FY 2018, and the City paid MuniServices $8,361 for invoicing and collection services from its BID Fund. According to the June 24, 2019 staff report, the City used its General Fund to cover the FY 2019 invoicing and collection cost. For FY 2020, PADBPA included $17,000 for invoicing cost in its BID budget to be covered through an operating transfer from the City’s General Fund. Monitoring PADBPA’s financial activities outside the BID Fund would help the City make better informed decisions on the BID budget and assessment fees The PADBPA’s annual BID budget covers financial activities that do not go through the City’s BID Fund, including: • Revenues from non-assessment sources and expenses funded by those revenues, such as sponsorships for events and in- kind contributions for banners and services. • Delinquent assessment fees directly collected by PADBPA. These external financial activities could significantly impact the PADBPA’s BID budget, but the City has not monitored them to evaluate the reasonableness of the following year’s BID budget and assessment fees proposed by PADBPA. The agreement requires PADBPA to submit an audit report of the BID’s expenditures and completed activities for the preceding fiscal year within 120 days after the fiscal year ends. However, PADBPA has not completed the audit in a timely manner for the last three years, as shown in Exhibit 8. EXHIBIT 8 Palo Alto Downtown Business and Professional Association’s Audited Financial Statements For Fiscal Year Ending: Submission Due Date Audit Completion Date June 30, 2016 October 28, 2016 May 15, 2017 June 30, 2017 October 28, 2017 August 31, 2018 June 30, 2018 October 28, 2018 February 28, 2019 SOURCE: The City’s Agreement with PADBPA and PADBPA Audited Financial Statements As shown in Exhibit 9, the PADBPA’s actual non-assessment revenues have declined over the years. For example, PADBPA raised only $5,850 of the projected $45,000 in sponsorships to fund events and the summer concert series in FY 2017. Consequently, it had to use its cash balance to cover the actual event costs of $23,534. For FY 2018, PADBPA raised $7,200 and Attachment A Audit of Nonprofit Service Agreements 13 spent $8,119 in event costs, which was much less than the budgeted amount of $28,000. Having PADBPA’s financial information would be helpful for the City to make informed decisions on PADBPA’s proposed BID budget and assessments. EXHIBIT 9 PADBPA’s Budgeted vs. Actual Non-Assessment Revenues Non-Assessment Revenues1 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Projected - BID Budget Events $15,000 - $5,000 - - Summer Concert Series - $40,000 $40,000 $28,000 $20,000 Legal Service $1,000 $1,000 $1,000 $1,000 $1,000 Banners $8,000 $16,000 $8,000 - - Outreach & Communication $1,000 - - - - Total $25,000 $57,000 $54,000 $29,000 $21,000 Actual - PADBPA Audited Financial Statements Sponsorships $40,850 $25,000 $5,850 $7,200 n/a Audit and Tax Services $7,975 $4,525 $4,550 $4,525 n/a Total $48,825 $29,525 $10,400 $11,725 n/a 1 Revenues from non-assessment sources such as sponsorships for events and in-kind contributions for banners and services. SOURCE: PADBPA’s financial documents The actual assessment revenues recorded in the PADBPA’s financial statements are also different from the amounts recorded in the City’s Comprehensive Annual Financial Report (CAFR), as shown in Exhibit 10. EXHIBIT 10 Comparison of Actual Assessment Revenues - City’s CAFR vs. PADBPA Financial Statements Actual Assessment Revenues FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 City’s CAFR $86,000 $100,000 $97,000 $72,000 n/a PADBPA Audited Financial Statements $120,975 $107,548 $100,736 $120,412 n/a SOURCE: The City’s and PADBPA’s financial documents The difference may represent the delinquent fees directly collected by PADBPA, although we did not verify it. The agreement allows PADBPA to submit a written request to the City after 90 days of delinquency to have past due assessments assigned to PADBPA for collection with the right to receive any amounts collected for benefit of the BID. The City has not Attachment A 14 Audit of Nonprofit Service Agreements monitored how much has been collected directly by PADBPA to gain a complete understanding of the collection rate for each year. The City has not assigned delinquent assessments to PADBPA since collection has been outsourced to MuniServices. The City did not ensure TMA’s compliance with reporting requirements but has since strengthened its oversight The City’s agreement with TMA was originally for “pilot projects” intended to reduce single occupancy vehicle trips by downtown workers. Therefore, rather than specifying goals and objectives in the agreement, the City required TMA to conduct an annual strategic planning session to produce “3-year goals and objectives and funding requirements, and a budget with projected metrics (cost per mode shift, ROI [Return on Investment], etc.)” for review and approval by the City. However, the City had not closely monitored TMA’s compliance due to transportation staff turnover. As a result, the City did not receive some required information from TMA. The City and TMA have since worked together to rectify noncompliance, and addressed all the issues identified in this audit as of June 2019. Both the City and TMA were affected by staff turnovers Both the City and TMA experienced high rate of staff turnover in recent years. For example, the Transportation Planning Manager position turned over three times in the last three years with the previous manager leaving in March 2018 and the current manager starting in July 2018. The Chief Transportation Official, who oversaw the TMA agreement while the Transportation Planning Manager position was vacant, left the City in September 2018. The TMA’s programs are supported by the Board of Directors who volunteer their time and a paid, part- time executive director. The current executive director started in July 2018, after the previous director hired in April 2018 resigned. TMA did not meet certain reporting requirements as a result of these transitions. For example, the agreement requires TMA to provide a detailed, updated strategic plan and budget to the City annually, identifying the pilot projects to be funded by the City for the City Manager’s review and approval. TMA finalized its first “Business Plan” in August 2016, which outlined the strategies with a goal to reduce single occupancy vehicle trips to downtown Palo Alto over the next several years by 30 percent. Attachment A Audit of Nonprofit Service Agreements 15 In September 2017, the City Council amended and restated the agreement to: • Extend the term from December 31, 2018 to July 1, 2020 • Provide $480,000 in funding for FY 2018 • Authorize the City Manager to execute future amendments to provide additional funding approved by Council in the City’s FY 2019 and FY 2020 budgets The City Council also directed TMA to present its business plan prior to the FY 2019 budget to allow informed budget allocation in May and June 2018. However, the City Council did not receive an updated plan until June 2019 as described below. The agreement also required TMA to “provide the City Council with quarterly written reports on the implementation and effectiveness of pilot programs funded by the City, including quantitative measures of Single Occupancy Vehicle trip reduction and mode shift achieved, metrics used, cost per employee mode shift, and how the City Funds were expended.” Although TMA submits a quarterly report along with its quarterly invoice to the City, the report had not included all required information such as cost per employee mode shift and how TMA spent the City funds. Additionally, City staff had not submitted the TMA’s quarterly reports to the City Council. The City and TMA have since addressed all instances of noncompliance Both the Transportation Planning Manager and the TMA’s Executive Director have taken immediate steps to rectify the noncompliance, acknowledging the need to meet all contractual requirements and to keep the City Council better informed on TMA’s program implementation status and effectiveness. As part of this effort, the City amended the September 2017 agreement to clarify that the quarterly reports are provided to City staff, not directly to the City Council. At the same time, TMA instituted an enhanced annual reporting process. In its annual report presented to the City Council in January 2019, TMA included improved and expanded data for evaluation of program performance, preliminary data from the 2018 Downtown Commute Survey, and opportunities and challenges in achieving its goals. TMA subsequently held strategic planning sessions, and the Executive Director updated the Finance Committee in April 2019 and asked for input on various funding scenarios, desired mode shift ideas, potential outcomes, and performance Attachment A 16 Audit of Nonprofit Service Agreements measures. Such dialogue can greatly benefit the City Council as it discusses projects and issues involving transportation and parking, and informs related funding decisions in May and June. TMA finalized the 2019 Strategic Business Plan in May 2019, which was transmitted to the City Council in June 2019. Measuring progress toward the TMA’s goal is difficult without reliable data on Downtown employees In its August 2016 Business Plan, TMA estimated that the population of Downtown employees was approximately 10,000 based on the City’s Business Registry and the 2016 Downtown Employee Commute Survey. Starting from the baseline of 5,500 employees driving alone to work as identified in the May 2015 benchmark survey (55 percent of 10,000 downtown employees), TMA estimated that its goal of 30 percent reduction in single occupancy vehicle (SOV) trips to downtown Palo Alto would change the commute patterns of about 1,650 employees. In its May 2019 Strategic Business Plan, TMA estimated the number of downtown employees to be approximately 5,000, which is half of the 2016 estimate. Using an adjusted baseline SOV rate of 57 percent, TMA estimated that 30 percent reduction from 57 percent yields a goal of 40 percent SOV rate, or 850 commuters to shift away from SOV (17 percent of 5,000 downtown employees).3 Although the agreement states that the City may elect to share certain data from its Business Registry with TMA for TMA’s program development and marketing, TMA has had difficulty accessing the Business Registry data. Due to data reliability issues as identified in the August 2018 Business Registry Audit, estimating the population of downtown employees continues to be a challenging task. The City has multiple agreements with DST, requiring improved coordination among City departments to monitor overlapping scope of services Downtown Streets Team (DST) receives funding from the City through four different channels, and different City departments separately administer the distribution of funds. There was little coordination among City departments, which increased the risk of duplicate payments by the City for the same services. Exhibit 11 shows the funding the City provided to DST in FY 2018. 3 The June 2017 Downtown Employee Commute Survey weighted prior year datasets to hold worksite type and worksite size constant, changing the May 2015 SOV rate from 55 percent to 57 percent. Attachment A Audit of Nonprofit Service Agreements 17 EXHIBIT 11 The City’s FY 2018 Funding Provided to Downtown Streets Team City Funding Responsible Department Amount Scope of Services 1. Cleaning and Maintenance/ University Avenue Parking Permit Fund & General Fund Public Works $136,872 Street cleaning services for the City’s five parking garages, sidewalks, and alleyways in downtown funded by parking permit revenues. Also includes litter clean up at Lytton and Cogswell Plazas, Stanford/Palo Alto Playing Fields, and Old Community Garden funded by General Fund. 2. HSRAP/General Fund Community Services/Human Services $74,572 Services to the homeless, including job skills training, work experience, and access to food through the Palo Alto Food Closet. 3. Department of Housing and Urban Development Community Development Block Grant (CDBG) Planning $336,400 Workforce Development Program to provide homeless and/or extremely low income individuals with job readiness training and employment opportunities. 4. PADBPA/BID Assessments City Manager $5,000 A discretionary fund approved as part of the annual BID budget. The amount was reduced to $3,000 for FY 2019. Total $552,844 SOURCE: City’s agreements with the DST Human Services and Planning started working together to clarify their scopes of services for the next funding cycle The City’s agreements with DST for HSRAP and Community Development Block Grant (CDBG) had similar scope of services for FYs 2018 and 2019, which could have caused duplicate payments by the City. Both DST and City staff stated that HSRAP and CDBG fund different DST staff members, or separate activities by the same staff member, even though the program goals and methods are very similar. They acknowledged the need to clarify the differences going forward. The Human Relations Commission reviews both HSRAP and CDBG applications and provides funding recommendations to the Finance Committee and the City Council. Human Services and Planning staff had not reviewed each other’s scope of services in the past to prevent potential duplication. Like HSRAP, Planning has a dedicated resource to administer the CDBG agreements, and uses established monitoring process and tools, including semiannual reports, to ensure the City’s compliance with the federal requirements for subrecipient monitoring. Human Services and Planning staff have already started working together to clearly distinguish the two agreements Attachment A 18 Audit of Nonprofit Service Agreements prior to finalizing the scope of services for each funding cycle. Three other nonprofit organizations received funding from both HSRAP and CDBG in FY 2018 (LifeMoves, Palo Alto Housing Corporation, and Project Sentinel), but we did not identify such overlap. Public Works no longer pays for the DST’s case management services, eliminating the risk of duplicate payments for similar services provided through HSRAP Public Works’ cleaning and maintenance agreement with DST includes outreach and case management services. The City used to pay $20,000 a year for these services under the agreement, even though it had been paying DST for the same services through HSRAP since FY 2011. Public Works did not require DST to provide a detailed statement of services performed with the invoice and did not monitor how DST was using the $20,000 a year. According to DST management, DST used the $20,000 a year to offset the case management costs incurred to house formerly homeless individuals from Palo Alto. As the years have gone by, however, they have had less access to housing due to lack of available housing. The City and DST agreed to remove this annual compensation of $20,000 in its current three-year cleaning and maintenance agreement renewed in November 2017. The cleaning and maintenance schedule specified in the agreement is not practical for DST to follow The cleaning and maintenance agreement includes a detailed schedule of performance as shown in Appendix 2. DST has not followed this schedule because it is not practical or feasible for DST team members to follow such a rigid schedule. DST instead uses a more loosely structured shift system as shown in Exhibit 12 to allow its team members, many of whom are just beginning to develop their basic job skills, more flexibility while ensuring that the assigned areas are cleaned during the shift. For example, the schedule in the agreement requires DST to clean Lytton Plaza from 11:30am to noon and from 3:30pm to 4pm on Mondays. The DST’s Project Manager for Palo Alto instead directs the team members to meet at Lytton Plaza at 8am to complete the maintenance tasks, and clean the Plaza again during the shift to ensure that the Plaza is cleaned at least twice per shift, or three to four times a day. The Project Manager also modifies the schedule based on the weather and the seasons to take advantage of sunlight and to keep the team members safe. Attachment A Audit of Nonprofit Service Agreements 19 EXHIBIT 12 Downtown Streets Team’s Cleaning and Maintenance Shifts as of June 2018 Shifts* (# team members assigned) Mon Tue Wed Thu Fri Sat Sun PADPW AM (7-8) 8am-Noon 8am-Noon 8am-Noon 8am-11am 8am-Noon - - Garages AM (2) 8am-Noon 8am-Noon 8am-Noon 8am-11am 8am-Noon - - PADPW PM (3-6) Noon-4pm Noon-4pm Noon-4pm 8am-11am Noon-4pm - - S/S PADPW and Garages AM (6-8) - - - - - 8am-2pm 8am-2pm S/S Garages PM (2) - - - - - 4pm-8pm 4pm-8pm Page Mill (2) - - - - 6am-9am 6am-9am 6am-9am * The DST Project Manager for Palo Alto assigns available team members to cover each shift on a weekly basis: PADPW - Downtown streets, alleyways, Lytton Plaza, Cogswell Plaza, and Old Community Garden Garages - Bryant/Lytton, High/Alma South, High/Alma North, Webster/Cowper, and Civic Center garages S/S - Saturday and Sunday Page Mill - Stanford/Palo Alto Playing Fields SOURCE: Downtown Streets Team DST tracks performance measures that can be used to evaluate the service level Although City staff perform spot checks, the City has not tracked DST’s performance measures to evaluate the service level under the cleaning and maintenance agreement. As mentioned earlier, the City has not required DST to provide a detailed statement of services performed when submitting an invoice. DST tracks its own performance measures, and reports them to the jurisdictions it works with when required or requested. DST reports its performance measures for the HSRAP and CDBG agreements in a semiannual report to the City, and stated that they would be happy to work with the City to set the performance measures for the cleaning and maintenance agreement and report them on a regular basis. For example, the City of San Rafael sets a targeted number of cleanup hours by DST team members and has tracked the actual hours to evaluate DST’s performance. DST also tracks the amount of debris removed, and the number of cigarette butts in cities with a recycling program for them, to quantify the cleanup work it performs. Attachment A 20 Audit of Nonprofit Service Agreements Recommendations We recommend that the City Manager: 1. Work with the Administrative Services Department’s Purchasing Division, the City Attorney’s Office, and the Community Services Department’s Office of Human Services to create a citywide template for nonprofit service agreements, and make it available to all City departments. The template should ensure that the City’s payments are tied to contractor performance by: a. Specifying program goals, measurable objectives, and performance targets are specified in the scope of services. b. Requiring specific deliverables (e.g., semiannual report, financial statements) are submitted along with each invoice, rather than requiring “a detailed statement” in broad terms that could be subject to interpretation. c. Requiring all deliverables be provided prior to the final payment. 2. Renew the 2004 agreement with PADBPA to: a. Require that a preliminary BID budget be submitted in accordance with the City’s budget schedule to ensure that the City operating budget is aligned with the PADBPA’s budget. b. Require that PADBPA include in its annual report previous two years’ budgeted and actual revenues and expenses in a format similar to the City’s operating budgets for better projection of the following fiscal year budget. c. Require that collection status, including delinquencies and any subsequent collections by PADBPA, be included in the annual report. d. Reflect the outsourcing of the assessment invoicing and collection and elimination of the Economic Development Manager position. 3. Establish a procedure or desk manual to clarify roles and responsibilities for monitoring the BID Fund records in SAP, PADBPA’s financial records, and MuniServices’ assessment collection data to ensure that accurate and complete Attachment A Audit of Nonprofit Service Agreements 21 financial data are provided to the City Council for informed budget and funding decisions. 4. Establish an overall monitoring method to ensure that nonprofit organizations with multiple agreements with the City are reviewed by all responsible departments to avoid redundancy while clarifying the goals, objectives, and performance measures to be tracked under each agreement. Attachment A 22 Audit of Nonprofit Service Agreements APPENDIX 1 – The City’s Nonprofit Service Agreements for FY 2018 (Total Contract Amount of $10K or More) No. Nonprofit Organization Name Start DATE End DATE Contract Amount1 Responsible Department Purpose Reviewed in this Audit? Total FY 2018 1 Abilities United 7/1/17 6/30/19 $44,691/yr $44,691 Community Services /Human Services HSRAP - Disability services. Yes 2 Acterra 1/13/16 1/12/19 $84,780/yr $84,780 Public Works School outreach and creek monitoring. No 3 Acterra 4/8/16 12/31/18 $6,480/yr $6,480 Public Works Irrigation, maintenance, and reporting. No 4 Acterra (Grassroots Ecology) 7/1/13 6/30/18 $36,646/yr $36,646 Community Services Habitat restoration at Foothills Park. No 5 Acterra (Grassroots Ecology) Nov. ‘16 Nov. ‘19 $32,000 $11,000 Community Services Protection of oak saplings at Pearson Arastradero Preserve to ensure growth. Mitigation for tree removal at golf course (contract amount varies each year). No 6 Acterra (Grassroots Ecology) 7/1/17 6/30/22 $75,720/yr $75,720 Community Services Habitat Restoration at Pearson Arastradero Preserve. No 7 Adolescent Counseling Services - Outlet 7/1/17 6/30/19 $10,250/yr $10,250 Community Services /Human Services HSRAP - Services to lesbian, gay, bisexual, transgender, queer and questioning (LGBTQQ) youth and their straight allies. No 8 Avenidas 9/15/15 6/30/20 $453,897/yr $477,341 Community Services /Human Services Senior programs (formerly part of HSRAP). Yes 9 Canopy 7/1/17 6/30/20 $395,130 $131,710 Public Works Urban forestry professional services, outreach, and education. No 10 Community Working Group 7/1/17 6/30/19 $30,000/yr $30,000 Community Services /Human Services HSRAP - Services to homeless Palo Alto residents. No Attachment A Audit of Nonprofit Service Agreements 23 No. Nonprofit Organization Name Start DATE End DATE Contract Amount1 Responsible Department Purpose Reviewed in this Audit? Total FY 2018 11 Counseling & Support Services for Youth 7/1/17 6/30/19 $35,000/yr $35,000 Community Services /Human Services HSRAP - Mental health support on Palo Alto Unified School District secondary school campuses. Yes 12 Downtown Streets Team 7/1/17 6/30/19 $74,572/yr $74,572 Community Services /Human Services HSRAP - Services to the homeless, including job skills training, work experience, and food for low income individuals through the Palo Alto Food Closet. Yes 13 Downtown Streets Team 11/12/17 11/11/20 $136,872/yr $136,872 Public Works Consists of 1) street cleaning services for the City’s five parking garages, sidewalks, and alleyways in the Downtown Palo Alto area funded by University Avenue Parking Permit Fund ($107,748/yr); and 2) litter clean up at Lytton and Cogswell Plazas, Stanford/Palo Alto Playing Fields, and Old Community Garden between Red Cross and El Camino Park. This portion is monitored by Community Services Department and funded by General Fund ($29,124/yr). Yes 14 DreamCatchers 7/1/17 6/30/19 $23,609/yr $23,609 Community Services /Human Services HSRAP - Tutoring for low income middle school students. No 15 Ecology Action2 6/30/15 6/30/18 $925,000 $308,333 Utilities Commercial/Key Account Energy Efficiency. No 16 Ecology Action 6/1/15 6/30/18 $650,000/yr $650,000 Utilities Small/Medium Business Energy Efficiency. No 17 Kara 7/1/17 6/30/19 $18,565/yr $18,565 Community Services /Human Services HSRAP - Grief support. No Attachment A 24 Audit of Nonprofit Service Agreements No. Nonprofit Organization Name Start DATE End DATE Contract Amount1 Responsible Department Purpose Reviewed in this Audit? Total FY 2018 18 La Comida 7/1/17 6/30/19 $36,372/yr $36,372 Community Services /Human Services HSRAP - Nutrition program for persons 60 years of age or older. Yes 19 LifeMoves 7/1/17 6/30/19 $35,257/yr $35,257 Community Services /Human Services HSRAP - Food services for homeless and very low income Palo Alto residents. Yes 20 Mayview Health Center 7/1/17 6/30/19 $26,990/yr $26,990 Community Services /Human Services HSRAP - Health services for low income, uninsured Palo Alto residents. No 21 Momentum for Mental Health 7/1/17 6/30/19 $44,724/yr $44,724 Community Services /Human Services HSRAP - Outreach to people in Palo Alto who are homeless and have a mental illness. Yes 22 Palo Alto Community Child Care 9/15/15 6/30/20 $459,841/yr $483,592 Community Services /Human Services Management of City's child care subsidy program (formerly part of HSRAP). Yes 23 Palo Alto Downtown Business & Professional Association 6/25/04 Renewed annually upon Council approval Based on annual budget submitted to Council $164,024 City Manager Administration of the Palo Alto Downtown Business Improvement District. Yes 24 Palo Alto Historical Association 6/27/16 6/30/19 $139,519 $47,544 Library Management of the City’s archives and facilitate public access to information and materials relating to the City. No 25 Palo Alto Housing Corp 7/1/17 6/30/19 $20,001/yr $20,001 Community Services /Human Services HSRAP - Various program for low income youth and seniors. No 26 Palo Alto Housing Corp 7/1/17 6/30/19 $274,000 $137,000 Planning Below Market Rate administration. No Attachment A Audit of Nonprofit Service Agreements 25 No. Nonprofit Organization Name Start DATE End DATE Contract Amount1 Responsible Department Purpose Reviewed in this Audit? Total FY 2018 27 Palo Alto Transportation Management Association 6/20/16 7/1/20 $680,000 $480,000 Transportation Serving as Transportation Management Association for Palo Alto. Yes 28 Partners & Advocates for Remarkable Children & Adults 7/1/17 6/30/19 $10,959/yr $10,959 Community Services /Human Services HSRAP - Services for disabled adults. No 29 Peninsula HealthCare Connection 7/1/17 6/30/19 $29,684/yr $29,684 Community Services /Human Services HSRAP - Mental & Physical HealthCare for low income and homeless Palo Alto residents. No 30 Project Sentinel 7/1/16 6/30/19 $65,000/yr $65,000 Community Services /Human Services Landlord-Tenant Mediation Program (formerly part of HSRAP). Yes 31 Regional Government Services3 7/1/16 6/30/19 $20,860 $7,000 Planning Management development. No 32 Santa Clara County Firesafe Council 7/1/13 6/30/20 $66,700/yr $66,700 Community Services Community Services portion for management plan to clear brush along Page Mill Road and surrounding areas. No $54,800/yr $54,800 Public Works Public Works portion for Fire prevention, fuels mitigation, evacuation route clearance, assessment, and outreach. No $60,000/yr $60,000 Fire Fire portion for planned prescribed burns and/or risk assessment and training about wildland fire behavior. No 33 Senior Adult Legal Assistance 7/1/17 6/30/19 $14,401/yr $14,401 Community Services /Human Services HSRAP - Legal Assistance for older adults. No 34 Stanford Hospital and Clinics3 2/6/17 2/5/20 $45,000 $15,000 Fire Medical oversight for ambulance transport services. No Attachment A 26 Audit of Nonprofit Service Agreements No. Nonprofit Organization Name Start DATE End DATE Contract Amount1 Responsible Department Purpose Reviewed in this Audit? Total FY 2018 35 Vista Center for the Blind and Visually Impaired 7/1/17 6/30/19 $26,475/yr $26,475 Community Services /Human Services HSRAP - Vision rehabilitation services for seniors in Palo Alto. No 36 Youth Community Service 6/1/17 5/30/20 $55,600/yr $55,600 Community Services Service-learning summer camp. No 37 Youth Community Services 7/1/17 6/30/19 $21,663/yr $21,663 Community Services /Human Services HSRAP - Community Service & Leadership program for middle & high school students. No 38 Youth Community Services (Youth Connectedness Initiative) 7/1/17 6/30/20 $50,000/yr $50,000 Community Services /Human Services Collaboration with County of Santa Clara. No 1 An annual amount is shown under the total amount if it is specified by the agreement. Some agreements do not specify yearly contract amounts, and may allow certain price adjustments in subsequent contract years. 2 The total compensation is $925,000 a year for this contract and two other contracts combined, not to exceed $2,775,000 over the original three-year contract term. We estimated the total contract amount to be one third of the $2,775,000, or $925,000, and the FY 2018 amount to be a third of the $925,000, or $308,333. The actual compensation differs because there is no specific allocation among the three contracts, and the contract term was extended by two years through June 30, 2020. 3 The FY 2018 amount is an estimate based on the contract amount and term. SOURCE: City departments Attachment A Audit of Nonprofit Service Agreements 27 APPENDIX 2 – The DST’s Cleaning and Maintenance Schedule in the Agreement Attachment A 28 Audit of Nonprofit Service Agreements APPENDIX 2 – The DST’s Cleaning and Maintenance Schedule in the Agreement (Continued) Attachment A Audit of Nonprofit Service Agreements 29 APPENDIX 2 – The DST’s Cleaning and Maintenance Schedule in the Agreement (Continued) Attachment A 30 Audit of Nonprofit Service Agreements APPENDIX 3 – City Manager’s Response The City Manager has agreed to take the following actions in response to the audit recommendations in this report. The City Manager will report progress on implementation six months after the Council accepts the audit report, and every six months thereafter until all recommendations have been implemented. Recommendation Responsible Department(s) Agree, Partially Agree, or Do Not Agree and Target Date and Corrective Action Plan To be completed 6 months after Council acceptance and every 6 months thereafter until all recommendations are implemented Current Status Implementation Update and Expected Completion Date Finding: The Office of Human Services effectively monitors contractor performance using an established process and tools, which can help other City departments better administer their nonprofit service agreements. We recommend that the City Manager: 1. Work with the Administrative Services Department’s Purchasing Division, the City Attorney’s Office, and the Community Services Department’s Office of Human Services to create a citywide template for nonprofit service agreements, and make it available to all City departments. The template should ensure that the City’s payments are tied to contractor performance by: a. Specifying program goals, measurable objectives, and performance targets are specified in the scope of services. b. Requiring specific deliverables (e.g., semiannual report, financial statements) are submitted along with each invoice, rather than requiring “a detailed statement” ASD/CAO/CSD/CMO Concurrence: Agree. Target Date: December 2020 Action Plan: Sept 2019 – June 2020: Interdepartmental team reviews and makes adjustments to business processes for nonprofit service agreement creation and management. June 2020 – December 2020: Develop template(s) and any other necessary implementation materials or guidelines. Attachment A Audit of Nonprofit Service Agreements 31 Recommendation Responsible Department(s) Agree, Partially Agree, or Do Not Agree and Target Date and Corrective Action Plan To be completed 6 months after Council acceptance and every 6 months thereafter until all recommendations are implemented Current Status Implementation Update and Expected Completion Date in broad terms that could be subject to interpretation. c. Requiring all deliverables be provided prior to the final payment. 2. Renew the 2004 agreement with PADBPA to: a. Require that a preliminary BID budget be submitted in accordance with the City’s budget schedule to ensure that the City operating budget is aligned with the PADBPA’s budget. b. Require that PADBPA include in its annual report previous two years’ budgeted and actual revenues and expenses in a format similar to the City’s operating budgets for better projection of the following fiscal year budget. c. Require that collection status, including delinquencies and any subsequent collections by PADBPA, be included in the annual report. d. Reflect the outsourcing of the assessment invoicing and collection and elimination of the Economic Development Manager position. CMO/CAO/ASD Concurrence: Agree. Target Date: June 2020 Action Plan: Sept – Dec 2019: Partner with PADBPA to identify shared understanding of agreement requirements. Jan – June 2020: Partner with CAO and PADBPA to propose revised agreement language and renewal of the agreement to Council. Attachment A 32 Audit of Nonprofit Service Agreements Recommendation Responsible Department(s) Agree, Partially Agree, or Do Not Agree and Target Date and Corrective Action Plan To be completed 6 months after Council acceptance and every 6 months thereafter until all recommendations are implemented Current Status Implementation Update and Expected Completion Date 3. Establish a procedure or desk manual to clarify roles and responsibilities for monitoring the BID Fund records in SAP, PADBPA’s financial records, and MuniServices’ assessment collection data to ensure that accurate and complete financial data are provided to the City Council for informed budget and funding decisions. CMO Concurrence: Agree. Target Date: March 2020 Action Plan: Incorporate into workplan for item 2. 4. Establish an overall monitoring method to ensure that nonprofit organizations with multiple agreements with the City are reviewed by all responsible departments to avoid redundancy while clarifying the goals, objectives, and performance measures to be tracked under each agreement. ASD Concurrence: Agree. Target Date: June 2020 Action Plan: Identity required resources including staff support to complete this function, develop a proposal for implementation to be considered as part of the annual budget process. Attachment A City of Palo Alto (ID # 10724) City Council Staff Report Report Type: Consent Calendar Meeting Date: 10/28/2019 City of Palo Alto Page 1 Summary Title: Airport Contract Amendments Title: Approval of Amendment Number 4 to Contract Number C15155208B With Mead & Hunt, Inc.; and Approval of Amendment Number 7 to Contract Number C15155208A With C&S Engineers, Inc. for Contract Extensions to Complete Phase II of the Airport Apron Reconstruction Capital Improvements Program Project (AP-16000) From: City Manager Lead Department: Public Works Recommendation Staff recommends that Council: 1. Approve Amendment No. 4 to Contract C15155208B with Mead & Hunt, Inc. (Attachment A) for a contract extension without additional cost to complete inspection and construction administration services related to the Airport Apron Reconstruction Project Phase II (AP-16000); and 2. Approve Amendment No. 7 to Contract C15155208A with C & S Engineers, Inc. (Attachment B) for a contract extension without additional cost to complete construction administration services related to the Airport Apron Reconstruction Project (AP-16000). Background The City of Palo Alto (City) has been working with the Federal Aviation Administration (FAA) to rehabilitate and update the airport to current FAA standards. To meet FAA design standards, correct deficiencies, and ultimately improve airport safety, a multi-phase apron reconstruction capital project (AP-16000) was established. The Airport is working to finish construction on Phase II of the Apron Reconstruction Project by November 2019. C&S Engineers and Mead & Hunt are responsible for construction administration and construction management, respectively. City of Palo Alto Page 2 As part of grant eligibility, the FAA requires that the City (an airport sponsor) conduct a consultant selection process that preapproves consultants for five years. The City must use qualifications-based selection procedures, omitting proposed fees, in the selection and engagement of consultants. On October 27, 2014, the City of Palo Alto executed two five-year contracts with Mead & Hunt and C&S Engineers for on-call design services, construction administration, environmental studies, and planning functions as required for FAA Airport CIP projects (CMR #4948). These contracts currently expire on October 31, 2019. In August 2018, the City executed Contract C19171727 with DeSilva Gates Construction LP for Phase II of the Airport Apron Reconstruction Project (CMR #9439). At the same time, contract amendment three for the Mead & Hunt contract was approved along with contract amendment six for the C&S Engineers contract. Construction of Phase II began in December 2018 and is expected to be completed in November 2019. Complete close out of the FAA grant for Phase II is expected to occur in December 2020. Discussion Consultant services have been vital to the successful delivery of CIP projects, providing on call design services, construction administration, environmental studies, and planning functions as required for FAA Airport CIP projects. Contract amendment four with Mead & Hunt will allow for the time required to provide construction administration and inspection until the end of Phase II of the Airport Apron Reconstruction Project. Similarly, contract amendment seven with C&S Engineers will provide sufficient time for construction observation and administration. Additionally, these contract extensions will allow for both consultants to complete as-builts and documents required for close out of the FAA grant, which is anticipated to take approximately one year. Resource Impact These contract amendments extend the terms of the contracts only and do not impact funding. Policy Implications Authorization of these amendments do not represent a change in existing policies. Environmental Review National Environmental Policy Act Based on FAA direction, C & S Engineers, Inc. prepared documentation necessary to comply with National Environmental Policy Act (NEPA) requirements for the proposed apron rehabilitation project at the Palo Alto Airport (PAO). As a project that involves only the rehabilitation and minor expansion of existing facilities it qualified as a categorical exclusion (CATEX) under FAA Order 1050.1FEnvironmental Impacts: Policies and Procedures. At the request of the FAA, two separate CATEX forms were submitted for review. The initial CATEX form, which only focused on the rehabilitation of the existing pavement and ancillary facilities, City of Palo Alto Page 3 was approved in January 2017. A second CATEX form was submitted for the minor apron expansion only. The CATEX was approved by the FAA in April 2017. The NEPA findings were adopted in CMR 8127. California Environmental Quality Act Environmental Assessment: Exempt from the Provisions of the California Environmental Quality Act (CEQA) per Guideline Section 15302 (Replacement or Reconstruction). The subject project has been assessed in accordance with the authority and criteria contained in the California Environmental Quality Act (CEQA), the State CEQA Guidelines, and the environmental regulations of the City. Specifically, the project is categorically exempt from the provisions of CEQA per Section 15301 (Existing Facilities). See the Notice of Exemption included in Attachment B of CMR 8127, which was filed with the County following Minor Architectural Review approval of the project. The CEQA findings were adopted in the same report. Attachments: • Attachment A: Amendment No. 4 to Contract C15155208B Mead and Hunt Inc. • Attachment B: Amendment No. 7 to Contract C15155208A C&S Engineering Inc. 1 Revision July 20, 2016 AMENDMENT NO. FOUR TO CONTRACT NO. C15155208B BETWEEN THE CITY OF PALO ALTO AND MEAD & HUNT, INC. This Amendment No. Four to Contract No. C15155208B (“Contract”) is entered into October 29, 2019, by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and MEAD & HUNT, INC., a Wisconsin corporation, located at 133 Aviation Boulevard, Suite 100, Santa Rosa, California 95403 (“CONSULTANT”). R E C I T A L S A. The Contract was entered into between the parties for the provision of On-call engineering services including planning, design engineering, environmental analyses, grant management and construction management. B. The parties wish to amend the Contract to extend the term. NOW, THEREFORE, in consideration of the covenants, terms, conditions, and provisions of this Amendment, the parties agree: SECTION 1. Section 2. TERM is hereby amended to read as follows: “The term of this Agreement shall be from the date of its full execution through December 31, 2020 unless terminated earlier pursuant to Section 19 of this Agreement.” SECTION 2. Except as herein modified, all other provisions of the Contract, including any exhibits and subsequent amendments thereto, shall remain in full force and effect. (SIGNATURE BLOCK FOLLOWS ON THE NEXT PAGE.) DocuSign Envelope ID: 9DF7935B-F5DD-443D-A55A-BDD92E3BD4E2 2 Revision July 20, 2016 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 or Designee APPROVED AS TO FORM: ____________________________ City Attorney or Designee ____________________________ Director of Public Works MEAD & HUNT, INC. Officer 1 By: Name: Title: Officer 2 By: Name: Title: DocuSign Envelope ID: 9DF7935B-F5DD-443D-A55A-BDD92E3BD4E2 Robert A. Casagrande Vice President Vice President Jon J. Faucher 1 Revision July 20, 2016 AMENDMENT NO. SEVEN TO CONTRACT NO. C15155208A BETWEEN THE CITY OF PALO ALTO AND C & S ENGINEERS, INC. This Amendment No. Seven to Contract No. C15155208A (“Contract”) is entered into October 29, 2019 by and between the CITY OF PALO ALTO, a California chartered municipal corporation (“CITY”), and C & S ENGINEEERS, INC., a New York corporation, located at 499 Col. Eileen Collins Boulevard, Syracuse, New York 13212 (“CONSULTANT”). R E C I T A L S A. The Contract was entered into between the parties for the provision of On-call engineering services including planning, design engineering, environmental analyses, grant management and construction management. B. The parties wish to amend the Contract to extend the term. NOW, THEREFORE, in consideration of the covenants, terms, conditions, and provisions of this Amendment, the parties agree: SECTION 1. Section 2. TERM is hereby amended to read as follows: “The term of this Agreement shall be from the date of its full execution through December 31, 2020.” SECTION 2. Except as herein modified, all other provisions of the Contract, including any exhibits and subsequent amendments thereto, shall remain in full force and effect. (SIGNATURE BLOCK FOLLOWS ON THE NEXT PAGE.) DocuSign Envelope ID: 91590218-F57F-4991-A8C8-96CAC9078493 2 Revision July 20, 2016 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 or Designee APPROVED AS TO FORM: _________________________ City Attorney or Designee _________________________ Director of Public Works C & S ENGINEERS, INC. By: Name: Title: By: Name: Title: DocuSign Envelope ID: 91590218-F57F-4991-A8C8-96CAC9078493 Department Manager Jessica L. Bryan Cory Hazlewood Department Manager City of Palo Alto (ID # 10752) City Council Staff Report Report Type: Consent Calendar Meeting Date: 10/28/2019 City of Palo Alto Page 1 Council Priority: Climate/Sustainability and Climate Action Plan Summary Title: Approval of REC Master Agreements with Two Suppliers Title: Adoption of a Resolution Approving an Updated Standard Form Master Renewable Energy Certificate (REC) Purchase and Sale Agreement, Approving Master REC Agreements With Two Counterparties, and Modifying the Approval Process for Future Individual REC Master Agreements, Thus Amending Section 2 and Recital J of Resolution Number 9652 (Continued From October 7, 2019) From: City Manager Lead Department: Utilities Recommendation Staff recommends that the City Council adopt a resolution (Attachment A) to: a) Approve an updated standard form Renewable Energy Certificate (REC) Master Purchase and Sale Agreement, amending Section 2 of Resolution 9652 to replace the prior version approved by Council in 2016; and, b) Approve the execution of Renewable Energy Credit (REC) Master Agreements using the updated standard form with two new counterparties (ACT Commodities and RPS Advisors); and, c) Waive the investment-grade credit rating requirement for these new counterparties as well as all future REC Master Agreement counterparties; and, d) Delegate authority to the City Manager, and/or his/her designee, to transact under REC Master Agreements and to enter into future REC Master Agreements subject to the $5 million maximum annual expenditure levels set forth in Resolution 9831; and, e) Approve a modification to the approval process for individual REC Master Agreements, amending Recital J of Resolution 9652, such that Council approval of individual REC Master Agreements is no longer required where Council has authorized the City Manager to award and sign REC contracts with qualified, eligible counterparties, as described in Section 2.30.340(b) of the Municipal Code. Background City of Palo Alto Page 2 An active set of counterparties is essential to ensure that the City of Palo Alto meets its electric supply portfolio objectives and various program needs in a competitive and efficient manner. To those ends, the Council has authorized the City to enter into electric and REC Master Agreements with a number of counterparties to enable the City to purchase and sell electricity, RECs, and related products, subject to specific delegated authorities, limits and internal risk management and purchasing controls. In November 2013, Council authorized the City Manager, or his designee, to buy RECs from thirteen pre-qualified suppliers with whom the City has executed REC Master Agreements (Staff Report 4170, Resolution 9379). The authority granted by that resolution applied to transactions to meet the needs of the PaloAltoGreen program, the City’s renewable portfolio standard (RPS) requirements, and the Carbon Neutral Plan, and was limited to a $5 million annual expenditure limit through 2018. In May 2019, Council approved a six-year extension of this authority—at the same expenditure level but with an updated set of suppliers—to enable the purchase of RECs that may be required to meet the City’s sustainability objectives in a competitive, timely, and cost-effective manner (Staff Report 10024, Resolution 9831). Note that the $5 million annual limit applies to the City’s expenditures to purchase RECs, but there is no corresponding cap on the revenue the City may receive from REC sales. In compliance with the City’s Energy Risk Management Policy, the City does not purchase supplies beyond what is needed to serve forecasted load. But due to the steady erosion of the City’s electric load and an evolution its RPS compliance strategy, the City has recently generated a surplus of RECs that staff wishes to sell. To streamline the process of establishing Master Agreements with potential suppliers, in 2016 Council pre-approved a standard form REC Master Agreement that is publicly available to be executed by suppliers meeting the City’s financial requirements (Staff Report 7428, Resolution 9652). While Section 2.30.340(b) of the Municipal Code permits Council to authorize the City Manager to award and sign contracts with eligible counterparties, in Resolution 9652 staff added an additional step in which each standard form Master Agreement negotiated with a specific supplier would also be presented to Council for approval. Staff now wishes to remove this extra step and simply follow the approval process set forth in Section 2.30.340(b). Discussion Since 2016, when Council authorized the use of a standard form REC Master Agreement that suppliers are able to execute at any time, no suppliers came forward until recently, when the current set of two suppliers did so independently. Therefore, this set of REC Master Agreements will be the first to be executed under the City’s rolling, standard form Master Agreement approval process.1 The two suppliers seeking REC Master Agreements with the City at this time both primarily sell RECs and other environmental commodities (ACT Commodities and RPS Advisors) to utilities and other buyers, although it is possible for the City to sell RECs to 1 Note that the standard form REC Master Agreement that staff seeks approval of in the attached resolution differs slightly from the form of agreement approved by Council in 2016. The non-substantive changes primarily relate to clarifying that the agreement can be used by the City to make purchases and sales of RECs. City of Palo Alto Page 3 them as well under the REC Master Agreements. Transactions allowed under the REC Master Agreements are limited to the purchase and sale of “unbundled” RECs—that is, the renewable energy attribute (the REC) is sold independently from the underlying electrical energy. Note that, as with the City’s other REC Master Agreements, these two will not include individual transaction limits; the only authority limit applicable to these agreements is the annual aggregate purchase limit of $5 million set forth in Resolution 9831. Staff also recommends that Council waive the City’s investment-grade credit rating requirement, which applies to suppliers of electrical wholesale utility commodities per Section 2.30.340(c) of the City’s Municipal Code, for these two counterparties, as well as future REC Master Agreement counterparties. Since the RECs the City purchases under these agreements are always transferred to the City within the year in which they’re purchased, and typically within days of the date of purchase, the City has no long-term exposure to counterparties under these agreements. REC Master Agreements are enabling agreements which prequalify counterparties and establish general terms and conditions under which the City and the supplier will transact and settle transactions. The REC Master Agreement does not commit the City to any transactions. Given this, and the fact that the City has no long-term exposure to counterparties under these agreements, staff also recommends modifying the REC Master Agreement approval process laid out in Recital J of Resolution 9652 such that Council approval of individual REC Master Agreements is no longer required. Council’s prior authorization, in Resolution 9831, to the City Manager to award and sign contracts with eligible counterparties under Section 2.30.340(b) of the Municipal Code would remain effective. Finally, given that Resolution 9831 capped the City’s total purchase authority under all of its REC Master Agreements at $5 million annually and because that authority only extends through 2024, staff recommends that no maximum expenditure limits or transaction terms be established for individual REC Master Agreements. Staff is currently working with the UAC to develop a long-term policy for REC sales, now that it appears the City may be in a position to sell RECs for several years to come. Once such a policy for the sale of RECs is recommended by the UAC and adopted by Council, revenues associated with the REC Master Agreements may be included in Utilities revenue forecasts on a long-term basis. Resource Impact Adoption of the attached resolution has no budgetary impact and will not commit the City to engaging in any transactions with the counterparties mentioned (ACT Commodities or RPS Advisors). However, adoption of the attached resolution will enable the City to proceed with individual transactions with any of the prequalified counterparties. Aggregate transactions executed under these REC Master Agreements will be subject to the previously adopted $5 million maximum annual purchase authority for REC transactions. Potential budget adjustments will be analyzed as part of the annual budget process. City of Palo Alto Page 4 Policy Implications Approval of the attached resolution is consistent with the Council-approved Electric Integrated Resource Plan; supports the Council-approved 2018 Utilities Strategic Plan’s strategy to achieve a sustainable and resilient energy supply; and supports the City’s Sustainability and Climate Action Plan (S/CAP). Environmental Review Adoption of the attached resolution updating the City’s REC Master Agreement template, approving two REC Master Agreements with individual counterparties and modifying the approval process for future REC Master Agreements is not subject to California Environmental Quality Act (CEQA) review, as it is an administrative governmental activity that will not result in any direct or indirect physical change to the environment (CEQA Guidelines section 15378(b)(5)). Attachments: • Attachment A: Resolution Approving Two REC Master Agreements and Modifying the REC Master Agreement Approval Process • Attachment B: Hyperlinked Agreements Attachment A * NOT YET APPROVED * 6055267A Resolution No. _____ Resolution of the Council of the City of Palo Alto Approving an Updated 2019 Standard Form Master Renewable Energy Certificate (REC) Purchase and Sale Agreement, Approving Master REC Agreements with Two Counterparties, and Modifying the Approval Process for Future Individual REC Master Agreements, Thus Amending Section 2 and Recital J of Resolution 9652 RECITALS A. The City of Palo Alto (the “City") provides electricity to residential and commercial customers located within its jurisdictional boundary. B. Implementing the City’s PaloAltoGreen voluntary renewable energy program (the “PAG Program”) and its Carbon Neutral Plan for the electric supply portfolio involves the City’s purchase of renewable energy certificates (“RECs”) to meet retail customer demands for renewable energy products in a competitive manner. C. The City purchases other RECs through long-term power purchase agreements (“PPAs”) to comply with California’s Senate Bill 100 (2018), which requires all load serving entities to have a Renewable Portfolio Standard (RPS) of at least 60 percent by 2030. D. Due to recent declines in its total electrical demand, the City has recently found itself with a surplus of RECs from its PPAs, and thus begun to pursue sales of some RECs. E. In 2013, through Resolution No. 9379, the Council delegated authority to the City Manager, or his designee, to execute purchases and sales of RECs to meet the needs of City’s PAG Program, RPS and Carbon Neutral Plan by negotiating and executing Master Agreements with the following thirteen pre-qualified suppliers, in an aggregate amount not to exceed five million dollars ($5,000,000) annually during calendar years 2013 through 2018, inclusive: 1. 3Degrees Group, Inc. 2. Bonneville Environmental Foundation 3. Constellation Energy Commodities Group 4. EDF Trading North America, LLC 5. Element Markets, LLC 6. Idaho Wind Power Partners 1, LLC 7. Lakeview Green Energy, Inc. 8. Nexant, Inc. 9. NextEra Energy Power Marketing, LLC 10. Pacific Corp. 11. Powerex Corp. 12. Shell Energy North America (US), L.P. 13. Sterling Planet Holdings, Inc. F. In May 2019, through Resolution 9831, the City extended the City Manager’s authority to execute transactions under the Master Renewable Energy Certificate (REC) Purchase Attachment A * NOT YET APPROVED * 6055267A and Sale Agreements through 2024 at the same aggregate expenditure limit ($5,000,000 annually), and repealed Resolution 9379. G. In 2016, through Resolution 9652, the City Council approved a Standard Form Master REC Agreement that is publicly available to be executed by suppliers meeting the City’s financial requirements. H. While Section 2.30.340(b) of the Municipal Code permits Council to authorize the City Manager to award and sign wholesale utility commodity Master Agreements with eligible counterparties, in Recital J of Resolution 9652 staff added an additional step in which each standard form Master Agreement negotiated with a specific supplier would also be presented to Council for approval. Staff now wishes to remove this extra step for REC Master Agreements only, and simply follow the approval process set forth in Section 2.30.340(b). I. Staff also wishes to update the City’s 2016 Standard Form REC Master Agreement approved in Resolution 9652; the updated 2019 agreement clarifies that it may be used to both purchase and sell RECs, and contains useful updates to the REC certification requirements, performance assurance terms, and billing dispute language. J. RECs procured through the City’s REC Master Agreements are always delivered to the City within days or weeks of the transaction, and therefore the City has no long-term exposure to its counterparties under these agreements. K. REC Master Agreements are enabling agreements which prequalify counterparties and establish general terms and conditions under which the City and the supplier will transact and settle transactions; they do not commit the City to any transactions. The Council of the City of Palo Alto does hereby RESOLVE, as follows: SECTION 1. The Council approves the updated 2019 standard form Renewable Energy Certificate Master Purchase and Sale Agreement (the 2019 Agreement with changes shown in redline is attached as Exhibit A, and the 2016 version of the Agreement is attached as Exhibit B), amending Section 2 of Resolution 9652 (Resolution 9652, as amended with changes shown in redline, is attached as Exhibit C) to replace the prior REC Master Agreement approved by Council in 2016; SECTION 2. The Council approves the execution of REC Master Purchase and Sale Agreements using the updated form with ACT Commodities and RPS Advisors, (both of these agreements are attached as Attachments B and C to the Staff Report). SECTION 3. The Council waives the credit rating requirements of Palo Alto Municipal Code Section 2.30.340(c) for the two counterparties listed above, as well as all future REC Master Agreement counterparties executed under the authority granted to the City Manager via Resolution 9831. Attachment A * NOT YET APPROVED * 6055267A SECTION 4. The Council authorizes the City Manager, and/or his/her designee, to transact under REC Master Agreements and to enter into future REC Master Agreements subject to the $5 million maximum annual expenditure levels set forth in Resolution 9831; terms of individual REC Master Agreements may be modified to fit the needs of specific transactions, with approval by the City Attorney’s Office. SECTION 5. The Council amends the approval process for individual REC Master Agreements, amending Recital J of Resolution 9652, such that Council approval of individual REC Master Agreements is no longer required, where the Council has authorized the City Manager to award and sign REC contracts with qualified, eligible counterparties, as described in Section 2.30.340(b) of the Municipal Code. The approval process outlined in Recital J for Standard Form Electric Master Agreements will remain unchanged (Resolution 9652, as amended with changes shown in redline, is attached as Exhibit C). SECTION 6. The Council finds that the adoption of this resolution updating the City’s REC Master Agreement template, approving two REC Master Agreements with individual counterparties and modifying the approval process for future REC Master Agreements is not subject to California Environmental Quality Act (CEQA) review because it is an administrative government activity that will not result in any direct or indirect physical change to the environment (CEQA Guidelines section 15378(b)(5)). 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 Exhibit A {D0387142.DOCX / 1}120110 dm 6051656 1 MASTER RENEWABLE ENERGY CERTIFICATE PURCHASE AND SALE AGREEMENT This Master Renewable Energy Certificate Purchase and Sale Agreement (the “Master Agreement”) is made as of this _____ day of __________, 20 (“Effective Date”), by and between the City of Palo Alto, California, a chartered California municipal corporation with its primary business address at 250 Hamilton Avenue, Palo Alto, California 94301 (“City”) and _______________ with its primary business address at __________________________ ( “Counterparty A”). Counterparty A and City may be referred to in the Master Agreement individually, as a “Party” and/or collectively, as “the Parties.” This Master Agreement, together with Confirmation Letters, Attestation Form, and other exhibits related to REC Transaction(s) shall be referred to as “Agreement(s).” RECITALS: A. The Parties wish to buy and sell RECs (as defined herein) on the terms set forth in this Master Agreement; B. City and Counterparty A wish to enter into this Master Agreement to facilitate future Renewable Energy Certificate (REC) purchases and/or sales; and C. This Master Agreement facilitates, but does not guarantee, Counterparty A’s qualifications with respect to future REC Transactions, and it does not guarantee that the City will enter into any future REC Transactions with the Counterparty A. NOW, THEREFORE, in consideration of the recitals and the covenants, terms and conditions of this Master Agreement, the Parties agree: AGREEMENT: 1. Term and Termination. The term of this Master Agreement shall commence on the Effective Date, as set forth above, and shall remain in effect until terminated. This Master Agreement may be terminated by either Party upon thirty (30) days’ written notice, except that any such termination shall not be effective until all payments, deliveries and other obligations of the Parties under this Master Agreement, and any Confirmation Letters executed there under, have been completed. 2. Definitions. As used in this Master Agreement, the following terms have the respective meanings set forth below, unless the context otherwise clearly indicates. Other capitalized terms are defined elsewhere in this Master Agreement. Exhibit A {D0387142.DOCX / 1}120110 dm 6051656 2 “Administrator” means a state or federal administrator, Certification Authority, Governmental Authority or other body with jurisdiction over Certification under, or the transfer or transferability of Environmental Attributes in, any particular Applicable Standard. “Applicable Law” means all legally binding constitutions, treaties, statutes, laws, ordinances, rules, regulations, orders, interpretations, permits, judgments, decrees, injunctions, writs and orders of any Governmental Authority or arbitrator that apply to the Applicable Standard or any one or both of the Parties or the terms hereof. “Applicable Standard” means a domestic, international or foreign Renewable Portfolio Standard, including a California or Federal Renewable Portfolio Standard, renewable energy, emissions reduction, or Product Reporting Rights program, scheme or organization, adopted by a Governmental Authority or otherwise, other mandatory or voluntary standard or set of rules, or other similar program with respect to which exists a market, registry or reporting for particular Environmental Attributes, as specified in the Confirmation Letter. An Applicable Standard may include any legislation or regulation concerned with renewable energy, oxides of nitrogen, sulfur, or carbon, with particulate matter, soot, or mercury, or implementing the UNFCCC or crediting “early action” with a view thereto, or laws or regulations involving or administered by an Administrator, or under any present or future domestic, international or foreign RECs, Products, Environmental Attributes or emissions trading program. Applicable Standards do not include legislation providing for production tax credits or other direct third-party subsidies for generation by a Renewable Energy Source. “Applicable Tracking System” means the generation information system, generation attribute tracking system, or other system specified in the Confirmation Letter that records generation from the Renewable Energy Facility in a particular geographic region, such as WREGIS. “Attestation Form” means the Green-e Energy Renewable Attestation From Wholesale Provider of Electricity Or RECs specified in the form set forth in Exhibit B to this Master Agreement, or such other form required under the Applicable Standard, which includes a binding declaration by the Seller, which substantiates the accuracy of the RECs and will provide all information required under the Applicable Standard. “Bankrupt” means with respect to any entity, such entity (i) files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or cause of action under any bankruptcy, insolvency, reorganization or similar law, or has any such petition filed or commenced against it, (ii) makes an assignment or any general arrangement for the benefit of creditors, (iii) otherwise becomes bankrupt or insolvent (however evidenced), (iv) has a liquidator, administrator, receiver, trustee, conservator or similar official appointed with respect to it or any substantial portion of its property or assets, or (v) is generally unable to pay its debts as they fall due. Exhibit A {D0387142.DOCX / 1}120110 dm 6051656 3 “Business Day” means any day, except a Saturday, Sunday, or any day observed as a legal holiday by the City. “Buyer” means the Party purchasing RECs in a REC Transaction governed by this Master Agreement. “Certification” means, if applicable, the certification by the Certification Authority of the Applicable Standard of (i) the creation and characteristics of a REC, (ii) the qualification of a Renewable Energy Facility or a Renewable Energy Source under an Applicable Standard, (iii) delivery of a REC, or (iv) other compliance with the requirements of an Applicable Standard. “Certification Authority” means an entity that certifies the generation, characteristics or delivery of a REC, or the qualification of a Renewable Energy Facility or Renewable Energy Source under an Applicable Standard, may include, as applicable, the Administrator, Applicable Tracking System, a Governmental Authority, the Verification Provider, one or both of the Parties, an independent auditor, or other third party, and should include (i) if no Applicable Standard is specified, the Seller, or the generator of the RECs if the Seller is not the generator, (ii) if the RECs are to be delivered pursuant to an Applicable Standard, the Administrator of the Applicable Standard, or such other person or entity specified by the Applicable Standard to perform Certification, or (iii) such other person or entity specified by the Parties. “Certified Renewable Energy Source” means any Renewable Energy Source that is recognized under an Applicable Standard as specified by the Parties. “Confidential Information” is defined in Section 12. “Confirmation Letter” or “Confirm” means the form used by the Parties to effect a REC Transaction in the form of Exhibit A, attached and incorporated by this reference, specifying the terms of such REC Transaction, including the following: (1) any Environmental Attributes not included with Product or Retained by Seller, (2) the quantity to be purchased and sold; (3) the purchase price; (4) the Delivery Deadline; (5) the Applicable Standard; and, (6) if necessary in accordance with the terms of the REC Transaction, (a) the Vintage(s); (b) the Renewable Energy Facility or Facilities from which the Product is to be generated; (c) the Renewable Energy Source and (d) the geography of the Product. The Confirmation Letter constitutes part of, and is subject to, the terms and provisions of this Master Agreement. “Costs” means, with respect to the Non-Defaulting Party, the present value of brokerage fees, commissions, attorneys’ fees, and other similar third party transaction costs and expenses reasonably incurred by such Party either in terminating or replacing any arrangement pursuant to this Master Agreement; as determined by the Non-Defaulting Party in a commercially reasonable manner. Exhibit A {D0387142.DOCX / 1}120110 dm 6051656 4 “Credit Rating” means with respect to a Party, on any date of determination, the lower of its long-term senior unsecured debt rating (not supported by third party credit enhancement) or its issuer rating by the specified rating agency. “Defaulting Party” is defined in Section 6. “Delivery Deadline” means date specified in the Confirmation Letter by which the Seller shall deliver and Buyer shall receive RECs in accordance with an Applicable Standard. . “Environmental Attribute” means an aspect, claim, characteristic, or benefit associated with the generation of a quantity of electricity by a Renewable Energy Facility, other than the Energy produced, and that is capable of being measured, verified or calculated. An Environmental Attribute may include one or more of the following identified with a particular megawatt hour of generation by a Renewable Energy Facility designated prior to Delivery: the Renewable Energy Facility’s use of a particular Renewable Energy Source, avoided Nox, Sox, CO2 or greenhouse gas emissions, avoided water use (but not water rights or other rights or credits obtained pursuant to requirements of Applicable Law in order to site and develop the Renewable Energy Facility itself) or as otherwise defined under an Applicable Standard, or as agreed by the Parties. Environmental Attributes do not include production tax credits or other direct third-party subsidies for generation of electricity by any specified Renewable Energy Facility. “Event of Default” is defined in Section 6. “Force Majeure” is defined in Section 22. “Gains” means, with respect to any Party, an amount equal to the present value of the economic benefit to it, if any (exclusive of Costs), resulting from the termination of a Terminated Transaction, determined by it in a commercially reasonable manner. “Governmental Authority” means any national, federal, provincial, state, municipal, county, regional or local government, administrative, judicial or regulatory entity operating under any Applicable Laws and includes any department, commission, bureau, board, administrative agency or regulatory body of any government. “Green-e” means an independent renewable energy certification and verification program, administered by the Center for Resource Solutions, a Section 501(c)3 nonprofit organization based in San Francisco, California. “Interest Rate” means the prime lending rate published under the heading “Money Rates” in the Wall Street Journal. Exhibit A {D0387142.DOCX / 1}120110 dm 6051656 5 “Losses” means, with respect to any Party, an amount equal to the present value of the economic loss to it, if any (exclusive of Costs), resulting from termination of a Terminated Transaction, determined by it in a commercially reasonable manner. “Party” or “Parties” means City and Counterparty A, individually or collectively, as applicable. “Product” means the RECs to be delivered in a particular Transaction, which may include Environmental Attributes, Verifications, Certifications and other characteristics as specified in a Confirmation Letter. “Product Reporting Rights” means the exclusive right to report sole ownership of the Product to any Certification Authority, Applicable Tracking System, Administrator, Governmental Authority or other party, including under Section 1605(b) of the Energy Policy Act of 1992, or under any present or future Applicable Standard. “REC Transaction” means a particular, specific transaction to purchase RECs agreed upon between the Parties as specified in a Confirmation Letter. “REC Transaction Date” means the date specified on the Confirmation Letter. “Renewable Energy Certificates” (“REC”) means a certificate, credit, allowance, green tag, Tradable Renewable Certificate (“TRC”) or other transferable document, which is created by an Applicable Standard or a Certification Authority and is associated with the generation of one (1) megawatt hour (“MWh”) of electricity from one or more Renewable Energy Sources by a Renewable Energy Facility. A REC shall include all Environmental Attributes associated with the generation of such electricity, unless specified otherwise in a Confirmation Letter and in accordance with the Applicable Standard, as well as all related Product Reporting Rights, and shall be verified or certified by a Verification Provider or Certification Authority, in accordance with the Applicable Standard. Such Environmental Attributes may be disaggregated and retained, or sold separately, as the Parties agree. A REC is separate from the energy produced and may be separately transferred or conveyed. “Renewable Energy Facility” means an electric generation unit or other facility or installation that produces electric energy using a Renewable Energy Source. “Renewable Energy Source” means an energy source that is not fossil carbon-based, non-renewable or radioactive, and may include solar, wind, biomass, geothermal, landfill, gas, or wave, tidal and thermal ocean technologies. “Renewable Portfolio Standard” or “RPS” means a state or federal law, rule or regulation that requires a stated amount or minimum proportion or quantity of electricity that is sold or used by specified persons to be generated from Renewable Energy Sources. Exhibit A {D0387142.DOCX / 1}120110 dm 6051656 6 “Seller” means the Party selling RECs in a REC Transaction governed by this Master Agreement. “Settlement Amount” means the Losses or Gains, and Costs which the Non-Defaulting Party incurs as a result of the liquidation of a Terminated Transaction pursuant to Section 7. “Terminated Transaction” is defined in Section 7. “Verification Provider” means an entity that could be an entity other than the Certification Authority, but could also be the Certification Authority, that verifies or audits specified aspects of Products, RECs, or one or more specified Environmental Attributes. “Vintage” means the calendar year, quarter, or other specified period of time in which the energy associated with the REC was generated. “WECC” means Western Electricity Coordinating Council, the western regional council of the North American Electric Reliability Corporation (NERC). “WREGIS” means the Western Renewable Energy Generation Information System, an independent, renewable energy tracking system for the region covered by the Western Electricity Coordinating Council (WECC). 3. REC Transactions. (a) Purchase and Sale: On the terms and subject to the conditions set forth in this Master Agreement, Seller agrees to sell, and Buyer agrees to purchase, all of Seller's rights, title and interest in and to the RECs to be provided on the dates and otherwise as set forth on any Confirmation Letter(s) now, or hereafter, entered into between the Parties (Exhibit A, attached and incorporated by this reference). (b) Delivery Obligations: As specified in the applicable Confirmation Letter, one of the following delivery obligations (“Delivery Obligation”) shall apply to each Product quantity to be delivered under each REC Transaction: If the Confirmation Letter provides that the RECs delivery obligation is: (i) “Firm” Seller shall deliver the RECs by the Delivery Deadline, and no ground for excuse other than Force Majeure shall apply; Exhibit A {D0387142.DOCX / 1}120110 dm 6051656 7 (ii) “Unit Contingent” Seller’s obligation to deliver the RECs will be excused to the extent the Renewable Energy Facility is not able to generate Environmental Attributes in the Vintage or other agreed-to time period as specified in the Confirmation Letter, (due to the performance of the Renewable Energy Facility); or (iii) “Project Contingent” Seller’s obligation to deliver the RECs will be excused to the extent the Renewable Energy Facility is not able to generate Environmental Attributes in the Vintage or other agreed-to time period as specified in the Confirmation Letter, due to a delay or failure in constructing or obtaining necessary approvals to construct or modify and operate the new or modified Renewable Energy Facility, or due to reasons as specified in the Confirmation Letter. (c) Right to Sell and Associated Declarations. With respect to each REC Transaction, Seller hereby represents and warrants to Buyer, upon Delivery for each Product, the following: (i) Seller has exclusive rights to, good and marketable title to, and unencumbered interest in, the Product described in each REC Transaction under Applicable Law; and (ii) Seller transfers and sells to Buyer all present and future rights, title, and unencumbered interest of Seller in and to the Environmental Attributes (as discussed in the Confirmation Letter) to the extent Seller will have such rights, title, and interest in and to such RECs under Applicable Law and such transfer and sale to Buyer is not in violation of any Applicable Law at the time of execution of the Confirmation Letter. (d) Notwithstanding whether such RECs are transferable to Seller under any Applicable Law, with respect to each REC Transaction upon Delivery for each Product, Seller covenants to Buyer that: (i) Seller has not transferred, and will not transfer, any portion of the rights, title and interest in and to the Product to a third party; (ii) Product will not be sold, marketed, or otherwise claimed by Seller; (iii) Product delivered to Buyer shall be sold by Seller once and only once; (iv) The Environmental Attributes or the electricity that was generated with the attributes were not used to meet any federal, state or local Exhibit A {D0387142.DOCX / 1}120110 dm 6051656 8 renewable energy requirement, renewable energy procurement, Renewable Portfolio Standard, or other renewable energy mandate; and (v) The electricity that was generated with the attributes was not separately sold, separately marketed or otherwise separately represented as renewable energy by Seller. Seller shall take such action as may be necessary to transfer and evidence the transfer of RECs to Buyer. (e) Confirmation. Unless otherwise agreed in writing, Seller will send Buyer a Confirmation Letter, which may be in substantially the form attached hereto as Exhibit A, or as modified, to describe the specific RECs to be purchased in the REC Transaction. Upon receipt of such Confirmation Letter, the other Party shall promptly return, in the manner described in Section 11, “Notices”, a written acceptance thereof, which shall be a signed copy of the Confirmation Letter. (f) REC Contract Price. Buyer agrees to buy and Seller agrees to sell each REC at a price in dollars per MWh as set forth in the Confirmation Letter. (g) REC Product Quantity. Seller will provide to Buyer RECs in the quantity as set forth in the Confirmation Letter in accordance with the specified Delivery Obligation. (h) Monetary Value of REC Transactions. The monetary value of each REC Transaction will be set forth in the Confirmation Letter associated with that Transaction. (i) Certification. Seller represents and warrants that it will provide to Buyer RECs that meet or exceed the Applicable Standard as set forth in the Confirmation Letter. (j) Reporting. (i) If required under the Applicable Standard, Seller shall be obligated to complete and provide to Buyer a signed copy of the Attestation Form, or City-approved equivalent substitute, no later than the Delivery Deadline, as specified in the Confirmation Letter. (ii) Buyer is not obligated to pay Seller for any RECs which have not been delivered. Exhibit A {D0387142.DOCX / 1}120110 dm 6051656 9 (k) Applicable Tracking System. If specified in the Confirmation Letter, Seller shall deliver to Buyer, and Buyer shall receive, the RECs by the Delivery Deadline via the Applicable Tracking System (or other mechanism provided for in the Confirmation Letter), such as WREGIS, such that all rights, title to and interest in the RECs shall transfer from Seller to Buyer upon such delivery and in accordance with the rules of the Applicable Tracking System. 4. Financial and Performance Assurances. (a) Material Adverse Change. A “Material Adverse Change” occurs with respect to either Party if: reasonable grounds exist to cause a Party to belief that the creditworthiness of the other Party has become unsatisfactory or that a Party’s ability to perform under this Master Agreement has been materially impaired. (b) Adequate Assurances. If a Party believes that a Material Adverse Change has occurred, the dissatisfied Party (the “First Party”) may make a written request for the other Party (the “Second Party”) to provide adequate assurance in an amount determined in a commercially reasonable manner, and in a form acceptable to the First Party (“Performance Assurance”). The sum total of all Performance Assurance that the First Party may request from the Second Party under this Master Agreement shall not exceed the value of the Termination Payment that would be owed to the First Party had an Early Termination Date occurred on the date of such request. Acceptable Performance Assurance includes cash, an irrevocable standby letter of credit, a prepayment or such other acceptable security acceptable to the First Party, in its sole discretion. Upon receipt of the request to provide adequate assurance, the Second Party shall have five (5) Business Days to provide such Performance Assurance before an Event of Default under Section 6 of this Master Agreement will be deemed to have occurred and the First Party will be entitled to the remedies set forth in Section 7. If the Second Party provides such Performance Assurance to the First Party within five (5) Business Days, it is understood that the Second Party shall not in fact have defaulted under this Master Agreement by incurring a Material Adverse Change. 5. Billing and Terms of Payment. (a) Billing. Upon each delivery of RECs, Seller shall provide an invoice to Buyer in the amount applicable to each REC Transaction executed under the Confirmation Letter. Exhibit A {D0387142.DOCX / 1}120110 dm 6051656 10 (b) Terms of Payment. The terms of payment shall be net thirty (30) days after the date Buyer receives a properly prepared and accurate invoice sent to the Buyer’s address, which shall include at a minimum: (1) Seller’s complete name and address where payment is to be remitted; (2) Buyer’s complete name and address where bill is to be sent; (3) Price and billing units consistent with the Confirmation Letter(s) executed by the Parties; (4) quantity; (5) Attestation, if required, will be delivered with invoice; (6) invoice date; (7) total monetary amount; (8) terms of payment, including any applicable discount calculations; (9) tax amount/rate information, if applicable. (c) Payment may be made by check or wire transfer. Payment by check shall be considered made when received by Seller. City agrees to send its payment to: Address: _____________________ Attention: _____________________ Wiring instructions: Counterparty A agrees to send its payment to: Address: 250 Hamilton Ave., Palo Alto, CA 94301 Attention: _____________________ Wiring instructions: (d) Disputes and Adjustments of Invoices. A Party may, in good faith, dispute the correctness of any invoice or any adjustment to an invoice, rendered under this Agreement or adjust any invoice for any arithmetic or computational error within twelve (12) months of the date the invoice, or adjustment to an invoice, was rendered. In the event an invoice or portion thereof is disputed, payment of the undisputed portion of the invoice shall be required to be made when due, with notice of the objection given to the other Party. Any invoice dispute or invoice adjustment shall be in writing and shall state the basis for the dispute or adjustment. Payment of the disputed amount shall not be required until the dispute is resolved. Upon resolution of the dispute, any required payment Exhibit A {D0387142.DOCX / 1}120110 dm 6051656 11 shall be made within two (2) Business Days of such resolution. Inadvertent overpayments shall be returned upon request or deducted by the Party receiving such overpayment from subsequent payments. Any dispute with respect to an invoice is waived unless the other Party is notified in accordance with this Section 5(d) within twelve (12) months after the invoice is rendered or any specific adjustment to the invoice is made. If an invoice is not rendered within twelve (12) months after the close of the month during which performance of a REC Transaction occurred, the right to payment for such performance is waived. 6. Events of Default. A Party is in default (“Default”) hereunder if that Party (the “Defaulting Party”) does any of the following (each an “Event of Default”): (a) the failure of the Buyer to make any payment required pursuant to this Master Agreement, if such failure is not remedied within fifteen (15) Business Days after written notice, provided that if the Buyer, in good faith, disputes all or any portion of the payment, the Buyer shall pay only that portion of the payment that it does not dispute; (b) the failure of the Seller to deliver RECs when due pursuant to this Master Agreement, if such failure is not remedied within five (5) Business Days after written notice to the affected Party; (c) any representation or warranty provided by either Party herein that shall prove to have been false or misleading in any material respect when made or repeated; (d) the failure by a Party to perform any covenant or agreement set forth in this Master Agreement and applicable Confirmation Letters and incorporated exhibits (other than its obligations to make any payment or obligations which are otherwise specifically covered as a separate Event of Default), and such failure is not cured within fifteen (15) Business Days after written notice thereof to the affected Party; (e) the Party becomes Bankrupt; or (f) the failure by a Party to provide timely and satisfactory financial and/or performance assurance when requested to do so under the terms of this Master Agreement, and such failure is not cured within five (5) Business Days after written notice thereof to the affected Party. Exhibit A {D0387142.DOCX / 1}120110 dm 6051656 12 7. Remedies for Default. (a) Declaration of Early Termination Date and Calculation of Settlement Amounts. If an Event of Default with respect to a Defaulting Party occurs and is continuing, the other Party (the “Non-Defaulting Party”) will have the right to do any or all of the following: (i) designate a day, no earlier than the day such notice is effective and no later than 20 days after such notice is effective, as an early termination date (“Early Termination Date”) to accelerate all amounts owing between the Parties and to liquidate and terminate all, but not less than all, REC Transactions (each referred to as a “Terminated Transaction”) between the Parties; (ii) withhold any payments due to the Defaulting Party under this Master Agreement; and (iii) suspend performance. (b) Calculation of Settlement Amounts. The Non-Defaulting Party will calculate, in a commercially reasonable manner, a Settlement Amount for each such Terminated Transaction as of the Early Termination Date by aggregating its Gains, Losses and Costs with respect to each such Terminated Transaction (or, to the extent that in the reasonable opinion of the Non-Defaulting Party certain of such Terminated Transactions are commercially impracticable to liquidate and terminate or may not be liquidated and terminated under Applicable Law on the Early Termination Date, as soon thereafter as is reasonably practicable). If the Non-Defaulting Party’s aggregate Gains exceed its aggregate Losses and Costs, if any, resulting from the termination of this Master Agreement, the settlement amount shall be zero, notwithstanding any provision of this Master Agreement to the contrary. (c) Net Out of Settlement Amounts. The Non-Defaulting Party will aggregate all Settlement Amounts into a single amount by netting out the following: (i) all amounts that are due to the Defaulting Party, if the Defaulting Party is Seller, for RECs that have been delivered and not yet paid for, plus, at the option of the Non-Defaulting Party, any or all other amounts due to the Defaulting Party under this Master Agreement; against Exhibit A {D0387142.DOCX / 1}120110 dm 6051656 13 (ii) all Settlement Amounts that are due to the Non-Defaulting Party under this Master Agreement, so that all such amounts will be netted out to a single liquidated amount (the “Termination Payment”) payable by the Non-Defaulting Party. The Termination Payment, if any, is due from the Defaulting Party to the Non-Defaulting Party within five (5) Business Days following notice. (d) Calculation Disputes. If the Defaulting Party disputes the Non-Defaulting Party’s calculation of the Settlement Amount or Termination Payment, in whole or in part, the Defaulting Party will, within five (5) Business Days of receipt of the Non-Defaulting Party’s calculation, provide the Non- Defaulting Party a detailed written explanation of the basis for such dispute. (e) Limitation on Damages. The Defaulting Party’s liability will be limited to direct, actual damages, and Costs only, and such direct, actual damages, and Costs will be the sole and exclusive remedy hereunder. In no event will either Party be liable to the other under this Master Agreement for any consequential, incidental, punitive, exemplary, or indirect damages in tort, contract, or otherwise pursuant to this Section 7, except for any claims indemnified pursuant to Section 8. (f) Exclusive Remedy. THE REMEDIES SET FORTH IN THIS SECTION ARE THE SOLE AND EXCLUSIVE REMEDIES AVAILABLE TO THE NONDEFAULTING PARTY IN THE EVENT OF A PARTY’S DEFAULT WITH RESPECT TO ITS OBLIGATIONS TO SELL OR PURCHASE RECS, AND A PARTY’S LIABILITY SHALL BE LIMITED AS SET FORTH IN THIS SECTION. ALL OTHER REMEDIES OR DAMAGES FOR FAILURE TO SELL OR PURCHASE RECS AT LAW ARE HEREBY WAIVED. 8. Indemnification. (a) Indemnification of City: To the fullest extent permitted by Applicable Law, Counterparty A agrees to protect, defend, hold harmless and indemnify City, its City Council, commissioners, officers, employees, volunteers and agents from and against any claim, injury, liability, loss, cost, and/or expense or damage, including all costs and reasonable attorney’s fees in providing a defense to any claim arising therefrom, for which City shall become liable arising from Counterparty A’s acts, errors, or omissions with respect to or in any way connected with the maintenance, assistance and services performed by Counterparty A pursuant to this Master Agreement and subsequent REC Exhibit A {D0387142.DOCX / 1}120110 dm 6051656 14 Transactions and related Confirmation Letters, except for claims, liabilities and damages caused by the City’s sole negligence or willful misconduct. (b) Indemnification of Counterparty A: To the fullest extent permitted by Applicable Law, City agrees to protect, defend, hold harmless and indemnify Counterparty A, its board of directors, officers, employees and agents from and against any claim, injury, liability, loss, cost, and/or expense or damage, including all costs and reasonable attorney’s fees in providing a defense to any claim arising therefrom, for which Counterparty A shall become liable arising from City’s negligent, reckless or wrongful acts, errors, or omissions with respect to or in any way connected with the maintenance, assistance and services performed by City pursuant to this Master Agreement and subsequent and related Confirmation Letters, except for claims, liabilities and damages caused by the Counterparty A’s comparative negligence or willful misconduct. 9. Relationship of the Parties. The relationship of the Parties under this Master Agreement is that of independent contractors. The Parties specifically state their intention that this Master Agreement is not intended to create a partnership or any other co-owned enterprise unless specifically agreed to by the Parties in a separate written instrument. Except as specifically provided herein, each Party shall continue to have the right to contract independent of the other Party with individuals and entities. Each Party shall be responsible for its own operating expenses and personnel expenses. 10. Taxes and Costs. Unless otherwise specified in the applicable Confirmation Letter (and to the extent not included in the purchase price), each Party shall bear the cost of any taxes imposed on such Party in relation to or arising out of such REC Transaction. Each Party shall be liable for all costs, fees, commissions or other payments due to brokers, agents or other intermediaries incurred by such Party (and shall indemnify and hold the other Party harmless from and against all such amounts) in connection with the drafting, consummation or performance of this Master Agreement or any REC Transaction hereunder. 11. Notices. All notices required or permitted to be given hereunder in writing shall, unless expressly provided otherwise, be in writing, properly addressed, postage pre-paid and delivered by hand, facsimile, certified or registered mail, courier or electronic Exhibit A {D0387142.DOCX / 1}120110 dm 6051656 15 messaging system to the appropriate address as either Party may designate from time to time by providing notice thereof to the other Party. If to City: Address: 250 Hamilton Ave. Palo Alto, CA 94301 Attention: City Clerk Phone: (650) 329-2571 Fax: (650) 328-3631 With a copy to: Address: 250 Hamilton Ave. Palo Alto, CA 94301 Attention: Director of Utilities Phone: (650) 329-2277 Fax: (650) 329-2154 If to Counterparty A: Address: Attention: Phone: Fax: Notices delivered by facsimile or by an electronic messaging system shall require confirmation through a reply facsimile or electronic message. 12. Confidential Information. (a) “Confidential Information” shall mean and include information consisting of documents and materials of a disclosing Party and/or any other technical, financial or business information of or about a disclosing Party which is not available to the general public, as well as all information derived from such information, which is furnished or made available to the other Party and is clearly labeled, marked or otherwise identified as “confidential” or “proprietary information.” (b) The disclosing Party is the Party to whom the Confidential Information originally belongs and who shall, after appropriate notice from the receiving Party, bear the burden of pursuing any legal remedies to retain the confidential status of the Confidential Information, as set forth in Section 12(e), below. (c) Confidential Information disclosed by either Party to the other shall be held by the receiving Party in confidence, and shall not be: (i) used by the recipient to the detriment of the disclosing Party; or (ii) made available for third parties to use. Exhibit A {D0387142.DOCX / 1}120110 dm 6051656 16 (d) Each Party will direct its employees, contractors, consultants and representatives who have access to any Confidential Information to comply with all the terms of this Section. Information received by the receiving Party shall not be Confidential Information if: (i) it is or becomes available to the public through no wrongful act of the receiving Party; (ii) it is already in the possession of the receiving Party and not subject to any confidentially agreement between the Parties; (iii) it is received from a third party without restriction for the benefit of the disclosing Party and without breach of this Master Agreement; (iv) it is independently developed by the receiving Party; or (v) it is disclosed pursuant to a requirement of law or a duly empowered government agency or a court of competent jurisdiction after due notice and an adequate opportunity to intervene is given to the disclosing Party, unless such notice is prohibited. (e) Counterparty A acknowledges that City is a public agency and is subject to the requirements of the California Public Records Act Cal. Gov. Code section 6250 et seq. Counterparty A may submit Confidential Information to City pursuant to Section 12(a), above and City will maintain such identified documents as confidential to the fullest ext extent allowed by law. However, upon request or demand from any third person or entity not a party to this Master Agreement (“Requestor”) for production, inspection and/or copying of information designated by a disclosing Party as Confidential Information, the receiving Party shall notify the disclosing Party that such request has been made in accordance with Section 11 of this Master Agreement. Upon receipt of this notice, the disclosing Party shall be solely responsible for taking whatever legal steps may be necessary to protect the information deemed by it to be Confidential Information and to prevent release of information to the Requestor by the receiving Party. If within ten (10) days after receiving the foregoing notice from the receiving Party, the disclosing Party takes no such action, the receiving Party shall be permitted to comply with the Requestor’s demand and is not required to defend against it. (f) Upon termination or expiration of this Master Agreement, the receiving Party shall, at the disclosing Party’s direction, either return or destroy all of the disclosing Party’s Confidential Information and so certify in writing. The obligations of this provision will survive for one (1) year after any termination or expiration of this Master Agreement. 13. Publicity and Disclosure. Exhibit A {D0387142.DOCX / 1}120110 dm 6051656 17 Counterparty A shall not use the name, trade name, trademarks, service marks of or owned by City, or logos of City, or share Confidential Information in any publicity releases, news releases, annual reports, product packaging, signage, stationery, print literature, advertising, websites or other media without securing the prior written approval of City. Counterparty A shall not, without prior written consent of City, represent, directly or indirectly, that any product or service offered by Counterparty A has been approved or endorsed by City. Counterparty A agrees that City may make oral and written reports and other communications regarding this Master Agreement and subsequent REC Transactions to the Palo Alto City Manager, City Council and other public officials as required by law, which reports and communications will be public reports and communications. 14. Nondiscrimination. As set forth in Palo Alto Municipal Code section 2.30.510, Counterparty A agrees that in the performance of this Master Agreement, it shall not discriminate in the employment of any person because of the race, skin color, gender, age, religion, disability, national origin, ancestry, sexual orientation, housing status, marital status, familial status, weight or height of such person. Counterparty A acknowledges that it has read and understands the provisions of Chapter 2.30 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and agrees to meet all requirements of Chapter 2.30 pertaining to nondiscrimination in employment, including completing the form furnished by City and set forth in Exhibit C. 15. Miscellaneous Representations and Warranties. (a) Each Party represents and warrants that the execution and performance of this Master Agreement and subsequent REC Transactions will not conflict with or result in a breach of any other agreement to which it is a party. (b) Each Party represents and warrants that it is duly organized, validly existing and in good standing under the laws of a state of the United States of America. (c) Each Party represents and warrants that it has full power and authority to make, execute, deliver and perform this Master Agreement and subsequent REC Transactions. (d) Each Party represents and warrants that it will abide by the Applicable Program as specified in each Confirmation Letter. (e) Each Party represents and warrants that it will abide by the Green-e Standard v. 1.5 or as amended when applicable. Exhibit A {D0387142.DOCX / 1}120110 dm 6051656 18 16. Choice of Law. The laws of the State of California shall be applied and be controlling for all purposes and all matters relating to the Master Agreement. In the event that an action is brought, the Parties agree that trial of such action will be vested exclusively in the United States District Court for the Northern District of California in the County of Santa Clara, State of California. 17. Entire Agreement. This Master Agreement constitutes the entire agreement between the Parties relating to the subject matter hereof and supersedes all prior agreements, understandings, negotiations, whether oral or written, of the Parties. 18. Amendments. Except to the extent herein provided, no amendment, supplement, modification, termination or waiver of this Master Agreement shall be enforceable unless executed in writing by the Party to be bound thereby. 19. Assignment. This Master Agreement is binding on any successors and assigns of the Parties. Neither Party may otherwise transfer or assign this Master Agreement, in whole or in part, without the other Party’s written consent. Such consent shall not be unreasonably withheld. 20 Non-Waiver; No Third Party Beneficiaries. No waiver by any Party of any of its rights with respect to the other Party or with respect to this Master Agreement or any matter or default arising in connection with this Master Agreement, shall be construed as a waiver of any other right, matter or default. Any waiver shall be in writing signed by the waiving Party. No payment, partial payment, acceptance or partial acceptance by City will operate as a waiver on the part of the City of any of its rights under the Master Agreement. This Master Agreement and subsequent Confirmation Letters related to REC Transaction are made and entered into for the sole benefit of the Parties, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, have any rights under, or have any direct or indirect cause of action or claim in connection with this Master Agreement. 21. Severability. In the event that any provision of the Master Agreement is found to be void or unenforceable, such findings shall not be construed to render any other provision of the Master Agreement Exhibit A {D0387142.DOCX / 1}120110 dm 6051656 19 either void or unenforceable, and all other provisions shall remain in full force and effect unless the provisions which are void or unenforceable shall substantially affect the rights or obligations granted to or undertaken by either Party. 22. Force Majeure. Neither Party shall be liable in any respect for failure or delay in the fulfillment or performance of REC Transactions under this Master Agreement, if performance is hindered or prevented, directly or indirectly by an event beyond the reasonable control of either Party, including, without limitation, war, public emergency or calamity, fire, earthquake, Acts of God, strikes, labor disturbance or actions, civil disturbances or riots, litigation brought by third parties against the Parties, or any act of a superior governmental authority or court order. Force Majeure may not be based on (i) Seller’s ability to sell RECs to another at a price greater than the purchase price specified in the Confirmation Letter, (ii) Buyer’s inability economically to use or resell the RECs, or (iii) Buyer’s ability to purchase RECs at a price less than the purchase price specified in the Confirmation Letter. 23. Exhibits and Insurance. The exhibits attached hereto are incorporated into this Master Agreement by reference. The exhibits may only be revised upon mutual agreement between the Parties unless otherwise specified in the exhibits. In the event of a conflict between this Master Agreement and the Confirmation Letter, the terms of the Confirmation Letter shall prevail. During the term of this Master Agreement, Counterparty A shall maintain the insurance levels set forth on Exhibit D. 24. Compliance with Law. Each Party will comply with all lawful federal, state and local law, ordinances, resolutions, rate schedules, rules and regulations that may affect its rights and obligations under the Master Agreement. 25. Fiscal Provisions. The REC Transactions under this Master Agreement are subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. The Master Agreement and all related Confirmation Letters and Agreements will terminate without penalty (i) at the end of any fiscal year in the event that funds are not appropriated for the following fiscal year, or (ii) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal years and funds for the City’s obligations are no longer made available. This provision will take precedence in the event of a conflict with any other term or condition of the Master Agreement. Exhibit A {D0387142.DOCX / 1}120110 dm 6051656 20 IN WITNESS WHEREOF, each of the Parties hereto acknowledge that they have read the terms and conditions contained herein, understand and agree to the same and agree to be bound thereby and have caused this Master Agreement to be executed in duplicate originals by its duly authorized representative on the respective dates entered below. CITY OF PALO ALTO (“CITY”) __________________________ City Manager APPROVED AS TO FORM: __________________________ Senior Deputy City Attorney APPROVED: __________________________ Director of Administrative Services __________________________ Director of Utilities XXXX (“Counterparty A”) By: __________________________ Name: Title: Taxpayer Identification No. Attachment A to 2019 REC Master Agreement 191009 dm 6051582 Confirmation Letter #1 The following describes a REC Transaction between City and Counterparty A for the sale, purchase and delivery of Renewable Energy Certificates (“RECs”) pursuant to the terms of the REC Master Agreement between the City of Palo Alto and Counterparty A dated ___________, 20__. Initially capitalized terms used and not otherwise defined herein are defined in the Master Agreement. Basic Commercial Terms: REC Transaction Date: REC Transaction Reference: Seller: Buyer: Renewable Resource Facility: Renewable Energy Source: Geography: Vintage(s): REC Product Quantity (MWh): REC Contract Price ($/MWh): Monetary Value of REC Transaction ($): Delivery Deadline: Product Specific Terms: Applicable Standard: Environmental Attributes retained by Seller, if any: Applicable Tracking System: Attestation Form Required [yes, no] Delivery Obligation [Firm, Unit Contingent, Project Contingent]: This Confirmation Letter is executed pursuant to and in accordance with the Master Agreement, and constitutes part of and is subject to the terms and provisions of the Master Agreement. The Parties agree to the REC Transaction set forth herein. XXXX (“Buyer”) XXXX (“Seller”) Signature Signature Name Name Title Title Date Date Attachment B to 2019 REC Master Agreement 191009 dm 6051582 Certification of Nondiscrimination As suppliers of goods or services to the City of Palo Alto, the firm and individuals listed below certify that they do not and will not during the course of this contract discriminate in the employment of any person because of race, skin color, gender, age, religion, disability, national origin, ancestry, sexual orientation, housing status, marital status, familial status, weight or height of such person and that they are in compliance with all Federal, State and local directives and executive orders regarding nondiscrimination in employment. THE INFORMATION HEREIN IS CERTIFIED CORRECT BY SIGNATURE(S) BELOW. Authorized Signature:____________________________________________________ Date: _____________________ 120110 dm 6051656 1 Attachment C to 2019 REC Master Agreement Insurance Requirements Counterparty A shall maintain the level of insurance set forth below: CONTRACTORS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, SHALL FOR THE TERM OF THE CONTRACT OBTAIN AND MAINTAIAN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW, AFFORDED BY COMPANIES WITH AM BEST’S KEY RATING OF A-:VII, OR HIGHER, AUTHORIZED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF CALIFORNIA. AWARD IS CONTINGENT ON COMPLIANCE WITH CITY’S INSURANCE REQUIREMENTS, AS SPECIFIED, BELOW: REQUIRED TYPE OF COVERAGE REQUIREMENT MINIMUM LIMITS EACH OCCURRENCE AGGREGATE YES WORKER’S COMPENSATION YES EMPLOYER’S LIABILITY STATUTORY STATUTORY YES GENERAL LIABILITY, INCLUDING PERSONAL INJURY, BROAD FORM PROPERTY DAMAGE BLANKET CONTRACTUAL, AND FIRE LEGAL LIABILITY BODILY INJURY PROPERTY DAMAGE BODILY INJURY & PROPERTY DAMAGE COMBINED. $5,000,000 $5,000,000 $10,000,000 $5,000,000 $5,000,000 $10,000,000 BODILY INJURY $1,000,000 $1,000,000 - EACH PERSON $1,000,000 $1,000,000 YES AUTOMOBILE LIABILITY, INCLUDING - EACH OCCURRENCE $1,000,000 $1,000,000 ALL OWNED, HIRED, NON-OWNED PROPERTY DAMAGE $1,000,000 $1,000,000 BODILY INJURY AND PROPERTY $1,000,000 $1,000,000 DAMAGE, COMBINED YES PROFESSIONAL LIABILITY, INCLUDING, ERRORS AND OMISSIONS, MALPRACTICE (WHEN APPLICABLE), AND NEGLIGENT PERFORMANCE ALL DAMAGES $5,000,000 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. 120110 dm 6051656 2 Attachment C to 2019 REC Master Agreement B. CROSS LIABILITY THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS POLICY. C. NOTICE OF CANCELLATION I. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON OTHER THAN THE NON-PAYMENT OF PREMIUM, THE CONTRACTOR SHALL PROVIDE CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION. II. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON-PAYMENT OF PREMIUM, THE CONTRACTOR 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 120110 dm 6051656 1 Exhibit B MASTER RENEWABLE ENERGY CERTIFICATE PURCHASE AND SALE AGREEMENT This Master Renewable Energy Certificate Purchase and Sale Agreement (the “Master Agreement”) is made as of this _____ day of __________, 2016 (“Effective Date”), by and between the City of Palo Alto, California, a chartered California municipal corporation with its primary business address at 250 Hamilton Avenue, Palo Alto California 94301 (“City” or “Buyer”) and ____________________, with its primary business address at _________________(“Seller”). Seller and Buyer may be referred to in the Master Agreement individually, as a “Party” and/or collectively, as “the Parties”. This Master Agreement, together with Confirmation Letters, Attestation Form, and other exhibits related to REC Transaction(s) shall be referred to as “Agreement(s).” RECITALS: A. The Parties wish to buy and sell RECs (as defined herein) on the terms set forth in this Master Agreement; B. Buyer wishes to enter into this Master Agreement with Seller to facilitate future Renewable Energy Certificate (REC) purchases to manage various customer programs administered by the Buyer; C. Seller has access to RECs from Renewable Energy Facilities and wishes to enter into this Master Agreement with Buyer to participate in the future REC Transactions that the City may undertake from time to time; and D. This Master Agreement facilitates, but does not guarantee, Seller’s qualifications to competitively participate with other sellers in future REC Transactions, and it does not guarantee that the City will enter into any future REC Transactions with the Seller. NOW, THEREFORE, in consideration of the recitals and the covenants, terms and conditions of this Master Agreement, the Parties agree: AGREEMENT: 1. Term and Termination. The term of this Master Agreement shall commence on the Effective Date, as set forth above, and shall remain in effect until terminated. This Master Agreement may be terminated by either Party upon thirty (30) days’ written notice, except that any such termination shall not be effective until all payments, deliveries and other obligations of the Parties under this Master Agreement, and any Confirmation Letters executed thereunder, have been completed. 2. Definitions. As used in this Master Agreement, the following terms have the respective meanings set forth below, unless the context otherwise clearly indicates. Other capitalized terms are defined elsewhere in this Master Agreement. 120110 dm 6051656 2 Exhibit B “Administrator” means a state or federal administrator, such as the Clean Air Markets Division of the Environmental Protection Agency, Applicable Tracking System, Certification Authority, if applicable, and any Governmental Authority or other body with jurisdiction over Certification under, or the transfer or transferability of Environmental Attributes in, any particular Applicable Standard. “Applicable Law” means all legally binding constitutions, treaties, statutes, laws, ordinances, rules, regulations, orders, interpretations, permits, judgments, decrees, injunctions, writs and orders of any Governmental Authority or arbitrator that apply to the Applicable Standard or any one or both of the Parties or the terms hereof. “Applicable Standard” means a domestic, international or foreign Renewable Portfolio Standard, including a California or Federal Renewable Portfolio Standard, renewable energy, emissions reduction, or Product Reporting Rights program, scheme or organization, adopted by a Governmental Authority or otherwise, other mandatory or voluntary standard or set of rules, or other similar program with respect to which exists a market, registry or reporting for particular Environmental Attributes, as specified in the Confirmation Letter. An Applicable Standard may include any legislation or regulation concerned with renewable energy, oxides of nitrogen, sulfur, or carbon, with particulate matter, soot, or mercury, or implementing the UNFCCC or crediting “early action” with a view thereto, or laws or regulations involving or administered by an Administrator, or under any present or future domestic, international or foreign RECs, Products, Environmental Attributes or emissions trading program. Applicable Standards do not include legislation providing for production tax credits or other direct third- party subsidies for generation by a Renewable Energy Source. “Applicable Tracking System” means the generation information system, generation attribute tracking system, or other system specified in the Confirmation Letter that records generation from the Renewable Energy Facility in a particular geographic region, such as WREGIS. “Attestation Form” means the Green-e Energy Renewable Attestation From Wholesale Provider of Electricity Or RECs specified in the form set forth in Exhibit B to this Master Agreement, or such other form required under the Applicable Standard, which includes a binding declaration by the Seller, which substantiates the accuracy of the RECs and will provide all information required under the Applicable Standard. “Bankrupt” means with respect to any entity, such entity (i) files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or cause of action under any bankruptcy, insolvency, reorganization or similar law, or has any such petition filed or commenced against it, (ii) makes an assignment or any general arrangement for the benefit of creditors, (iii) otherwise becomes bankrupt or insolvent (however evidenced), (iv) has a liquidator, administrator, receiver, trustee, conservator or similar official appointed with respect to it or any substantial portion of its property or assets, or (v) is generally unable to pay its debts as they fall due. “Business Day” means any day, except a Saturday, Sunday, or any day observed as a legal holiday by the City. 120110 dm 6051656 3 Exhibit B “Certification” means, if applicable, the certification by the Certification Authority of the Applicable Standard of (i) the creation and characteristics of a REC, (ii) the qualification of a Renewable Energy Facility or a Renewable Energy Source under an Applicable Standard, (iii) delivery of a REC, or (iv) other compliance with the requirements of an Applicable Standard. “Certification Authority” means an entity that certifies the generation, characteristics or delivery of a REC, or the qualification of a Renewable Energy Facility or Renewable Energy Source under an Applicable Standard, may include, as applicable, the Administrator, Applicable Tracking System, a Governmental Authority, the Verification Provider, one or both of the Parties, an independent auditor, or other third party, and should include (i) if no Applicable Standard is specified, the Seller, or the generator of the RECs if the Seller is not the generator, (ii) if the RECs are to be delivered pursuant to an Applicable Standard, the Administrator of the Applicable Standard, or such other person or entity specified by the Applicable Standard to perform Certification, or (iii) such other person or entity specified by the Parties. “Certified Renewable Energy Source” means any Renewable Energy Source that is recognized under an Applicable Standard as specified by the Parties. “Confidential Information” is defined in Section 12 “Confirmation Letter” or “Confirm” means the form used by the Parties to effect a REC Transaction in the form of Exhibit A, attached and incorporated by this reference, specifying the terms of such REC Transaction, including the following: (1) any Environmental Attributes not included with Product or Retained by Seller, (2) the quantity to be purchased and sold; (3) the purchase price; (4) the Delivery Deadline; (5) the Applicable Standard; and, (6) if necessary in accordance with the terms of the REC Transaction, (a) the Vintage(s); (b) the Renewable Energy Facility or Facilities from which the Product is to be generated; (c) the Renewable Energy Source and (d) the geography of the Product. The Confirmation Letter constitutes part of, and is subject to, the terms and provisions of this Master Agreement. “Costs” means, with respect to the Non-Defaulting Party, the present value of brokerage fees, commissions, attorneys’ fees, and other similar third party transaction costs and expenses reasonably incurred by such Party either in terminating or replacing any arrangement pursuant to this Master Agreement; and any charges, penalties, fines or fees imposed or assessed against the Non-Defaulting Party by an Administrator or Governmental Authority on account of delivery not occurring on the Delivery Deadline, as determined by the Non-Defaulting Party in a commercially reasonable manner. “Credit Rating” means with respect to a Party, on any date of determination, the lower of its long-term senior unsecured debt rating (not supported by third party credit enhancement) or its issuer rating by the specified rating agency. “Defaulting Party” is defined in Section 6. 120110 dm 6051656 4 Exhibit B “Delivery Deadline” means date specified in the Confirmation Letter by which the Seller shall deliver and Buyer shall receive RECs in accordance with an Applicable Standard. “Environmental Attribute” means an aspect, claim, characteristic, or benefit associated with the generation of a quantity of electricity by a Renewable Energy Facility, other than the Energy produced, and that is capable of being measured, verified or calculated. An Environmental Attribute may include one or more of the following identified with a particular megawatt hour of generation by a Renewable Energy Facility designated prior to Delivery: the Renewable Energy Facility’s use of a particular Renewable Energy Source, avoided Nox, Sox, CO2 or greenhouse gas emissions, avoided water use (but not water rights or other rights or credits obtained pursuant to requirements of Applicable Law in order to site and develop the Renewable Energy Facility itself) or as otherwise defined under an Applicable Standard, or as agreed by the Parties. Environmental Attributes do not include production tax credits or other direct third-party subsidies for generation of electricity by any specified Renewable Energy Facility. “Event of Default” is defined in Section 6. “Force Majeure” is defined in Section 22. “Gains” means, with respect to any Party, an amount equal to the present value of the economic benefit to it, if any (exclusive of Costs), resulting from the termination of a Terminated Transaction, determined by it in a commercially reasonable manner. “Governmental Authority” means any national, federal, provincial, state, municipal, county, regional or local government, administrative, judicial or regulatory entity operating under any Applicable Laws and includes any department, commission, bureau, board, administrative agency or regulatory body of any government. “Green-e” means an independent renewable energy certification and verification program, administered by the Center for Resource Solutions, a Section 501(c)3 nonprofit organization based in San Francisco, California. “Interest Rate” means the prime lending rate published under the heading “Money Rates” in the Wall Street Journal. “Losses” means, with respect to any Party, an amount equal to the present value of the economic loss to it, if any (exclusive of Costs), resulting from termination of a Terminated Transaction, determined by it in a commercially reasonable manner. applicable. “Party” or “Parties” means Buyer and Seller, individually or collectively, as “Product” means the RECs to be delivered in a particular Transaction, which may include Environmental Attributes, Verifications, Certifications and other characteristics as specified in a Confirmation Letter. 120110 dm 6051656 5 Exhibit B “Product Reporting Rights” means the exclusive right to report sole ownership of the Product to any Certification Authority, Applicable Tracking System, Administrator, Governmental Authority or other party, including under Section 1605(b) of the Energy Policy Act of 1992, or under any present or future Applicable Standard. “REC Transaction” means a particular, specific transaction to purchase RECs agreed upon between the Parties as specified in a Confirmation Letter. “REC Transaction Date” means the date specified on the Confirmation Letter. “Renewable Energy Certificates” (“REC” or “Credits”) means a certificate, credit, allowance, green tag, Tradable Renewable Certificate (“TRC”) or other transferable document, which is created by an Applicable Standard or a Certification Authority and is associated with the generation of one (1) megawatt hour (“MWh”) of electricity from one or more Renewable Energy Sources by a Renewable Energy Facility. A REC shall include all Environmental Attributes associated with the generation of such electricity, unless specified otherwise in a Confirmation Letter and in accordance with the Applicable Standard, as well as all related Product Reporting Rights, and shall be verified or certified by a Verification Provider or Certification Authority, in accordance with the Applicable Standard. Such Environmental Attributes may be disaggregated and retained, or sold separately, as the Parties agree. A REC is separate from the energy produced and may be separately transferred or conveyed. “Renewable Energy Facility” means an electric generation unit or other facility or installation that produces electric energy using a Renewable Energy Source. “Renewable Energy Source” means an energy source that is not fossil carbon- based, non-renewable or radioactive, and may include solar, wind, biomass, geothermal, landfill, gas, or wave, tidal and thermal ocean technologies. “Renewable Portfolio Standard” or “RPS” means a state or federal law, rule or regulation that requires a stated amount or minimum proportion or quantity of electricity that is sold or used by specified persons to be generated from Renewable Energy Sources. “Settlement Amount” means the Losses or Gains, and Costs which the Non- Defaulting Party incurs as a result of the liquidation of a Terminated Transaction pursuant to Section 7. “Terminated Transaction” is defined in Section 7. “Verification Provider” means an entity that could be an entity other than the Certification Authority, but could also be the Certification Authority, that verifies or audits specified aspects of Products, RECs, or one or more specified Environmental Attributes. “Vintage” means the calendar year, quarter, or other specified period of time in which the energy associated with the REC was generated. 120110 dm 6051656 6 Exhibit B “WECC” means Western Electricity Coordinating Council, the western regional council of the North American Electric Reliability Corporation (NERC). “WREGIS” means the Western Renewable Energy Generation Information System, an independent, renewable energy tracking system for the region covered by the Western Electricity Coordinating Council (WECC). 3. REC Transactions. (a) Purchase and Sale: On the terms and subject to the conditions set forth in this Master Agreement, Seller agrees to sell, and Buyer agrees to purchase, all of Seller's rights, title and interest in and to the RECs to be provided on the dates and otherwise as set forth on any Confirmation Letter(s) now, or hereafter, entered into between the Parties (Exhibit A, attached and incorporated by this reference). (b) Delivery Obligations: As specified in the applicable Confirmation Letter, one of the following delivery obligations (“Delivery Obligation”) shall apply to each Product quantity to be delivered under each REC Transaction: If the Confirmation Letter provides that the RECs delivery obligation is: (i) “Firm” Seller shall deliver the RECs by the Delivery Deadline, and no ground for excuse other than Force Majeure shall apply; (ii) “Unit Contingent” Seller’s obligation to deliver the RECs will be excused to the extent the Renewable Energy Facility is not able to generate Environmental Attributes in the Vintage or other agreed-to time period as specified in the Confirmation Letter, (due to the performance of the Renewable Energy Facility); or (iii) “Project Contingent” Seller’s obligation to deliver the RECs will be excused to the extent the Renewable Energy Facility is not able to generate Environmental Attributes in the Vintage or other agreed-to time period as specified in the Confirmation Letter, due to a delay or failure in constructing or obtaining necessary approvals to construct or modify and operate the new or modified Renewable Energy Facility, or due to reasons as specified in the Confirmation Letter. (c) Right to Sell and Associated Declarations. With respect to each REC Transaction, Seller hereby represents and warrants to Buyer, upon Delivery for each Product, the following: 120110 dm 6051656 7 Exhibit B (i) Seller has exclusive rights to, good and marketable title to, and unencumbered interest in, the Product described in each REC Transaction under Applicable Law; and (ii) Seller transfers and sells to Buyer all present and future rights, title, and unencumbered interest of Seller in and to the Environmental Attributes (as discussed in the Confirmation Letter) to the extent Seller will have such rights, title, and interest in and to such RECs under Applicable Law and such transfer and sale to Buyer is not in violation of any Applicable Law at the time of execution of the Confirmation Letter. (d) Notwithstanding whether such RECs are transferable to Seller under any Applicable Law, with respect to each REC Transaction upon Delivery for each Product, Seller covenants to Buyer that: (i) Seller has not transferred, and will not transfer, any portion of the rights, title and interest in and to the Product to a third party; (ii) Product will not be sold, marketed, or otherwise claimed by Seller; (iii) Product delivered to Buyer shall be sold by Seller once and only once; (iv) The Environmental Attributes or the electricity that was generated with the attributes were not used to meet any federal, state or local renewable energy requirement, renewable energy procurement, Renewable Portfolio Standard, or other renewable energy mandate; and (v) The electricity that was generated with the attributes was not separately sold, separately marketed or otherwise separately represented as renewable energy by Seller. Seller shall take such action as may be necessary to transfer and evidence the transfer of RECs to Buyer. (e) Confirmation. Unless otherwise agreed in writing, Seller will send Buyer a Confirmation Letter, which may be in substantially the form attached hereto as Exhibit A, or as modified, to describe the specific RECs to be purchased in the REC Transaction. Upon receipt of such Confirmation Letter, the other Party shall promptly return, in the manner described in Section 11, “Notices”, a written acceptance thereof, which shall be a signed copy of the Confirmation Letter. (f) REC Contract Price. Buyer agrees to buy and Seller agrees to sell each REC at a price in dollars per MWh as set forth in the Confirmation Letter. 120110 dm 6051656 8 Exhibit B (g) REC Product Quantity. Seller will provide to Buyer RECs in the quantity as set forth in the Confirmation Letter in accordance with the specified Delivery Obligation. (h) Monetary Value of REC Transactions. The monetary value of each REC Transaction, which is the REC Contract Price times the REC Product Quantity, shall be set forth in the Confirmation Letter associated with that Transaction. (i) Certification. Seller represents and warrants that it will provide to Buyer RECs that meet or exceed the Applicable Standard as set forth in the Confirmation Letter such as, for example, the requirements of the Center for Resource Solutions’ Green-e certification program, as amended from time to time and referenced in Exhibit B. (j) Reporting. (i) If required under the Applicable Standard, Seller shall be obligated to complete and provide to Buyer a signed copy of the Attestation Form, or suitable equivalent substitute no later than the Delivery Deadline, as specified in the Confirmation Letter. (ii) Buyer is not obligated to pay Seller for any RECs which have not been delivered. (k) Applicable Tracking System. If specified in the Confirmation Letter, Seller shall deliver to Buyer, and Buyer shall receive, the RECs by the Delivery Deadline via the Applicable Tracking System (or other mechanism provided for in the Confirmation Letter), such as WREGIS, such that all rights, title to and interest in the RECs shall transfer from Seller to Buyer upon such delivery and in accordance with the rules of the Applicable Tracking System. 4. Financial and Performance Assurances. (a) Material Adverse Change. A “Material Adverse Change” occurs with respect to either Party if: reasonable grounds exist to cause a Party to belief that the creditworthiness of the other Party has become unsatisfactory or that a Party’s ability to perform under this Master Agreement has been materially impaired. (b) Adequate Assurances. If a Party believes that a Material Adverse Change has occurred, the dissatisfied Party (the “First Party”) may make a written request for the other Party (the “Second Party”) to provide adequate assurance in an amount determined in a commercially reasonable manner, 120110 dm 6051656 9 Exhibit B and in a form acceptable to the First Party. Acceptable Performance Assurance includes (i) cash; (ii) an irrevocable, non-transferable standby letter of credit issued by a U.S. commercial bank or a foreign bank with a U.S. branch acceptable to the First Party in its sole discretion with such bank having a credit rating of at least A- from Standard & Poor’s Rating Group (a division of McGraw-Hill, Inc) (or its successor) or A3 from Inc. (or its successor), in a form acceptable to the First Party with costs of a letter of credit borne by the applicant of such letter of credit; (iii) a prepayment; or (iv) such other acceptable security acceptable to the First Party; each of (i) through (iv) in the First Party’s sole discretion. Upon receipt of the request to provide adequate assurance, the Second Party shall have two (2) Business Days to provide such assurance before an Event of Default under Section 6 of this Master Agreement will be deemed to have occurred and the First Party will be entitled to the remedies set forth in Section 7. If the Second Party provides such adequate assurance to the First Party within two (2) Business Days, it is understood that the Second Party shall not in fact have defaulted under this Master Agreement by incurring a Material Adverse Change. 5. Billing and Terms of Payment. (a) Billing. Upon each delivery of RECs, Seller shall provide an invoice to Buyer in the amount applicable to each REC Transaction executed under the Confirmation Letter. (b) Terms of Payment. The terms of payment shall be net thirty (30) days after the date Buyer receives a properly prepared and accurate invoice sent to the Buyer’s address, which shall include at a minimum: (1) Seller’s complete name and address where payment is to be remitted; (2) Buyer’s complete name and address where bill is to be sent; (3) Price and billing units consistent with the Confirmation Letter(s) executed by the Parties; (4) quantity; (5) Attestation, if required, will be delivered with invoice; (6) invoice date; (7) total monetary amount; (8) terms of payment, including any applicable discount calculations; (9) tax amount/rate information, if applicable. (c) Payment may be made by check or wire transfer. Payment by check shall be considered made when received by Seller. Buyer agrees to send its payment to: Address: 120110 dm 6051656 10 Exhibit B Attention: Wiring instructions: 6. Events of Default. A Party is in default (“Default”) hereunder if that Party (the “Defaulting Party”) does any of the following (each an “Event of Default”): (a) the failure of the Buyer to make any payment required pursuant to this Master Agreement, if such failure is not remedied within fifteen (15) Business Days after written notice, provided that if the Buyer, in good faith, disputes all or any portion of the payment, the Buyer shall pay only that portion of the payment that it does not dispute; (b) the failure of the Seller to deliver RECs when due pursuant to this Master Agreement, if such failure is not remedied within five (5) Business Days after written notice to the affected Party; (c) any representation or warranty provided by either Party herein that shall prove to have been false or misleading in any material respect when made or repeated; (d) the failure by a Party to perform any covenant or agreement set forth in this Master Agreement and applicable Confirmation Letters and incorporated exhibits (other than its obligations to make any payment or obligations which are otherwise specifically covered as a separate Event of Default), and such failure is not cured within fifteen (15) Business Days after written notice thereof to the affected Party; (e) the Party becomes Bankrupt; or (f) the failure by a Party to provide timely and satisfactory financial and/or performance assurance when requested to do so under the terms of this Master Agreement, and such failure is not cured within five (5) Business Days after written notice thereof to the affected Party. 7. Remedies for Default. (a) Declaration of Early Termination Date and Calculation of Settlement Amounts. If an Event of Default with respect to a Defaulting Party occurs and is continuing, the other Party (the “Non-Defaulting Party”) will have the right to do any or all of the following: 120110 dm 6051656 11 Exhibit B (i) designate a day, no earlier than the day such notice is effective and no later than 20 days after such notice is effective, as an early termination date (“Early Termination Date”) to accelerate all amounts owing between the Parties and to liquidate and terminate all, but not less than all, REC Transactions (each referred to as a “Terminated Transaction”) between the Parties; (ii) withhold any payments due to the Defaulting Party under this Master Agreement; and (iii) suspend performance. (b) Calculation of Settlement Amounts. The Non-Defaulting Party will calculate, in a commercially reasonable manner, a Settlement Amount for each such Terminated Transaction as of the Early Termination Date by aggregating its Gains, Losses and Costs with respect to each such Terminated Transaction (or, to the extent that in the reasonable opinion of the Non-Defaulting Party certain of such Terminated Transactions are commercially impracticable to liquidate and terminate or may not be liquidated and terminated under Applicable Law on the Early Termination Date, as soon thereafter as is reasonably practicable). If the Non- Defaulting Party’s aggregate Gains exceed its aggregate Losses and Costs, if any, resulting from the termination of this Master Agreement, the settlement amount shall be zero, notwithstanding any provision of this Master Agreement to the contrary. (c) Net Out of Settlement Amounts. The Non-Defaulting Party will aggregate all Settlement Amounts into a single amount by netting out the following: (i) all amounts that are due to the Defaulting Party, if the Defaulting Party is Seller, for RECs that have been delivered and not yet paid for, plus, at the option of the Non-Defaulting Party, any or all other amounts due to the Defaulting Party under this Master Agreement; against (ii) all Settlement Amounts that are due to the Non-Defaulting Party under this Master Agreement, so that all such amounts will be netted out to a single liquidated amount (the “Termination Payment”) payable by the Non-Defaulting Party. The Termination Payment, if any, is due from the Defaulting Party to the Non-Defaulting Party within five (5) Business Days following notice. (d) Calculation Disputes. If the Defaulting Party disputes the Non-Defaulting Party’s calculation of the Settlement Amount or Termination Payment, in whole or in part, the Defaulting Party will, within five (5) Business Days 120110 dm 6051656 12 Exhibit B of receipt of the Non-Defaulting Party’s calculation, provide the Non- Defaulting Party a detailed written explanation of the basis for such dispute. (e) Limitation on Damages. The Defaulting Party’s liability will be limited to direct, actual damages, and Costs only, and such direct, actual damages, and Costs will be the sole and exclusive remedy hereunder. In no event will either Party be liable to the other under this Master Agreement for any consequential, incidental, punitive, exemplary, or indirect damages in tort, contract, or otherwise pursuant to this Section 7, except for any claims indemnified pursuant to Section 8. (f) Exclusive Remedy. THE REMEDIES SET FORTH IN THIS SECTION ARE THE SOLE AND EXCLUSIVE REMEDIES AVAILABLE TO THE NONDEFAULTING PARTY IN THE EVENT OF A PARTY’S DEFAULT WITH RESPECT TO ITS OBLIGATIONS TO SELL OR PURCHASE RECS, AND A PARTY’S LIA B ILITY SHA LL BE LIMITED AS SET FORTH IN THIS SECTION. ALL OTHER REMEDIES OR DAMAGES FOR FAILURE TO SELL OR PURCHASE RECS AT LAW ARE HEREBY WAIVED. 8. Indemnification. (a) Indemnification of Buyer: To the fullest extent permitted by Applicable Law, Seller agrees to protect, defend, hold harmless and indemnify Buyer, its City Council, commissioners, officers, employees, volunteers and agents from and against any claim, injury, liability, loss, cost, and/or expense or damage, including all costs and reasonable attorney’s fees in providing a defense to any claim arising therefrom, for which Buyer shall become liable arising from Seller’s acts, errors, or omissions with respect to or in any way connected with the maintenance, assistance and services performed by Seller pursuant to this Master Agreement and subsequent REC Transactions and related Confirmation Letters, except for claims, liabilities and damages caused by the Buyer’s sole negligence or willful misconduct. (b) Indemnification of Seller: To the fullest extent permitted by Applicable Law, Buyer agrees to protect, defend, hold harmless and indemnify Seller, its board of directors, officers, employees, volunteers and agents from and against any claim, injury, liability, loss, cost, and/or expense or damage, including all costs and reasonable attorney’s fees in providing a defense to any claim arising therefrom, for which Seller shall become liable arising from Buyer’s negligent, reckless or wrongful acts, errors, or omissions with respect to or in any way connected with the maintenance, assistance and services performed by Buyer pursuant to this Master Agreement and subsequent and related Confirmation Letters, except for claims, liabilities 120110 dm 6051656 13 Exhibit B and damages caused by the Seller’s comparative negligence or willful misconduct. 9. Relationship of the Parties. The relationship of the Parties under this Master Agreement is that of independent contractors. The Parties specifically state their intention that this Master Agreement is not intended to create a partnership or any other co-owned enterprise unless specifically agreed to by the Parties in a separate written instrument. Except as specifically provided herein, each Party shall continue to have the right to contract independent of the other Party with individuals and entities. Each Party shall be responsible for its own operating expenses and personnel expenses. 10. Taxes and Costs. Unless otherwise specified in the applicable Confirmation Letter (and to the extent not included in the purchase price), each Party shall bear the cost of any taxes imposed on such Party in relation to or arising out of such REC Transaction. Each Party shall be liable for all costs, fees, commissions or other payments due to brokers, agents or other intermediaries incurred by such Party (and shall indemnify and hold the other Party harmless from and against all such amounts) in connection with the drafting, consummation or performance of this Master Agreement or any REC Transaction hereunder. 11. Notices. All notices required or permitted to be given hereunder in writing shall, unless expressly provided otherwise, be in writing, properly addressed, postage pre-paid and delivered by hand, facsimile, certified or registered mail, courier or electronic messaging system to the appropriate address as either Party may designate from time to time by providing notice thereof to the other Party. 120110 dm 6051656 14 Exhibit B If to Buyer: Address: 250 Hamilton Ave. Palo Alto, CA 94301 Attention: City Clerk Phone: 650-329-2119 Fax: 650-617-3140 With a copy to: Address: 250 Hamilton Ave. Palo Alto, CA 94301 Attention: Director of Utilities Phone: 650-329-2119 Fax: 650-617-3140 If to Seller: Address: Attention: Phone: Fax: Notices delivered by facsimile or by an electronic messaging system shall require confirmation through a reply facsimile or electronic message. 12. Confidential Information. (a) “Confidential Information” shall mean and include information consisting of documents and materials of a disclosing Party and/or any other technical, financial or business information of or about a disclosing Party which is not available to the general public, as well as all information derived from such information, which is furnished or made available to the other Party and is clearly labeled, marked or otherwise identified as “confidential” or “proprietary information.” (b) The disclosing Party is the Party to whom the Confidential Information originally belongs and who shall, after appropriate notice from the receiving Party, bear the burden of pursuing any legal remedies to retain the confidential status of the Confidential Information, as set forth in Section 12(e), below. (c) Confidential Information disclosed by either Party to the other shall be held by the receiving Party in confidence, and shall not be: (i) used by the recipient to the detriment of the disclosing Party; or (ii) made available for third parties to use. (d) Each Party shall direct its employees, contractors, consultants and representatives who have access to any Confidential Information to comply with all the terms of this Section. Information received by the receiving Party shall not be Confidential Information if: 120110 dm 6051656 15 Exhibit B (i) it is or becomes available to the public through no wrongful act of the receiving Party; (ii) it is already in the possession of the receiving Party and not subject to any confidentially agreement between the Parties; (iii) it is received from a third party without restriction for the benefit of the disclosing Party and without breach of this Master Agreement; (iv) it is independently developed by the receiving Party; or (v) it is disclosed pursuant to a requirement of law or a duly empowered government agency or a court of competent jurisdiction after due notice and an adequate opportunity to intervene is given to the disclosing Party, unless such notice is prohibited. (e) Seller acknowledges that City is a public agency and is subject to the requirements of the California Public Records Act Cal. Gov. Code section 6250 et seq. Seller may submit Confidential Information to City pursuant to Section 12(a), above and City will maintain such identified documents as confidential to the fullest ext extent allowed by law. However, upon request or demand from any third person or entity not a party to this Master Agreement (“Requestor”) for production, inspection and/or copying of information designated by a disclosing Party as Confidential Information, the receiving Party shall notify the disclosing Party that such request has been made in accordance with Section 11 of this Master Agreement. Upon receipt of this notice, the disclosing Party shall be solely responsible for taking whatever legal steps may be necessary to protect the information deemed by it to be Confidential Information and to prevent release of information to the Requestor by the receiving Party. If within ten (10) days after receiving the foregoing notice from the receiving Party, the disclosing Party takes no such action, the receiving Party shall be permitted to comply with the Requestor’s demand and is not required to defend against it. (f) Upon termination or expiration of this Master Agreement, the receiving Party shall, at the disclosing Party’s direction, either return or destroy all of the disclosing Party’s Confidential Information and so certify in writing. The obligations of this provision will survive for one (1) year after any termination or expiration of this Master Agreement. 13. Publicity and Disclosure. Seller shall not use the name, trade name, trademarks, service marks of or owned by Buyer, or logos of Buyer, or share Confidential Information in any publicity releases, news releases, annual reports, product packaging, signage, stationery, print literature, advertising, websites or other media without securing the prior written approval of Buyer. Seller shall not, without prior written consent of Buyer, represent, directly or indirectly, that any product or service offered by Seller has been approved or endorsed by Buyer. Seller agrees that Buyer may make oral and written reports and other communications regarding this Master Agreement and subsequent REC Transactions to the Palo Alto City Manager, City Council and other 120110 dm 6051656 16 Exhibit B public officials as required by law, which reports and communications will be public reports and communications. 14. Nondiscrimination. As set forth in Palo Alto Municipal Code section 2.30.510, Seller agrees that in the performance of this Master Agreement, it shall not discriminate in the employment of any person because of the race, skin color, gender, gender identity, age, religion, disability, national origin, ancestry, sexual orientation, pregnancy, genetic information or condition, housing status, marital status, familial status, weight or height of such person. Seller acknowledges that it has read and understands the provisions of Chapter 2.30 of the Palo Alto Municipal Code relating to Nondiscrimination Requirements and the penalties for violation thereof, and agrees to meet all requirements of Chapter 2.30 pertaining to nondiscrimination in employment, including completing the form furnished by Buyer and set forth in Exhibit C. 15. Miscellaneous Representations and Warranties. (a) Each Party represents and warrants that the execution and performance of this Master Agreement and subsequent REC Transactions will not conflict with or result in a breach of any other agreement to which it is a party. (b) Each Party represents and warrants that it is duly organized, validly existing and in good standing under the laws of a state of the United States of America. (c) Each Party represents and warrants that it has full power and authority to make, execute, deliver and perform this Master Agreement and subsequent REC Transactions. (d) Each Party represents and warrants that it will abide by the Applicable Program as specified in each Confirmation Letter. (e) Each Party represents and warrants that it will abide by the Green-e Standard v. 1.5 or as amended when applicable. 16. Choice of Law. The laws of the State of California shall be applied and be controlling for all purposes and all matters relating to the Master Agreement. In the event that an action is brought, the Parties agree that trial of such action will be vested exclusively in the United States District Court for the Northern District of California in the County of Santa Clara, State of California. 120110 dm 6051656 17 Exhibit B 17. Entire Agreement. This Master Agreement constitutes the entire agreement between the Parties relating to the subject matter hereof and supersedes all prior agreements, understandings, negotiations, whether oral or written, of the Parties. 18. Amendments. Except to the extent herein provided, no amendment, supplement, modification, termination or waiver of this Master Agreement shall be enforceable unless executed in writing by the Party to be bound thereby. 19. Assignment. This Master Agreement is binding on any successors and assigns of the Parties. Neither Party may otherwise transfer or assign this Master Agreement, in whole or in part, without the other Party’s written consent. Such consent shall not be unreasonably withheld. Notwithstanding any provision to the contrary in this Agreement, any direct or indirect change of control of Seller (whether voluntary or by operation of law) shall be deemed an assignment and shall require the prior written consent of Buyer, which consent shall not be unreasonably withheld. 20 Non-Waiver; No Third Party Beneficiaries. No waiver by any Party of any of its rights with respect to the other Party or with respect to this Master Agreement or any matter or default arising in connection with this Master Agreement, shall be construed as a waiver of any other right, matter or default. Any waiver shall be in writing signed by the waiving Party. No payment, partial payment, acceptance or partial acceptance by Buyer will operate as a waiver on the part of the Buyer of any of its rights under the Master Agreement. This Master Agreement and subsequent Confirmation Letters related to REC Transaction are made and entered into for the sole benefit of the Parties, and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, have any rights under, or have any direct or indirect cause of action or claim in connection with this Master Agreement. 21. Severability. In the event that any provision of the Master Agreement is found to be void or unenforceable, such findings shall not be construed to render any other provision of the Master Agreement either void or unenforceable, and all other provisions shall remain in full force and effect unless the provisions which are void or unenforceable shall substantially affect the rights or obligations granted to or undertaken by either Party. 120110 dm 6051656 18 Exhibit B 22. Force Majeure. Neither Party shall be liable in any respect for failure or delay in the fulfillment or performance of REC Transactions under this Master Agreement, if performance is hindered or prevented, directly or indirectly by an event beyond the reasonable control of either Party, including, without limitation, war, public emergency or calamity, fire, earthquake, Acts of God, strikes, labor disturbance or actions, civil disturbances or riots, litigation brought by third parties against the Parties, or any act of a superior governmental authority or court order. Force Majeure may not be based on (i) Seller’s ability to sell RECs to another at a price greater than the purchase price specified in the Confirmation Letter, (ii) Buyer’s inability economically to use or resell the RECs, or (iii) Buyer’s ability to purchase RECs at a price less than the purchase price specified in the Confirmation Letter. 23. Exhibits and Insurance. The exhibits attached hereto are incorporated into this Master Agreement by reference. The exhibits may only be revised upon mutual agreement between the Parties unless otherwise specified in the exhibits. In the event of a conflict between this Master Agreement and the Confirmation Letter, the terms of the Confirmation Letter shall prevail. During the term of this Master Agreement, Seller shall maintain the insurance levels set forth on Exhibit D. 24. Compliance with Law. Each Party will comply with all lawful federal, state and local law, ordinances, resolutions, rate schedules, rules and regulations that may affect its rights and obligations under the Master Agreement. 25. Fiscal Provisions. The REC Transactions under this Master Agreement are subject to the fiscal provisions of the Charter of the City of Palo Alto and the Palo Alto Municipal Code. The Master Agreement and all related Confirmation Letters and Agreements will terminate without penalty (i) at the end of any fiscal year in the event that funds are not appropriated for the following fiscal year, or (ii) at any time within a fiscal year in the event that funds are only appropriated for a portion of the fiscal years and funds for the City’s obligations are no longer made available. This provision will take precedence in the event of a conflict with any other term or condition of the Master Agreement. [SIGNATURES ON NEXT PAGE] 120110 dm 6051656 19 Exhibit B IN WITNESS WHEREOF, each of the Parties hereto acknowledge that they have read the terms and conditions contained herein, understand and agree to the same and agree to be bound thereby and have caused this Master Agreement to be executed in duplicate originals by its duly authorized representative on the respective dates entered below. CITY OF PALO ALTO (“BUYER”) City Manager APPROVED AS TO FORM: Senior Deputy City Attorney APPROVED: XXXX (“SELLER”) By: _ Name: Title: Taxpayer Identification No. Director of Administrative Services Director of Utilities Exhibit B Exhibit A Confirmation Letter #1 The following describes a REC Transaction between Buyer and Seller for the sale, purchase and delivery of Renewable Energy Certificates (“RECs”) pursuant to the terms of the Master Agreement between the City of Palo Alto and dated , 2016. Initially capitalized terms used and not otherwise defined herein are defined in the Master Agreement. Basic Commercial Terms: REC Transaction Date: REC Transaction Reference: Seller: Buyer: Renewable Resource Facility: Renewable Energy Source: Geography: Vintage(s): REC Product Quantity (MWh): REC Contract Price ($/MWh): Monetary Value of REC Transaction ($): Delivery Deadline: Product Specific Terms: Applicable Standard: Environmental Attributes retained by Seller, if any: Applicable Tracking System: Attestation Form [yes, no] Delivery Obligation [Firm, Unit Contingent, Project Contingent]: This Confirmation Letter is executed pursuant to and in accordance with the Master Agreement, and constitutes part of and is subject to the terms and provisions of the Master Agreement. The Parties agree to the REC Transaction set forth herein. City of Palo Alto (“Buyer”) XXXX (“Seller”) Signature Signature Name Name Title Title Date Date 161128 dm 6051582 Page 1 of 1 Page 1 of 2 161128 dm 6051582 Exhibit B Exhibit B Attestation Form Green-E Renewable Attestation from Wholesale Provider of Electricity or Recs I. Wholesale Provider Information Name of Provider: Address of Provider: Contact Person: Title: Telephone: Address: Fax: Email II.Declaration I, (print name and title) declare(s) that the (indicate with “x”)1 electricity bundled with renewable attributes / renewable attributes only 2 listed below were sold exclusively from: (name of Provider) (“Provider”) to: (name of REC provider, utility, or electric service provider) (“Purchaser”). On behalf of the Provider, I further declare that: 1) all the renewable attributes (including CO2 benefits), including any emissions offsets, reductions or claims, represented by the renewable electricity generation listed below were transferred to Purchaser; 2) to the best of my knowledge, the renewable attributes were not sold, marketed or otherwise claimed by a third party; 3) Provider sold the renewable attributes only once; 4) the renewable attributes or the electricity that was generated with the attributes was not used to meet any federal, state or local renewable energy requirement, renewable energy procurement, renewable portfolio standard, or other renewable energy mandate by Provider, nor, to the best of my knowledge, by any other entity; 5) the electrical energy that was generated with the attributes was not separately sold, separately marketed or otherwise separately represented as renewable energy by Provider, or, to the best of my knowledge, by any other entity; and 1 1 Use separate forms to report electricity and REC sales. 2 If Seller purchased electricity bundled with renewable attributes and has stripped off those attributes to sell in this transaction, and is selling the undifferentiated electricity to a utility or load-serving entity, see section III also. Page 2 of 2 161128 dm 6051582 Exhibit B 6) the facilities that generated all of the renewable electricity / renewable attributes (as indicated above) sold to Purchaser are listed below by fuel type. List the renewable MWhs sold or transferred to Purchaser identified below by quarter of generation as a separate line item. Generator Name Generator ID Number (EIA or QF) Nameplate Capacity (MW) Fuel Type # MWhs RECs / Elec. Sold First Date of Generator Operation (mm/yy)3 Period of Generation (quarter#/yy or mm/yy) As an authorized agent of Provider, I attest that the above statements are true and correct. Signature Date Place of Execution III. Additional Statement required of Provider selling electricity to Purchaser (Check box if not applicable: [ ]) I declare that the electricity listed above was delivered into the following NERC region or ISO: IV.Additional Statement required if Provider is selling only RECs to Purchaser and selling the associated electricity to a utility or load-serving entity (Check box if not applicable: [ ]) Please write the name of the utility or load-serving entity here: By signing below, I attest to the accuracy of all Additional Statements above (III through IV): Signature Date Place of Execution 3 For facilities that have added new renewable capacity, please indicate the amount and operational date of the new capacity and the existing capacity. Page 3 of 2 161128 dm 6051582 Exhibit B This Form is used by the Center for Resource Solutions to verify the accuracy of claims made by retail marketers. The information on this form is held strictly confidential and will not be shared Page 1 of 1 161128 dm 6051582 Exhibit B Exhibit C Certification of Nondiscrimination As suppliers of goods or services to the City of Palo Alto, the firm and individuals listed below certify that they do not and will not during the course of this contract discriminate in the employment of any person because of person because of the race, skin color, gender, gender identity, age, religion, disability, national origin, ancestry, sexual orientation, pregnancy, genetic information or condition, housing status, marital status, familial status, weight or height of such person and that they are in compliance with all Federal, State and local directives and executive orders regarding nondiscrimination in employment. THE INFORMATION HEREIN IS CERTIFIED CORRECT BY SIGNATURE(S) BELOW. Authorized Signature: Date: Page 1 of 1 161128 dm 6051582 Exhibit B EXHIBIT D INSURANCE REQUIREMENTS Seller shall maintain the level of insurance set forth below: Page 1 of 1 161128 dm 6051582 Exhibit C Resolution No. 9652 (Amended via Resolution No. ####) Resolution of the Council of the City of Palo Alto Approving the Standard Form Edison Electric Institute Master Power Purchase and Sale Agreement and the Standard Form Master Renewable Energy Certificate Purchase and Sale Agreement R E C I T A L S A. On March 7, 2011, the Council adopted Resolution 9152 approving the Long-term Electric Acquisition Plan Objectives, Strategies, and Implementation Plan, as subsequently modified by Council on March 19, 2012 and April 16, 2012 (LEAP). B. In accordance with LEAP, the City must actively monitor and manage operational, counterparty and wholesale energy price risk by maintaining an adequate pool of creditworthy suppliers and diversifying supply purchases across commitment date, start date, duration, suppliers and pricing terms in alignment with rate stability objectives and reserve guidelines. C. The City's Energy Risk Management Policy provides for an anti-speculation policy limiting purchases of electricity and related products to meet the City’s projected load. D. The Utilities Strategic Plan’s strategic objectives are, among other things, to a) negotiate supply contracts to minimize financial risk; and b) reduce cost of delivering service through best management practices. E. Through Resolution No. 9379, the Council authorized the City Manager, or his designee, to execute purchases (and incidental sales) of renewable energy credits (RECs) to meet the needs of the City’s PaloAltoGreen (PAG) Program, Renewable Portfolio Standard (RPS) and Carbon Neutral Plan by negotiating and executing REC Master Agreements with thirteen pre- qualified suppliers subject to transaction term and expenditure limits enumerated in that resolution. F. By Ordinance No. 5387, Council approved changes to the Municipal Code specifically streamlining the purchase and sale of wholesale utility commodities and services and explicitly allowing for standard form Master Agreements. G. The standard form electric master agreement is based on the year 2000 version of the Edison Electric Institute (EEI) Master Power Purchase and Sale Agreement, and includes special provisions in the form of a Cover Sheet (Standard Form Electric Master Agreement), which is based on previously Cover Sheets approved as to form by the City Attorney’s Office. H. The standard form REC master agreement is based on the form of REC Master Agreement previously approved by Council in Resolution No. 9379 (Standard Form REC Master Agreement), and will be for suppliers transacting only in RECs. I. Both the Standard Form Electric Master Agreement and the Standard Form Master REC Agreement incorporates the contract terms and conditions required in City of Palo Alto Municipal Code Section 2.30.340(c). Page 1 of 1 161128 dm 6051582 Exhibit C J. Each of the Standard Form Electric Master Agreements and Standard Form REC Master Agreement negotiated with a specific electric and REC suppliers, respectively, will be recommended to Council for approval with maximum expenditure limits and transaction terms. NOW, THEREFORE, the Council of the City of Palo Alto RESOLVES as follows: SECTION 1. The Council hereby approves the attached Standard Form Electric Master Agreement. SECTION 2. The Council hereby approves the attached 2019 Standard Form REC Master Renewable Energy Certificate Purchase and Sale Agreement. SECTION 3. The Council hereby finds and determines that the adoption of this Resolution does not meet the definition of a project for the purposes of the California Environmental Quality Act, under Public Resources Code Section 21065 and CEQA Guidelines Section 15378(b)(5), because it is an administrative governmental activity, which will not cause a direct or indirect physical change in the environment. INTRODUCED AND PASSED: December 12, 2016 AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ___________________________ ___________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ___________________________ ___________________________ Senior DeputyAssistant City Attorney City Manager ___________________________ Director of Utilities ___________________________ Director of Administrative Services ATTACHMENT B ID# 10752 October 28, 2019 Adoption of a Resolution Approving an Updated Standard Form Master Renewable Energy Certificate (REC) Purchase and Sale Agreement, Approving Master REC Agreements With Two Counterparties, and Modifying the Approval Process for Future Individual REC Master Agreements, Thus Amending Section 2 and Recital J of Resolution Number 9652 (Continued From October 7, 2019) Master Renewable Energy Certificate Purchase and Sale Agreement Between the City of Palo Alto and ACT Commodities, Inc. Master Renewable Energy Certificate Purchase and Sale Agreement Between the City of Palo Alto and Renewable Power Strategies, LLC dba RPS Advisors City of Palo Alto (ID # 10748) City Council Staff Report Report Type: Consent Calendar Meeting Date: 10/28/2019 City of Palo Alto Page 1 Summary Title: Amendment to Agreement with Friends of JMZ Title: Approval of Amendment Number 1 to the Facilities Agreement Between the City of Palo Alto and the Friends of the Palo Alto Junior Museum and Zoo, and Budget Amendments in the Capital Improvement Fund and Community Center Impact Fund From: City Manager Lead Department: Community Services Recommendation Staff recommends that City Council approve: 1) Amendment No. 1 to the Facilities Agreement between the City of Palo Alto and the Friends of the Palo Alto Junior Museum and Zoo; 2) Amending the Fiscal Year 2020 Budget Appropriation Ordinance for: a. The Capital Improvement Fund by: i. increasing the transfer from the Community Center Impact Fund by $1 million; and ii. increasing the Junior Museum and Zoo Renovation Project AC- 18001 appropriation in the amount of $1 million; and b. The Community Center Impact Fund by: i. increasing the transfer to the Capital Improvement Fund by $1 million; and ii. decreasing the Community Center Impact Fund balance in the amount of $1 million. Background The Palo Alto Junior Museum and Zoo (JMZ) is a treasured local museum, zoo and education center situated in Rinconada Park that serves Palo Alto families and children. The JMZ is a valued amenity at Rinconada Park, welcoming 184,000 visitors annually. Currently, the JMZ facility is being replaced because the museum, built in 1941, and zoo, built in 1969, were not adequately-sized or designed to accommodate the JMZ’s vibrant programs, current requirements to support living and non-living collections, City of Palo Alto Page 2 expanded educational programs, and current accessibility or seismic code requirements. Major goals of the replacement project are to provide the JMZ with adequate storage and support space to meet standards for zoo accreditation, museum accreditation, and provide sufficient storage and preparation space for the on-site and off-site educational programs. Another major goal is to improve circulation to allow universal access for children with disabilities to all exhibits and areas of the facility, which requires considerably more space than allowed for in the original facility. The new JMZ facilities will better serve its current local visitors and schools and maintain an intimate experience for children to explore science and nature. In 2013, the Friends of the Junior Museum and Zoo (Friends) generously raised $25 million for the JMZ replacement project. On November 10, 2014, City Council approved a Letter of Intent (LOI) from the Friends for construction and operation of the new JMZ building by the Friends (City Council Staff Report ID #5170). The City of Palo Alto (City) and Friends then negotiated the terms and conditions for the construction and operation of the new center. On February 5, 2018, City Council approved Agreements between the City and the Friends to replace the existing building and facilities housing the JMZ with a new building and facilities (Facilities Agreement), including the site lease and agreement regarding use restriction (City Council Staff Report ID #8851). On May 29, 2018, City Council approved the addition of Loose in the Zoo Netting and a Tree House feature for the new JMZ project, thereby supporting construction of an estimated $2 million in enhanced features and directed that the City would contribute an additional $1 million toward the cost by fiscal year 2020 (City Council Staff Report ID #9245). Discussion The purpose of this Amendment is to modify the Facilities Agreement to reflect the terms the Parties have mutually agreed upon for adding the Loose in the Zoo Netting and the Tree House as approved by City Council on May 29, 2018 and to authorize the transfer of $1 million to the Friends for the City’s contribution to the project from the Community Center Impact Fund. The City’s contribution was raised through the sale of Transfer of Development Rights (TDR) (City Council Staff Report ID #9596). The Friends have funded and included the Loose in the Zoo Netting in the construction contract as their contribution to the Amendment. The Loose in the Zoo Netting, defined as the netted enclosure covering the zoo as well as the animal enclosures within the exterior zoo management area, is depicted in Bulletin 24 prepared by CAW Architects, dated February 1, 2019 and is attached as Exhibit 1 in the Amendment. City of Palo Alto Page 3 The Tree House, defined as the elevated structure and associated elevated walkways, stairs, wheelchair lift, roofed platforms, net-climbing tubes, net-climbing platform, and vertical circulation climber, is depicted in Bulletin 11 and 33 R2 prepared by CAW Architects, dated January 7, 2019 and June 12, 2019. The Bulletins are attached as Exhibit 2 in the Amendment. Timeline The Loose in the Zoo Netting and Tree House are under construction and staff will endeavor to transfer the funds to the Friends within 45 days of City Council’s approval of this Amendment. Resource Impact The Loose in the Zoo and Tree House features of the JMZ Renovation Project (AC- 18001) will require a commitment from the City of $1 million, which as stated above, has been funded through the sale of TDRs and approved by City Council in May 2018 (City Council Staff Report ID #9245). The anticipated remaining balance in the Community Center Impact Fund would be approximately $1.4M if this action is approved. The Friends will be responsible for raising any required funds for the Project should the cost of the Loose and the Zoo Netting and the Tree House exceed budget. Stakeholder Engagement Staff worked closely with the Friends Board of Directors to draft the Agreement amendment and continue to collaborate with the Friends during construction of the Project. Environmental Review In conformance with the California Environmental Quality Act (CEQA), the Initial Study/Mitigated Negative Declaration was approved by Council on Dec. 4, 2017. Attachments Attachment A: Amendment No. 1 to the Facilities Agreement between the City of Palo Alto and the Friends of the Palo Alto Junior Museum and Zoo Attachments: • Attachment A: First Amendment to Friends of the JMZ Agreement CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR October 28, 2019 The Honorable City Council Palo Alto, California Policy and Services Committee Recommends the City Council Accept the Auditor’s Office Quarterly Report as of June 30, 2019 The Office of the City Auditor recommends acceptance of the Auditor’s Office Quarterly Report as of June 30, 2019. At its meeting on September 10, 2019, the Policy and Services Committee recommended by a vote of 2-1 that the City Council accept the report. Since the item did not receive a unanimous vote from the Policy and Services Committee, it was placed as an action item for City Council discussion. The City Auditor’s report to the Policy and Services Committee and the transcript minutes are available on the City’s Policy and Services Committee website. Discussion At the Policy and Services Committee meeting on September 10, several questions were asked about the timing of the original target date a department would set for implementing an audit recommendation and about the fraud, waste, and abuse hotline. Responses to these questions are detailed below. Audit Recommendation Target Dates A question arose as to how the Committee could determine the original target date a department set for implementation of audit recommendations and whether that information should be included in the Auditor’s Quarterly Report to assess how timely a department was in addressing audit issues that came up. Special Advisor to the Office of the City Auditor, Don Rhoads, stated at that time that this information could be included in the report. However, after some research on the matter it was determined that the original target date is provided in a different report, the “Status of Audit Recommendations” report, which is presented to the Policy and Services Committee for every audit every six months. In addition, updated targets for unimplemented items are included in the Status of Audit Recommendations report along with the date an item is completed to show how timely the departments have been with the implementation of audit recommendations. This same information hasn’t been included in the Auditor’s Quarterly Report because that report is meant to be a summary with just the number of recommendations and number of recommendations open at the time of the report. In addition, having departments provide updated status information every three months would add a lot of work for them as well as for the Auditor’s Office. Fraud, Waste, and Abuse Hotline Questions also were asked about the reporting of activity from the fraud, waste, and abuse hotline in the Auditor’s Quarterly Report. First, it was not made clear during the presentation that the Page 2 existing hotline is only for employees of the City. This explains in part why there are relatively few calls reported in the chart shown in the Auditor’s Quarterly Report (and shown below). Committee member Tanaka also asked whether all cases shown in the chart below were currently closed. He asked this because the legend included “open complaints,” but the chart didn’t show any open complaints. This question was researched by reviewing the hotline database and it was verified that there are no currently open complaints. There was an instance from a prior year where an open case had not been closed by the end of the quarter so that was shown in the chart as an “open complaint.” In the future, if there are no open complaints at the end of a quarter the legend will only show “closed complaints.” The June 30, 2019 Auditor’s Quarterly Report has also been corrected to show only closed complaints since none were open at that time. Finally, the suggestion was made that we consider showing the category of the hotline complaints that come in. Upon review of the hotline database it was determined that hotline cases have so far not been categorized. This is a good suggestion however so we will begin categorizing hotline calls going forward. Respectfully submitted, Don Rhoads, CPA Special Advisor to the Office of the City Auditor Management Partners ATTACHMENTS: • Attachment A: Auditor's Office Quarterly Report as of June 30, 2019 (PDF) Department Head: Don Rhoads, Special Advisor to the Office of the City Auditor Page 3 Quarterly Report as of June 30, 2019 Office of the City Auditor “Promoting honest, efficient, effective, economical, and fully accountable and transparent city government.” Attachment A PAGE 2 Fiscal Year (FY) 2019 Fourth Quarter Update (April – June 2019) Overview The audit function is essential to the City of Palo Alto’s public accountability. The mission of the Office of the City Auditor, as mandated by the City Charter and Municipal Code, is to promote honest, efficient, effective, economical, and fully accountable and transparent city government. We conduct performance audits and reviews to provide the City Council and City management with information and evaluations regarding how effectively and efficiently resources are used; the adequacy of internal control systems; and compliance with policies, procedures, and regulatory requirements. Taking appropriate action on our audit recommendations helps the City reduce risks and protect its good reputation. Activity Highlights The City Council appointed Management Partners, Inc. in March 2019 to serve as the City’s Interim Auditor for up to a six-month term. Management Partners assigned Don Rhoads, CPA as Special Advisor to the Office of the City Auditor. Audit staff have reinitiated several audits that have been on hold given the vacancy in the City Auditor position. These include Nonprofit Service Agreements, additional analysis related to the Business Registry, and the Contract Risk and Oversight audits. Significant progress was made in bringing required departmental status reports on the implementation of past audit recommendations to the Policy & Services Committee for approval. Nearly all status report (12 out of 13) were presented to and approved by the Committee in June. One new audit from the 2019 Audit Plan, a look at the status of the City’s Transfer of Development Rights program, that had been on hold for almost a year was reinitiated during the 4th quarter. A long-time Performance Auditor retired from her position at the end of June. This leaves staffing levels in the City Auditor’s Office at three performance auditor positions and the vacant City Auditor position, currently filled by Management Partners. Audit and Project Work Below is a summary of our audit and project work for the fourth quarter of FY 2019: Title Objective(s) Start Date End Date Status Results/Comments Business Registry Evaluate the rules and processes used to establish the business registry and make recommendations to help clean up the data and ensure accuracy in the future. 02/18 08/19 In Progress This audit was presented to the Policy & Services Committee in September 2018. The Committee requested additional analysis, which has been completed. The audit and additional analysis will be brought to City Council for approval in August 2019. Attachment A PAGE 3 Title Objective(s) Start Date End Date Status Results/Comments ERP Planning Audit: Data Reliability and Integrity – Personnel Data This is one of a series of audits that focus on evaluating the integrity and reliability of data in SAP and making recommendations to ensure that identified deficiencies are corrected prior to transferring data to the new ERP system. This audit focuses on assessing the accuracy of employee master data, such as name, address, birthdate, and social security number. 09/17 2020 On hold This audit is currently on hold pending arrival of the permanent City Auditor due to a current potential independence impairment. NOTE: We previously referred to this audit as “Human Resources/Payroll Data” but changed it to “Personnel Data” for clarification. ERP Planning Audit: Data Reliability and Integrity – Utilities Customer Data This is one of a series of audits that focus on evaluating the integrity and reliability of data in SAP and making recommendations to ensure that identified deficiencies are corrected prior to transferring data to the new ERP system. This audit focuses on assessing the accuracy of Utilities’ customer master data that is used for billing purposes, such as customer name, service and billing addresses, and move-in and move-out dates. 06/18 Late 2019 In Progress This audit is completed, ready for City Auditor review, and will be presented to the Policy & Services Committee in late 2019. Mobile Device Inventory and Security Determine if the City accurately inventories and securely manages city- owned mobile devices, including laptops, tablets, and cell/smart phones. 03/18 Late 2019 In Progress This audit is completed, ready for City Auditor review, and will be presented to the Policy & Services Committee in late 2019. Nonprofit Service Agreements Audit Evaluate whether nonprofit organizations that receive City funding are achieving the outcomes we expect from the funding we provide and if City departments monitor the nonprofit service agreements to ensure that the required services are performed. The audit focuses primarily on nonprofit organizations that provide senior or nutrition services. 06/18 08/19 In Progress This audit is completed and will be presented to the Policy & Services Committee in September 2019. NOTE: We previously referred to this audit as “Nonprofit Organizations Audit” but changed it to “Nonprofit Service Agreements” for clarification. Contract Oversight Select a sample of contracts to evaluate the contract oversight process by determining if the City has adequate processes to ensure that the City receives the goods and services it paid for, that contracts did not result in unnecessary overlaps in services, and that contract extensions and change orders were appropriate. 06/18 Late 2019 In Progress This audit is in the field work phase and will be presented to the Policy & Services Committee in late 2019. Attachment A PAGE 4 Title Objective(s) Start Date End Date Status Results/Comments Transferable Development Rights (TDR) Program Determine if the City 1) maintains an accurate and complete record of the historic and seismic floor area bonuses that are eligible for the City’s TDR program; 2) certifies eligible floor area bonuses for transfer in accordance with Palo Alto Municipal Code; and 3) maintains a special fund to accurately and completely account for the sales of development rights.. 06/18 Late 2019 In Progress This audit was in the planning phase last year but had been on hold since July 2018 due to staff turnover. We resumed the audit in April 2019 and expect to complete it in late 2019. ERP Nonaudit Service Provide advisory services to the Department of Information Technology regarding its planning of a new ERP system. 09/16 N/A On hold This service has been on hold pending arrival of the permanent City Auditor, who will determine how we can assist the City with addressing the issues we identified during the ERP planning phase and prior audits. Performance Report Provides citywide information for key areas, including spending, staffing, workload, and performance. 10/18 06/19 Completed Departments provided data, which was compiled into the annual report. The report was published in June 2019. Citizen Centric Report Provides City and community information, performance results, and summary revenue and expenditure data in an easy-to-ready four-page format. 10/18 06/19 Completed Data have been collected and were compiled into the report, which was published in June 2019. Other Monitoring and Administrative Assignments Below is a summary of other assignments as of June 30, 2019: Title Objective(s) Status Results/Comments City Auditor Advisory Roles Provide guidance and advice to key governance committees within the City. Ongoing The City Auditor serves as an advisor to the Utilities Risk Oversight Committee and Information Security Steering Committee. Attachment A PAGE 5 Title Objective(s) Status Results/Comments Sales and Use Tax Allocation Reviews 1) Identify businesses that do business in Palo Alto that may have underreported or misallo- cated their sales and use tax and submit inquiries to the state for review and tax reallocation. 2) Monitor sales taxes received from the Stanford University Medical Center Project and notify Stanford of any differences between their reported taxes and state sales tax information, in accordance with the development agreement. 3) Provide Quarterly Status Updates and Sales Tax Digest Summaries for Council review. Ongoing We are discussing the possibility of transitioning roles and responsibility for sales and use tax allocation reviews to the Administrative Services Department. A decision should be made by late 2019. 1) The City’s consultant inquiries resulted in about $950 in sales and use tax recoveries for the quarter. 2) We receive prior calendar-year sales tax information for the Stanford Medicine development project several months after the end of the calendar year and report these on our June quarterly report. The City has received $4,307,756 for calendar years 2011 through 2018 as a result of the development agreement for this project. 3) Quarterly sales tax reports have been published on the Office of the City Auditor website at www.cityofpaloalto.org/gov/depts/aud/reports/default.asp. Status of Audit Recommendations Fifty-nine recommendations were open at the beginning of the fourth quarter of FY 2019. Eighteen, or just over 30% of all outstanding audit recommendations, were closed during the fourth quarter and we did not add any recommendations during the quarter, which resulted in 41 recommendations open at the end of the quarter. Twelve of the thirteen status reports due were presented to the Policy and Services Committee during the quarter. The one remaining status report due will be presented in late 2019. Below is a summary of the open audit recommendations as of June 30, 2019: Audit Title and Report Date Due Date and Prior Status Report Dates Total Recommendations/ Number Open Summary of Open Recommendations Citywide Cash Handling and Travel Expense Issued: 09/15/10 Due – 12/10/19 06/11/19 10/23/18 03/21/18 08/22/17 11/10/15 09/23/14 09/10/13 10/22/12 04/19/11 Recommendations: 11 Open: 1 Implemented during quarter: 0 Review practice of reimbursing employee meals when not in a travel status and report the amounts as income to employees to conform to Internal Revenue Service requirements (ASD) Attachment A PAGE 6 Audit Title and Report Date Due Date and Prior Status Report Dates Total Recommendations/ Number Open Summary of Open Recommendations Inventory Management Issued: 02/18/14 Due – 12/10/19 06/11/19 10/23/18 11/02/17 09/23/14 Recommendations: 14 Open: 0 Implemented during quarter: 4 Implement City’s inventory management policies and procedures (ASD/UTL/PWD/IT) Update and enforce inventory count policies and procedures to ensure consistent and accurate inventory records (ASD) Identify, formalize, and communicate inventory management goals and objectives to City departments (ASD) Ensure staff identify and use key SAP inventory management reports and appropriately configure and update SAP parameters that affect inventory levels (ASD/IT) Parking Funds Issued: 12/15/15 Due – 03/12/19 06/21/18 11/14/17 Recommendations: 8 Open: 0 Implemented during quarter: 0 Develop policies and procedures to clarify roles and responsibilities and ensure accurate calculation and reporting of parking-in-lieu fees (PCE, ASD, PWD, CLK) Disability Rates and Workers’ Compensation Issued: 05/10/16 Due – 12/10/19 06/11/19 10/23/18 02/13/18 Recommendations: 15 Open: 4 Implemented during quarter: 0 Review departmental procedures and safety requirements to ensure they align with citywide policies and procedures (HR) Identify and provide industry-specific ergonomics and general wellness training opportunities (HR) Address the disability leave benefits incorrectly reported as compensation to CalPERS (HR) Ensure that data for managing disability leave is accurately captured through SAP time reporting (HR) Cable Franchise and Public, Education, and Government (PEG) Fees Issued: 06/14/16 Due – 12/10/19 06/11/19 10/23/18 03/21/18 08/22/17 Recommendations: 9 Open: 4 Implemented during quarter: 2 Assess ongoing need for PEG fees; place fees in restricted account until decisions are made about use of fees (CMO/ATTY/ASD/IT) Determine whether to allocate unrestricted funds, instead of PEG fees, to subsidize the Media Center’s operations. (CMO/ATTY/ASD/IT) Send letters to cable companies to demand payment of underpaid franchise and PEG fees (CMO/ATTY/ASD/IT) Develop criteria for assessing the accuracy of future cable franchise and PEG fee payments and require more detail with payment remittances (ASD) Assign responsibility for the cable communications program and provide effective oversight of the program (CMO/CLK) Draft an ordinance to update the Palo Alto Municipal Code based on clarified assignment of responsibility (CMO/ASD/ATTY/CLK) Attachment A PAGE 7 Audit Title and Report Date Due Date and Prior Status Report Dates Total Recommendations/ Number Open Summary of Open Recommendations Community Services Department (CSD): Fee Schedule Audit Issued: 02/14/17 Due – 12/10/19 06/11/19 06/21/18 11/14/17 Recommendations: 3 Open: 1 Implemented during quarter: 1 Revise City’s cost recovery policy to align with relevant laws and reconfigure the Questica budget system to support fees that recover more than 100 percent of costs (ASD) Configure SAP or the new ERP system to align cost centers with CSD programs (CSD) Continuous Monitoring: Payments Issued: 04/13/17 Due – 12/10/19 06/11/19 10/23/18 03/21/18 Recommendations: 7 Open: 3 Implemented during quarter: 0 Build a continuous monitoring process into the new ERP system to identify potential duplicate invoices and seek recovery of duplicate payments (ASD) Build a continuous monitoring process into the new ERP system to identify duplicate, incomplete, or unused vendor records (ASD) Clean vendor master file before merging data into new ERP system (ASD) Green Purchasing Practices Issued: 04/13/17 Due – 12/10/19 06/11/19 06/21/18 Recommendations: 8 Open: 5 Implemented during quarter: 1 Clearly define department(s) responsible for implementing green purchasing policies and determine if additional staffing and funding are needed to implement the policies (ASD/CMO) Develop consolidated procedures to implement green purchasing policies (CMO/ASD/PWD) Educate City staff on green purchasing policies (ASD) Evaluate potential for use of 40 percent post- consumer fiber paper towels/other green janitorial products and monitor janitorial contractor’s compliance with green purchasing requirements (PWD) Evaluate if new e-procurement system or other technology solution can help with tracking and reporting green purchases and establish appropriate green purchasing performance measures (ASD/PWD) Require vendors to provide data on amounts of green products and services that City purchases from them (ASD/PWD) Utilities Department: Cross Bore Inspection Contract Issued: 06/01/17 Due – 12/10/19 06/11/19 06/21/18 Recommendations: 4 Open: 0 Implemented during quarter: 4 Prioritize uninspected sewer pipelines for inspection and disclose potential inspection challenges in future contract solicitations (UTL) Identify and update missing data in laterals database (UTL) Incorporate relevant provisions from National Association of Sewer Service Companies’ contract template in future sewer inspection contracts (UTL) Identify gaps in staff expertise and develop a training and certification plan for field staff who will monitor field inspections (UTL) Attachment A PAGE 8 Audit Title and Report Date Due Date and Prior Status Report Dates Total Recommendations/ Number Open Summary of Open Recommendations Accuracy of Water Meter Billing Issued: 08/16/17 Due – 12/10/19 06/11/19 06/21/18 Recommendations: 11 Open: 3 Implemented during quarter: 4 Review and correct meter records for meters larger than 2 inches (UTL) Explore options for addressing equity in meter size rates (UTL) Develop a policy and procedures to report significant, systemic infrastructure changes to Council and update City of Palo Alto Utilities’ (CPAU) Rules and Regulations as needed (UTL) Seek direction from Council before proceeding with installing additional electronic meters (UTL) Determine if installed eMeters should be replaced and if billing adjustments are required (UTL) Clarify purchasing policy and procedures for product standardization and sole source (ASD) Retrain staff on purchasing policies and procedures and completion of required forms (ASD) Continuous Monitoring: Overtime Issued: 09/06/17 Due – 12/10/19 06/11/19 Recommendations: 2 Open: 2 Implemented during quarter: 0 Explore potential of developing a continuous monitoring process for overtime (ASD) Form a work group to design standardized overtime management processes in the new ERP environment (ASD) Information Technology and Data Governance Issued: 06/13/18 Due – 12/10/19 06/11/19 Recommendations: 4 Open: 2 Implemented during quarter: 2 Assign roles and responsibilities for IT governance to ensure that governance coveralls all key aspects of the City’s information systems (IT) Adopt an industry standard IT governance framework and create a plan to achieve a process capability model of “established” or higher (IT) Assign roles and responsibilities for data governance to ensure that governance coveralls all key aspects of the City’s information systems (IT) Adopt an industry standard data governance framework and create a plan to achieve a process capability model of “established” or higher (IT) Business Registry Issued: 08/28/18 Will be determined after Council acceptance Recommendations: 3 Open: 3 Implemented during quarter: 0 Clarify existing and potential uses and priorities for business registry data and update questions in business registry survey as appropriate (CMO, DSD, PCE, Trans) Identify external data that can improve accuracy of data collected and provide the data to the business registry consultant (DSD) Update business registry administrative manual to reflect current process, including roles and responsibilities (DSD and Attorney) Attachment A PAGE 9 Audit Title and Report Date Due Date and Prior Status Report Dates Total Recommendations/ Number Open Summary of Open Recommendations Code Enforcement Issued: 11/06/18 Due – 12/10/19 None Recommendations: 7 Open: 7 Implemented during quarter: 0 Clarify the City’s code enforcement strategy and priorities with the City Council; develop an updated enforcement procedure that is aligned with the strategy (CMO) Update Municipal Code sections governing code enforcement, including combining, clarifying, and streamlining the administrative procedures and clarifying roles and responsibilities (CMO) Hold regular meetings with staff who have code enforcement responsibilities to share information and develop collective and consistent enforcement action plans (CMO) Identify what complaint and case data to capture, track, and share internally and externally; determine which system(s) to use to track data for each code enforcement function, including standardizing code enforcement terminology; design reporting processes capable of aggregating data into a citywide view; develop citywide performance measures for code enforcement (CMO) Reconfigure Accela Code Enforcement to enhance data collection and reporting, to pave the way for other functions that may adopt Accela (CMO) Provide general, citywide information on code enforcement in a central location on the City’s website and assign responsibility for ensuring that the information is kept up to date (CMO) Assign staff to be responsible for citywide administration of PaloAlto311 to provide ongoing maintenance and support, including redefining PaloAlto311 issue types and reconfiguring workflows, managing user access and making training materials available for new users, and updating and maintaining the PaloAlto311 data and dashboard on the City’s Open Data Portal (CMO) ERP Planning – Separation of Duties Issued: 10/17/18 Due – 12/10/19 None Recommendations: 2 Open: 2 Implemented during quarter: 0 Transfer task of entering Accounts Payable’s invoices to ASD Administration; have Payroll redesign manual controls to mitigate high-risk areas of separation of duties conflicts; and share with Utilities relevant, adopted separation of duties practices to ensure consistency with ASD practices (ASD) Revisit the design and definitions of profiles and roles according to the concept of least privilege, where possible (IT) Attachment A PAGE 10 Audit Title and Report Date Due Date and Prior Status Report Dates Total Recommendations/ Number Open Summary of Open Recommendations ERP Planning – Data Standardization Issued: 10/17/18 Due – 12/10/19 None Recommendations: 4 Open: 4 Implemented during quarter: 0 Provide governance over data standardization, such as who is responsible and what is subject to data standardization (IT) Review other systems and determine what is subject to data standardization, especially for data that feeds into the SAP system (IT) Work with Departments to review the data within SAP and determine what will benefit most by standardizing data (IT) Require Departments to implement data standardization requirements during data cleansing in the ERP transition (IT) Open Recommendations by Audit Issuance Date Fiscal Year Audit Title Number of Open Recommendations 2011 Citywide Cash Handling and Travel Expense 1 of 11 2014 Inventory Management 0 of 14 2016 Parking Funds 0 of 8 Cable Franchise and Public, Education, and Government (PEG) Fees 4 of 9 Disability Rates and Workers’ Compensation 4 of 15 2017 Community Services Department: Fee Schedule 1 of 3 Continuous Monitoring: Payments 3 of 7 Green Purchasing Practices 5 of 8 Utilities Department: Cross Bore Inspection Contract 0 of 4 2018 Accuracy of Water Meter Billing 3 of 11 Continuous Monitoring: Overtime 2 of 2 Information Technology and Data Governance 2 of 4 2019 Business Registry 3 of 3 Code Enforcement 7 of 7 ERP Planning – Separation of Duties 2 of 2 ERP Planning – Data Standardization 4 of 4 7 0 1 18 0 5 10 15 20 Q1 Q2 Q3 Q4 Number of Implemented Recommendations by Quarter 9 9 7 16 0 20 40 60 Number of Open Recommendations FY 19 FY 18 FY 17 Prior Fiscal Years Attachment A PAGE 11 Fraud, Waste, and Abuse Hotline Administration The hotline review committee, composed of the City Auditor, the City Attorney, and the City Manager, or their designees, meets as needed to review hotline-related activities. One complaint was received during the first quarter of FY 2019, which was closed during the second quarter due to lack of receipt of additional information from complainant. No complaints were received in the quarter of FY 2019, and all prior-year complaints have been closed. The chart below summarizes the status of complaints received in each fiscal year since the hotline was implemented. 7 3 2 13 9 0 10 2 4 6 8 10 12 14 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Status of Complaints Received by Fiscal Year Closed Complaints Attachment A City of Palo Alto (ID # 10489) City Council Staff Report Report Type: Action Items Meeting Date: 10/28/2019 City of Palo Alto Page 1 Summary Title: 874 Boyce: Code Text Amendment and Preliminary Parcel Map With Exceptions Title: PUBLIC HEARING / QUASI-JUDICIAL. 874 Boyce Avenue [18PLN-00030]: Adoption of an Ordinance Amending Chapter 20.21 of Title 21 of the Palo Alto Municipal Code to Allow the Creation of a Flag Lot Where the Residence on the Front Portion of the Existing lot to be Subdivided Would be Protected Under an Historic Covenant, and Approval of a Preliminary Parcel Map to Create two Lots With an Exception Allowing; (1) a Narrower Than Standard Front lot in the R-1 Zone District (Single-Family Residential), and (2) a 28-Foot Longer Access Easement Than the 100 Foot Long Easement Allowed Without Exception. Environmental Assessment: Exempt From the Provisions of CEQA Pursuant to CEQA Guidelines Section 15308 (Protection of the Environment) and 15332 (Infill Development) From: City Manager Lead Department: Planning and Development Services Recommendation Staff recommends that Council take the following actions: 1. Find the project exempt from the provisions of the California Environmental Quality Act (CEQA) in accordance with CEQA Guidelines Sections 15308 (Protection of the Environment) and 15332 (Infill Development). 2. Adopt the proposed ordinance amending Title 21 (Subdivisions and Other Divisions of Land), Chapter 21.20 (Design), Section 21.20.301 (Flag Lots) of the Palo Alto Municipal Code (PAMC) included in Attachment B. 3. Approve the Preliminary Parcel Map with Exceptions based on findings and subject to conditions of approval included in the Draft Record of Land Use Action included in Attachment C. Executive Summary City of Palo Alto Page 2 The proposed project includes a request for a Preliminary Parcel Map with Exceptions to subdivide an existing residential parcel located at 874 Boyce into two lots; one lot would be a flag lot1. The existing parcel at 874 Boyce is 12,403 sf and the resulting lots would be 6,090 sf and 6,000 sf. The proposed map includes an adjustment to the lot line between the subject site and the adjacent 872 Boyce property. The owner of 874 Boyce would give 313 square feet (sf) of property to 872 Boyce. This adjustment requires a request for a map exception to allow for the resulting lot at 874 Boyce to be 47.42 feet wide along the frontage instead of the code required 60 feet. In addition, the applicant requests an exception for the proposed length of the access easements. Title 21, Chapter 21.20 of the PAMC currently does not allow for the creation of a flag lot in the R-1 zone district, except when an owner will record a historic preservation covenant on an existing residence on the new flag lot. The proposed project includes a Category 4 historic resource on the existing parcel, but the historic structure would be on the street-fronting lot rather than the proposed flag lot. The proposed ordinance would revise PAMC Section 21.20.301. The amendment would allow creation of a new flag lot when the owner will record a historic preservation covenant for the historic resource located on the flag lot or resulting street frontage lot. The purpose of the proposed project is to encourage historic preservation and the creation of an additional housing unit. Background The proposed project is located at 874 Boyce Avenue, near the three-way intersection of Seneca Street, Homer Avenue, and Boyce Avenue. Adjacent structures are primarily two-story residences; however, there is a mix of single-story and two-story residences throughout the neighborhood. The City’s Historic Inventory identifies both the residence at 874 Boyce and the adjacent residence at 872 Boyce as Category 4 (contributing) historic structures. There are several components to the proposed project. These include an Ordinance amending Title 21, Chapter 21.20; a preliminary parcel map with exceptions; revisions to existing easements; and a historical preservation covenant. A location map is provided as Attachment A and the proposed Preliminary Parcel Map is included as Attachment D. Ordinance to Amend Title 21, Chapter 21.20 1 “Flag Lot” means an interior lot that is either a landlocked parcel which has a driveway easement across another lot abutting a street, or a lot having limited frontage providing only enough width for a driveway to reach the buildable area of the lot which is located behind another lot abutting a street. City of Palo Alto Page 3 Chapter 21.20 of the Palo Alto Municipal Code (PAMC) only allows for the creation of a flag lot in instances where there is a historic residence to be preserved on the flag lot to be created. There is a Category 4 (contributing) historic structure located at 874 Boyce; however, it is located towards the street frontage rather than on the flag lot to be created. The proposed ordinance in Attachment B would amend the code to allow the creation of a flag lot in instances where the existing historic structure on the resulting front parcel would have the protection of a historic preservation covenant. The process for evaluating this type of application is set forth in PAMC Section 18.80.080. Preliminary Parcel Map with Exceptions The preliminary parcel map would subdivide the existing parcel located at 874 Boyce (APN 003- 25-039) into two parcels, one of which would be a flag lot. The existing lot area is 12,403 sf; the resulting lot areas would be 6,090 sf and 6,000 sf. As part of the project, the applicant will give 313 sf of the existing lot area at 874 Boyce to the owner of the adjacent property at 872 Boyce. The gifted area would enable a 12-foot wide access easement to extend from the public right- of-way, through 872 Boyce, to the existing flag lot at 876 Boyce. The proposed map includes a request for two exceptions: (1) An exception to allow for the street fronting lot at 874 Boyce to be 47.42 feet wide. A 60-foot lot width is the minimum standard normally required in the R-1 (single family residential) Zone District; and (2) An exception to allow for the length of the required access easement to extend 128.05 feet. Where a historic preservation covenant is recorded, PAMC Section 21.20.301(a)(3) states that no exception is required for an access easement of up to 100 feet; staff interprets this section to allow a longer easement length to be granted through an exception process. These two design exceptions are necessary to accommodate the required access easements for the adjacent and proposed flag lots. The easements would not have an adverse impact upon either of the existing historic residences or associated features (e.g. existing landscaping, fencing, or walkways) at 872 or 874 Boyce. The process for evaluating this type of application is set forth in Title 21 of the Palo Alto Municipal Code (PAMC) and California Government Code Section 66474. Although staff may review and approve preliminary parcel maps, PAMC Section 21.32.020 requires Planning and Transportation Commission (PTC) review and Council approval of preliminary parcels maps when the map includes exceptions. Both bodies review whether the amended subdivision complies and is consistent with the applicable laws. These include: • The Subdivision Map Act (in particular Government Code 66474), City of Palo Alto Page 4 • Title 21 of the Palo Alto Municipal Code, • Palo Alto Comprehensive Plan, and • Other applicable provisions of the Palo Alto Municipal Code and state law. Staff forwards the PTC’s recommendation to the City Council for final approval. Easements Currently there is a 17-foot-wide access easement shared between the three existing lots (874, 872, and 876 Boyce). The applicant proposes to abandon the existing shared easement as part of this proposed map and create two new easements. New easements would include: • A 12-foot-wide access easement at 872 Boyce for access to the existing flag lot (876 Boyce), and • A 12-foot-wide access easement at 874 Boyce for access to the new flag lot. The applicant proposes two separate access easements to avoid creation of a “private street.” In accordance with PAMC Section 21.20.240 (b)(4), if a single easement serves more than one lot at the rear, it is required to meet the design requirements of a private street. The code requires the deduction of private streets from the gross lot area when determining floor area ratio (FAR) allowances. Such a deduction would impact 872 Boyce, creating a non-compliance with a development standard (the existing home would exceed the FAR maximum). In addition, the two parcels could not both meet the minimum lot size requirements. By creating two separate easements, each serving a single lot at the rear, the applicant avoids the restrictive impacts associated with a single private street. In addition, the applicant proposes a new 10-foot-wide public utility easement for the maintenance of utilities, running from the public right-of-way to the new flag lot. The existing utility easement at 872 and 876 Boyce would remain. Historic Preservation Covenant If Council approves the Ordinance and the Record of Land Use Action for the Parcel Map with Exceptions, conditions of approval would require the recordation of an historic preservation covenant. The covenant would apply to the existing residence at 874 Boyce and would protect this Category 4 historic resource in perpetuity. The adjacent property at 872 Boyce is also a Category 4 contributing structure; it is a “twin” residence to 874 Boyce because the buildings on these properties mirror each other. The 1985 updated Department of Parks and Recreation historic inventory form prepared for the parcel, which is included in Attachment E, notes that this is “a pair of individually elegant and matched houses carefully placed to enhance the simple formality of their design.” The twin, adjacent home at 872 Boyce has a preservation covenant, recorded in conjunction with a subdivision where two homes existed. Protection of 874 Boyce would preserve both “twin” houses. As part of the approval, a covenant would be recorded requiring the property owner to maintain the historic structure in a manner that is consistent with state historic guidelines. City of Palo Alto Page 5 Previous Hearings The Planning and Transportation Commission reviewed the proposed Preliminary Parcel Map with Exceptions and Code Text Amendment on August 28, 2019 and voted unanimously to recommend approval of the map to Council. The staff report can be found at: https://tinyurl.com/874-Boyce-PTC-SR and the video can be viewed at: https://tinyurl.com/874-Boyce-PTC-Video. Draft meeting minutes are available online: https://www.cityofpaloalto.org/civicax/filebank/documents/73589. In its review, the PTC requested information regarding the number of potentially affected parcels associated with the flag lot amendment; implications using an easement as an alternative to a private street for the flag lot; and, whether staff and the applicant explored applying the ADU regulations instead of subdividing the property. In response, staff has identified about 25 parcels that are of sufficient size that could possibly be divided into a flag lot that also contain a potential historic resource. The use of the easement as opposed to requiring a private street does represent a policy approach that makes this particular application feasible and may have some benefit to other properties. Staff does not consider the easement precedent setting as each individual application would need to be evaluated based on site characteristics, the integrity of the potential historic resource and other factors. On balance, it is anticipated this approach has limited application in the City. With regard adding an ADU and not subdividing the property – this remains an option for the owner, but it does not achieve the owner’s objectives to provide a larger dwelling unit under separate ownership. This approach also does not preserve the historic resource, which under current codes, could be displaced with a new single story residence. The HRB held two study sessions on April 26, 2018 and June 14, 2018 to discuss the proposed project. The original application varied from the current proposal. The applicant’s current proposal does not include any physical changes to the existing residence at 874 Boyce. The applicant did not propose a design for a new residence on the new flag lot. However, the HRB supported the concept of subdividing the historic property to retain the existing historic resource via recorded preservation covenant. Any future modifications to 874 Boyce or on the new flag lot would be subject to the restrictions identified within the historic preservation covenant to be recorded on the site. The April 26, 2018 staff report is viewable here: https://www.cityofpaloalto.org/civicax/filebank/documents/64686 and a video of the hearing is accessed here: http://midpenmedia.org/historic-resources-board-46-2-3-2/ The June 14, 2018 study session staff report is viewable here: https://www.cityofpaloalto.org/civicax/filebank/documents/65432 and a video of the hearing is accessed here: http://midpenmedia.org/local-tv/watch-now/. Discussion City of Palo Alto Page 6 Following is staff’s analysis of the proposed project’s consistency with applicable plans, guidelines, and regulations as well as relevant policy considerations. Consistency with the Comprehensive Plan, Area Plans and Guidelines2 The proposed project is located within the single-family residential land use designation. The project would be consistent with the applicable goals and policies outlined in the Comprehensive Plan as detailed in the Draft Record of Land Use Action in Attachment C. In particular, the project would encourage historic preservation and would allow for the development of an additional residential unit. These outcomes are encouraged under the Land Use and Community Design Element and Housing Element of the Comprehensive Plan, respectively. There are no other plans or guidelines applicable to the subject property. Municipal Code Compliance The project complies with relevant titles of the PAMC, particularly Title 18 (Zoning); Title 21 (Subdivisions and other Divisions of Land); and Title 16, Chapter 16.49, (Historic Preservation), or is otherwise seeking, through the requested entitlements and approvals, permission to deviate from certain code standards in a manner that is consistent with the Municipal Code. Title 18, Zoning, Compliance3 The subject property is located within the R-1 (single-family residential) zone district. A detailed review of the proposed project’s consistency with applicable zoning standards is in the summary table (Attachment F). The proposed project complies with the zoning ordinance except with respect to the proposed width of the parcel at 874 Boyce. PAMC Section 18.12.040 identifies development standards within the R-1 Zone District and requires a 60-foot width for parcels within this district. The requested exception would allow for the width of the parcel at 874 Boyce to be approximately 47.5 feet where the existing parcel is 50 feet wide and the standard is 60 feet. As described above, this exception would allow for the gift of 313 sf of land for an access easement across 872 Boyce that meets the required 12-foot width (and 10 foot paved width) without making physical changes to that historic property, which is under an existing preservation covenant. The existing parcel at 874 Boyce is 12,403 sf and the resulting lots would be 6,090 sf for the new lot fronting the street and 6,000 sf for the new flag lot. The size of these parcels either meets or exceeds the minimum lot size requirement of 6,000 sf for the R-1 Zone District. Because the applicant is not requesting use of preservation incentives for development (e.g. a smaller minimum lot size for the resulting lots) the requirements outlined in PAMC Section 18.12.140 would not apply to the proposed project. 2 The Palo Alto Comprehensive Plan is available online: http://www.cityofpaloalto.org/gov/topics/projects/landuse/compplan.asp 3 The Palo Alto Zoning Code is available online: http://www.amlegal.com/codes/client/palo-alto_ca City of Palo Alto Page 7 Title 21, Subdivisions and other Divisions of Land, Compliance PAMC Chapter 21 includes standards for reviewing preliminary parcel maps. The proposed project is consistent with most requirements outlined in this title with respect to parcel maps. However, the project would not be consistent with PAMC Section 21.20.030 (flag lots), which outlines when flag lots are allowed to be created. Accordingly, the proposed project includes a request for a Municipal Code Text Amendment, as described above. In addition, the proposed project includes a request for an easement that is longer than typically allowed under PAMC Section 21.20.030. Therefore, the proposed map would include an exception to allow for a 128.05-foot long easement; the maximum access easement length is 100 feet. With approval of the proposed ordinance in Attachment B to amend the Code, and approval of the preliminary parcel map with exceptions, the proposed project would comply with Title 21 of the Municipal Code. Title 16, Chapter 16.49, Historic Preservation Ordinance, Compliance The proposed ordinance is consistent with the original intent for a subdivision incentive for historic preservation: to help preserve historic resources that could otherwise be demolished. The City’s historic ordinance (PAMC Chapter 16.49) does not offer protection for Category 4 homes located outside the Downtown or Professorville Historic District. The proposed project would preserve this Category 4 resource in perpetuity while also allowing for construction of an additional dwelling unit. A historic preservation covenant similar to that recorded for the adjacent parcels at 872 and 876 Boyce will be recorded by the property owner as a condition of approval. The covenant, at minimum, will require maintenance of the 874 Boyce home in accordance with the Secretary of the Interior’s Standards for Rehabilitation. The covenant would also require any new construction on this lot or on the new flag lot to be compatible with the existing historic structure. Construction on the new flag lot would need to be a single-story structure in order to meet the City’s requirements for development of a flag lot. The owner would record the covenant prior to recording the parcel map. Multi-Modal Access & Parking The proposed project would not conflict with any existing or future planned bicycle lanes. It is not located on a Safe Routes to School path. As noted previously, the owner proposes proper ingress/egress access in accordance with the design requirements outlined in Title 21 for access to the three existing units and the proposed flag lot. Consistency with Application Findings The proposed project complies with the applicable findings set forth in California Government Code Section 66474 under the Subdivision Map Act, and with the findings for map exceptions outlined in PAMC Chapter 21.32.020. In particular, the project is consistent with the Comprehensive Plan in that it supports the addition of a new dwelling unit. The City’s policies encourage housing units. The project would also preserve a historic residence in perpetuity, consistent with the city’s goals and policies for historic preservation. With approval of the City of Palo Alto Page 8 allowed amendments and exceptions, the project would be consistent with the municipal code, as discussed above. The draft findings for the proposed exceptions are in Attachment C. The existing lot is unique in that the existing residence on the parcel is historic and the parcel is substantially larger than the allowed lot size for this zone district. This allows for the subdivision of the lot while still providing two parcels that meet the minimum lot size requirements. The project design ensures the project would not be detrimental to the public welfare or injurious to other nearby property as discussed further in the findings. Public Comments As of the writing of this report, no project-related public comments were received other than comments received through coordination with adjacent property owners. As noted, the project affects the property at 872 Boyce in that it will expand via the gift of a small portion of 874 Boyce. Therefore, the property owner of 872 Boyce will be a signatory to the proposed map. A joint letter from the property owners at 872 and 876 Boyce is included in Attachment G. These neighbors have expressed support for the project, as long as (1) the project is designed such that no additional paving is required on the 872 or 876 Boyce properties and (2) the new access easement through 872 Boyce only affects land covered under existing easements (i.e. does not further restrict the 872 Boyce property). During the planning commission hearing, one member of the public indicated his concerns regarding the project and urged the PTC to recommend denial. The specific concerns raised by this member of the public included the fact that the two easements would run parallel to each other and would therefore serve as a private street. While it’s true that these two easements would run parallel to each other; the project is designed in such a way that a fence could be constructed between the two properties and that the easements for each property would meet all code requirements to serve the respective flag lots at the rear. The commenter also expressed concern that, during early HRB study sessions, the applicant indicated an initial intent to divide the lot in such a way that they could provide an addition to the historic residence. The current project does not include an addition to the historic residence at 874 Boyce. However, the resulting lot would only allow for an addition of up to 387 sf, above which an addition would exceed the FAR requirements. The covenant, as with all historic preservation covenants, would not restrict the property from any future improvements. However, it would require that any future improvements be consistent with the Secretary of the Interior’s Standards for Rehabilitation. Therefore, any improvement in the future would not affect the historic status of the property. Policy Implications As discussed above, the project would encourage historic preservation, consistent with Policy L- 7.1 of the Comprehensive Plan Land Use Element. Policy 7.1 states “Encourage public and private upkeep and preservation of resources that have historic merit, including residences City of Palo Alto Page 9 listed in the City’s historic resource Inventory, the California Register of Historical Resources, or the National Register of Historic Places.” The project would also allow for an additional housing unit, consistent with Policy H2.1.2 of the Comprehensive Plan Housing Element. Policy H2.1.2 states “Allow increased residential densities and mixed use development only where adequate urban services and amenities, including roadway capacity, are available.” The proposed code text amendment could affect approximately 25 additional R-1 zoned parcels throughout the city. All of those 25 parcels are historic resources listed on the City’s Historic Inventory (historic categories 1 to 4) and are more than 12,000 sf in area. Therefore, these oversized R-1 lots have the potential for subdivision into two lots, each meeting the minimum lot size requirement of 6,000 square feet. However, there are restrictions based on lot configuration, access, setbacks, floor area, and protected trees that could make such subdivision more difficult. Resource Impact The developer would be required to pay Parkland Dedication Fees estimated at approximately $63,108 for the proposed subdivision, as documented in Condition of Approval 8 in Attachment C. Prior to the issuance of any future building permit, development impact fees would also be required for the new single-family residence on the new flag lot. Timeline If Council approves the Zoning Code text amendment, the amendment would return to the Council consent agenda for a second reading and would become effective 30 days thereafter. As noted in Section 1E of the RLUA in Attachment C, if Council approves the Preliminary Parcel Map with exceptions, such approval would be provisional on the adoption and effectiveness of the text amendment ordinance in Attachment B. Following completion of the Preliminary Parcel Map with Exceptions, the applicant must file a Parcel Map application. The map process concludes with Council consent action on the Parcel Map and recordation of the map and any associated easements and covenants. Environmental Review The City assessed the subject project in accordance with the authority and criteria contained in the California Environmental Quality Act (CEQA), CEQA Guidelines, and the City’s environmental regulations. The project is exempt from the provisions of CEQA pursuant to 15308 (Protection of the Environment) and 15332 (Infill Development). Further description is in the draft documentation associated with the Notice of Exemption, included in Attachment H. City of Palo Alto Page 10 Alternative Actions In addition to the recommended action, the City Council may: 1. Approve the project with modified findings or conditions; 2. Continue the project to a date (un)certain; or 3. Recommend project denial based on revised findings. Attachments: Attachment A: Location Map (PDF) Attachment B: Proposed Ordinance Amending Title 21 Chapter 20 (PDF) Attachment C: Record of Land Use Action (DOCX) Attachment D: Project Plans (Preliminary Parcel Map) (DOCX) Attachment E: Zoning Consistency Table (DOCX) Attachment F: Historic Resources Inventory (DPR Form) (PDF) Attachment G: Neighbor Correspondence (PDF) Attachment H: Notice of Exemption (DOCX) 003-25-039 003-25-060 003-25-059 003-25-065 003-25-073 28.3' 0' 11.8' 152.6' 88.8' 159.0' 1 8 .8' 88.8' 50.0' 50.0' 100.0' 50.0' 100.0' 50.0' 148.0' 50.0' 148.0' 50.0' 148.0' 50.0' 50.0' 100.0' 50.0' 50.0' 66.7' 248.0' 50.0' 187.0' 16.7'61.0' 248.1' 50.0' 248.0' 50.0' 100.5' 80.0' 100.6' 80.0' 70.0' 120.1' 70.0' 15.0 100.0' 113.0' 50.0' 147.5' 80.0' 19.6' 70.0' 118.1' 118.1' 100.0' 63.0 100.0' 63.0' 100.0' 50.0 100.0' 50.0' 100.0' 50.0' 100.0' 50.0' 100.0' 88.1 88.1' 100.0' 83.3' 61.0' 33.3' 187.0' 50.0' 248.0' 50.0' 187.0' 50.0' 187.0' 50.0' 50.0' 50.0' 50.0' 136.5'111.5' 111.5'136.5' 50.0' 50.0'50.0' 50 . 0 ' 2 923 844 850 848 846 949 955 1020 888 1052 868 870 969A 886884 872 874 5 1058 1050 1040 10301010 876 963 BO YC E AV E N UE This map is a product of the City of Palo Alto GIS This document is a graphic representation only of best available sources. Legend Historic Site abc Known Structures Tree (TR) Zone Districts abc Zone District Notes Curb Edge abc Dimensions (AP) Sidewalk Underlying Lot Line abc Easement abc Zone District Labels 0' 57' 874 Boyce CITY O F PALO A L TO IN C O R P O RATE D C ALIFOR N IA P a l o A l t oT h e C i t y o f A P RIL 16 1894 The City of Palo Alto assumes no responsibility for any errors ©1989 to 2016 City of Palo Alto chodgki, 2019-08-22 08:22:49Parcel Report with zoningdistricts (\\cc-maps\Encompass\Admin\Personal\Planning.mdb) 191009 sm 010 1 ORDINANCE NO. _____ Ordinance of the Council of the City of Palo Alto Amending Section 21.20.301 (Flag Lots) of Chapter 21.20 (Design) of Title 20 (Subdivisions and Other Divisions of Land) of the Palo Alto Municipal Code. The Council of the City of Palo Alto does ORDAIN as follows: SECTION 1. Section 21.20.301 (Flag Lots) of Chapter 21.20 (Design) of Title 21 (Subdivisions and Other Divisions of Land) of the Palo Alto Municipal Code is hereby amended to read as follows: 21.20.301 Flag Lots (a) The director of planning may approve, pursuant to a preliminary parcel map, not more than one flag lot, as defined in Title 18 of this code, under the following conditions: (1) The flag lot shall be used only for single-family residential use; (2) The flag lot shall meet all of the requirements of the zone district within which it is located and, in addition, shall have an area which exceeds the lot area requirement of the zone district by not less than twenty percent exclusive of any portion of the lot used for access to a public street., except when the flag lot to be created contains a residence with recorded preservation covenants, where the flag lot area is not required to exceed the lot requirement of the zone district and no request for nor approval of exceptions to said standards shall be required; and (3) Access from the flag lot to a public street shall not be over an easement but over land under the same ownership as the flag lot. Such access shall have a minimum width of fifteen feet and shall have a paved way not less than ten feet in width., (4) Notwithstanding the foregoing, if except whenthe flag lot or adjacent lot to be created contains a residence with recorded preservation covenants, where the flag lot area is not required to exceed the lot requirement of the zone district and the flag lot access may be over an easement or land under the same ownership, the access shall have a minimum width of twelve feet for a maximum length no more than 100 feet, and shall have a paved way not less than ten feet in width, and no request for nor approval of exceptions to said standards shall be required. (b) Notwithstanding the foregoing, the creation of flag lots, as defined in Title 18 of this code, shall be prohibited in the R-1 single-family residence district, and no exceptions shall be granted therefore; provided, however, that: 191009 sm 010 2 (1) Flag lots may be created in the R-1 zone district pursuant to Title 18 as long as a the residence thereon has a recorded preservation covenant is recorded for a historic resource located on the flag lot or on an adjacent lot to be created; and (2) Flag lots in the R-1 zone district shall comply with the requirements stated in subsection (a), except that smaller lot areas may be approved pursuant to Section 18.12.140 of Title 18. (3) Flag lots validly existing in the R-1 district as of the effective date of said prohibition shall, nonetheless, be recognized as legal lots for purposes of this Title 21 only. Development of such existing flag lots shall be subject to all applicable provisions of Title 18 of this code as of the date of any such proposed development. SECTION 2. The Council finds that the Ordinance is exempt from the provisions of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15305, because it is a minor alteration in land use limitations, and section 15308, because it is an action taken for the protection of historic resources. SECTION 3. This ordinance shall be effective on the thirty-first day after the date of its adoption. INTRODUCED: PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: ____________________________ ____________________________ City Clerk Mayor APPROVED AS TO FORM: APPROVED: ____________________________ ____________________________ Deputy City Attorney City Manager ____________________________ 191009 sm 010 3 Director of Planning and Development Services ____________________________ Director of Administrative Services Attachment C APPROVAL NO. 2018- RECORD OF THE COUNCIL OF THE CITY OF PALO LAND ALTO LAND USE ACTION FOR 874 BOYCE AVE APPROVING A PRELIMINARY PARCEL MAP WITH EXCEPTIONS [FILE NO 18PLN-00030] SECTION 1. BACKGROUND. The City Council of the City of Palo Alto (“City Council”) finds, determines, and declares as follows: A. On January 23, 2018, Leopold Vandeneyde on behalf of Christopher and Ximena Loops, applied for a Preliminary Parcel Map with exceptions to subdivide an existing 12,403 square foot single-family residential parcel, in order to create two parcels (“The Project”). B. The project site is comprised of two lots (APN Nos. 003-25-039 and 003-25-073), located at 874 and 872 Boyce respectively. The subject property at 874 Boyce totals 12,403 sf (0.28 ac) and would be subdivided to create two parcels, which would be 6,090 sf and 6,000 sf. The property at 872 Boyce is currently 6,607 sf (0.15 ac) and would be expanded by 313 sf; therefore, the resulting lot would be 6,902 sf (0.158 ac). Single-family residential land uses are located adjacent to the lot to the north, south, east and west. C. Staff has determined that, with adoption of the proposed Municipal Code Text Amendment (Ordinance ______) amending Title 21, Chapter 20, Section 21.20.030 of the Palo Alto Municipal Code and with approval of the requested map exceptions, the proposed project is consistent with all applicable standards of the Palo Alto Municipal Code. D. Following staff review, the Planning and Transportation Commission reviewed the project and recommended approval on August 28, 2019 subject to conditions of approval. E. On ____________ 2019, the City Council held a duly noticed public hearing, at which evidence was considered and all persons were afforded an opportunity to be heard in accordance with the City Council’s policies and procedures. After hearing public testimony, the Council voted to approve the preliminary parcel map with exceptions subject to the conditions set forth in Section 6 of this Record of Land Use Action, and subject to the adoption and effectiveness of the Municipal Code text amendment ordinance. F. On ___________2019 the City Council held a second reading for the Municipal Code Text Amendment, which is effective 30 days thereafter. SECTION 2. ENVIRONMENTAL REVIEW. The City as the lead agency for the Project has determined that the project is subject to environmental review under provisions of the California Environmental Quality Act (CEQA). The subject project has been assessed in accordance with the authority and criteria contained in the California Environmental Quality Act (CEQA), the State CEQA Guidelines, and the environmental regulations of the City and was found to be exempt from CEQA in accordance with CEQA Guidelines Section 15308 (Actions for protection of the environment) and Guidelines Section 15332 (In-fill exemption). SECTION 3. PRELIMINARY PARCEL MAP FINDINGS. A legislative body of a city shall deny approval of a Tentative Map, if it makes any of the following findings (California Government Code Section 66474). The City Council cannot make these findings for the following reasons: 1. That the proposed map is not consistent with applicable general and specific plans as specified in Section 65451: The proposed Preliminary Parcel Map is consistent with the City’s Comprehensive Plan (i.e. general plan). Specifically, the project site is designated as having a single family residential land use designation, which encourages single-family residential uses. The proposed project would allow for the development of another single family dwelling unit and would also preserve the existing historic structure under a historic preservation covenant. This is consistent with policies outlined, in particular, in the Housing and the Land Use and Community Design Elements of the City’s Comprehensive Plan. Therefore, the proposed map is consistent with the Comprehensive Plan. 2. That the design or improvement of the proposed subdivision is not consistent with applicable general and specific plans: As noted above, the subdivision would allow for a single lot that currently exceeds the code requirements to be subdivided into two parcels in order to add a second single-family residence. The project does not currently propose any improvements other than minor paving at 874 Boyce in order to provide a 10 foot paved width. However, it is anticipated that with approval of the map, construction of single-story detached single-family residence would be a reasonably foreseeable future action. The proposed map is consistent with the City’s Comprehensive Plan, as outlined in Table 1. Table 1: Comprehensive Plan Consistency Comp Plan Goals and Policies How project adheres or does not adhere to Comp Plan Land Use and Community Design Element Goal L-1.2: Limit future urban development to currently developed lands within the urban service area. The proposed map is consistent with the Comprehensive Plan in that it would encourage in- fill development by allowing for the addition of a new residence in a single-family residential land use designation in an urbanized area. The only proposed improvements at the site at this time would be minimal paving to provide access to the new flag lot. It is anticipated that the rear parcel would be developed with a single-story residence; however, the design is not yet known. The historic preservation covenant will require that the new development be consistent with the historic character of the existing development. Policy L-1.3: Infill development in the urban service area should be compatible with its surroundings and the overall scale and character of the city to ensure a compact, efficient development pattern. Policy L-7.1: Encourage public and private upkeep and preservation of resources that have historic merit, including residences listed in the City’s historic resource Inventory, the California Register of Historical Resources, or the National Register of Historic Places. The project would include recordation of a historic preservation covenant that would protect the existing historic residence at 874 Boyce in perpetuity. This is consistent with Policy L-7.1, which encourages the preservation of historic resources. Natural Environment Element Policy N-2.10: Preserve and protect Regulated Trees, such as native oaks and other significant trees, on public and private property, including landscape trees approved as part of a development review process and consider strategies for expanding tree protection in Palo Alto. The proposed flag lot includes a protected oak tree. With approval of the lot subdivision, a condition of approval has been added to ensure that future development would not significantly impact this protected tree. Housing Element Program H2.1.2: Allow increased residential densities and mixed use development only where adequate urban services and amenities, including roadway capacity, are available. The Housing Element encourages the development of housing, especially on underdeveloped sites. The proposed project would increase the housing density on this parcel by allowing for two single- family residences where only one is currently allowed in accordance with the zoning requirements. 3. That the site is not physically suitable for the type of development: The site is well suited for the proposed development. The current parcel at 874 Boyce exceeds the maximum lot size requirements. The proposed project would split the lot in order to create two parcels that meet the area requirements allowed under the City’s single-family residential zoning. Access would be provided with minimal improvements at 874 Boyce and without any improvements at the adjacent residence at 872 Boyce. The proposed parcel at 874 Boyce would be slightly narrower than the width allowed under the R-1 single family residential zoning. However, many other sites in the vicinity have narrower lots than are typically allowed under the code (typically around 50 feet in width where a 60 foot width is required); therefore, the project, which would allow a parcel with an approximately 47.5 foot lot width, would be consistent with other development in the area and is physically suitable for this type of development. 4. That the site is not physically suitable for the proposed density of development: The single family residential land use designation identified 1 to 7 units per acre as the typical density range. The project site is 0.28 acres and therefore two units on this site area would be consistent with the typical density range identified in the Comprehensive Plan land use element. Proper utility connections (e.g. sewer, water, gas) are already available for the site and proper access and parking can be accommodated. Therefore, the site is physically suitable for the proposed density of development. 5. That the design of the subdivision or the proposed improvements are likely to cause substantial environmental damage or substantially and avoidably injure fish or wildlife or their habitat: The proposed preliminary Parcel Map and minor improvement to provide 10 feet paved width access to the new flag lot would not cause substantial environmental damage or substantially and avoidably injure fish or wildlife or their habitat. There are no open space areas or natural features within the vicinity of the project site. The area is entirely urban in nature. The adopted Palo Alto 2030 Comprehensive Plan includes Map N-1, which identifies sensitive animal and plant species within the Palo Alto quadrangle, a large geographic area that includes the urban portions and portions along the bay and within the foothills, based on information in the California Natural Diversity Database (CNDDB). Based on this map and the urban nature of the site, the subject property does not contain any habitat for endangered, rare, or threatened species and has not historical supported any of these species. 6. That the design of the subdivision or type of improvements is likely to cause serious public health problems: The proposed subdivision and the minor improvement to the drive aisle would not have the potential to cause a serious public health problem. The proposed use would not include use or storage of hazardous materials in large quantities and the site is not located on a hazardous waste site pursuant to 65962.5 of the government code. 7. That the design of the subdivision or the type of improvements will conflict with easements, acquired by the public at large, for access through or use of, property within the proposed subdivision. In this connection, the governing body may approve a map if it finds that alternate easements, for access or for use, will be provided, and that these will be substantially equivalent to ones previously acquired by the public. This subsection shall apply only to easements of record or to easements established by judgment of a court of competent jurisdiction and no authority is hereby granted to a legislative body to determine that the public at large has acquired easements for access through or use of property within the proposed subdivision. The proposed Preliminary Parcel Map and minor anticipated improvements will not conflict with any public easements (e.g. utility or access easements) on the site. There are no public access easements on the property currently. There is one public utility easement that runs from the public right-of-way through 872 Boyce to serve the existing flag lot at 876 Boyce. This easement would not be affected by the proposed project. The proposed development would require a new public utility easement to provide utility services to the new flag lot. SECTION 4. MAP EXCEPTION FINDINGS. The project proposes exceptions to the design standards for lot width and for the length of a required access easement as depicted on Preliminary Parcel Map: • Lot width (47.5 feet) • Easement length (128.5 feet) 1. There are special circumstances or conditions affecting the property. The subject property is irregular in that it is narrower and much longer than the typical surrounding lot. The total lot area is 12,403 sf, which far exceeds the maximum allowed under the R-1 (single family residential) zone district (9,999 sf). In addition, the parcel includes a Category 4 historic resource that is considered a “twin” to the adjacent house at 872 Boyce Avenue. These special circumstances (the lot design and the historic structure) affecting the property limit the development that can occur on this site. 2. The exception is necessary for the preservation and enjoyment of a substantial property right of the petitioner. The proposed exceptions would allow the property owner to utilize the full site area to its maximum potential without impacting the existing historic residence. Preservation of the existing historic residence and the addition of housing units are both highly encouraged under the City’s Comprehensive Plan. Without the approval of these exceptions, an additional single-family residence could not be constructed at the rear of the property and the historic residence would not be preserved. 3. The granting of the exception will not be detrimental to the public welfare or injurious to other property in the territory in which the property is situated. The proposed exceptions would preserve the existing residence at 874 Boyce in perpetuity and allow for the development of a second single-story home on the new flag lot. The project has been designed to eliminate the need for any changes to the physical improvements at 872 or 876 Boyce and with only very minor changes (minor paving) at 874 Boyce to accommodate proper access to the new flag lot. The subject property is designed for single-family residential use. Therefore, the project would not be detrimental to the public welfare or injurious to other property in the territory. 4. The granting of the exception will not violate the requirements, goals, policies, or spirit of the law. The granting of these exceptions does not violate the requirements, goals, policies or spirit of the law. These exceptions are allowed in accordance with the City’s municipal code. The proposed exception to the lot width would not affect the parcel’s compliance with the zoning ordinance (e.g. setback requirements) and the proposed exception to the easement length would not affect proper access to the site for regular vehicles or emergency access. The Fire Department would typically allow for a 150 foot access easement before additional protections are required and the proposed width is consistent with the code requirements. SECTION 5. PRELIMINARY PARCEL MAP APPROVAL GRANTED. Preliminary Parcel Map approval is granted by the City Council in accordance with PAMC Sections 21.12 and 21.20 and the California Government Code Section 66474, subject to the conditions of approval in Section 6 of this Record. SECTION 6. PARCEL MAP APPROVAL. The Parcel Map submitted for review and approval by the City Council shall be in substantial conformance with the Preliminary Parcel Map prepared by L. Wade Hammond, “Preliminary 3-Lot Parcel Map 874 Boyce Ave, Palo Alto and 872 Boyce Ave, Palo Alto”, consisting of three lots, dated July 12, 2019, except as modified to incorporate the conditions of approval in Section 6. A copy of this plan is on file in the Department of Planning and Development Services, Current Planning Division. Within two years of the approval date of the Preliminary Parcel Map, the subdivider shall cause the subdivision or any part thereof to be surveyed, and a Parcel Map, as specified in Chapter 21.08, to be prepared in conformance with the Preliminary Parcel Map as conditionally approved, and in compliance with the provisions of the Subdivision Map Act and PAMC Section 21.16 and submitted to the City Engineer (PAMC Section 21.16.010[a]). SECTION 7. CONDITIONS OF APPROVAL. PLANNING DIVISION 1. CONFORMANCE WITH PLANS. The Parcel Map shall conform to the approved plans entitled, "Preliminary 3-Lot Parcel Map 874 Boyce and 872 Boyce,” stamped as received by the City on August 13, 2019 on file with the Planning and Development Services Department, 250 Hamilton Avenue, Palo Alto, California except as modified by these conditions of approval. 2. FUTURE DEVELOPMENT. This project does not include approval of any physical improvements to the site other than minor paving for the access easement serving the new flag lot; therefore, no building permit is required at this time. Any future improvements to the site may require additional permits (e.g. building, grading, street work, etc. depending on the proposed improvements. 3. EASEMENT RECORDATION AND ABANDONMENT. As shown on the preliminary parcel map, the existing shared easement (Access Easement Doc #18998265) shall be abandoned and the two new access easements serving the existing flag lot at 876 Boyce and the new flag lot shall be recorded, as shown on the preliminary parcel map, immediately prior to recordation of the Parcel Map. 4. PROTECTED OAK TREE. The existing oak tree located at the northwest corner of the new flag lot (Proposed Parcel B), which is considered a projected tree under Title 8 of the PAMC, would not be impacted by the project as no construction activities are proposed. The oak tree shall be retained and protected as part of any future development proposal for Parcel B. 5. HISTORIC PRESERVATION COVENANT. Prior to approval of the Parcel Map, a historic preservation covenant shall be recorded for protection of the Category 4 Historic structure located at 874 Boyce in perpetuity. The historic preservation covenant shall include a requirement that the existing structure be preserved in perpetuity, that any future development at 874 Boyce comply with the Secretary of the Interior’s Standards for Rehabilitation, and that any future development of the new flag lot be compatible with the historic structure located at 874 Boyce. The historic preservation covenant shall be in a form approved by the City Attorney. 6. NOISE. In accordance with PAMC Section 9.10.040 no person shall produce, suffer or allow to be produced by any machine or device, or any combination of same, on commercial or industrial property, a noise level more than eight dB above the local ambient at any point outside of the property plane. The signage showing construction hours, as required under PAMC Section 9.10.040 shall include an emergency number for reporting noise concerns. 7. INDEMNITY. To the extent permitted by law, the Applicant shall indemnify and hold harmless the City, its City Council, its officers, employees and agents (the “indemnified parties”) from and against any claim, action, or proceeding brought by a third party against the indemnified parties and the applicant to attack, set aside or void, any permit or approval authorized hereby for the Project, including (without limitation) reimbursing the City for its actual attorneys’ fees and costs incurred in defense of the litigation. The City may, in its sole discretion, elect to defend any such action with attorneys of its own choice. 8. PARKLAND DEDICATION FEES. Parkland Dedication Fees, currently estimated in the amount of $63,104.04 shall be paid prior to the approval of the Parcel Map. Additional development impact fees may be required prior to approval of a building permit for any future development. 9. IMPACT FEE 90-DAY PROTEST PERIOD. California Government Code Section 66020 provides that a project applicant who desires to protest the fees, dedications, reservations, or other exactions imposed on a development project must initiate the protest at the time the development project is approved or conditionally approved or within ninety (90) days after the date that fees, dedications, reservations or exactions are imposed on the Project. Additionally, procedural requirements for protesting these development fees, dedications, reservations and exactions are set forth in Government Code Section 66020. IF YOU FAIL TO INITIATE A PROTEST WITHIN THE 90-DAY PERIOD OR FOLLOW THE PROTEST PROCEDURES DESCRIBED IN GOVERNMENT CODE SECTION 66020, YOU WILL BE BARRED FROM CHALLENGING THE VALIDITY OR REASONABLENESS OF THE FEES, DEDICATIONS, RESERVATIONS, AND EXACTIONS. If these requirements constitute fees, taxes, assessments, dedications, reservations, or other exactions as specified in Government Code Sections 66020(a) or 66021, this is to provide notification that, as of the date of this notice, the 90-day period has begun in which you may protest these requirements. This matter is subject to the California Code of Civil Procedures (CCP) Section 1094.5; the time by which judicial review must be sought is governed by CCP Section 1094.6. PUBLIC WORKS ENGINEERING Prior to Public Works Engineering review of the parcel map, the following items must be shown on the map: 10. The Parcel Map shall include FLOOD ZONE DESIGNATION statement. 11. The Parcel Map shall reference the NAVD 88 datum. 12. The Parcel Map shall include CITY ENGINEER STATEMENT, CITY SURVEYOR STATEMENT and DIRECTOR OF PLANNING AND DEVELOPMENT SERVICES STATEMENT. 13. Provide electronic copies of the referenced documents submitted to Public Works. This includes the records of survey, maps, etc. 14. Include additional signature blocks for neighboring property owners as appropriate. 15. Include City Clerk signature as appropriate. 16. If applicable to this map provide a Beneficiary or Trustee and Acknowledgement statement on the map. 17. Please show all existing easements along with all proposed easements for both properties. Prior to parcel map recordation: 18. The City of Palo Alto does not currently have a City Surveyor and has retained the services of Siegfried Engineering (“Siegfried”) to review and provide approval on behalf of the City. Siegfried will be reviewing, signing and stamping the Parcel Map associated with the project. Applicant applicant is required to provide payment to City to cover the cost of Siegfried Engineering’s review. The City will forward the Parcel Map to Siegfried for an initial preliminary review of the documents. Siegfried will then provide a review cost amount based on the complexity of the project and the information shown on the document. The City will share this information with the applicant once received and ask that the applicant return a copy acknowledging the amount. Applicant shall then provide a check for this amount as payment for the review cost. The City must receive payment prior to beginning the final review process. Scope and Fee Letter from Siegfried will be provided separately. 19. Once the Parcel Map is approved by the City, submit wet signed and stamped mylar copy of the Parcel Map to the Public Works for signature. Map shall be signed by Owner, Notary and Surveyor prior to formal submittal. 20. Provide the electronic CAD file for the Map. Detail format of electronic submittal to be provided. Prior to any future building, grading or excavation permit issuance: 21. Parcel Map shall be recorded with County Recorder. A conformed mylar copy shall be submitted to the City. 22. Any existing building(s) will need to be demolished prior to recordation of Parcel Map. PUBLIC WORKS UTILITIES DIVISION 23. The public utility easement from the public right of way and through Parcel A to serve Parcel B shall be recorded in coordination with the Parcel Map. Underground electric service, running inside the Public Utilities Easement, shall be provided prior to approval of any future building permit for the new flag lot. UTILITILES- WATER, GAS, WASTEWATER 24. Utility vaults, transformers, utility cabinets, concrete bases, or other structures cannot be placed over existing water, gas or wastewater mains/services. Maintain 1’ horizontal clear separation from the vault/cabinet/concrete base to existing utilities as found in the field. If there is a conflict with existing utilities, Cabinets/vaults/bases shall be relocated from the plan location as needed to meet field conditions. Trees may not be planted within 10 feet of existing water, gas or wastewater mains/services or meters unless otherwise approved by the Waste-Gas-Water Division. New water, gas or wastewater services/meters may not be installed within 10’ or existing trees unless otherwise approved by the Waste- Gas-Water Division. 25. The applicant shall record the public utilities easement through the private driveway/area for facilities installed in private property as part of the Parcel Map. The applicant's engineer shall obtain, prepare, record with the county of Santa Clara, and provide the utilities engineering section with copies of the public utilities easement across the adjacent parcels as is necessary to serve the development. 26. Where public mains/services are installed in private land/P.U.Es for the home in the back parcel, the final map shall include the statement: “Public Utility Easements: If the City’s reasonable use of the Public Utility Easements, which are shown as P.U.E on the Map, results in any damage to the PUE area, then it shall be the responsibility of the owner, and not of the City, to Restore the affected portion(s) of the P.U.E Area. This Section may not be amended without the prior written consent of the City” 27. Any water service, gas service, or wastewater lateral not in use must be disconnected and abandoned. 28. Each unit shall have its own water and gas meter. Each parcel shall have its own water service, gas service, and wastewater lateral connection. 29. The applicant shall be responsible for installing and upgrading the existing utility mains and/or services as necessary to handle anticipated peak loads. This responsibility includes all costs associated with the design and construction for the installation/upgrade of the utility mains and/or services. 30. The contractor shall not disconnect any part of the existing water, gas, or wastewater mains except by expressed permission of the WGW utilities inspector and shall submit a schedule of the estimated shutdown time to obtain said permission. 31. Only City forces can work on the City gas distribution system. SECTION 8. TERM OF APPROVAL. Preliminary Parcel Map with Exceptions Approval. The project approval shall be effective on the effective date of the Municipal Code Text Amendment Ordinance, and shall be valid for a period of two years. In the event that a Parcel Map is not secured for the project within the time limit specified above, the Preliminary Parcel Map with exceptions approval shall expire and be of no further force or effect. Application for extension of this entitlement may be made prior to expiration. PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk Mayor APPROVED AS TO FORM: APPROVED: Deputy City Attorney Director of Planning and Development Services Attachment D Project Plans Council members receive hardcopies of map. The map is available to the public online and/or by visiting the Planning and Development Services Department on the 5th floor of City Hall at 250 Hamilton Avenue. Directions to review the map online: 1. Go to: bit.ly/PApendingprojects 2. Scroll down to find “874 Boyce” and click the address link 3. On this project specific webpage you will find a link to the map and other important information Direct Link to Project Webpage: https://www.cityofpaloalto.org/news/displaynews.asp?NewsID=4666 ATTACHMENT E ZONING CONSISTENCY TABLE 874 Boyce Avenue Applications 18PLN-00030 Table 1: Compliance with R-1 Zone District Regulations Regulation Requirement Existing Proposed Minimum and Maximum Lot Area 6,000 – 9,999 sf Parcel A: 12,403 sf (Noncomplying) Parcel C: 6,067 sf Complies Parcel A (874 Boyce): 6,000 sf Parcel B (new flag lot): 6,090 sf Parcel C (872 Boyce): 6,380 sf Min. Site Width 60 feet Parcel A: 50 feet Parcel C: 50 feet Exception needed Parcel A: 47.42 feet Parcel B: 50 feet Parcel C: 52.58 feet Min. Site Depth 100 feet Parcel A: 248.05 feet Parcel C: 121.17 Complies Parcel A: 128.02 feet Parcel B: 120 feet Parcel C: 121.17 feet Received —0 APR 15 2019 Leopold Design DepartmentofPlanning &Community EnvironmentNeighborAcknowledgment March 6,2019 Subject:874 Boyce Avenue Subdivision Dear Claire Hodgkins, City of Palo Alto Project planner for 874 Boyce Ave. We understand that Chris Loops,the owner at 874 Boyce Ave.,has requested to create a separate lot in the back portion of the existing 874 Boyce property.This request affects the legal description of my current title report.This change is necessary for him to develop his property.The owner at 874 Boyce is going to gift a sliver of their property along the southern border of their lot to the 872 Boyce Ave.owners (the “Gifted Property”).The length of the Gifted Property will be 121.52’(i.e.,the entire length of the northern property line of the 872 Boyce property)and the width will be 2’7”,or such greater width as is needed to cause the conditions below to be satisfied. As a condition of approval,the property owners at 872 &876 Boyce will need to amend the legal descriptions of the prospective properties to now be separate flag lots. The scope of work includes the abandonment of the shared driveway I easements and the creation of a separate flag lot easement,for the 872 Boyce property.This requires the 872 Boyce property to file for a lot line adjustment and have a 10’-O”paved width and a 12’-O” wide access easement entirely on the 872 Boyce property and leading to the rear lot at 876 Boyce. In addition to the transfer of the Gifted Property,the amendment of the legal description of 872 Boyce would be subject to the following conditions:(1)no additional paving on 872 Boyce will be required to the south of the southern edge of the existing pavement,(2)the new access easement will covet only land that is either currently subject to the utility easement or is the Gifted Property (and so the southern edge of the new access easement will not be further south than the southern edge of the utility easement)and (3)the Allowable Floor Area available for future renovation projects for 872 Boyce will be increased by 30%x the square footage of the Gifted Property. 3tCttq Thank you, Leopold Vandeneynde,Architect 650-224-685 Ho eoyjiit Boyce Ave. P71J4’UtL— Date L,4//q Date // leopoIdleopolddesign.com Leopold Vandeneynde -650.224.6852 777 Enright Avenue,Santa Clara,CA 95050 Homeowner at 876 Boyce Ave. Notice of Exemption Project Title: 874 Boyce Avenue Project Location (include county): 874 Boyce Avenue, Palo Alto, CA 94301 (Santa Clara County) Project Description: Request for approval of an ordinance to amend Title 21, Chapter 20 to allow for creation of a flag lot where the residence on the existing lot to be subdivided would be protected under a historic preservation covenant as well as approval of a Preliminary Parcel Map with Exceptions. The exceptions would allow for a narrower front lot than is allowed within the R-1 Zone District as well as allow for an access easement that extends 128.05 feet where Title 21 only allows for easements to extend up to 100 feet. The project does not currently include development of the proposed flag lot; however, it is reasonably assumed that with approval of the proposed project, the resulting flag lot would eventually be redeveloped with a single-story residence. Name of Public Agency Approving Project: City of Palo Alto Name of Person or Agency Carrying Out Project: Christopher and Ximena Loops, Property owners Exempt Status: (check one) □ Ministerial (Sec. 21080(b)(1); 15268); □ Declared Emergency (Sec. 21080(b)(3); 15269(a)); □ Emergency Project (Sec. 21080(b)(4); 15269(b)(c)); Categorical Exemption: 15308 (actions by regulatory agencies for protection of natural resources) and 15332 (in-fill exemption) □ Statutory Exemptions. State code number Reasons why project is exempt: The City has determined that the proposed 874 Boyce Avenue Project is categorically exempt from CEQA under Class 8 (Actions by regulatory agencies for protection of natural resources) and Class 32 (In-fill development projects). CEQA Guidelines §15308 reads: Class 8 consists of actions taken by regulatory agencies, as authorized by state or local ordinance, to assure the maintenance, restoration, enhancement, or protection of the environment where the regulatory process involves procedures for protection of the environment.” CEQA Guidelines §15332 reads: “Class 32 consists of projects characterized as in-fill development meeting the conditions described in this section.” The attached information documents the project’s eligibility for these exemptions, including compliance with the specific Class 32 conditions and a summary of why the project falls under the Class 32 and Class 8 exemptions. It also confirms that no exceptions to the exemptions, as outlined in CEQA Guidelines §15300.2, apply to the project. Project Planner: Claire Hodgkins, AICP E-mail: Claire.Hodgkins@cityofpaloalto.org If filed by applicant: 1. Attach certified document of exemption finding. 2. Has a Notice of Exemption been filed by the public agency approving the project? □ Yes N/A Planner September XX, 2019 Signature (Public Agency) Title Date Documentation of Project’s Eligibility for Class 8 and Class 32 Categorical Exemptions under CEQA The proposed project includes code amendments to Title 21 that would encourage the preservation of historic resources within the City. This would, in particular, allow for the project at 874 Boyce, which would include recordation of a historic covenant for preservation of a Category 4 historic resource. Therefore, the project would further protect the built environment with respect to historic resources, consistent with a Class 8 Exemption (Actions by regulatory agencies for protection of the environment). The project also meets the requirements for Class 32 exemptions. The proposed project would include a preliminary parcel map with exceptions to subdivide one residentially zoned parcel into two parcels to allow for development of a second residence. This project qualifies for a Class 32 exemption because it allows for in-fill development, encouraging higher density housing within an urban, heavily developed area that is appropriate for the proposed use. Below is a summary of how the project would meet the specific conditions under the Class 32 exemption. a. The project is consistent with the applicable general plan policies as well as with applicable zoning designation and regulations The project site’s Comprehensive Plan Land Use Designation is “Single-family residential”, which applies to residential neighborhoods primarily characterized by detached single-family homes, typically with one dwelling unit on each lot. The net density in single family areas ranges from one to 7 units per acre with population densities ranging from one to 30 people per acre. The proposed project is consistent with the Comprehensive Plan (i.e. general plan) land use designation in that it allows for an additional single-family residential unit to be constructed while still complying with the identified range of units and persons that would be allowed per acre. The addition of a new parcel in order to allow for an additional single-family residential housing unit is consistent with the goals and policies outlined in the Housing Element of the City’s Comprehensive Plan. Because the subdivision would also include recordation of a historic preservation covenant for an identified historic resource, it is also consistent with the policies for historic preservation outlined in the Land Use and Community Design Element of the Comprehensive Plan. Class 32 Exemption Condition Complies? a. The project is consistent with the applicable general plan policies as well as with applicable zoning designation and regulations ■ b. The proposed development occurs within city limits on a project site of no more than five acres substantially surrounded by urban uses ■ c. The project site has no value as habitat for endangered, rare, or threatened species ■ d. Approval of the project would not result in any significant effects relating to traffic, noise, air quality, or water quality ■ e. The site can be adequately served by all required utilities and public services ■ The site is zoned R-1 (single-family residential). The R-1 zone district is intended to create, preserve, and enhance areas suitable for detached dwellings. The proposed project would create two parcels, both of which would meet the minimum lot size requirements, from a single parcel that currently exceeds the maximum lot size requirements; thereby addressing a legal noncomplying condition at the project site. The project includes a request for an exception to the 60 foot required lot width identified for lots within the R-1 zone district. The resulting lot would be 47.5 feet wide. However, most lots within this area are approximately 50 feet or less, including the existing lot. Therefore, the proposed lot width would be generally consistent with the existing character of the neighborhood. With approval of the exception, in allowance with the code, the project would be in compliance with the zoning ordinance. b. The proposed development occurs within city limits on a project site of no more than five acres substantially surrounded by urban uses. The proposed project is located on APN 003-25-039, which is a 12,403 square foot site (0.28 acres) that is located wholly within the City of Palo Alto’s jurisdiction. Surrounding uses are single-family residential. There are no open space areas or natural features (such as creeks) within the vicinity of the site. c. The project site has no value as habitat for endangered, rare, or threatened species As noted above, there are no open space areas or natural features within the vicinity of the project site. The area is entirely urban in nature. The adopted Palo Alto 2030 Comprehensive Plan includes Map N-1, which identifies sensitive animal and plant species within the Palo Alto quadrangle, a large geographic area that includes the urban portions and portions along the bay and within the foothills, based on information in the California Natural Diversity Database (CNDDB). Based on this map and the urban nature of the site, the subject property does not contain any habitat for endangered, rare, or threatened species and has not historical supported any of these species. d. Approval of the project would not result in any significant effects relating to traffic, noise, air quality or water quality The proposed project does not include any proposed demolition or development and therefore could not result in any significant effects relating to traffic, noise, air quality, or water quality. It is reasonably foreseeable that, with approval of the subdivision, a new residence would be proposed on the newly created flag lot. In accordance with the R-1 zone district requirements, only a single-story residence could be developed on the flag lot. If a new house were to be developed, this would result in nominal impacts on traffic, noise, and air quality, primarily due to short-term construction related activities. Compliance with applicable regulations (e.g. basic dust control measures required by the BAAQMD and Title 9 construction noise requirements) would ensure that impacts remain less than significant. Traffic In accordance with the R-1 zone district requirements, only a single-story residence could be developed on the flag lot. The addition of one single-story residence at this property would not have the potential to result in any significant impact on traffic given the urban nature of this area and the nominal additional trips associated with one single-story detached dwelling unit. Noise No demolition is required or proposed given that the rear portion of the parcel is vacant and the existing residence on the site would be preserved under an historic preservation covenant. Construction of any new residence on this parcel would be required to comply with the regulations outlined in Title 9 of the Palo Alto Municipal Code (PAMC) with respect to construction noise, which stipulates maximum allowed decibels and restricts construction hours. Therefore, the project would not result in a significant impact on noise due to construction activities. Any HVAC equipment for the new residence would also be required to comply with the noise ordinance, which would reduce permanent impacts to a less than significant level. Water Quality The project is not located within the vicinity of any waterways; therefore the project would not alter the course of a stream or river. The project is located within a flood Zone, but any future development would be designed to meet FEMA requirements for construction of a residence within a flood zone. The future development would follow public works engineering’s required standard practices to control erosion and siltation during construction activities so as not to degrade water quality. Air Quality Future construction activities associated with development of the flag lot would be required to comply with BAAQMD requirements, which stipulate requirements for basic dust control to reduce PM10 and PM2.5. Construction of a single- story detached residence would not have the potential to exceed the daily thresholds for other criteria pollutants, including any pollutants for which the basin is in non-attainment. e. The site can be adequately served by all required utilities and public services The site is within an urban area that is already served by utilities and public services. Although new utility hook-ups would be required for any future proposed building, the site would be adequately served by existing infrastructure within the immediate vicinity. Exceptions to the Exemptions The City is aware that there are six categories or exceptions that preclude the use of Categorical Exemptions, as listed in CEQA Guidelines 15300.2 These categories, followed by the reason(s) the City believes they are not applicable to this project, are as follows: 15300.2(a) Location. Classes 3,4,5,6 and 11 are qualified by consideration of where the project is to be located—a project that is ordinarily insignificant in its impact may in a particularly sensitive environment By definition, this exception does not apply to Class 32 or Class 8 Exemptions. 15300.2(b) Cumulative Impact. All exemptions for these classes are inapplicable when the cumulative impact of successive projects of the same type in the same place, over time is significant. The project is a site specific subdivision project that would not be phased. The analysis above takes into account the reasonably foreseeable future action of constructing a new single-family residence on the resulting flag lot and this, in conjunction with the proposed project, would not result in a cumulatively significant impact. No other projects are planned for this site. 15300.2(c) Significant Effect. There are no unusual circumstances creating the possibility that the project will have a significant effect on the environment pursuant to CEQA. There are no unusual circumstances affecting the project or property or anything unique about the location of the property or adjacent properties, which could result in a significant effect on the environment, such as the presence of archeological or cultural resources. The project complies with the comprehensive plan in an area where the proposed use is highly encouraged and, with approval of the requested exception, as allowed in accordance with the code, would comply with zoning. 15300.2(d) Scenic Highways. A categorical exemption shall not be used for a project which may result in damage to scenic resources, including but not limited to, trees, historic buildings, rock outcroppings, or similar resources, within a highway officially designated as a state scenic highway. This does not apply to improvements which are required as mitigation by an adopted negative declaration or certified EIR. The project site is not visible from a scenic highway. I-280 and Skyline Blvd (HWY 35) are the only State scenic highways in Palo Alto and they are not visible from 874 Boyce Avenue. 15300.2(e Hazardous Waste Sites. A categorical exemption shall not be used for a project located on a site which is included on any list compiled pursuant to Section 65962.5 of the Government Code. The City has reviewed the Phase I ESA and the Cortese List on the Envirostor databased to confirm that the project site is not on a list of hazardous waste sites compiled pursuant to Sec 65962.5 of the Government Code. 15300.2(f)Historical Resources. A categorical exemption shall not be used for a project which may cause a substantial adverse change in the significance of an historical resource. For purposes of this section, an historical resource is a resource listed in, or determined to be eligible for listing in, the California Register of Historical Resources. Historical resources included in a local register of historical resources, as defined in subdivision (k) of Section 5020.1, or deemed significant pursuant to criteria set forth in subdivision (g) of Section 5024.1, are presumed to be historically or culturally significant for purposes of this section, unless the preponderance of the evidence demonstrates that the resource is not historically or culturally significant. The proposed project is specifically designed to preserve, in perpetuity, the existing Category 4 historic resource on the site through recordation of a historic preservation covenant. Any future development is required to be compatible with this preserved resource. Therefore, the project would not cause a substantial adverse change in the significance of a historic resource. City of Palo Alto (ID # 10808) City Council Staff Report Report Type: Rail Communications Update Meeting Date: 11/4/2019 City of Palo Alto Page 1 Summary Title: Update From the Expanded Community Advisory Panel Title: Update From the Expanded Community Advisory Panel (XCAP) and Potential Community Engagement Efforts From: City Manager Lead Department: City Manager Rail (Connecting Palo Alto) Update: a.Update from the Expanded Community Advisory Panel b.Update on Rail Communication and Potential Community Engagement Efforts a.Update from the Expanded Community Advisory Panel At the September 9, 2019 City Council meeting, the City Council adopted some changes to the Expanded Community Advisory Panel (XCAP). The changes allowed the XCAP to elect a Chair and Vice Chair as well as to take votes on recommendations, among other things. In the Council motion, the City Council also asked the XCAP to provide no less than every other month updates to the City Council. The XCAP update today is a follow up to the City Council action in September. The XCAP will provide the City Council with an update on their progress to date. The next XCAP update is planned for early to mid-December. b.Update on Rail Communication and Potential Community Engagement Efforts The City of Palo Alto has undertaken a community-based process to address the increased traffic congestion expected when Caltrain electrifies the tracks and runs more trains through the region, including the Palo Alto corridor. Caltrain’s expanded service and other changes are outlined in their CalMod Plan and Business Plan. The City’s community-based process, called Connecting Palo Alto, seeks to evaluate the best options to maintain community access and address local traffic congestion as Caltrain electrified service begins in 2023. Significant work has been achieved to date and more work is planned to gain community feedback as part of the decision-making process that will affect Palo Alto’s future rail City of Palo Alto Page 2 crossings. Staff is actively working to share information about the process to inform and engage the community as the City Council considers options in spring 2020. Staff will update the City Council on efforts underway and seek feedback on ideas around communications and community engagement for Connecting Palo Alto rail grade separation at this Council update on October 28, 2019. This discussion with the City Council is to gain their feedback on the ideas planned for communications and community engagement. The update will also provide a general timeline of efforts planned, including returning to the City Council in December to gain input on establishing a Rail Blue Ribbon Committee. An example of communications to share information about the process is the new Blog Series on Medium.com the City of Palo Alto’s new blog platform. The first two blogs can be viewed here. The blog series is one of many ways the City is sharing information to increase awareness about the City’s community-driven process as it evaluates current options and plans for City Council decisions in spring of 2020. An example of planned community engagement around the existing options and neighborhood impacts is the upcoming community meeting scheduled on November 7, 2019. This will represent a significant milestone in the development of community-wide awareness of the options being considered for grade separations at Charleston Road, Meadow Drive, and Churchill Avenue. The XCAP has been instrumental in understanding the options being considered and ensuring that the technical analysis reflects sensitivity to localized and community-wide perspectives. The November community meeting will provide the first overview of work to date specifically designed for the general public since March 2019. As the consideration of grade separation options moves into the “community conversations” phase in which community members will be invited to provide feedback on the options as well as express preferences, staff is developing a framework for this engagement. This can include open houses and town hall meetings at which the XCAP and Council can hear directly from community members in early 2020, as well as an online surveys and other engagement methods. Staff is also mindful of the City Council direction from September 9 to bring to Council recommendations related to a potential Rail Blue Ribbon Commission. These two items are an opportunity to update the City Council and gain feedback on efforts underway as the City and community evaluates the best options to address community access and local traffic congestion as Caltrain’s modernization and growth plans proceed.